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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 October 2, 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 Identification
incorporation or organization) 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 71,375,020 shares of common stock outstanding as of October 31, 2004.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income for the three and nine
month periods ended October 2, 2004 and September 27, 2003.... Page 3
Consolidated Balance Sheets as of October 2, 2004 and
January 3, 2004............................................... Page 4
Consolidated Statements of Shareowners' Equity as of
October 2, 2004 and September 27, 2003........................ Page 5
Consolidated Statements of Cash Flows for the three and nine
month periods ended October 2, 2004 and September 27, 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 25
Item 4. Controls and Procedures....................................... Page 25
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................. Page 26
Item 6. Financial Statement Schedules and Exhibits.................... Page 26
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 nine months ended
--------------------------- ---------------------------
OCTOBER 2, SEPTEMBER 27, OCTOBER 2, SEPTEMBER 27,
2004 2003 2004 2003
---------- ------------- ---------- -------------
SALES $ 442.4 $ 389.8 $ 1,277.0 $ 1,073.2
Cost of sales 371.4 314.7 1,050.1 864.8
--------- --------- --------- ---------
GROSS PROFIT 71.0 75.1 226.9 208.4
Selling, general and administrative
expenses 33.3 29.1 106.1 93.2
Unusual items (0.2) -- (0.7) (0.8)
--------- --------- --------- ---------
OPERATING INCOME 37.9 46.0 121.5 116.0
Other expense (income), net -- (0.6) 0.3 0.8
Interest expense, net 6.4 6.8 19.6 21.1
Minority interest 1.0 0.8 3.2 2.1
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES AND
EQUITY LOSS 30.5 39.0 98.4 92.0
Income taxes - note 3 (8.3) (13.3) (31.2) (31.1)
Equity loss (0.1) -- (0.3) (0.1)
--------- --------- --------- ---------
NET INCOME - note 4 $ 22.1 $ 25.7 $ 66.9 $ 60.8
========= ========= ========= =========
PER SHARE DATA - note 5
NET INCOME PER COMMON SHARE
Basic $ 0.31 $ 0.37 $ 0.94 $ 0.88
Diluted $ 0.31 $ 0.36 $ 0.93 $ 0.86
The accompanying notes are an integral part of these consolidated
financial statements.
3
COTT CORPORATION
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
(in millions of U.S. dollars)
OCTOBER 2, JANUARY 3,
2004 2004
---------- ----------
Unaudited Audited
ASSETS
CURRENT ASSETS
Cash $ 21.0 $ 18.4
Accounts receivable 185.7 148.8
Inventories - note 6 127.1 94.4
Prepaid and other assets 20.1 5.5
-------- --------
353.9 267.1
PROPERTY, PLANT AND EQUIPMENT - note 8 323.7 314.3
GOODWILL - note 9 82.1 81.6
INTANGIBLES AND OTHER ASSETS - note 10 237.8 245.8
-------- --------
$ 997.5 $ 908.8
======== ========
LIABILITIES
CURRENT LIABILITIES
Short-term borrowings $ 61.7 $ 78.1
Current maturities of long-term debt 0.8 3.3
Accounts payable and accrued liabilities 158.8 140.5
-------- --------
221.3 221.9
LONG-TERM DEBT 272.5 275.7
DEFERRED INCOME TAXES 46.7 40.5
-------- --------
540.5 538.1
-------- --------
MINORITY INTEREST 24.5 25.6
SHAREOWNERS' EQUITY
CAPITAL STOCK
Common shares - 71,344,220 shares issued 285.5 267.9
RETAINED EARNINGS 150.2 83.3
ACCUMULATED OTHER COMPREHENSIVE LOSS (3.2) (6.1)
-------- --------
432.5 345.1
-------- --------
$ 997.5 $ 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 ACCUMULATED
COMMON OTHER
SHARES COMMON RETAINED COMPREHENSIVE TOTAL
(in thousands) SHARES EARNINGS INCOME (LOSS) EQUITY
-------------- ------- -------- ------------- --------
Balance at December 28, 2002 68,559 $ 248.1 $ 5.9 $ (35.8) 218.2
Options exercised, including tax
benefit of $3.0 million 959 9.7 -- -- 9.7
Comprehensive income - note 4
Currency translation adjustment -- -- -- 18.1 18.1
Net income -- -- 60.8 -- 60.8
------ ------- ------- ------- -------
Balance at September 27, 2003 69,518 $ 257.8 $ 66.7 $ (17.7) $ 306.8
====== ======= ======= ======= =======
Balance at January 3, 2004 70,259 $ 267.9 $ 83.3 $ (6.1) $ 345.1
Options exercised, including tax
benefit of $4.8 million 1,085 17.6 -- -- 17.6
Comprehensive income (loss) - note 4
Currency translation adjustment -- -- -- 3.5 3.5
Unrealized losses on cash flow hedges -- -- -- (0.6) (0.6)
Net income -- -- 66.9 -- 66.9
------ ------- ------- ------- -------
Balance at October 2, 2004 71,344 $ 285.5 $ 150.2 $ (3.2) $ 432.5
====== ======= ======= ======= =======
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 nine months ended
-------------------------- --------------------------
OCTOBER 2, SEPTEMBER 27, OCTOBER 2, SEPTEMBER 27,
2004 2003 2004 2003
---------- ------------- ---------- -------------
OPERATING ACTIVITIES
Net income $ 22.1 $ 25.7 $ 66.9 $ 60.8
Depreciation and amortization 14.7 13.0 44.7 37.9
Amortization of financing fees 0.2 0.2 0.5 1.5
Deferred income taxes 2.4 3.6 6.7 10.1
Minority interest 1.0 0.8 3.2 2.1
Equity loss 0.1 -- 0.3 0.1
Other non-cash items 0.2 0.4 0.8 --
Net change in non-cash working capital -
note 11 17.5 15.3 (47.9) (4.5)
------- ------- ------- -------
Cash provided by operating activities 58.2 59.0 75.2 108.0
------- ------- ------- -------
INVESTING ACTIVITIES
Additions to property, plant and equipment (21.2) (7.0) (43.6) (34.9)
Acquisition of production capacity (3.8) -- (3.8) --
Acquisitions and equity investments -- 1.0 (17.7) 0.5
Notes receivable -- (2.5) -- (2.5)
Other investing activities 0.7 (0.3) 3.8 (0.2)
------- ------- ------- -------
Cash used in investing activities (24.3) (8.8) (61.3) (37.1)
------- ------- ------- -------
FINANCING ACTIVITIES
Payments of long-term debt (0.7) (38.5) (3.2) (88.2)
Short-term borrowings (22.9) (4.6) (16.5) 19.7
Distributions to subsidiary minority
shareowner (2.1) (1.1) (4.3) (2.8)
Issue of common shares 2.9 1.0 12.8 6.7
Other financing activities (0.1) (0.1) (0.3) (0.3)
------- ------- ------- -------
Cash used in financing activities (22.9) (43.3) (11.5) (64.9)
------- ------- ------- -------
Effect of exchange rate changes on cash 0.4 0.2 0.2 0.1
------- ------- ------- -------
NET INCREASE IN CASH 11.4 7.1 2.6 6.1
CASH, BEGINNING OF PERIOD 9.6 2.3 18.4 3.3
------- ------- ------- -------
CASH, END OF PERIOD $ 21.0 $ 9.4 $ 21.0 $ 9.4
======= ======= ======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
6
COTT CORPORATION
NOTES TO THE 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 nine month periods ended October 2,
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 nine months ended
----------------------------- -----------------------------
OCTOBER 2, SEPTEMBER 27, OCTOBER 2, SEPTEMBER 27,
2004 2003 2004 2003
---------- ------------- ---------- -------------
(in millions of U.S. dollars) (in millions of U.S. dollars)
Income tax provision based on
Canadian statutory rates $ (10.6) $ (14.1) $ (34.1) $ (33.2)
Foreign tax rate differential 0.3 0.5 0.5 1.8
Manufacturing and processing
deduction -- 0.1 -- 0.2
Non-deductible and other items 2.0 0.2 2.4 0.1
------- ------- ------- -------
$ (8.3) $ (13.3) $ (31.2) $ (31.1)
======= ======= ======= =======
7
COTT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unaudited
NOTE 4 - COMPREHENSIVE INCOME
For the three months ended For the nine months ended
----------------------------- -----------------------------
OCTOBER 2, SEPTEMBER 27, OCTOBER 2, SEPTEMBER 27,
2004 2003 2004 2003
---------- ------------- ---------- -------------
(in millions of U.S. dollars) (in millions of U.S. dollars)
Net income $ 22.1 $ 25.7 $ 66.9 $ 60.8
Foreign currency translation gain
(loss) 5.1 (0.7) 3.5 18.1
Unrealized losses on cash flow
hedges (0.1) -- (0.6) --
------- ------- ------- -------
$ 27.1 $ 25.0 $ 69.8 $ 78.9
======= ======= ======= =======
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 nine months ended
--------------------------- ---------------------------
OCTOBER 2, SEPTEMBER 27, OCTOBER 2, SEPTEMBER 27,
2004 2003 2004 2003
---------- ------------- ---------- -------------
(in thousands) (in thousands)
Weighted average number of shares
outstanding - basic 71,294 69,501 70,870 69,109
Dilutive effect of stock options 949 1,638 1,236 1,671
------ ------ ------ ------
Adjusted weighted average number
of shares outstanding - diluted 72,243 71,139 72,106 70,780
====== ====== ====== ======
At October 2, 2004, options to purchase 1,437,000 shares (773,500 - September
27, 2003) of common stock at a weighted average exercise price of $41.14
Canadian per share ($31.77 Canadian - September 27, 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 October 2, 2004, Cott had 71,344,220 common shares and 4,276,140 common
share options outstanding. Of the common share options outstanding, 1,892,135
options were exercisable as of October 2, 2004.
8
COTT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unaudited
NOTE 6 - INVENTORIES
OCTOBER 2, JANUARY 3,
2004 2004
---------- ----------
(in millions of U.S. dollars)
Raw materials $ 47.9 $ 37.7
Finished goods 64.5 46.8
Other 14.7 9.9
-------- -------
$ 127.1 $ 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 July 1, 2005. The fair market value of the foreign
exchange options is included in prepaid and other assets.
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 assets are recorded in earnings in
the same periods in which the forecasted purchases or payments affect earnings.
At October 2, 2004, the fair value of the options was $0.3 million and Cott
recorded $0.1 million unrealized loss in comprehensive income for the third
quarter of 2004 and $0.6 million for the first nine months of 2004.
NOTE 8 - PROPERTY, PLANT AND EQUIPMENT
OCTOBER 2, JANUARY 3,
2004 2004
---------- ----------
(in millions of U.S. dollars)
Cost $ 581.5 $ 552.7
Accumulated depreciation (257.8) (238.4)
-------- --------
$ 323.7 $ 314.3
======== ========
NOTE 9 - GOODWILL
For the three months ended For the nine months ended
----------------------------- -----------------------------
OCTOBER 2, SEPTEMBER 27, OCTOBER 2, SEPTEMBER 27,
2004 2003 2004 2003
---------- ------------- ---------- -------------
(in millions of U.S. dollars) (in millions of U.S. dollars)
Balance at beginning of period $ 81.0 $ 80.6 $ 81.6 $ 77.0
Acquisitions -- -- -- 0.7
Foreign exchange 1.1 (0.1) 0.5 2.8
------- ------- ------- -------
Balance at end of period $ 82.1 $ 80.5 $ 82.1 $ 80.5
======= ======= ======= =======
9
COTT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unaudited
NOTE 10 - INTANGIBLES AND OTHER ASSETS
OCTOBER 2, 2004 JANUARY 3, 2004
---------------------------------- ----------------------------------
ACCUMULATED ACCUMULATED
COST AMORTIZATION NET COST AMORTIZATION NET
------- ------------ ------- ------- ------------ -------
(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 28.7 130.9 157.9 20.8 137.1
Trademarks 26.6 6.8 19.8 25.8 5.5 20.3
Other 3.6 0.6 3.0 3.6 0.3 3.3
------- ------- ------- ------- ------- -------
189.8 36.1 153.7 187.3 26.6 160.7
------- ------- ------- ------- ------- -------
270.2 36.1 234.1 267.7 26.6 241.1
------- ------- ------- ------- ------- -------
OTHER ASSETS
Financing costs 5.6 4.5 1.1 5.6 3.9 1.7
Other 4.0 1.4 2.6 3.9 0.9 3.0
------- ------- ------- ------- ------- -------
9.6 5.9 3.7 9.5 4.8 4.7
------- ------- ------- ------- ------- -------
$ 279.8 $ 42.0 $ 237.8 $ 277.2 $ 31.4 $ 245.8
======= ======= ======= ======= ======= =======
Amortization expense of intangible assets for the third quarter ended October 2,
2004 was $3.2 million ($2.0 million - September 27, 2003). Amortization expense
of intangible assets for the first nine months of 2004 was $9.5 million ($7.0
million - September 27, 2003). The amortization expense for intangible assets is
estimated at about $13.0 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 nine months ended
----------------------------- -----------------------------
OCTOBER 2, SEPTEMBER 27, OCTOBER 2, SEPTEMBER 27,
2004 2003 2004 2003
---------- ------------- ---------- -------------
(in millions of U.S. dollars) (in millions of U.S. dollars)
Decrease (increase) in accounts
receivable $ 38.7 $ 13.3 $ (30.1) $ (19.0)
Decrease (increase) in inventories 2.8 (5.3) (31.0) (17.2)
Decrease (increase) in prepaid and
other assets 0.8 (2.6) (3.5) (0.8)
Increase (decrease) in accounts
payable and accrued liabilities (24.8) 9.9 16.7 32.5
------- ------- ------- -------
$ 17.5 $ 15.3 $ (47.9) $ (4.5)
======= ======= ======= =======
10
COTT CORPORATION
NOTES TO THE 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 nine months ended
----------------------------- -----------------------------
OCTOBER 2, SEPTEMBER 27, OCTOBER 2, SEPTEMBER 27,
2004 2003 2004 2003
---------- ------------- ----------- -------------
(in millions of U.S. dollars, (in millions of U.S. dollars,
except per share amounts) except per share amounts)
NET INCOME
As reported $ 22.1 $ 25.7 $ 66.9 $ 60.8
Compensation expense (2.2) (1.6) (6.2) (4.5)
Pro forma 19.9 24.1 60.7 56.3
NET INCOME PER SHARE - BASIC
As reported 0.31 0.37 0.94 0.88
Pro forma 0.28 0.35 0.86 0.81
NET INCOME PER SHARE - DILUTED
As reported 0.31 0.36 0.93 0.86
Pro forma 0.28 0.34 0.84 0.80
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:
OCTOBER 2, 2004 SEPTEMBER 27, 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 THE 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:
OCTOBER 2, 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 THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unaudited
NOTE 15 - SEGMENT REPORTING (continued)
BUSINESS SEGMENTS
FOR THE THREE UNITED
MONTHS ENDED UNITED KINGDOM & CORPORATE
OCTOBER 2, 2004 STATES CANADA EUROPE INTERNATIONAL & OTHER TOTAL
- ------------------------ -------- -------- --------- ------------- --------- ---------
(in millions of U.S. dollars)
External sales $ 325.3 $ 49.8 $ 51.1 $ 15.5 $ 0.7 $ 442.4
Intersegment sales 0.3 4.3 -- -- (4.6) --
Depreciation and
amortization 10.0 2.1 1.9 0.3 0.4 14.7
Operating income (loss) 29.8 2.9 4.4 1.9 (1.1) 37.9
Property, plant and
equipment 181.0 55.2 65.1 9.8 12.6 323.7
Goodwill 49.9 22.5 -- 4.6 5.1 82.1
Intangibles and other
assets 156.4 (1.6) -- 1.0 82.0 237.8
Total assets 584.4 128.3 138.3 77.9 68.6 997.5
Additions to property,
plant and equipment 15.3 2.1 0.9 0.6 2.3 21.2
Acquisition of
production capacity 3.8 -- -- -- -- 3.8
13
COTT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unaudited
NOTE 15 - SEGMENT REPORTING (continued)
FOR THE THREE MONTHS UNITED
ENDED UNITED KINGDOM & CORPORATE
SEPTEMBER 27, 2003 STATES CANADA EUROPE INTERNATIONAL & OTHER TOTAL
- ---------------------- -------- -------- --------- ------------- --------- ---------
(in millions of U.S. dollars)
External sales $ 274.4 $ 55.3 $ 47.6 $ 12.0 $ 0.5 $ 389.8
Intersegment sales -- 9.7 -- -- (9.7) --
Depreciation and
amortization 8.7 2.0 1.7 0.3 0.3 13.0
Operating income 34.6 6.2 3.9 1.3 -- 46.0
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 1.8 1.4 3.2 (2.8) 3.4 7.0
FOR THE NINE MONTHS UNITED
ENDED UNITED KINGDOM & CORPORATE
OCTOBER 2, 2004 STATES CANADA EUROPE INTERNATIONAL & OTHER TOTAL
- ----------------------- -------- -------- --------- ------------- ---------- ---------
(in millions of U.S. dollars)
External sales $ 938.8 $ 144.5 $ 145.5 $ 46.3 $ 1.9 $ 1,277.0
Intersegment sales 0.3 16.3 -- -- (16.6) --
Depreciation and
amortization 29.9 6.4 6.0 0.9 1.5 44.7
Operating income (loss) 100.8 9.6 9.8 8.4 (7.1) 121.5
Additions to property,
plant and equipment 29.1 4.0 3.1 1.4 6.0 43.6
Acquisition of
production capacity 3.8 -- -- -- -- 3.8
14
COTT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unaudited
NOTE 15 - SEGMENT REPORTING (continued)
FOR THE NINE MONTHS UNITED
ENDED UNITED KINGDOM & CORPORATE
SEPTEMBER 27, 2003 STATES CANADA EUROPE INTERNATIONAL & OTHER TOTAL
- ----------------------- -------- -------- --------- ------------- ---------- ---------
(in millions of U.S. dollars)
External sales $ 779.0 $ 142.8 $ 120.7 $ 29.7 $ 1.0 $ 1,073.2
Intersegment sales 0.1 35.8 -- -- (35.9) --
Depreciation and
amortization 25.2 6.1 5.2 0.4 1.0 37.9
Operating income (loss) 95.8 13.1 6.6 4.5 (4.0) 116.0
Additions to property,
plant and equipment 11.0 7.4 5.7 6.5 4.3 34.9
Intersegment sales and total assets under the Corporate & Other caption include
the elimination of intersegment sales, receivables and investments.
For the nine months ended October 2, 2004, sales to one major customer accounted
for 40% (September 27, 2003 - 42%) of Cott's total sales.
Revenues by geographic area are as follows:
For the three months ended For the nine months ended
----------------------------- -----------------------------
OCTOBER 2, SEPTEMBER 27, OCTOBER 2, SEPTEMBER 27,
2004 2003 2004 2003
---------- ------------- ---------- -------------
(in millions of U.S. dollars) (in millions of U.S. dollars)
United States $ 330.6 $ 279.9 $ 957.3 $ 793.6
Canada 49.8 55.3 144.5 142.8
United Kingdom 49.3 46.1 139.8 116.0
Other Countries 12.7 8.5 35.4 20.8
-------- -------- --------- ---------
$ 442.4 $ 389.8 $ 1,277.0 $ 1,073.2
======== ======== ========= =========
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:
OCTOBER 2, JANUARY 3,
2004 2004
---------- ----------
(in millions of U.S. dollars)
United States $ 488.2 $ 481.4
Canada 79.5 81.9
United Kingdom 65.1 67.8
Other countries 10.8 10.6
------- -------
$ 643.6 $ 641.7
======= =======
15
COTT CORPORATION
NOTES TO THE 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
$2.8 million, $2.0 million net of tax of $0.8 million, was recorded in the
third quarter of 2004 and compensation expense of $6.8 million, $5.1
million net of tax of $1.7 million, was recorded in the first nine months
of 2004. This policy was adopted on a retroactive basis with no restatement
of comparative figures and as a result $5.6 million was charged to opening
retained earnings as at January 3, 2004. Contributed surplus of $12.8
million was recorded to reflect the charge for unexercised options and
share capital of $1.3 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 $0.1 million in
the third quarter of 2004 and $0.6 million in the first nine months of 2004
have been reclassified from other comprehensive income to prepaid and other
assets.
16
COTT CORPORATION
NOTES TO THE 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:
OCTOBER 2, 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 assets (d) $ 20.1 $ 20.7 $ 5.5 $ 5.5
Property, plant & equipment (b) 323.7 324.2 314.3 315.1
Goodwill (b) 82.1 82.6 81.6 82.1
Total assets 997.5 999.1 908.8 910.1
Deferred income taxes (a),(b) 46.7 43.8 40.5 41.1
Total liabilities and minority
interest 565.0 562.1 563.7 564.3
Capital stock (a),(c) 285.5 257.5 267.9 238.6
Contributed Surplus (a) -- 12.8 -- --
Retained earnings (a),(c) 150.2 126.9 83.3 70.9
Cumulative translation adjustment (c) (2.6) 39.8 (6.1) 36.3
Unrealized losses on cash flow
hedges (d) (0.6) -- -- --
Total shareowners' equity 432.5 437.0 345.1 345.8
Income reconciliation for the Income reconciliation for the
three months ended nine months ended
----------------------------- -----------------------------
OCTOBER 2, SEPTEMBER 27, OCTOBER 2, SEPTEMBER 27,
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 $ 22.1 $ 25.7 $ 66.9 $ 60.8
Cost of sales (b) (0.1) (0.1) (0.3) (0.3)
Stock compensation expense (a) (2.8) -- (6.8) --
Recovery of income taxes (a),(b) 0.8 -- 1.8 0.1
--------- --------- --------- ---------
Net income under Canadian GAAP $ 20.0 $ 25.6 $ 61.6 $ 60.6
========= ========= ========= =========
Basic income per common share,
Canadian GAAP $ 0.28 $ 0.37 $ 0.87 $ 0.88
Diluted income per common share,
Canadian GAAP $ 0.28 $ 0.36 $ 0.85 $ 0.86
17
COTT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unaudited
NOTE 16. DIFFERENCES BETWEEN UNITED STATES AND CANADIAN ACCOUNTING PRINCIPLES
AND PRACTICES (continued)
Cash flow reconciliation for Cash flow reconciliation for
the three months ended the nine months ended
----------------------------- -----------------------------
OCTOBER 2, SEPTEMBER 27, OCTOBER 2, SEPTEMBER 27,
2004 2003 2004 2003
---------- ------------- ---------- -------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions of U.S. dollars) (in millions of U.S. dollars)
Cash provided by operating activities
U.S. GAAP $ 58.2 $ 59.0 $ 75.2 $ 108.0
Net income (a),(b) (2.1) (0.1) (5.3) (0.2)
Depreciation & amortization (b) 0.1 0.1 0.3 0.3
Deferred income taxes (a),(b) (0.8) -- (1.8) (0.1)
Other non-cash items (a) 2.8 -- 6.8 --
------- ------- ------- --------
Cash provided by operating activities
Canadian GAAP $ 58.2 $ 59.0 $ 75.2 $ 108.0
======= ======= ======= ========
NOTE 17. SUBSEQUENT EVENTS
Subsequent to the date of these financial statements, Cott acquired certain of
the assets of Metro Beverages Co., a soft drink manufacturer based in Columbus,
Ohio. The total purchase price for the acquisition was $16.8 million, including
estimated acquisition costs of $0.5 million. The acquisition was funded from
short-term borrowings.
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 $22.1 million, or $0.31 per diluted share, for the
third quarter ended October 2, 2004, down 14% as compared with $25.7 million, or
$0.36 per diluted share, for the third quarter of 2003. For the first nine
months of 2004, net income increased 10% to $66.9 million, or $0.93 per diluted
share, from $60.8 million, or $0.86 per diluted share, in the same period last
year.
SALES - Sales were up 13% to $442.4 million in the third quarter of 2004
compared to $389.8 million for the third quarter of 2003. 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 $15.8 million, or 4%, in the aggregate to sales
for the third quarter of 2004. Excluding acquisitions, sales increased $36.8
million, or 9% from the same period last year. Excluding both the impact of the
acquisitions and foreign exchange rates, sales increased 7% compared to the
third quarter of 2003.
Total 8oz equivalent case volume was 302.0 million cases in the third quarter of
2004, up 3% from 293.0 million cases in the third quarter of 2003. Excluding the
QBB and Cardinal acquisitions and concentrate sales, volume was 225.0 million
8oz equivalent cases in the third quarter of 2004, up 6% compared to 212.7
million 8oz equivalent cases in the third quarter of 2003. The acquisitions
contributed 8.3 million 8oz equivalent cases to sales volume in the third
quarter of 2004. The sale of concentrates is a high volume but low dollar
component of Cott's overall sales.
Sales for the first nine months of 2004 increased to $1,277.0 million, 19%
higher than the same period last year and up 12% when the impact of the QBB and
Cardinal acquisitions and foreign exchange rates are excluded. The QBB and
Cardinal acquisitions contributed $47.0 million to sales for the first nine
months of 2004.
Total 8oz equivalent case volume was 900.7 million cases for the first nine
months of 2004, up 17% from 768.4 million cases in the first nine months of
2003. Excluding the QBB and Cardinal acquisitions and concentrate sales, volume
was 655.6 million 8oz equivalent cases for the first nine months of 2004, an
increase of 11% compared to 588.2 million 8oz equivalent cases in the first nine
months of 2003. The acquisitions contributed 24.1 million 8oz equivalent cases
to sales volume in the first nine months of 2004.
Sales in the U.S. during the third quarter of 2004 increased to $325.3 million,
up 19% from $274.4 million in the third quarter of 2003. Excluding the QBB and
Cardinal acquisitions, sales increased 13% for the quarter. In the first nine
months of 2004, sales of $938.8 million grew by 21% compared with the first nine
months of 2003. Excluding the QBB and Cardinal acquisitions, sales in the first
nine months of 2004 increased 14% as compared to the first nine months of 2003.
The increase in sales for both the quarter and the first nine months of the year
was primarily driven by a higher volume of carbonated soft drink sales with
existing customers.
19
Sales in Canada were $49.8 million for the third quarter of 2004, down 10% from
$55.3 million in the third quarter of 2003 and down $8.6 million, or 15%,
excluding the impact of foreign exchange rates. The decrease in sales for the
quarter is a reflection of an overall carbonated soft drink grocery channel
sales volume decrease in Canada as compared to last year. For the first nine
months of the year, sales of $144.5 million were 1% higher than $142.8 million
for the same period last year, and down $7.8 million, or 5% when the effect of
foreign exchange rates is taken into account. The impact of the strengthening of
the Canadian dollar was offset by lower sales in the second and third quarters
of 2004.
Sales in the U.K. and Europe of $51.1 million in the third quarter of 2004
increased 7% from $47.6 million for the same period in 2003. Excluding the
impact of the strengthened U.K. pound, sales were down $2.8 million, or 5%. For
the first nine months of 2004, sales of $145.5 million were up 21% from the same
period in 2003. Excluding the impact of foreign exchange rates, sales were up
$9.1 million, or 7%. The decrease in the third quarter is due primarily to a
decline in business with existing customers. Sales in the first nine months 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 and increased sales to existing customers in the second quarter of 2004.
The International business unit includes Mexico, Royal Crown International and
the Asia business. Sales by this business unit were $15.5 million for the third
quarter of 2004, up 29% from $12.0 million in the third quarter of 2003. For the
first nine months of the year, sales of $46.3 million were 56% higher than $29.7
million for the same period last year. Much of the growth for this business unit
is attributable to Mexico, which accounted for $3.9 million of the increase in
the third quarter and $13.6 million of the increase in the first nine months 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 third quarter of 2004 was $71.0 million, or
16.0% of sales, down from $75.1 million, or 19.3% of sales in the third quarter
of 2003. Gross profit in the first nine months of 2004 was $226.9 million, or
17.8% of sales, compared to gross profit of $208.4 million, or 19.4% of sales,
in the first nine months of 2003. The decrease for both the quarter and the
first nine months of the year was a consequence of higher manufacturing and
logistics costs, including additional co-pack fees, inter-plant shipping costs
and customer freight, resulting from higher than projected volume in the U.S. In
order to reduce these costs and improve gross margins going forward, Cott is
focused on SKU reductions and improved plant efficiencies. In addition, Cott has
added additional manufacturing capacity in the U.S. which is expected to reduce
logistical costs and co-pack fees.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") - SG&A was $33.3 million
for the third quarter of 2004, an increase of $4.2 million, or 14%, from $29.1
million for the third quarter of 2003. For the first nine months of 2004, SG&A
of $106.1 million was $12.9 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
$2.6 million of the increase in the first nine months of the year and $0.7
million of the third quarter increase. The remaining increase was primarily due
to higher marketing, promotion and professional fees incurred to meet Cott's
growing business needs. As a percentage of sales, SG&A comprised 7.5% for the
third quarter of 2004, in line with the same period last year and declined to
8.3%, from 8.7% in the first nine months of the year.
20
INCOME TAXES - Cott recorded an income tax provision of $8.3 million for the
third quarter and $31.2 million for the first nine months of 2004 as compared
with $13.3 million and $31.1 million, respectively, for the same periods last
year. For the first nine months of 2004, the overall effective tax rate was
31.7% compared with 33.8% for the same period last year. The current year's
income tax expense was impacted by a change in managements estimate to the third
quarter reserve.
FINANCIAL CONDITION - Cash provided by operating activities for the first nine
months of 2004 was $31.6 million, after capital expenditures of $43.6 million,
as compared to the first nine months of 2003 in which cash provided by operating
activities was $73.1 million, after capital expenditures of $34.9 million. Cash
from operations in the first nine months of 2004 decreased due to an increase in
net working capital of $43.4 million primarily related to volume growth in the
U.S.
Cash increased $2.6 million in the first nine months of 2004 to $21.0 million
from $18.4 million as of the end of the last fiscal year.
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.
In October 2004, Cott acquired certain of the assets of Elan Waters, located in
Blairsville, Georgia. The total purchase price of the assets was $3.8 million.
The acquisition was funded from short-term borrowings.
CAPITAL EXPENDITURES - Capital expenditures for the first nine months of 2004
were $43.6 million compared with $34.9 million in the same period last year.
Major capital expenditures through the first nine months of 2004 included $34.0
million on manufacturing equipment and plates and film, primarily in the U.S.,
to meet the needs of Cott's growing business and $4.9 million on information
technology improvements. In the third quarter of 2004, Cott announced plans to
build a new beverage manufacturing facility in Dallas-Fort Worth, Texas. Cott
commenced construction in the third quarter of 2004 and anticipates that the
plant will be ready for full production by the third 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 $152.0 million. At
October 2, 2004, approximately $71.1 million of the committed revolving credit
facility in the U.S. and Canada and $22.2 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 3.76% as of October 2,
2004, as compared to 3.1% as of January 3, 2004.
As of October 2, 2004, Cott's long-term debt totaled $273.3 million as compared
with $279.0 million at the end of 2003. At the end of the third quarter of 2004,
debt consisted of $269.6 million in 8% senior subordinated notes with a face
value of $275 million and $3.7 million of other debt.
21
OUTSTANDING SHARE DATA - As of October 2, 2004, Cott had 71,344,220 common
shares and 4,276,140 common share options outstanding. Of the common share
options outstanding, 1,892,135 options were exercisable as of October 2, 2004.
CANADIAN GAAP - Under Canadian GAAP, in the first nine months of 2004, Cott
reported net income of $61.6 million and total assets of $999.1 million compared
to net income and total assets under U.S. GAAP of $66.9 million and $997.5
million, respectively, in the first nine months of 2004.
The main U.S./Canadian GAAP difference in the first nine 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
$2.8 million, $2.0 million net of tax of $0.8 million, was recorded in the third
quarter of 2004 and compensation expense of $6.8 million, $5.1 million net of
tax of $1.7 million, was recorded in the first nine months of 2004 This policy
was adopted on a retroactive basis with no restatement of comparative figures
and as a result $5.6 million was charged to opening retained earnings as at
January 3, 2004. 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.
There were no material U.S./Canadian GAAP differences for the first nine months
of 2003.
SUBSEQUENT EVENTS - Subsequent to the date of these financial statements, Cott
acquired certain of the assets of Metro Beverages Co., a soft drink manufacturer
based in Columbus, Ohio. The total purchase price for the acquisition was $16.8
million, including estimated acquisition costs of $0.5 million. The acquisition
was funded from short-term borrowings.
OUTLOOK - Cott's ongoing focus is to increase sales, market share and
profitability for Cott and its customers. While the carbonated soft drink
industry is experiencing low growth, the retailer brand segment is growing
significantly, driven by strong sales in the U.S. market. 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 16% and 19% for 2004 and earnings per
diluted share are expected to be between $1.15 and $1.19 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.
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 nine 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 nine
22
months of 2004 and 2003 accounted for 68% and 71%, 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 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
23
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.
24
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.
In the first nine months 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 rates per Canadian dollar
and British pound and mature at various dates through July 1, 2005. The fair
market value of the foreign exchange options is included in prepaid and other
assets.
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 assets are recorded in earnings in
the same periods in which the forecasted purchases or payments affect earnings.
At October 2, 2004, the fair value of the options was $0.3 million and Cott
recorded $0.1 million unrealized loss in comprehensive income for the third
quarter of 2004 and $0.6 million for the first nine months of 2004. 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.
25
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 quarters ended April 3, 2004 and July 3, 2004 respectively.
ITEM 6. FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
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).
31.1 Certification of the president and chief executive officer
pursuant to section 302 of the Sarbanes-Oxley Act of 2002
for the quarterly period ended October 2, 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
October 2, 2004.
32.1 Certification of the president and chief executive officer
pursuant to section 906 of the Sarbanes-Oxley Act of 2002
for the quarterly period ended October 2, 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
October 2, 2004.
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
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: November 10, 2004 /s/ Raymond P. Silcock
----------------------------------------
Raymond P. Silcock
Executive Vice President &
Chief Financial Officer
(On behalf of the Company)
Date: November 10, 2004 /s/ Tina Dell'Aquila
----------------------------------------
Tina Dell'Aquila
Vice President, Controller and Assistant
Secretary
(Principal accounting officer)
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 OCTOBER 2, 2004
---------------------------------------------------------------------------------------
NON-
COTT COTT GUARANTOR GUARANTOR ELIMINATION
CORPORATION BEVERAGES INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED
-------------- -------------- ------------- -------------- ------------- --------------
SALES $ 54.1 $ 302.7 $ 12.6 $ 80.9 $ (7.9) $ 442.4
Cost of sales 46.4 254.6 10.3 68.0 (7.9) 371.4
------ ------- ------ ------ ------ -------
GROSS PROFIT 7.7 48.1 2.3 12.9 -- 71.0
Selling, general and
administrative expenses 10.4 16.3 0.9 5.7 -- 33.3
Unusual items (0.2) -- -- -- -- (0.2)
------ ------- ------ ------ ------ -------
OPERATING INCOME (LOSS) (2.5) 31.8 1.4 7.2 -- 37.9
Other expense (income), net -- 0.8 (1.0) 0.2 -- --
Interest expense (income), net -- 8.2 (1.7) (0.1) -- 6.4
Minority interest -- -- -- 1.0 -- 1.0
------ ------- ------ ------ ------ -------
INCOME (LOSS) BEFORE INCOME
TAXES AND EQUITY INCOME (2.5) 22.8 4.1 6.1 -- 30.5
Income taxes 2.7 (9.6) -- (1.4) -- (8.3)
Equity income (loss) 21.9 3.2 14.1 -- (39.3) (0.1)
------ ------- ------ ------ ------ -------
NET INCOME $ 22.1 $ 16.4 $ 18.2 $ 4.7 $(39.3) $ 22.1
====== ======= ====== ====== ====== =======
28
COTT CORPORATION
CONSOLIDATING STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
(in millions of U.S. dollars, unaudited)
FOR THE NINE MONTHS ENDED OCTOBER 2, 2004
--------------------------------------------------------------------------------------
NON-
COTT COTT GUARANTOR GUARANTOR ELIMINATION
CORPORATION BEVERAGES INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED
------------- -------------- ------------- ------------- ------------ ------------
SALES $ 160.8 $ 873.4 $ 36.3 $ 232.4 $ (25.9) $ 1,277.0
Cost of sales 133.2 716.7 30.0 196.1 (25.9) 1,050.1
------- ------- ------ ------- ------- ---------
GROSS PROFIT 27.6 156.7 6.3 36.3 -- 226.9
Selling, general and
administrative expenses 33.5 51.4 3.0 18.2 -- 106.1
Unusual items (0.2) -- -- (0.5) -- (0.7)
------- ------- ------ ------- ------- ---------
OPERATING INCOME (LOSS) (5.7) 105.3 3.3 18.6 -- 121.5
Other expense (income), net 0.7 0.9 (1.4) 0.1 -- 0.3
Interest expense (income), net -- 24.5 (4.8) (0.1) -- 19.6
Minority interest -- -- -- 3.2 -- 3.2
------- ------- ------ ------- ------- ---------
INCOME (LOSS) BEFORE INCOME
TAXES AND EQUITY INCOME (6.4) 79.9 9.5 15.4 -- 98.4
Income taxes 4.2 (32.2) -- (3.2) -- (31.2)
Equity income (loss) 69.1 7.7 50.8 -- (127.9) (0.3)
------- ------- ------ ------- ------- ---------
NET INCOME $ 66.9 $ 55.4 $ 60.3 $ 12.2 $(127.9) $ 66.9
======= ======= ====== ======= ======= =========
29
COTT CORPORATION
CONSOLIDATING BALANCE SHEETS
- --------------------------------------------------------------------------------
(in millions of U.S. dollars, unaudited)
AS OF OCTOBER 2, 2004
------------------------------------------------------------------------------------
COTT COTT GUARANTOR NON-GUARANTOR ELIMINATION
CORPORATION BEVERAGES INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED
------------- -------------- ------------- ------------- ------------ ------------
ASSETS
CURRENT ASSETS
Cash $ 9.0 $ (1.5) $ -- $ 13.5 $ -- $ 21.0
Accounts receivable 40.0 109.9 16.4 42.7 (23.3) 185.7
Inventories 20.7 74.7 5.7 26.0 -- 127.1
Prepaid and other assets 3.9 12.7 0.9 2.6 -- 20.1
------ ------- ------- ------- -------- --------
73.6 195.8 23.0 84.8 (23.3) 353.9
Property, plant and equipment 53.7 169.9 20.1 80.0 -- 323.7
Goodwill 21.8 46.0 13.5 0.8 -- 82.1
Intangibles and other assets 0.7 179.1 11.9 46.1 -- 237.8
Due from affiliates 53.8 4.7 97.7 275.9 (432.1) --
Investments in subsidiaries 331.5 74.4 55.7 -- (461.6) --
------- ------- ------- ------- -------- --------
$ 535.1 $ 669.9 $ 221.9 $ 487.6 $ (917.0) $ 997.5
======= ======= ======= ======= ======== ========
LIABILITIES
CURRENT LIABILITIES
Short-term borrowings $ -- $ 56.0 $ 0.9 $ 4.8 $ -- $ 61.7
Current maturities of
long-term debt -- 0.8 -- -- -- 0.8
Accounts payable and
accrued liabilities 31.6 88.1 8.7 53.7 (23.3) 158.8
------- ------- ------- ------- -------- --------
31.6 144.9 9.6 58.5 (23.3) 221.3
Long-term debt -- 272.5 -- -- -- 272.5
Due to affiliates 66.4 100.9 210.5 54.3 (432.1) --
Deferred income taxes 4.6 34.7 -- 7.4 -- 46.7
------- ------- ------- ------- -------- --------
102.6 553.0 220.1 120.2 (455.4) 540.5
------- ------- ------- ------- -------- --------
Minority interest -- -- -- 24.5 -- 24.5
SHAREOWNERS' EQUITY
Capital stock
Common shares 285.5 275.8 142.7 451.4 (869.9) 285.5
Retained earnings (deficit) 150.2 (158.9) (140.9) (86.4) 386.2 150.2
Accumulated other
comprehensive loss (3.2) -- -- (22.1) 22.1 (3.2)
------- ------- ------- ------- -------- --------
432.5 116.9 1.8 342.9 (461.6) 432.5
------- ------- ------- ------- -------- --------
$ 535.1 $ 669.9 $ 221.9 $ 487.6 $ (917.0) $ 997.5
======= ======= ======= ======= ======== ========
30
COTT CORPORATION
CONSOLIDATING STATEMENTS OF CASH FLOWS
(in millions of U.S. dollars, unaudited)
FOR THE NINE MONTHS ENDED OCTOBER 2, 2004
-------------------------------------------------------------------------------------
COTT COTT GUARANTOR NON-GUARANTOR ELIMINATION
CORPORATION BEVERAGES INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED
----------- -------------- ------------ ------------ ----------- ------------
OPERATING ACTIVITIES
Net income $ 66.9 $ 55.4 $ 60.3 $ 12.2 $ (127.9) $ 66.9
Depreciation and amortization 7.0 23.2 4.3 10.2 -- 44.7
Amortization of financing fees -- 0.5 -- -- -- 0.5
Deferred income taxes (2.3) 8.0 -- 1.0 -- 6.7
Minority interest -- -- -- 3.2 -- 3.2
Equity income (loss), net of
distributions (69.1) (3.2) (50.8) -- 123.4 0.3
Other non-cash items 0.9 (0.8) -- 0.7 -- 0.8
Net change in non-cash
working capital (14.0) (27.9) (6.1) 0.1 -- (47.9)
------- ------- ------- ------ -------- -------
Cash provided by (used in)
operating activities (10.6) 55.2 7.7 27.4 (4.5) 75.2
------- ------- ------- ------ -------- -------
INVESTING ACTIVITIES
Additions to property, plant
and equipment (6.1) (29.6) (2.7) (5.2) -- (43.6)
Acquisition of production
capacity -- (3.8) -- -- -- (3.8)
Acquisitions and equity
investments -- (17.7) -- -- -- (17.7)
Advances to affiliates 3.5 -- (9.8) -- 6.3 --
Investment in subsidiary (5.0) -- -- -- 5.0 --
Other investing activities 0.7 2.5 0.2 0.4 -- 3.8
------- ------- ------- ------ -------- -------
Cash used in investing
activities (6.9) (48.6) (12.3) (4.8) 11.3 (61.3)
------- ------- ------- ------ -------- -------
FINANCING ACTIVITIES
Payments of long-term debt -- (1.1) -- (2.1) -- (3.2)
Short-term borrowings -- (16.2) (0.2) (0.1) -- (16.5)
Advances from affiliates -- 9.8 -- (3.5) (6.3) --
Distributions to subsidiary
minority shareowner -- -- -- (4.3) -- (4.3)
Issue of common shares 12.8 -- 5.0 -- (5.0) 12.8
Dividends paid -- -- -- (4.5) 4.5 --
Other financing activities -- -- (0.3) -- -- (0.3)
------- ------- ------- ------ -------- -------
Cash provided by (used in)
financing activities 12.8 (7.5) 4.5 (14.5) (6.8) (11.5)
------- ------- ------- ------ -------- -------
Effect of exchange rate
changes on cash 0.3 -- -- (0.1) -- 0.2
------- ------- ------- ------ -------- -------
NET INCREASE (DECREASE) IN CASH (4.4) (0.9) (0.1) 8.0 -- 2.6
CASH, BEGINNING OF PERIOD 13.4 (0.6) 0.1 5.5 -- 18.4
------- ------- ------- ------ -------- -------
CASH, END OF PERIOD $ 9.0 $ (1.5) $ -- $ 13.5 $ -- $ 21.0
======= ======= ======= ====== ======== =======
31
COTT CORPORATION
CONSOLIDATING STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
(in millions of U.S. dollars, unaudited)
FOR THE THREE MONTHS ENDED SEPTEMBER 27, 2003
---------------------------------------------------------------------------------------
COTT COTT GUARANTOR NON-GUARANTOR ELIMINATION
CORPORATION BEVERAGES INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED
-------------- -------------- ------------- -------------- ------------- --------------
SALES $ 65.1 $ 253.3 $ 11.8 $ 72.2 $ (12.6) $ 389.8
Cost of sales 53.4 203.4 9.5 61.0 (12.6) 314.7
------- ------- ------ ------ ------- -------
GROSS PROFIT 11.7 49.9 2.3 11.2 -- 75.1
Selling, general and
administrative expenses 5.0 17.2 1.4 5.5 -- 29.1
------- ------- ------ ------ ------- -------
OPERATING INCOME 6.7 32.7 0.9 5.7 -- 46.0
Other expense (income), net (0.6) (0.2) -- 0.2 -- (0.6)
Interest expense (income), net (0.1) 7.9 (1.2) 0.2 -- 6.8
Minority interest -- -- -- 0.8 -- 0.8
------- ------- ------ ------ ------- -------
INCOME BEFORE INCOME TAXES AND
EQUITY INCOME 7.4 25.0 2.1 4.5 -- 39.0
Income taxes (2.5) (9.6) -- (1.2) -- (13.3)
Equity income 20.8 1.7 16.2 -- (38.7) --
------- ------- ------ ------ ------- -------
NET INCOME $ 25.7 $ 17.1 $ 18.3 $ 3.3 $ (38.7) $ 25.7
======= ======= ====== ====== ======= =======
FOR THE NINE MONTHS ENDED SEPTEMBER 27, 2003
-----------------------------------------------------------------------------------------
COTT COTT GUARANTOR NON-GUARANTOR ELIMINATION
CORPORATION BEVERAGES INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED
-------------- -------------- -------------- -------------- ----------- -------------
SALES $ 178.7 $ 719.8 $ 32.5 $ 185.3 $ (43.1) $ 1,073.2
Cost of sales 148.5 573.9 27.2 158.3 (43.1) 864.8
------- ------- ------ ------- ------- ---------
GROSS PROFIT 30.2 145.9 5.3 27.0 -- 208.4
Selling, general and
administrative expenses 16.9 55.6 4.1 16.6 -- 93.2
Unusual items -- (0.2) -- (0.6) (0.8)
------- ------- ------ ------- ------- ---------
OPERATING INCOME 13.3 90.5 1.2 11.0 -- 116.0
Other expense (income), net 0.3 (0.1) -- 0.6 -- 0.8
Interest expense (income), net (0.1) 24.7 (3.4) (0.1) -- 21.1
Minority interest -- -- -- 2.1 -- 2.1
------- ------- ------ ------- ------- ---------
INCOME BEFORE INCOME TAXES AND
EQUITY INCOME 13.1 65.9 4.6 8.4 92.0
Income taxes (4.2) (24.7) -- (2.2) -- (31.1)
Equity income (loss) 51.9 3.4 43.4 -- (98.8) (0.1)
------- ------- ------ ------- ------- ---------
NET INCOME $ 60.8 $ 44.6 $ 48.0 $ 6.2 $ (98.8) $ 60.8
======= ======= ====== ======= ======= =========
32
COTT CORPORATION
CONSOLIDATING BALANCE SHEETS
- --------------------------------------------------------------------------------
(in millions of U.S. dollars)
AS OF JANUARY 3, 2004
---------------------------------------------------------------------------------------
COTT COTT GUARANTOR NON-GUARANTOR ELIMINATION
CORPORATION BEVERAGES 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 and other assets 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
======= ======= ====== ======= ======== ========
33
COTT CORPORATION
CONSOLIDATING STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
(in millions of U.S. dollars, unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 27, 2003
---------------------------------------------------------------------------------------
NON-
COTT COTT GUARANTOR GUARANTOR ELIMINATION
CORPORATION BEVERAGES INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED
------------- --------------- ------------- -------------- ------------- --------------
OPERATING ACTIVITIES
Net income $ 60.8 $ 44.6 $ 48.0 $ 6.2 $ (98.8) $ 60.8
Depreciation and amortization 6.0 18.6 4.4 8.9 -- 37.9
Amortization of financing fees -- 1.5 -- -- -- 1.5
Deferred income taxes 4.0 4.1 -- 2.0 -- 10.1
Minority interest -- -- -- 2.1 -- 2.1
Equity income (loss), net of
distributions (51.9) (0.5) (43.5) -- 96.0 0.1
Other non-cash items 0.7 (1.2) -- 0.5 -- --
Net change in non-cash
working capital (6.1) 2.5 (4.9) 4.0 -- (4.5)
------- ------- ------- ------ ------- -------
Cash provided by operating
activities 13.5 69.6 4.0 23.7 (2.8) 108.0
------- ------- ------- ------ ------- -------
INVESTING ACTIVITIES
Additions to property, plant
and equipment (8.3) (13.0) (1.1) (12.5) -- (34.9)
Acquisitions and equity
investments -- -- -- 0.5 -- 0.5
Notes receivable (2.5) -- -- -- -- (2.5)
Advances to affiliates 2.9 (0.2) (8.3) (6.0) 11.6 --
Investment in subsidiary (8.0) -- -- -- 8.0 --
Other investing activities 0.2 (0.5) 0.1 -- -- (0.2)
------- ------- ------- ------ ------- -------
Cash used in investing
activities (15.7) (13.7) (9.3) (18.0) 19.6 (37.1)
------- ------- ------- ------ ------- -------
FINANCING ACTIVITIES
Payments of long-term debt -- (87.7) -- (0.5) -- (88.2)
Short-term borrowings (2.6) 19.5 0.6 2.2 -- 19.7
Advances from affiliates 0.6 13.3 -- (2.2) (11.7) --
Distributions to subsidiary
minority shareowner -- -- -- (2.8) -- (2.8)
Issue of common shares 6.7 -- 5.0 3.0 (8.0) 6.7
Dividends paid -- -- -- (2.9) 2.9 --
Other financing activities -- -- (0.3) -- -- (0.3)
------- ------- ------- ------ ------- -------
Cash provided by (used in)
financing activities 4.7 (54.9) 5.3 (3.2) (16.8) (64.9)
------- ------- ------- ------ ------- -------
Effect of exchange rate
changes on cash (0.1) -- -- 0.2 -- 0.1
------- ------- ------- ------ ------- -------
NET INCREASE IN CASH 2.4 1.0 -- 2.7 -- 6.1
CASH, BEGINNING OF PERIOD -- -- 0.1 3.2 -- 3.3
------- ------- ------- ------ ------- -------
CASH, END OF PERIOD $ 2.4 $ 1.0 $ 0.1 $ 5.9 $ -- $ 9.4
======= ======= ======= ====== ======= =======
34