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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 3, 2004
----------------------
Commission File Number 000-19914
----------------------
COTT CORPORATION
(Exact name of registrant as specified in its charter)
CANADA None
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
207 Queen's Quay West, Suite 340, Toronto, Ontario M5J 1A7
-------------------------------------------------------------------
(Address of principal executive offices) (Postal Code)
(416) 203-3898
----------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [X] No [ ]
--- ---
There were 71,245,020 shares of common stock outstanding as of July 31, 2004.
1
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income for the three and six month periods ended July 3, 2004 and
June 28, 2003.......................................................................... Page 3
Consolidated Balance Sheets as of July 3, 2004 and January 3, 2004.......................... Page 4
Consolidated Statements of Shareowners' Equity as of July 3, 2004 and June 28, 2003......... Page 5
Consolidated Statements of Cash Flows for the three and six month periods ended July 3, 2004
and June 28, 2003...................................................................... Page 6
Notes to the Consolidated Financial Statements ............................................. Page 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ...... Page 19
Item 3. Quantitative and Qualitative Disclosures about Market Risk ................................. Page 24
Item 4. Controls and Procedures .................................................................... Page 24
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings .......................................................................... Page 25
Item 4. Submission of Matters to a Vote of Security Holders......................................... Page 25
Item 6. Financial Statement Schedules, Exhibits and Reports on Form 8-K ............................ Page 25
Signatures............................................................................................ Page 27
2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COTT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
(in millions of U.S. dollars, except per share amounts)
Unaudited
For the three months ended For the six months ended
-------------------------- --------------------------
JULY 3, JUNE 28, JULY 3, JUNE 28,
2004 2003 2004 2003
-------- -------- -------- --------
SALES $ 463.7 $ 388.1 $ 834.6 $ 683.4
Cost of sales 378.2 311.2 678.7 550.1
-------- -------- -------- --------
GROSS PROFIT 85.5 76.9 155.9 133.3
Selling, general and administrative
expenses 34.1 32.5 72.8 64.1
Unusual items (0.5) (0.8) (0.5) (0.8)
-------- -------- -------- --------
OPERATING INCOME 51.9 45.2 83.6 70.0
Other expense, net -- 0.9 0.3 1.4
Interest expense, net 6.6 6.6 13.2 14.3
Minority interest 1.2 0.7 2.2 1.3
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES AND EQUITY LOSS 44.1 37.0 67.9 53.0
Income taxes -- note 3 (14.6) (12.4) (22.9) (17.8)
Equity loss (0.1) -- (0.2) (0.1)
-------- -------- -------- --------
NET INCOME -- note 4 $ 29.4 $ 24.6 $ 44.8 $ 35.1
======== ======== ======== ========
PER SHARE DATA -- note 5
NET INCOME PER COMMON SHARE
Basic $ 0.41 $ 0.36 $ 0.63 $ 0.51
Diluted $ 0.41 $ 0.35 $ 0.62 $ 0.50
The accompanying notes are an integral part of these consolidated financial statements.
3
COTT CORPORATION
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
(in millions of U.S. dollars)
JULY 3, JANUARY 3,
2004 2004
---------- ----------
Unaudited Audited
ASSETS
CURRENT ASSETS
Cash $ 9.6 $ 18.4
Accounts receivable 224.6 148.8
Inventories -- note 6 129.3 94.4
Prepaid and other expenses 9.2 5.5
---------- ----------
372.7 267.1
PROPERTY, PLANT AND EQUIPMENT -- note 8 323.8 314.3
GOODWILL -- note 9 81.0 81.6
INTANGIBLES AND OTHER ASSETS -- note 10 241.5 245.8
---------- ----------
$ 1,019.0 $ 908.8
========== ==========
LIABILITIES
CURRENT LIABILITIES
Short-term borrowings $ 84.7 $ 78.1
Current maturities of long-term debt 1.5 3.3
Accounts payable and accrued liabilities 184.7 140.5
---------- ----------
270.9 221.9
LONG-TERM DEBT 275.4 275.7
DEFERRED INCOME TAXES 45.4 40.5
---------- ----------
591.7 538.1
---------- ----------
MINORITY INTEREST 25.6 25.6
SHAREOWNERS' EQUITY
CAPITAL STOCK
Common shares -- 71,121,028 shares issued 281.8 267.9
RETAINED EARNINGS 128.1 83.3
ACCUMULATED OTHER COMPREHENSIVE LOSS (8.2) (6.1)
---------- ----------
401.7 345.1
---------- ----------
$ 1,019.0 $ 908.8
========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
4
COTT CORPORATION
CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
- --------------------------------------------------------------------------------
(in millions of U.S. dollars)
Unaudited
NUMBER OF COMMON RETAINED ACCUMULATED TOTAL
COMMON SHARES EARNINGS OTHER EQUITY
SHARES COMPREHENSIVE
(in thousands) INCOME (LOSS)
--------------------------------------------------------------------------
Balance at December 28, 2002 68,559 $ 248.1 $ 5.9 $ (35.8) $ 218.2
Options exercised, including tax
benefit of $2.9 million 860 8.6 -- -- 8.6
Comprehensive income -- note 4
Currency translation adjustment -- -- -- 18.8 18.8
Net income -- -- 35.1 -- 35.1
--------------------------------------------------------------------------
Balance at June 28, 2003 69,419 $ 256.7 $ 41.0 $ (17.0) $ 280.7
--------------------------------------------------------------------------
Balance at January 3, 2004 70,259 $ 267.9 $ 83.3 $ (6.1) $ 345.1
Options exercised, including tax
benefit of $4.0 million 862 13.9 -- -- 13.9
Comprehensive income (loss) -- note 4
Currency translation adjustment -- -- -- (1.6) (1.6)
Unrealized losses on cash flow hedges -- -- -- (0.5) (0.5)
Net income -- -- 44.8 -- 44.8
--------------------------------------------------------------------------
Balance at July 3, 2004 71,121 $ 281.8 $ 128.1 $ (8.2) $ 401.7
==========================================================================
The accompanying notes are an integral part of these consolidated financial statements.
5
COTT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
(in millions of U.S. dollars)
Unaudited
For the three months ended For the six months ended
-------------------------------------- -------------------------------------
JULY 3, 2004 JUNE 28, 2003 JULY 3, 2004 JUNE 28, 2003
----------------- ----------------- ----------------- -----------------
OPERATING ACTIVITIES
Net income $ 29.4 $ 24.6 $ 44.8 $ 35.1
Depreciation and amortization 15.0 12.8 30.0 24.9
Amortization of financing fees 0.1 0.4 0.3 1.3
Deferred income taxes 4.6 4.4 4.3 6.5
Minority interest 1.2 0.7 2.2 1.3
Equity loss 0.1 -- 0.2 0.1
Other non-cash items 0.3 (0.7) 0.6 (0.4)
Net change in non-cash working capital --
note 11 (52.7) (18.1) (65.4) (19.8)
------------ ------------ ----------- ------------
Cash provided by (used in) operating
activities (2.0) 24.1 17.0 49.0
------------ ------------ ----------- ------------
INVESTING ACTIVITIES
Additions to property, plant and equipment (11.1) (17.8) (22.4) (27.9)
Acquisitions and equity investments -- (0.2) (17.7) (0.5)
Other investing activities 3.3 0.1 3.1 0.1
------------ ------------ ----------- ------------
Cash used in investing activities (7.8) (17.9) (37.0) (28.3)
------------ ------------ ----------- ------------
FINANCING ACTIVITIES
Payments of long-term debt (0.3) (15.4) (2.5) (53.4)
Issue of long-term debt -- 3.7 -- 3.7
Short-term borrowings 4.3 2.6 6.4 24.3
Distributions to subsidiary minority
shareowner (1.0) (0.5) (2.2) (1.7)
Issue of common shares 7.7 4.6 9.9 5.7
Other financing activities (0.1) (0.2) (0.2) (0.2)
------------ ------------ ----------- ------------
Cash provided by (used in) financing
activities 10.6 (5.2) 11.4 (21.6)
------------ ------------ ----------- ------------
Effect of exchange rate changes on cash (0.2) (0.1) (0.2) (0.1)
------------ ------------ ----------- ------------
NET INCREASE (DECREASE) IN CASH 0.6 0.9 (8.8) (1.0)
CASH, BEGINNING OF PERIOD 9.0 1.4 18.4 3.3
------------ ------------ ----------- ------------
CASH, END OF PERIOD $ 9.6 $ 2.3 $ 9.6 $ 2.3
------------ ------------ ----------- ------------
The accompanying notes are an integral part of these consolidated financial statements.
6
COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unaudited
NOTE 1 -- BASIS OF PRESENTATION
The interim consolidated financial statements have been prepared in accordance
with United States ("U.S.") generally accepted accounting principles ("GAAP")
for interim financial information. Accordingly, they do not include all
information and notes presented in the annual consolidated financial statements
in conformity with U.S. GAAP. In the opinion of management, the financial
statements reflect all adjustments that are necessary for a fair statement of
the results for the interim periods presented. All such adjustments are of a
normal recurring nature.
These financial statements should be read in conjunction with the most recent
annual consolidated financial statements. The accounting policies used in these
interim consolidated financial statements are consistent with those used in the
annual consolidated financial statements.
Material recognition, measurement, and presentation difference between U.S. GAAP
and Canadian GAAP are disclosed in note 16.
NOTE 2 -- BUSINESS SEASONALITY
Cott's operating results for the three and six month periods ended July 3, 2004
are not necessarily indicative of the results that may be expected for the full
year due to business seasonality. Operating results are impacted by business
seasonality, which leads to higher sales in the second and third quarters versus
the first and fourth quarters of the year. Conversely, fixed costs such as
depreciation, amortization and interest, are not impacted by seasonal trends.
NOTE 3 -- INCOME TAXES
The following table reconciles income taxes calculated at the basic Canadian
corporate rates with the income tax provision:
For the three months ended For the six months ended
-------------------------- --------------------------
JULY 3, JUNE 28, JULY 3, JUNE 28,
2004 2003 2004 2003
-------- -------- -------- --------
(in millions of U.S. dollars) (in millions of U.S. dollars)
Income tax provision based on
Canadian statutory rates $ (15.2) $ (13.3) $ (23.5) $ (19.1)
Foreign tax rate differential -- 0.5 0.2 1.3
Manufacturing and processing
deduction -- 0.1 -- 0.1
Non-deductible and other items 0.6 0.3 0.4 (0.1)
-------- -------- -------- --------
$ (14.6) $ (12.4) $ (22.9) $ (17.8)
======== ======== ======== ========
7
COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unaudited
NOTE 4 -- COMPREHENSIVE INCOME
For the three months ended For the six months ended
-------------------------- --------------------------
JULY 3, JUNE 28, JULY 3, JUNE 28,
2004 2003 2004 2003
-------- -------- -------- --------
(in millions of U.S. dollars) (in millions of U.S. dollars)
Net income $ 29.4 $ 24.6 $ 44.8 $ 35.1
Foreign currency translation gain
(loss) (0.9) 13.5 (1.6) 18.8
Unrealized losses on cash flow
hedges (0.5) -- (0.5) --
-------- -------- -------- --------
$ 28.0 $ 38.1 $ 42.7 $ 53.9
======== ======== ======== ========
NOTE 5 -- NET INCOME PER COMMON SHARE
Basic net income per common share is computed by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
net income per common share is calculated using the weighted average number of
common shares outstanding adjusted to include the effect that would occur if
in-the-money stock options were exercised.
The following table reconciles the basic weighted average number of common
shares outstanding to the diluted weighted average number of common shares
outstanding:
For the three months ended For the six months ended
-------------------------- --------------------------
JULY 3, JUNE 28, JULY 3, JUNE 28,
2004 2003 2004 2003
-------- -------- -------- --------
(in thousands) (in thousands)
Weighted average number of shares
outstanding -- basic 70,926 69,189 70,658 68,913
Dilutive effect of stock options 1,307 1,427 1,380 1,674
-------- -------- -------- --------
Adjusted weighted average number
of shares outstanding -- diluted 72,233 70,616 72,038 70,587
======== ======== ======== ========
At July 3, 2004, options to purchase 2,500 shares (1,080,150 -- June 28, 2003)
of common stock at an exercise price of $43.64 Canadian per share ($30.67
Canadian -- June 28, 2003) were outstanding, but were not included in the
computation of diluted net income per share because the options' exercise price
was greater than the average market price of the common stock.
As of July 3, 2004, Cott had 71,121,028 common shares and 4,545,757 common share
options outstanding. Of the common share options outstanding, 1,485,007 options
were exercisable as of July 3, 2004.
8
COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unaudited
NOTE 6 -- INVENTORIES
JULY 3, JANUARY 3,
2004 2004
--------- ------------
(In millions of U.S. dollars)
Raw materials $ 52.7 $37.7
Finished goods 64.2 46.8
Other 12.4 9.9
------ -----
$129.3 $94.4
====== =====
NOTE 7 -- DERIVATIVE FINANCIAL INSTRUMENTS
In 2004, Cott entered into cash flow hedges to mitigate exposure to declines in
the value of the Canadian dollar and British pound attributable to certain
forecasted U.S. dollar raw material purchases of the Canada and U.K. and Europe
business segments. The hedges consist of monthly foreign exchange options to buy
U.S. dollars at fixed rates per Canadian dollar and British pound and mature at
various dates through to December 29, 2004. Cott's payment for the foreign
exchange options is included in prepaid and other expenses.
Changes in the fair value of the cash flow hedge instruments are recognized in
accumulated other comprehensive income. Amounts recognized in accumulated other
comprehensive income and prepaid and other expenses are recorded in earnings in
the same periods in which the forecasted purchases or payments affect earnings.
At July 3, 2004, the fair value of the options was $0.5 million and $0.5 million
unrealized loss has been recorded in comprehensive income.
NOTE 8 -- PROPERTY, PLANT AND EQUIPMENT
JULY 3, JANUARY 3,
2004 2004
--------- ------------
(In millions of U.S. dollars)
Cost $567.6 $552.7
Accumulated depreciation (243.8) (238.4)
------ ------
$323.8 $314.3
====== ======
NOTE 9 -- GOODWILL
For the three months ended For the six months ended
-------------------------- ------------------------
JULY 3, JUNE 28, JULY 3, JUNE 28,
2004 2003 2004 2003
-------- --------- ------- --------
(In millions of U.S. (In millions of U.S.
dollars) dollars)
Balance at beginning of period $81.2 $78.9 $81.6 $77.0
Acquisitions -- -- -- 0.7
Foreign exchange (0.2) 1.7 (0.6) 2.9
----- ----- ----- -----
Balance at end of period $81.0 $80.6 $81.0 $80.6
===== ===== ===== =====
9
COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unaudited
NOTE 10 -- INTANGIBLES AND OTHER ASSETS
JULY 3, 2004 JANUARY 3, 2004
-------------------------------------------- ------------------------------------------
COST ACCUMULATED NET COST ACCUMULATED NET
AMORTIZATION AMORTIZATION
-------------- --------------- ------------- --------------- --------------- ----------
(in millions of U.S. dollars) (in millions of U.S. dollars)
INTANGIBLES
Not subject to
amortization
Rights $ 80.4 $ -- $ 80.4 $ 80.4 $ -- $ 80.4
---------- ------------ ---------- ----------- ----------- ----------
Subject to amortization
Customer relationships 159.6 26.1 133.5 157.9 20.8 137.1
Trademarks 26.6 6.3 20.3 25.8 5.5 20.3
Other 3.5 0.5 3.0 3.6 0.3 3.3
---------- ------------ ---------- ----------- ----------- ----------
189.7 32.9 156.8 187.3 26.6 160.7
---------- ------------ ---------- ----------- ----------- ----------
270.1 32.9 237.2 267.7 26.6 241.1
---------- ------------ ---------- ----------- ----------- ----------
OTHER ASSETS
Financing costs 5.6 4.3 1.3 5.6 3.9 1.7
Other 4.2 1.2 3.0 3.9 0.9 3.0
---------- ------------ ---------- ----------- ----------- ----------
9.8 5.5 4.3 9.5 4.8 4.7
---------- ------------ ---------- ----------- ----------- ----------
$ 279.9 $ 38.4 $ 241.5 $ 277.2 $ 31.4 $ 245.8
========== ============ ========== =========== =========== ==========
Amortization expense of intangible assets was $6.3 million for the period ended
July 3, 2004 ($5.0 million -- June 28, 2003). The amortization expense for
intangible assets is estimated at about $12.6 million per year for the next five
years.
NOTE 11 -- NET CHANGE IN NON-CASH WORKING CAPITAL
The changes in non-cash working capital components, net of effects of unrealized
foreign exchange gains and losses, are as follows:
For the three months ended For the six months ended
-------------------------- --------------------------
JULY 3, JUNE 28, JULY 3, JUNE 28,
2004 2003 2004 2003
-------- -------- -------- --------
(in millions of U.S. dollars) (in millions of U.S. dollars)
Decrease (increase) in accounts
receivable $ (49.7) $ (36.6) $ (68.8) $ (32.3)
Decrease (increase) in inventories (9.4) (3.4) (33.8) (11.9)
Decrease (increase) in prepaid and
other expenses (3.3) 2.2 (4.3) 1.8
Increase (decrease) in accounts payable
and accrued liabilities 9.7 19.7 41.5 22.6
-------- -------- -------- --------
$ (52.7) $ (18.1) $ (65.4) $ (19.8)
======== ======== ======== ========
10
COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unaudited
NOTE 12 -- STOCK OPTION PLANS
Pursuant to the SFAS No. 123, Accounting for Stock-Based Compensation, Cott has
elected to account for its employee stock option plan under APB opinion No. 25,
Accounting for Stock Issued to Employees. Under this method of accounting,
compensation expense is measured as the excess, if any, of the market value of
Cott common stock at the award date over the amount the employee must pay for
the stock (exercise price). Cott's policy is to award stock options with an
exercise price equal to the closing price of Cott's common stock on the Toronto
Stock Exchange on the last trading day immediately before the date of award, and
accordingly, no compensation expense has been recognized for stock options
issued under these plans. Had compensation expense for the plans been determined
based on the fair value at the grant date consistent with SFAS No. 123, Cott's
net income and net income per common share would have been as follows:
For the three months ended For the six months ended
---------------------------------------- ---------------------------------------
JULY 3, JUNE 28, JULY 3, JUNE 28,
2004 2003 2004 2003
------------------- ------------------ ------------------ -----------------
(in millions of U.S. dollars, except (in millions of U.S. dollars, except
per share amounts) per share amounts)
NET INCOME
As reported $ 29.4 $ 24.6 $ 44.8 $ 35.1
Compensation expense (2.3) (1.4) (4.0) (2.9)
Pro forma 27.1 23.2 40.8 32.2
NET INCOME PER SHARE -- BASIC
As reported 0.41 0.36 0.63 0.51
Pro forma 0.38 0.34 0.58 0.47
NET INCOME PER SHARE -- DILUTED
As reported 0.41 0.35 0.62 0.50
Pro forma 0.38 0.33 0.57 0.46
The pro forma compensation expense has been tax effected to the extent it
relates to stock options granted in jurisdictions where the related benefits are
deductible for income tax purposes.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:
JULY 3, 2004 JUNE 28, 2003
---------------- -----------------
Risk-free interest rate 3.3% -- 3.9% 3.9% -- 4.3%
Average expected life (years) 4 4
Expected volatility 45.0% 45.0%
Expected dividend yield -- --
11
COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unaudited
NOTE 13 -- ACQUISITIONS
Effective March 17, 2004, Cott acquired certain of the assets of The Cardinal
Companies of Elizabethtown, LLC located in Kentucky.
This acquisition has been accounted for using the purchase method. The results
of operations have been included in Cott's consolidated statements of income
from the effective date of purchase. The total purchase price for the
acquisition was $17.7 million, including estimated acquisition costs of $0.3
million. The acquisition was funded from cash flow from operations and
short-term borrowings.
The purchase price was allocated as follows based on the fair values of the net
assets:
JULY 3, 2004
-------------------------
(in millions of U.S.
dollars)
Current assets $ 2.6
Property, plant & equipment 14.8
Customer relationships 1.7
Trademark 0.8
------
19.9
------
Current liabilities 2.2
------
$ 17.7
======
NOTE 14 -- CONTINGENCIES
Cott is subject to various claims and legal proceedings with respect to matters
such as governmental regulations, income taxes, and other actions arising out of
the normal course of business. Management believes that the resolution of these
matters will not have a material adverse effect on Cott's financial position or
results from operations.
NOTE 15 -- SEGMENT REPORTING
Cott produces, packages and distributes retailer brand and branded bottled and
canned beverages to regional and national grocery, mass-merchandise and
wholesale chains in the United States, Canada, the United Kingdom & Europe and
International. The International segment includes the Mexican business and the
Royal Crown International business. The concentrate assets, sales and related
expenses have been included in the Corporate & Other segment.
12
COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unaudited
NOTE 15 -- SEGMENT REPORTING (continued)
BUSINESS SEGMENTS
FOR THE THREE MONTHS UNITED
ENDED UNITED KINGDOM & CORPORATE
JULY 3, 2004 STATES CANADA EUROPE INTERNATIONAL & OTHER TOTAL
- ------------------------ ------------ -------------- ------------- ----------------- ------------- --------------
(in millions of U.S. dollars)
External sales $ 340.4 $ 54.9 $ 51.7 $ 16.1 $ 0.6 $ 463.7
Intersegment sales -- 6.3 -- -- (6.3) --
Depreciation and
amortization 10.1 2.2 2.1 -- 0.6 15.0
Operating income (loss) 39.9 6.3 3.8 3.7 (1.8) 51.9
Property, plant and
equipment 182.0 54.5 67.3 9.5 10.5 323.8
Goodwill 49.9 21.5 -- 4.5 5.1 81.0
Intangibles and other
assets 159.7 (1.4) -- 1.0 82.2 241.5
Total assets 598.0 137.3 143.0 80.5 60.2 1,019.0
Additions to property,
plant and equipment 7.1 0.9 1.0 0.3 1.8 11.1
- ------------------------ ------------ -------------- ------------- ----------------- ------------- --------------
FOR THE THREE MONTHS UNITED
ENDED UNITED KINGDOM & CORPORATE
JUNE 28, 2003 STATES CANADA EUROPE INTERNATIONAL & OTHER TOTAL
- ------------------------ ------------ -------------- ------------- ----------------- ------------- --------------
(in millions of U.S. dollars)
External sales $ 278.0 $ 55.7 $ 43.6 $ 10.5 $ 0.3 $ 388.1
Intersegment sales -- 15.2 -- -- (15.2) --
Depreciation and
amortization 8.2 2.3 1.8 0.1 0.4 12.8
Operating income (loss) 35.7 6.1 3.0 1.9 (1.5) 45.2
Property, plant and
equipment (as of
January 3, 2004) 169.3 59.1 67.8 9.5 8.6 314.3
Goodwill (as of
January 3, 2004) 49.9 22.0 -- 4.6 5.1 81.6
Intangibles and other
assets (as of
January 3, 2004) 163.2 (1.0) -- 1.0 82.6 245.8
Total assets (as of
January 3, 2004) 514.9 130.3 126.7 77.6 59.3 908.8
Additions to property,
plant and equipment 6.7 1.6 1.8 5.0 2.7 17.8
- ------------------------ ------------ -------------- ------------- ----------------- ------------- --------------
13
COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unaudited
NOTE 15 -- SEGMENT REPORTING (continued)
UNITED
FOR THE SIX MONTHS KINGDOM
ENDED UNITED & CORPORATE
JULY 3, 2004 STATES CANADA EUROPE INTERNATIONAL & OTHER TOTAL
- ---------------------------------------------------------------------------------------------------------------------
(in millions of U.S. dollars)
External sales $613.5 $94.7 $94.4 $30.8 $ 1.2 $834.6
Intersegment sales -- 12.0 -- -- (12.0) --
Depreciation and
amortization 19.9 4.3 4.1 0.6 1.1 30.0
Operating income
(loss) 71.0 6.7 5.4 6.4 (5.9) 83.6
Property, plant and
equipment 182.0 54.5 67.3 9.5 10.5 323.8
Goodwill 49.9 21.5 -- 4.5 5.1 81.0
Intangibles and
other assets 159.7 (1.4) -- 1.0 82.2 241.5
Total assets 598.0 137.3 143.0 80.5 60.2 1,019.0
Additions to
property, plant and
equipment 13.8 1.9 2.2 0.8 3.7 22.4
- ---------------------------------------------------------------------------------------------------------------------
UNITED
FOR THE SIX MONTHS KINGDOM
ENDED UNITED & CORPORATE
JUNE 28, 2003 STATES CANADA EUROPE INTERNATIONAL & OTHER TOTAL
- ---------------------------------------------------------------------------------------------------------------------
(in millions of U.S. dollars)
External sales $504.6 $87.5 $73.1 $17.7 $ 0.5 $683.4
Intersegment sales -- 26.2 -- -- (26.2) --
Depreciation and
amortization 16.4 4.1 3.5 0.2 0.7 24.9
Operating income
(loss) 61.2 6.9 2.7 3.2 (4.0) 70.0
Property, plant and
equipment (as of
January 3, 2004) 169.3 59.1 67.8 9.5 8.6 314.3
Goodwill (as of
January 3, 2004) 49.9 22.0 -- 4.6 5.1 81.6
Intangibles and
other assets (as of
January 3, 2004) 163.2 (1.0) -- 1.0 82.6 245.8
Total assets (as of
January 3, 2004) 514.9 130.3 126.7 77.6 59.3 908.8
Additions to
property, plant and
equipment 9.3 2.2 2.5 9.1 4.8 27.9
- ---------------------------------------------------------------------------------------------------------------------
14
COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unaudited
NOTE 15 -- SEGMENT REPORTING (continued)
Intersegment sales and total assets under the Corporate & Other caption include
the elimination of intersegment sales, receivables and investments.
For the six months ended July 3, 2004, sales to one major customer accounted for
40% (June 28, 2003 -- 42%) of Cott's total sales.
Revenues by geographic area are as follows:
For the three months ended For the six months ended
-------------------------- --------------------------
JULY 3, JUNE 28, JULY 3, JUNE 28,
2004 2003 2004 2003
-------- -------- -------- --------
(in millions of U.S. dollars) (in millions of U.S. dollars)
United States $ 347.2 $ 283.0 $ 626.7 $ 513.7
Canada 54.9 55.7 94.7 87.5
United Kingdom 49.5 41.9 90.5 69.9
Other Countries 12.1 7.5 22.7 12.3
-------- -------- -------- --------
$ 463.7 $ 388.1 $ 834.6 $ 683.4
======== ======== ======== ========
Revenues are attributed to countries based on the location of the plant.
Property, plant and equipment, goodwill, and intangibles and other assets by
geographic area are as follows:
JULY 3, 2004 JANUARY 3, 2004
-------------- ---------------
(in millions of U.S. dollars)
United States $491.9 $481.4
Canada 76.6 81.9
United Kingdom 67.3 67.8
Other countries 10.5 10.6
------ ------
$646.3 $641.7
====== ======
15
COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unaudited
NOTE 16 -- DIFFERENCES BETWEEN UNITED STATES AND CANADIAN ACCOUNTING PRINCIPLES
AND PRACTICES
These consolidated financial statements have been prepared in accordance with
U.S. GAAP which differ in certain respects from those principles and practices
that Cott would have followed had its consolidated financial statements been
prepared in accordance with Canadian GAAP.
(a) Under U.S. GAAP, Cott has elected not to record compensation expense for
options issued to employees with an exercise price equal to the market
value of the options. Under Canadian GAAP, effective January 1, 2004, stock
options issued to employees subsequent to January 1, 2002 are recognized in
net income based on their fair value. As a result, compensation expense of
$4.0 million, $3.1 million net of tax of $0.9 million, was recorded in the
first six months of 2004 and $5.6 million was charged to opening retained
earnings as at January 3, 2004, as this policy was adopted on a prospective
basis with no restatement of comparative figures. Contributed surplus of
$10.3 million was recorded to reflect the charge for unexercised options
and share capital of $1.0 million was recorded to reflect the options
exercised.
(b) Under U.S. GAAP, costs of start-up activities and organization costs are
expensed as incurred. Under Canadian GAAP these costs, if they meet certain
criteria, can be capitalized and amortized over the future benefit period.
(c) Under U.S. GAAP, the adoption of the U.S. dollar in 1998 as the
presentation and reporting currency was implemented retroactively, such
that prior period financial statements are translated under the current
rate method using the foreign exchange rates in effect on those dates.
Under Canadian GAAP, the change in presentation and reporting currency was
implemented by translating all prior year financial statement amounts at
the foreign exchange rate on January 31, 1998. As a result, there is a
difference in the share capital, deficit and cumulative translation
adjustment amounts under Canadian GAAP as compared to U.S. GAAP.
(d) Under U.S. GAAP, changes in the fair value of derivative instruments of
cash flow hedges are recorded in other comprehensive income. Under Canadian
GAAP, these changes in fair value are recorded as a hedging asset.
Accordingly, the unrealized losses on cash flow hedges of $0.5 million have
been reclassified from other comprehensive income to prepaid and other
expenses.
16
COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unaudited
NOTE 16. -- DIFFERENCES BETWEEN UNITED STATES AND CANADIAN ACCOUNTING PRINCIPLES
AND PRACTICES (continued)
Under Canadian GAAP, these differences would have been reported in the
consolidated statements of income, consolidated balance sheets, consolidated
statements of shareowners' equity and consolidated statements of cash flow as
follows:
JULY 3, 2004 JANUARY 3, 2004
---------------------------------------- ---------------------------------------
U.S. GAAP CANADIAN GAAP U.S. GAAP CANADIAN GAAP
----------------- ------------------- --------------- -------------------
CONSOLIDATED BALANCE SHEETS (in millions of U.S. dollars) (in millions of U.S. dollars)
Prepaid and other expenses (d) $ 9.2 $ 9.7 $ 5.5 $ 5.5
Property, plant & equipment (b) 323.8 324.4 314.3 315.1
Goodwill (b) 81.0 81.5 81.6 82.1
Total assets 1,019.0 1,020.6 908.8 910.1
Deferred income taxes (a),(b) 45.4 43.3 40.5 41.1
Total liabilities and minority
interest 617.3 615.2 563.7 564.3
Capital stock (a),(c) 281.8 253.5 267.9 238.6
Contributed Surplus (a) -- 10.3 -- --
Retained earnings (a),(c) 128.1 106.9 83.3 70.9
Cumulative translation adjustment (c) (7.7) 34.7 (6.1) 36.3
Unrealized losses on cash flow
hedges (d) (0.5) -- -- --
Total shareowners' equity 401.7 405.4 345.1 345.8
Income reconciliation for the Income reconciliation for the
three months ended six months ended
----------------------------------- ------------------------------------
JULY 3, JUNE 28, JULY 3, JUNE 28,
2004 2003 2004 2003
----------------- ------------------- --------------- ---------------
CONSOLIDATED STATEMENTS OF INCOME (in millions of U.S. dollars) (in millions of U.S. dollars)
Net income under U.S. GAAP $ 29.4 $ 24.6 $ 44.8 $ 35.1
Cost of sales (b) (0.1) (0.1) (0.2) (0.2)
Stock compensation expense (a) (2.4) -- (4.0) --
Recovery of income taxes (a),(b) 0.6 0.1 1.0 0.1
----------------- ------------------- --------------- ---------------
Net income under Canadian GAAP $ 27.5 $ 24.6 $ 41.6 $ 35.0
================= =================== =============== ===============
Basic income per common share,
Canadian GAAP $ 0.39 $ 0.36 $ 0.59 $ 0.51
Diluted income per common share,
Canadian GAAP $ 0.38 $ 0.35 $ 0.58 $ 0.50
17
COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unaudited
NOTE 16. -- DIFFERENCES BETWEEN UNITED STATES AND CANADIAN ACCOUNTING
PRINCIPLES AND PRACTICES (continued)
Cash flow reconciliation for the Cash flow reconciliation for the
three months ended six months ended
----------------------------------- ------------------------------------
JULY 3, JUNE 28, JULY 3, JUNE 28,
2004 2003 2004 2003
---------- ------------ ----------- -----------
CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions of U.S. dollars) (in millions of U.S. dollars)
Cash provided by (used in) operating
activities U.S. GAAP $ (2.0) $ 24.1 $ 17.0 $ 49.0
Net income (a),(b) (1.9) -- (3.2) (0.1)
Depreciation & amortization (b) 0.1 0.1 0.2 0.2
Deferred income taxes (a),(b) (0.6) (0.1) (1.0) (0.1)
Other non-cash items (a) 2.4 -- 4.0 --
------ ------ ------ ------
Cash provided by (used in) operating
activities Canadian GAAP $ (2.0) $ 24.1 $ 17.0 $ 49.0
====== ====== ====== ======
18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Cott Corporation is the leading supplier of premium quality retailer brand
carbonated soft drinks in the United States, Canada and the United Kingdom.
RESULTS OF OPERATIONS
Cott reported net income of $29.4 million or $0.41 per diluted share for the
second quarter ended July 3, 2004, up 20% as compared with $24.6 million, or
$0.35 per diluted share, for the second quarter of 2003. For the first half of
2004, net income increased 28% to $44.8 million or $0.62 per diluted share, from
$35.1 million or $0.50 per diluted share in the same period last year.
SALES -- Sales were up 19% to $463.7 million in the second quarter of 2004
compared to $388.1 million for the second quarter of 2003. Excluding
acquisitions sales increased 15% from the same period last year. In December
2003, Cott acquired the retailer brand beverage business of Quality Beverage
Brands, L.L.C. ("QBB") located in North Carolina and in March 2004 Cott acquired
certain of the assets of The Cardinal Companies of Elizabethtown, LLC
("Cardinal") located in Kentucky, which, together, added $17.8 million in the
aggregate to sales for the second quarter of 2004. Excluding the impact of the
acquisitions and foreign exchange rates, sales increased 13% compared to the
second quarter of 2003.
Total 8oz equivalent case volume was 328.6 million cases in the second quarter
of 2004, up 23% from 267.3 million cases in the second quarter of 2003.
Excluding acquisitions and concentrate sales, volume was 237.6 million 8oz
equivalent cases up 14% compared to the second quarter of 2003. The acquisitions
contributed 9.2 million 8oz equivalent cases to sales volume in the second
quarter of 2004. The sale of concentrates is a high volume but low dollar
component of Cott's overall sales.
Sales for the first half of 2004 increased to $834.6 million, 22% higher than
the same period last year and up 15% when the impact of acquisitions and foreign
exchange rates are excluded. The QBB and Cardinal acquisitions contributed $30.0
million to sales for the first half of 2004.
Total 8oz equivalent case volume was 598.7 million cases for the first half of
2004, up 26% from 475.4 million cases in the first half of 2003. Excluding
acquisitions and concentrate sales, volume was 430.6 million 8oz equivalent
cases for the first half of 2004, an increase of 15% compared to the first half
of 2003. The acquisitions contributed 15.8 million 8oz equivalent cases to sales
volume in the first half of 2004.
Sales in the U.S. during the second quarter of 2004 increased to $340.4 million,
up 22% from $278.0 million in the second quarter of 2003. Excluding the QBB and
Cardinal acquisitions, sales increased 16% for the quarter. In the first half of
2004, sales of $613.5 million grew by 22% compared with the first half of 2003.
Excluding the acquisitions, sales in the first half of 2004 increased 16% as
compared to the first half of 2003. The increase in sales for both the quarter
and the first half of the year was primarily driven by a higher volume of
carbonated soft drink sales with existing customers.
Sales in Canada were $54.9 million for the second quarter of 2004, down 1% from
$55.7 million in the second quarter of 2003 and down 5% excluding the impact of
foreign exchange rates. The decrease in sales for the quarter is a reflection of
an overall carbonated soft drink industry volume decrease in Canada as compared
to last year. For the first half of the year, sales of $94.7 million were 8%
higher than $87.5 million for the same period last year, and up 1% when the
effect of foreign exchange
19
rates is taken into account. The impact of the strengthening of the Canadian
dollar was offset by lower sales in the second quarter of 2004.
Sales in the U.K. and Europe of $51.7 million in the second quarter of 2004
increased 19% from $43.6 million in the same period in 2003. Excluding the
impact of the strengthened U.K. pound, sales increased 6%. For the first half of
2004, sales of $94.4 million were up 29% from the same period in 2003. Excluding
the impact of foreign exchange rates, sales were up 14%. The increase in the
second quarter is due primarily to increased business with existing customers.
Sales in the first half of 2004 were also impacted by new business gained in the
second quarter of 2003, which contributed approximately $5.6 million to sales in
the first quarter of 2004.
The International business unit includes Mexico, Royal Crown International and
the Asia business. Sales by this business unit were $16.1 million for the second
quarter of 2004, up 53% from $10.5 million in the second quarter of 2003. For
the first half of the year, sales of $30.8 million were 74% higher than $17.7
million for the same period last year. Much of the growth for this business unit
is attributable to Mexico, which accounted for $4.1 million of the increase in
the second quarter and $9.7 million of the increase in the first half of 2004.
The increase in sales for Mexico is due to growth in retailer brand sales with
existing customers and higher non-supermarket channel sales.
GROSS PROFIT -- Gross profit for the second quarter of 2004 was $85.5 million,
or 18.4% of sales, down from 19.8% of sales in the second quarter of 2003. Gross
profit in the first half of 2004 was $155.9 million, or 18.7% of sales, compared
to gross profit of $133.3 million, or 19.5% of sales, in the first half of 2003.
The decrease for both the quarter and the first half of the year was a
consequence of higher input costs, combined with the impact of excess logistics
costs resulting from higher than projected volume in the U.S. These logistics
costs included additional co-pack fees, inter-plant shipping costs and customer
freight.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") -- SG&A was $34.1 million
for the second quarter of 2004, an increase of $1.6 million, or 5%, from $32.5
million for the second quarter of 2003. For the first six months of 2004, SG&A
of $72.8 million was $8.7 million, or 14%, higher than the same period in 2003.
In the first quarter of 2004, Cott recorded a $2.3 million provision against an
export receivable in Canada, which was included in SG&A. The impact of foreign
exchange rates in the U.K. and Canada business segments accounted for $1.9
million of the increase in the first half of the year and $0.5 million of the
second quarter increase. The remaining increase was due to increased costs
incurred to meet Cott's growing business needs. As a percentage of sales, SG&A
declined to 7.4% during the second quarter of 2004, down from 8.4% for the same
period last year and to 8.7%, down from 9.4% in the first half of the year.
In the second quarter of 2004, Cott signed a ten year information technology
contract with CGI Group Inc. ("CGI"). The contract is valued at approximately
$155 million over the ten year term.
INCOME TAXES -- Cott recorded an income tax provision of $14.6 million for the
second quarter and $22.9 million for the first half of 2004 as compared with
$12.4 million and $17.8 million, respectively, for the same periods last year.
For the first half of 2004, the overall effective tax rate was 33.7%, which is
consistent with the same period last year.
FINANCIAL CONDITION -- Cash used in operating activities for the first half of
2004 was $5.4 million, after capital expenditures of $22.4 million, as compared
to the first half of 2003 in which cash provided by operating activities was
$21.1 million, after capital expenditures of $27.9 million. Cash from operations
decreased due to a decrease in the net change in working capital of $45.6
million primarily related to volume growth in the U.S.
20
Cash decreased $8.8 million in the first half of 2004 to $9.6 million.
INVESTING ACTIVITIES -- In March 2004, Cott acquired certain of the assets of
Cardinal, including a bottling facility. The acquisition is expected to add
approximately $12 million a year in carbonated soft drink sales and additional
manufacturing capacity to support Cott's growing demand for retailer branded
beverages.
The total purchase price for the acquisition was $17.7 million, including
estimated acquisition costs of $0.3 million. The acquisition was funded from
cash flow from operations and short-term borrowings.
CAPITAL EXPENDITURES -- Capital expenditures for the first six months of 2004
were $22.4 million compared with $27.9 million in the same period last year.
Major expenditures through the first half of 2004 included $17.1 million on
manufacturing equipment and plates and film, primarily in the U.S., to meet the
needs of Cott's growing business and $2.9 million on information technology
improvements. Subsequent to the end of the second quarter of 2004, Cott
announced plans to build a new beverage manufacturing facility in Dallas Fort
Worth, Texas. Cott expects to commence construction in the third quarter of 2004
and anticipates that the plant will be ready for full production by the fourth
quarter of 2005. Cott expects capital expenditures for 2004 to be approximately
$65.0 million.
CAPITAL RESOURCES AND LONG-TERM DEBT -- Cott's sources of capital include
operating cash flows, short term borrowings under current credit facilities,
issuance of public and private debt and issuance of equity securities.
Management believes Cott has adequate financial resources to meet its ongoing
cash requirements for operations and capital expenditures, as well as its other
financial obligations based on its operating cash flows and currently available
credit.
Cott's current credit facilities provide maximum credit of $152.5 million. At
July 3, 2004, approximately $50.2 million of the committed revolving credit
facility in the U.S. and Canada and $22.7 million of the demand revolving credit
facility in the U.K. were available. The weighted average interest rate on
outstanding borrowings under the credit facilities was 3.17% as of July 3, 2004,
as compared to 3.1% as of January 3, 2004.
As of July 3, 2004, Cott's long-term debt totaled $276.9 million as compared
with $279.0 million at the end of 2003. At the end of the second quarter of
2004, debt consisted of $269.4 million in 8% senior subordinated notes with a
face value of $275 million and $7.5 million of other debt.
OUTSTANDING SHARE DATA -- As of July 3, 2004, Cott had 71,121,028 common shares
and 4,545,757 common share options outstanding. Of the common share options
outstanding, 1,485,007 options were exercisable as of July 3, 2004.
CANADIAN GAAP -- Under Canadian GAAP, in the first six months of 2004, Cott
reported net income of $41.6 million and total assets of $1,020.6 million
compared to net income and total assets under U.S. GAAP of $44.8 million and
$1,019.0 million, respectively, in the first six months of 2004.
The main U.S./Canadian GAAP difference in the first six months of 2004 was the
accounting of stock options. Under Canadian GAAP, effective January 1, 2004,
stock options issued to employees subsequent to January 1, 2002 are recognized
in net income based on their fair value. As a result, compensation expense of
$2.4 million, $1.9 million after tax of $0.5 million, was recorded in the second
quarter of 2004, compensation expense of $4.0 million, $3.1 million after tax of
$0.9 million, was recorded in the first half of 2004 and $5.6 million was
charged to opening retained earnings as this policy was adopted on a prospective
basis. Under U.S. GAAP, Cott has elected not to record compensation expense for
options issued to employees with an exercise price equal to the market value of
the options.
21
There were no material U.S./Canadian GAAP differences for the first six months
of 2003.
OUTLOOK -- Cott's ongoing focus is to increase sales, market share and
profitability for Cott and its customers. While the carbonated soft drink
industry continues to experience slow volume growth, the retailer brand segment
is experiencing significant positive growth, especially in the U.S. However, as
there is intense price competition from heavily promoted global and regional
brands in the beverage industry, Cott's major opportunity for growth depends on
management's execution of its strategies and on retailers' continued commitment
to their retailer brand soft drink programs.
In 2004, Cott intends to continue to strive to expand the business through
growing sales with existing customers and the pursuit of new customers and
channels and through new acquisitions and alliances. Cott is not able to
accurately predict the success or timing of such efforts. As of the date of this
report, sales are expected to grow between 15% and 18% for 2004 and earnings per
diluted share are expected to be between $1.23 and $1.27 for the year. The
majority of this growth is anticipated to come from the U.S., Canada and the
U.K. and is expected to be achieved through increased sales with existing
customers. Along with sales growth from major customers, management also
believes there are significant opportunities for growth of the U.S. business
unit as retailer brand penetration in the U.S. market is not currently as high
as in other markets. The Canadian business unit intends to focus on innovation
and entry into new channels, such as convenience stores and gas and food
service. The U.K. business unit will continue to focus on innovation as a way of
creating new sales opportunities. Cott also believes that significant growth
opportunities exist in Mexico. Mexico has a population of approximately 100
million and it is second only to the United States in per-capita consumption of
soft drinks.
RISKS AND UNCERTAINTIES -- Risks and uncertainties include national brand
pricing strategies, commitment of major customers to retailer brand programs,
stability of procurement costs for items such as sweetener, packaging materials
and other ingredients, the successful integration of new acquisitions, the
ability to protect intellectual property and fluctuations in interest rates and
foreign currencies versus the U.S. dollar.
Sales to Cott's top customer (Wal-Mart Stores, Inc.) in the first six months of
2004 and 2003 accounted for 40% and 42%, respectively, of Cott's total sales.
Sales to the top ten customers in the first six months of 2004 and 2003
accounted for 68% and 72%, respectively, of Cott's total sales. The loss of any
significant customer, or customers which in the aggregate represent a
significant portion of Cott's sales, could have a material adverse effect on the
Company's operating results and cash flows.
FORWARD-LOOKING STATEMENTS -- In addition to historical information, this report
and the reports and documents incorporated by reference in this report contain
statements relating to future events and Cott's future results. These statements
are "forward-looking" within the meaning of the Private Securities Litigation
Reform Act of 1995 and include, but are not limited to, statements that relate
to projections of sales, earnings, earnings per share, cash flows, capital
expenditures or other financial items, discussions of estimated future revenue
enhancements and cost savings. These statements also relate to Cott's business
strategy, goals and expectations concerning its market position, future
operations, margins, profitability, liquidity and capital resources. Generally,
words such as "anticipate", "believe", "continue", "could", "estimate",
"expect", "intend", "may", "plan", "predict", "project", "should" and similar
terms and phrases are used to identify forward-looking statements in this report
and in the documents incorporated in this report by reference. These
forward-looking statements are made as of the date of this report.
Although Cott believes the assumptions underlying these forward-looking
statements are reasonable, any of these assumptions could prove to be inaccurate
and, as a result, the forward-looking statements based
22
on those assumptions could be incorrect. Cott's operations involve risks and
uncertainties, many of which are outside of its control, and any one or any
combination of these risks and uncertainties could also affect whether the
forward-looking statements ultimately prove to be correct.
The following are some of the factors that could affect Cott's financial
performance, including but not limited to sales, earnings and cash flows, or
could cause actual results to differ materially from estimates contained in or
underlying the forward-looking statements:
o loss of key customers, particularly Wal-Mart, and the commitment of
retailer brand beverage customers to their own retailer brand beverage
programs;
o increases in competitor consolidations and other market-place
competition, particularly among branded beverage products;
o Cott's ability to identify acquisition and alliance candidates and to
integrate into its operations the businesses and product lines that
are acquired or allied with;
o Cott's ability to secure additional production capacity either through
acquisitions, or third party manufacturing arrangements;
o fluctuations in the cost and availability of beverage ingredients and
packaging supplies, and Cott's ability to maintain favorable
arrangements and relationships with its suppliers;
o unseasonably cold or wet weather, which could reduce demand for Cott's
beverages;
o Cott's ability to protect the intellectual property inherent in new
and existing products;
o adverse rulings, judgments or settlements in Cott's existing
litigation, and the possibility that additional litigation will be
brought against Cott;
o product recalls or changes in or increased enforcement of the laws and
regulations that affect Cott's business;
o currency fluctuations that adversely affect the exchange between the
U.S. dollar on one hand and the pound sterling, the Canadian dollar
and other currencies on the other;
o changes in interest rates;
o changes in tax laws and interpretations of tax laws;
o changes in consumer tastes and preferences and market demand for new
and existing products;
o interruption in transportation systems, labor strikes, work stoppages
and other interruptions or difficulties in the employment of labor or
transportation in Cott's markets; and
o changes in general economic and business conditions.
Many of these factors are described in greater detail in Cott's other filings
with the U.S. Securities and Exchange Commission. Cott undertakes no obligation
to update any information contained in this report or to publicly release the
results of any revisions to forward-looking statements to reflect events or
circumstances that Cott may become aware of after the date of this report. Undue
reliance should not be placed on forward-looking statements.
All future written and oral forward-looking statements attributable to Cott or
persons acting on Cott's behalf are expressly qualified in their entirety by the
foregoing.
23
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to Item 7A: Quantitative and Qualitative Disclosures about
Market Risk described in Cott's Annual Report on Form 10-K for the fiscal year
ended January 3, 2004 and to Item 3: Quantitative and Qualitative Disclosures
about Market Risk found in Cott's Quarterly Report on Form 10-Q for the quarter
ended April 3, 2004.
In the first half of 2004, Cott entered into cash flow hedges to mitigate
exposure to declines in the value of the Canadian dollar and British pound
attributable to certain forecasted U.S. dollar raw material purchases of the
Canada and U.K. and Europe business segments. The hedges consist of monthly
foreign exchange options to buy U.S. dollars at fixed rate per Canadian dollar
and British pound and mature at various dates through to December 29, 2004.
Cott's payment for the foreign exchange options is included in prepaid and other
expenses.
The instruments are cash flow hedges under SFAS No. 133; accordingly changes in
the fair value of the cash flow hedge instruments are recognized in accumulated
other comprehensive income. Amounts recognized in accumulated other
comprehensive income and prepaid and other expenses are recorded in earnings in
the same periods in which the forecasted purchases or payments affect earnings.
At July 3, 2004, the fair value of the options was $0.5 million and $0.5 million
unrealized loss has been recorded in other comprehensive income. See "Note 7
Derivative Financial Instruments."
Cott's sales outside the U.S. are concentrated principally in the U.K. and
Canada. Cott believes that its foreign currency exchange rate risk has been
immaterial given the historic stability of the U.S. dollar exchange rates with
respect to the foreign currencies to which Cott has its principal exposure.
However, there can be no assurance that these exchange rates will remain stable
or that Cott's exposure to foreign currency exchange rate risk will not increase
in the future.
ITEM 4. CONTROLS AND PROCEDURES
Cott's management, including Cott's Chief Executive Officer and Chief Financial
Officer, have concluded that its disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) are effective, based on their
evaluation of these controls and procedures as of the end of the period covered
by this report. There have been no significant changes in Cott's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation.
24
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the legal proceedings described in Cott's Annual Report on
Form 10-K for the fiscal year ended January 3, 2004 and Cott's Quarterly Report
on Form 10-Q for the quarter ended April 3, 2004.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual and Special Meeting of the Cott's Shareholders was held on April
27, 2004.
(b) The meeting was held to consider and vote on the following matters:
---------------------------------------------------------------------------------------------
MATTERS SUBMITTED TO A VOTE FOR AGAINST/ BROKER
WITHHELD NON-VOTES
---------------------------------------------------------------------------------------------
To elect directors for a period of
one year:
Colin J. Adair 54,014,993 1,350,066 --
W. John Bennett 55,327,693 37,366 --
C. Hunter Boll 53,938,292 1,426,767 --
Serge Gouin 55,145,029 220,030 --
Thomas M. Hagerty 30,789,045 24,576,014 --
Stephen H. Halperin 55,250,465 114,594 --
David V. Harkins 53,937,192 1,427,867 --
Philip B. Livingston 55,327,693 37,366 --
Christine A. Magee 55,325,393 39,666 --
John K. Sheppard 55,251,122 113,937 --
Donald G. Watt 53,069,602 2,295,457 --
Frank E. Weise III 55,232,296 132,763 --
---------------------------------------------------------------------------------------------
To appoint
PricewaterhouseCoopers LLP
as auditors 55,349,800 4,960 --
---------------------------------------------------------------------------------------------
25
---------------------------------------------------------------------------------------------
To approve Cott's executive
investment share purchase plan 51,426,866 592,531 3,318,729
---------------------------------------------------------------------------------------------
To approve amendments to
Cott's 1986 common share option
plan 31,427,991 20,597,637 3,318,729
---------------------------------------------------------------------------------------------
ITEM 6. FINANCIAL STATEMENT SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K
1. Financial Statement Schedules
Schedule III -- Consolidating Financial Statements
2. Exhibits
Number Description
------ -----------
3.1 Articles of Incorporation of Cott (incorporated by reference
to Exhibit 3.1 to Cott's Form 10-K dated March 31, 2000).
3.2 By-laws of Cott (incorporated by reference to Exhibit 3.2 to
Cott's Form 10-K dated March 8, 2002).
10.1 (*) Employment Agreement, made as of March 11, 2004, between
Cott Corporation and John K. Sheppard (incorporated by
reference to Exhibit 10.4 to Cott's Registration Statement
on Form S-3, Registration No. 333-112092).
10.2 (*) Letter Agreement, dated as of April 28, 2004, between
Cott Corporation and Frank E. Weise III (incorporated by
reference to Exhibit 10.5 to Cott's Registration Statement
on Form S-3, Registration No. 333-112092).
31.1 Certification of the chairman, and chief executive officer
pursuant to section 302 of the Sarbanes-Oxley Act of 2002
for the quarterly period ended July 3, 2004.
31.2 Certification of the executive vice-president and chief
financial officer pursuant to section 302 of the
Sarbanes-Oxley Act of 2002 for the quarterly period ended
July 3, 2004.
32.1 Certification of the chairman, and chief executive officer
pursuant to section 906 of the Sarbanes-Oxley Act of 2002
for the quarterly period ended July 3, 2004.
32.2 Certification of the executive vice-president and chief
financial officer pursuant to section 906 of the
Sarbanes-Oxley Act of 2002 for the quarterly period ended
July 3, 2004.
(*) Indicates a management contract or compensatory plan.
In accordance with SEC Release No. 33-8238, Exhibits 32.1 and 32.2 are to be
treated as "accompanying" this report rather than "filed" as part of the report.
26
3. Reports on Form 8-K
1. Cott filed a Current Report on Form 8-K, dated April 20, 2004,
furnishing a press release that announced its financial results for
the three months ended April 3, 2004.
2. Cott filed a Current Report on Form 8-K, dated July 22, 2004,
announcing the resignations of C. Hunter Boll, Thomas M. Hagerty and
David V. Harkins from Cott's Board of Directors as of July 23, 2004
and furnishing a press release that announced its financial results
for the three and six months ended July 3, 2004.
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COTT CORPORATION
(Registrant)
Date: August 10, 2004 /s/ Raymond P. Silcock
Raymond P. Silcock
Executive Vice President &
Chief Financial Officer
(On behalf of the Company)
Date: August 10, 2004 /s/ Tina Dell'Aquila
Tina Dell'Aquila
Vice President, Controller and Assistant
Secretary
(Principal accounting officer)
28
SCHEDULE III -- CONSOLIDATING FINANCIAL STATEMENTS
Cott Beverages Inc., a wholly owned subsidiary of Cott, has entered into
financing arrangements that are guaranteed by Cott and certain other wholly
owned subsidiaries of Cott (the "Guarantor Subsidiaries"). Such guarantees are
full, unconditional and joint and several.
The following supplemental financial information sets forth on an unconsolidated
basis, balance sheets, statements of income and cash flows for Cott Corporation,
Cott Beverages Inc., Guarantor Subsidiaries and Cott's other subsidiaries (the
"Non-guarantor Subsidiaries"). The supplemental financial information reflects
the investments of Cott and Cott Beverages Inc. in their respective subsidiaries
using the equity method of accounting.
COTT CORPORATION
CONSOLIDATING STATEMENTS OF INCOME
- -------------------------------------------------------------------------------
(in millions of U.S. dollars, unaudited)
FOR THE THREE MONTHS ENDED JULY 3, 2004
----------------------------------------------------------------------------------
COTT
COTT BEVERAGES GUARANTOR NON-GUARANTOR ELIMINATION
CORPORATION INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED
----------- --------- ------------ ------------- ----------- ------------
SALES $ 61.2 $ 316.7 $ 13.0 $ 82.8 $ (10.0) $ 463.7
Cost of sales 49.6 259.5 10.4 68.7 (10.0) 378.2
------- -------- ------- ------- ------- -------
GROSS PROFIT 11.6 57.2 2.6 14.1 -- 85.5
Selling, general and administrative
expenses 9.4 16.4 1.2 7.1 -- 34.1
Unusual items -- -- -- (0.5) -- (0.5)
------- -------- ------- ------- ------- -------
OPERATING INCOME 2.2 40.8 1.4 7.5 -- 51.9
Other expense, net 0.4 -- (0.2) (0.2) -- --
Interest expense (income), net -- 8.4 (1.7) (0.1) -- 6.6
Minority interest -- -- -- 1.2 -- 1.2
------- -------- ------- ------- ------- -------
INCOME BEFORE INCOME TAXES AND EQUITY
INCOME 1.8 32.4 3.3 6.6 -- 44.1
Income taxes (0.3) (13.1) -- (1.2) -- (14.6)
Equity income 27.9 2.8 20.4 -- (51.2) (0.1)
------- -------- ------- ------- ------- -------
NET INCOME $ 29.4 $ 22.1 $ 23.7 $ 5.4 $ (51.2) $ 29.4
======= ======== ======= ======= ======= =======
29
COTT CORPORATION
CONSOLIDATING STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
(in millions of U.S. dollars, unaudited)
FOR THE SIX MONTHS ENDED JULY 3, 2004
----------------------------------------------------------------------------------
COTT
COTT BEVERAGES GUARANTOR NON-GUARANTOR ELIMINATION
CORPORATION INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED
----------- --------- ------------ ------------- ----------- ------------
SALES $ 106.7 $ 570.7 $ 23.7 $ 151.5 $ (18.0) $ 834.6
Cost of sales 86.8 462.1 19.7 128.1 (18.0) 678.7
------- -------- ------- ------- ------- -------
GROSS PROFIT 19.9 108.6 4.0 23.4 -- 155.9
Selling, general and administrative
expenses 23.1 35.1 2.1 12.5 -- 72.8
Unusual items -- -- -- (0.5) -- (0.5)
------- -------- ------- ------- ------- -------
OPERATING INCOME (3.2) 73.5 1.9 11.4 -- 83.6
Other expense, net 0.7 0.1 (0.4) (0.1) -- 0.3
Interest expense (income), net -- 16.3 (3.1) -- -- 13.2
Minority interest -- -- -- 2.2 -- 2.2
------- -------- ------- ------- ------- -------
INCOME BEFORE INCOME TAXES AND EQUITY
INCOME (3.9) 57.1 5.4 9.3 -- 67.9
Income taxes 1.5 (22.6) -- (1.8) -- (22.9)
Equity income (loss) 47.2 4.5 36.7 -- (88.6) (0.2)
------- -------- ------- ------- ------- -------
NET INCOME $ 44.8 $ 39.0 $ 42.1 $ 7.5 $ (88.6) $ 44.8
======= ======= ======= ======= ======= ======
30
COTT CORPORATION
CONSOLIDATING BALANCE SHEETS
- --------------------------------------------------------------------------------
(in millions of U.S. dollars, unaudited)
AS OF JULY 3, 2004
----------------------------------------------------------------------------------
COTT
COTT BEVERAGES GUARANTOR NON-GUARANTOR ELIMINATION
CORPORATION INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED
----------- --------- ------------ ------------- ----------- ------------
ASSETS
Current assets
Cash $ -- $ (2.0) $ -- $ 11.6 $ -- $ 9.6
Accounts receivable 53.3 129.6 15.2 50.3 (23.8) 224.6
Inventories 22.1 72.9 5.8 28.5 -- 129.3
Prepaid expenses 2.6 2.5 0.9 3.2 -- 9.2
------- -------- -------- -------- --------- --------
78.0 203.0 21.9 93.6 (23.8) 372.7
Property, plant and equipment 51.8 170.7 19.6 81.7 -- 323.8
Goodwill 20.7 46.0 13.5 0.8 -- 81.0
Intangibles and other assets 1.2 181.0 12.1 47.2 -- 241.5
Due from affiliates 54.4 4.7 96.0 274.9 (430.0) --
Investments in subsidiaries 308.4 74.1 41.5 -- (424.0) --
------- -------- -------- -------- --------- --------
$ 514.5 $ 679.5 $ 204.6 $ 498.2 $ (877.8) $1,019.0
======= ======== ======== ======== ========- ========
LIABILITIES
Current liabilities
Short-term borrowings $ 2.1 $ 76.7 $ 1.1 $ 4.8 $ -- $ 84.7
Current maturities of long-term debt -- 1.2 -- 0.3 -- 1.5
Accounts payable and accrued
liabilities 37.1 95.4 9.4 66.6 (23.8) 184.7
------- -------- -------- -------- --------- --------
39.2 173.3 10.5 71.7 (23.8) 270.9
Long-term debt -- 275.4 -- -- -- 275.4
Due to affiliates 65.3 99.3 210.5 54.9 (430.0) --
Deferred income taxes 8.3 31.0 -- 6.1 -- 45.4
------- -------- -------- -------- --------- --------
112.8 579.0 221.0 132.7 (453.8) 591.7
------- -------- -------- -------- --------- --------
Minority interest -- -- -- 25.6 -- 25.6
SHAREOWNERS' EQUITY
Capital stock
Common shares 281.8 275.8 142.7 451.4 (869.9) 281.8
Retained earnings (deficit) 128.1 (175.3) (159.1) (88.9) 423.3 128.1
Accumulated other comprehensive income
(loss) (8.2) -- -- (22.6) 22.6 (8.2)
------- -------- -------- -------- --------- --------
401.7 100.5 (16.4) 339.9 (424.0) 401.7
------- -------- -------- -------- --------- --------
$ 514.5 $ 679.5 $ 204.6 $ 498.2 $ (877.8) $1,019.0
======= ======== ======== ======== ========= ========
31
COTT CORPORATION
CONSOLIDATING STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
(in millions of U.S. dollars, unaudited)
FOR THE SIX MONTHS ENDED JULY 3, 2004
----------------------------------------------------------------------------------
COTT
COTT BEVERAGES GUARANTOR NON-GUARANTOR ELIMINATION
CORPORATION INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED
----------- --------- ------------ ------------- ----------- ------------
OPERATING ACTIVITIES
Net income $ 44.8 $ 39.0 $ 42.1 $ 7.5 $ (88.6) $ 44.8
Depreciation and amortization 4.7 15.6 2.9 6.8 -- 30.0
Amortization of financing fees -- 0.3 -- -- -- 0.3
Deferred income taxes (1.6) 4.2 -- 1.7 -- 4.3
Minority interest -- -- -- 2.2 -- 2.2
Equity income (loss), net of
distributions (47.2) (2.1) (36.7) -- 86.2 0.2
Other non-cash items 0.6 (0.5) -- 0.5 -- 0.6
Net change in non-cash working capital
from continuing operations (22.9) (38.9) (4.4) 0.8 -- (65.4)
------- ------- ------- ------- ------- -------
Cash provided by (used in) operating
activities (21.6) 17.6 3.9 19.5 (2.4) 17.0
------- ------- ------- ------- ------- -------
INVESTING ACTIVITIES
Additions to property, plant and
equipment (2.6) (15.1) (1.0) (3.7) -- (22.4)
Acquisitions and equity investments -- (17.7) -- -- -- (17.7)
Advances to affiliates 3.5 -- (8.1) -- 4.6 --
Investment in subsidiary (5.0) -- -- -- 5.0 --
Other 0.6 1.9 0.2 0.4 -- 3.1
------- ------- ------- ------- ------- -------
Cash used in investing activities (3.5) (30.9) (8.9) (3.3) 9.6 (37.0)
------- ------- ------- ------- ------- -------
FINANCING ACTIVITIES
Payments of long-term debt -- (0.7) -- (1.8) -- (2.5)
Short-term borrowings 2.0 4.5 0.1 (0.2) -- 6.4
Advances from affiliates -- 8.1 -- (3.5) (4.6) --
Distributions to subsidiary minority
shareowner -- -- -- (2.2) -- (2.2)
Issue of common shares 9.9 -- 5.0 -- (5.0) 9.9
Dividends paid -- -- -- (2.4) 2.4 --
Other -- -- (0.2) -- -- (0.2)
------- ------- ------- ------- ------- -------
Cash provided by (used in) financing
activities 11.9 11.9 4.9 (10.1) (7.2) 11.4
------- ------- ------- ------- ------- -------
Effect of exchange rate changes on cash (0.2) -- -- -- -- (0.2)
------- ------- ------- ------- ------- -------
NET INCREASE (DECREASE) IN CASH (13.4) (1.4) (0.1) 6.1 -- (8.8)
CASH, BEGINNING OF PERIOD 13.4 (0.6) 0.1 5.5 -- 18.4
------- ------- ------- ------- ------- -------
CASH, END OF PERIOD $ -- $ (2.0) $ -- $ 11.6 $ -- $ 9.6
======= ======= ======= ======= ======= =======
32
COTT CORPORATION
CONSOLIDATING STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
(in millions of U.S. dollars, unaudited)
FOR THE THREE MONTHS ENDED JUNE 28, 2003
----------------------------------------------------------------------------------
COTT
COTT BEVERAGES GUARANTOR NON-GUARANTOR ELIMINATION
CORPORATION INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED
----------- --------- ------------ ------------- ----------- ------------
SALES $ 70.8 $ 257.8 $ 10.8 $ 66.6 $ (17.9) $ 388.1
Cost of sales 57.9 205.9 8.7 56.6 (17.9) 311.2
------- -------- ------- ------- ------- --------
GROSS PROFIT 12.9 51.9 2.1 10.0 -- 76.9
Selling, general and administrative expenses 6.9 18.4 1.6 5.6 -- 32.5
Unusual items -- (0.2) -- (0.6) -- (0.8)
------- -------- ------- ------- ------- --------
OPERATING INCOME 6.0 33.7 0.5 5.0 -- 45.2
Other expense, net 0.4 -- -- 0.5 -- 0.9
Interest expense (income), net -- 8.0 (1.1) (0.3) -- 6.6
Minority interest -- -- -- 0.7 -- 0.7
------- -------- ------- ------- ------- --------
INCOME BEFORE INCOME TAXES AND EQUITY
INCOME 5.6 25.7 1.6 4.1 -- 37.0
Income taxes (1.6) (9.8) -- (1.0) -- (12.4)
Equity income 20.6 1.3 16.7 -- (38.6) --
------- -------- ------- ------- ------- --------
NET INCOME $ 24.6 $ 17.2 $ 18.3 $ 3.1 $ (38.6) $ 24.6
======= ======== ======= ======= ======= ========
FOR THE SIX MONTHS ENDED JUNE 28, 2003
--------------------------------------------------------------------------------
COTT
COTT BEVERAGES GUARANTOR NON-GUARANTOR ELIMINATION
CORPORATION INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED
----------- --------- ------------ ------------- ----------- ------------
SALES $ 113.6 $ 466.5 $ 20.7 $ 113.1 (30.5) $ 683.4
Cost of sales 95.1 370.5 17.7 97.3 (30.5) 550.1
-------- -------- ------- -------- ----- --------
GROSS PROFIT 18.5 96.0 3.0 15.8 -- 133.3
Selling, general and administrative expenses 11.9 38.4 2.7 11.1 -- 64.1
Unusual items -- (0.2) -- (0.6) -- (0.8)
-------- -------- ------- -------- ----- --------
OPERATING INCOME 6.6 57.8 0.3 5.3 -- 70.0
Other expense, net 0.9 0.1 -- 0.4 -- 1.4
Interest expense (income), net -- 16.8 (2.2) (0.3) -- 14.3
Minority interest -- -- -- 1.3 -- 1.3
-------- -------- ------- -------- ----- --------
INCOME BEFORE INCOME TAXES AND EQUITY
INCOME 5.7 40.9 2.5 3.9 -- 53.0
Income taxes (1.7) (15.1) -- (1.0) -- (17.8)
Equity income (loss) 31.1 1.7 27.2 -- (60.1) (0.1)
-------- -------- ------- -------- ----- --------
NET INCOME $ 35.1 $ 27.5 $ 29.7 $ 2.9 $ (60.1) $ 35.1
======== ======== ======= ======== ======= ========
33
COTT CORPORATION
CONSOLIDATING BALANCE SHEETS
- --------------------------------------------------------------------------------
(in millions of U.S. dollars)
AS OF JANUARY 3, 2004
-----------------------------------------------------------------------------------
COTT
COTT BEVERAGES GUARANTOR NON-GUARANTOR ELIMINATION
CORPORATION INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED
----------- --------- ------------ ------------- ----------- ------------
ASSETS
Current assets
Cash $ 13.4 $ (0.6) $ 0.1 $ 5.5 $ -- $ 18.4
Accounts receivable 46.6 89.2 11.6 41.5 (40.1) 148.8
Inventories 16.3 54.1 4.3 19.7 -- 94.4
Prepaid expenses 1.9 1.2 0.8 1.6 -- 5.5
-------- --------- ------- ------- -------- --------
78.2 143.9 16.8 68.3 (40.1) 267.1
Property, plant and equipment 56.1 154.7 21.2 82.3 -- 314.3
Goodwill 21.2 46.1 13.5 0.8 -- 81.6
Intangibles and other assets 2.2 181.4 12.6 49.6 -- 245.8
Due from affiliates 57.5 4.8 87.9 275.4 (425.6) --
Investments in subsidiaries 252.2 76.0 4.8 -- (333.0) --
-------- --------- ------- ------- -------- --------
$ 467.4 $ 606.9 $ 156.8 $ 476.4 $ (798.7) $ 908.8
-------- --------- ------- ------- -------- --------
LIABILITIES
Current liabilities
Short-term borrowings $ -- $ 72.2 $ 1.0 $ 4.9 $ -- $ 78.1
Current maturities of long-term debt -- 1.1 -- 2.2 -- 3.3
Accounts payable and accrued
liabilities 47.0 80.9 6.4 46.3 (40.1) 140.5
-------- --------- ------- ------- -------- --------
47.0 154.2 7.4 53.4 (40.1) 221.9
Long-term debt -- 275.7 -- -- -- 275.7
Due to affiliates 65.9 91.1 210.5 58.1 (425.6) --
Deferred income taxes 9.4 24.4 2.4 4.3 -- 40.5
-------- --------- ------- ------- -------- --------
122.3 545.4 220.3 115.8 (465.7) 538.1
-------- --------- ------- ------- -------- --------
Minority interest -- -- -- 25.6 -- 25.6
SHAREOWNERS' EQUITY
Capital stock
Common shares 267.9 275.8 137.7 451.4 (864.9) 267.9
Retained earnings (deficit) 83.3 (214.3) (201.2) (94.1) 509.6 83.3
Accumulated other comprehensive loss (6.1) -- -- (22.3) 22.3 (6.1)
-------- --------- ------- ------- -------- --------
345.1 61.5 (63.5) 335.0 (333.0) 345.1
-------- --------- ------- ------- -------- --------
$ 467.4 $ 606.9 $ 156.8 $ 476.4 $ (798.7) $ 908.8
======== ========= ======= ======= ======== ========
34
COTT CORPORATION
CONSOLIDATING STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
(in millions of U.S. dollars, unaudited)
FOR THE SIX MONTHS ENDED JUNE 28, 2003
---------------------------------------------------------------------------------
COTT
COTT BEVERAGES GUARANTOR NON-GUARANTOR ELIMINATION
CORPORATION INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED
----------- --------- ------------ ------------- ----------- ------------
OPERATING ACTIVITIES
Net income $ 35.1 $ 27.5 $ 29.7 $ 2.9 $ (60.1) $ 35.1
Depreciation and amortization 4.0 12.2 3.0 5.7 -- 24.9
Amortization of financing fees -- 1.3 -- -- -- 1.3
Deferred income taxes 1.6 4.0 -- 0.9 -- 6.5
Minority interest -- -- -- 1.3 -- 1.3
Equity income (loss), net of
distributions (31.1) 0.1 (27.2) -- 58.3 0.1
Other non-cash items 0.6 (0.7) -- (0.3) -- (0.4)
Net change in non-cash working capital (5.8) (9.2) (2.8) (2.0) -- (19.8)
------- ------- ------- ------- ------- -------
Cash provided by operating activities 4.4 35.2 2.7 8.5 (1.8) 49.0
------- ------- ------- ------- ------- -------
INVESTING ACTIVITIES
Additions to property, plant and
equipment (5.9) (9.3) (0.8) (11.9) -- (27.9)
Acquisitions and equity investments -- -- -- (0.5) -- (0.5)
Advances to affiliates 2.3 (0.4) (2.2) (5.0) 5.3 --
Investment in subsidiary (3.0) -- -- -- 3.0 --
Other 0.1 -- -- -- -- 0.1
------- ------- ------- ------- ------- -------
Cash used in investing activities (6.5) (9.7) (3.0) (17.4) 8.3 (28.3)
------- ------- ------- ------- ------- -------
FINANCING ACTIVITIES
Payments of long-term debt -- (53.1) -- (0.3) -- (53.4)
Issue of long-term debt -- 3.7 -- -- -- 3.7
Short-term borrowings (2.6) 15.1 0.6 11.2 -- 24.3
Advances from affiliates -- 8.5 -- (3.2) (5.3) --
Distributions to subsidiary minority
shareowner -- -- -- (1.7) -- (1.7)
Issue of common shares 5.7 -- -- 3.0 (3.0) 5.7
Dividends paid -- -- -- (1.8) 1.8 --
Other -- -- (0.2) -- -- (0.2)
------- ------- ------- ------- ------- -------
Cash provided by (used in) financing
activities 3.1 (25.8) 0.4 7.2 (6.5) (21.6)
------- ------- ------- ------- ------- -------
Effect of exchange rate changes on cash (0.2) -- -- 0.1 -- (0.1)
------- ------- ------- ------- ------- -------
NET INCREASE (DECREASE) IN CASH 0.8 (0.3) 0.1 (1.6) -- (1.0)
CASH, BEGINNING OF PERIOD -- -- 0.1 3.2 -- 3.3
------- ------- ------- ------- ------- -------
CASH, END OF PERIOD $ 0.8 $ (0.3) $ 0.2 $ 1.6 $ -- $ 2.3
======= ======= ======= ======= ======= =======
35