10-Q 1 d542327d10q.htm FORM 10-Q Form 10-Q

 

 

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: June 29, 2013

 

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                     

Commission File Number: 001-31410

 

 

COTT CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

CANADA   98-0154711

(State or Other Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification No.)

6525 VISCOUNT ROAD

MISSISSAUGA, ONTARIO

5519 WEST IDLEWILD AVE

TAMPA, FLORIDA

 

L4V 1H6

33634

(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (905) 672-1900 and (813) 313-1800

 

 

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨  (do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding at July 29, 2013

Common Stock, no par value per share   94,236,098 shares

 

 

 


PART I – FINANCIAL INFORMATION

  

Item 1.

 

Financial Statements (unaudited)

     3   
 

Consolidated Statements of Operations

     3   
 

Condensed Consolidated Statements of Comprehensive Income

     4   
 

Consolidated Balance Sheets

     5   
 

Consolidated Statements of Cash Flows

     6   
 

Consolidated Statements of Equity

     7   
 

Notes to the Consolidated Financial Statements

     8   

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     34   

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

     48   

Item 4.

 

Controls and Procedures

     48   

PART II – OTHER INFORMATION

     49   

Item 1.

 

Legal Proceedings

     49   

Item 1A.

 

Risk Factors

     49   

Item 2

 

Unregistered Sales of Equity Securities and Use of Proceeds

     49   

Item 6.

 

Exhibits

     50   

SIGNATURES

     51   

 

2


PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

Cott Corporation

Consolidated Statements of Operations

(in millions of U.S. dollars, except share and per share amounts)

Unaudited

 

     For the Three Months Ended     For the Six Months Ended  
     June 29, 2013      June 30, 2012     June 29, 2013      June 30, 2012  

Revenue, net

   $ 563.8       $ 625.8      $ 1,069.2       $ 1,149.6   

Cost of sales

     487.2         533.5        936.2         993.9   
  

 

 

    

 

 

   

 

 

    

 

 

 

Gross profit

     76.6         92.3        133.0         155.7   

Selling, general and administrative expenses

     41.7         48.8        83.0         90.6   

Loss on disposal of property, plant & equipment

     0.3         0.3        0.3         0.9   

Restructuring

     2.0         —          2.0         —     
  

 

 

    

 

 

   

 

 

    

 

 

 

Operating income

     32.6         43.2        47.7         64.2   

Other (income) expense, net

     —           (0.5     0.3         (0.7

Interest expense, net

     12.8         13.5        26.1         27.5   
  

 

 

    

 

 

   

 

 

    

 

 

 

Income before income taxes

     19.8         30.2        21.3         37.4   

Income tax expense

     1.7         3.9        2.2         4.3   
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income

   $ 18.1       $ 26.3      $ 19.1       $ 33.1   

Less: Net income attributable to non-controlling interests

     1.6         1.2        2.6         2.1   
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income attributed to Cott Corporation

   $ 16.5       $ 25.1      $ 16.5       $ 31.0   
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income per common share attributed to Cott Corporation

          

Basic

   $ 0.17       $ 0.27      $ 0.17       $ 0.33   

Diluted

   $ 0.17       $ 0.26      $ 0.17       $ 0.32   

Weighted average outstanding shares (thousands) attributed to Cott Corporation

          

Basic

     95,159         94,469        95,265         94,448   

Diluted

     95,981         95,515        96,048         95,479   

Dividends declared per share

   $ 0.06       $ —        $ 0.12       $ —     

The accompanying notes are an integral part of these consolidated financial statements.

 

3


Cott Corporation

Condensed Consolidated Statements of Comprehensive Income

(in millions of U.S. dollars)

Unaudited

 

     For the Three Months Ended     For the Six Months Ended  
     June 29, 2013     June 30, 2012     June 29, 2013     June 30, 2012  

Net income

   $ 18.1      $ 26.3      $ 19.1      $ 33.1   

Other comprehensive (loss) income:

        

Currency translation adjustment

     (4.4     (7.2     (16.8     1.0   

Pension benefit plan, net of tax1

     0.2        0.3        0.4        (0.2

Unrealized loss on derivative instruments, net of tax2

     (0.1     —          —          (0.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive (loss) income

     (4.3     (6.9     (16.4     0.5   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 13.8      $ 19.4      $ 2.7      $ 33.6   

Less: Comprehensive income attributable to non-controlling interests

     1.7        1.2        2.6        2.0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributed to Cott Corporation

   $ 12.1      $ 18.2      $ 0.1      $ 31.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

1 

Net of the effect of $0.1 million and $0.2 million tax expense for the three and six months ended June 29, 2013, respectively, and net of the effect of $0.1 million and $0.1 million tax expense for the three and six months ended June 30, 2012, respectively.

2 

Net of the effect of $0.1 million and a nil tax benefit for the three and six months ended June 29, 2013, respectively, and net of the effect of a nil and $0.1 million tax benefit for the three and six months ended June 30, 2012, respectively.

The accompanying notes are an integral part of these consolidated financial statements.

 

4


Cott Corporation

Consolidated Balance Sheets

(in millions of U.S. dollars, except share amounts)

Unaudited

 

     June 29, 2013     December 29, 2012  

ASSETS

    

Current assets

    

Cash & cash equivalents

   $ 66.8      $ 179.4   

Accounts receivable, net of allowance of $ 6.1 ($6.8 as of December 29, 2012)

     266.7        199.4   

Income taxes recoverable

     0.8        1.2   

Inventories

     240.0        224.8   

Prepaid expenses and other assets

     22.7        20.3   
  

 

 

   

 

 

 

Total current assets

     597.0        625.1   

Property, plant & equipment, net

     492.2        490.9   

Goodwill

     139.4        130.3   

Intangibles and other assets, net

     313.6        315.4   

Deferred income taxes

     2.7        3.3   

Other tax receivable

     1.2        0.9   
  

 

 

   

 

 

 

Total assets

   $ 1,546.1      $ 1,565.9   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Current liabilities

    

Current maturities of long-term debt

   $ 2.6      $ 1.9   

Accounts payable and accrued liabilities

     264.6        287.7   
  

 

 

   

 

 

 

Total current liabilities

     267.2        289.6   

Long-term debt

     602.1        601.8   

Deferred income taxes

     44.4        39.1   

Other long-term liabilities

     23.8        12.5   
  

 

 

   

 

 

 

Total liabilities

     937.5        943.0   

Equity

    

Capital stock, no par - 94,773,326 (December 29, 2012 - 95,371,484) shares issued

     394.9        397.8   

Additional paid-in-capital

     42.9        40.4   

Retained earnings

     188.7        186.0   

Accumulated other comprehensive loss

     (28.8     (12.4
  

 

 

   

 

 

 

Total Cott Corporation equity

     597.7        611.8   

Non-controlling interests

     10.9        11.1   
  

 

 

   

 

 

 

Total equity

     608.6        622.9   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 1,546.1      $ 1,565.9   
  

 

 

   

 

 

 

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  
     June 29, 2013     June 30, 2012     June 29, 2013     June 30, 2012  

Operating Activities

        

Net income

   $ 18.1      $ 26.3      $ 19.1      $ 33.1   

Depreciation & amortization

     24.9        23.7        49.6        47.5   

Amortization of financing fees

     0.8        0.9        1.5        2.1   

Share-based compensation expense

     1.8        1.4        2.5        2.2   

Increase in deferred income taxes

     1.6        4.0        1.6        4.0   

Gain on bargain purchase

     —          (0.9     —          (0.9

Loss on disposal of property, plant & equipment

     0.3        0.3        0.3        0.9   

Other non-cash items

     (0.1     1.0        0.2        0.6   

Change in operating assets and liabilities, net of acquisition:

        

Accounts receivable

     (29.6     (31.3     (57.8     (51.8

Inventories

     2.4        (6.5     (10.8     (23.0

Prepaid expenses and other assets

     (1.4     (4.1     (2.0     (5.9

Other assets

     —          (0.1     (0.1     0.9   

Accounts payable and accrued liabilities

     15.2        22.1        (28.9     (16.3

Income taxes recoverable

     0.1        1.3        0.3        1.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     34.1        38.1        (24.5     (5.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Investing Activities

        

Acquisition, net of cash acquired

     (6.5     —          (6.5     (5.0

Additions to property, plant & equipment

     (14.6     (19.7     (34.5     (37.4

Additions to intangibles and other assets

     (1.7     (1.0     (1.9     (3.7

Proceeds from sale of assets held for sale

     —          1.0        —          1.0   

Proceeds from insurance recoveries

     —          —          0.4        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (22.8     (19.7     (42.5     (45.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Financing Activities

        

Payments of long-term debt

     (19.1     (1.4     (19.6     (2.6

Borrowings under ABL

     —          17.5        —          24.5   

Payments under ABL

     —          (17.5     —          (24.5

Distributions to non-controlling interests

     (0.7     (0.3     (2.8     (1.4

Common shares repurchased and cancelled

     (5.5     (0.3     (8.4     (0.3

Dividends to shareholders

     (11.2     —          (11.2     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

     (36.5     (2.0     (42.0     (4.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes on cash

     (1.0     (0.9     (3.6     0.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (decrease) increase in cash & cash equivalents

     (26.2     15.5        (112.6     (53.8

Cash & cash equivalents, beginning of period

     93.0        31.6        179.4        100.9   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash & cash equivalents, end of period

   $ 66.8      $ 47.1      $ 66.8      $ 47.1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Supplemental Disclosures of Cash Flow information:

        

Cash paid for interest

   $ 9.2      $ 9.5      $ 25.1      $ 25.5   

Cash (received) paid for income taxes, net

   $ (0.2   $ 0.1      $ 0.3      $ 0.4   

Supplemental Non-cash Investing and Financing Activities:

        

Deferred consideration

   $ 5.1      $ —        $ 5.1      $ —     

The accompanying notes are an integral part of these consolidated financial statements.

 

6


Cott Corporation

Consolidated Statements of Equity

(in millions of U.S. dollars, except share amounts)

Unaudited

 

    Cott Corporation Equity     Non-
Controlling
Interests
    Total
Equity
 
    Number of
Common
Shares

(In thousands)
    Number of
Treasury
Shares

(In thousands)
    Common
Shares
    Treasury
Shares
    Additional Paid-
in-Capital
    Retained
Earnings
    Accumulated
Other
Comprehensive
Loss
     

Balance at December 31, 2011

    95,101        674      $ 395.9      $ (2.1   $ 42.6      $ 144.1      $ (24.7   $ 12.4      $ 568.2   

Common shares issued - Directors’ share award

    96        —          —          —          0.7        —          —          —          0.7   

Common shares repurchased

    (35     —          (0.2     —          —          (0.1     —          —          (0.3

Share-based compensation

    —          —          —          —          1.5        —          —          —          1.5   

Distributions to non-controlling interests

    —          —          —          —          —          —          —          (1.4     (1.4

Comprehensive income

                 

Currency translation adjustment

    —          —          —          —          —          —          1.1        (0.1     1.0   

Pension benefit plan, net of tax

    —          —          —          —          —          —          (0.2     —          (0.2

Unrealized loss on derivative instruments, net of tax

    —          —          —          —          —          —          (0.3     —          (0.3

Net income

    —          —          —          —          —          31.0        —          2.1        33.1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2012

    95,162        674      $ 395.7      $ (2.1   $ 44.8      $ 175.0      $ (24.1   $ 13.0      $ 602.3   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 29, 2012

    95,371        —        $ 397.8      $ —        $ 40.4      $ 186.0      $ (12.4   $ 11.1      $ 622.9   

Common shares issued - Directors’ share award

    87        —          —          —          0.8        —          —          —          0.8   

Common shares repurchased and cancelled

    (692     —          (2.9     —          —          (2.6     —          —          (5.5

Common shares issued - Time-based RSUs

    7        —          —          —          —          —          —          —          —     

Share-based compensation

    —          —          —          —          1.7        —          —          —          1.7   

Dividend payment

    —          —          —          —          —          (11.2     —          —          (11.2

Distributions to non-controlling interests

    —          —          —          —          —          —          —          (2.8     (2.8

Comprehensive income

                 

Currency translation adjustment

    —          —          —          —          —          —          (16.8     —          (16.8

Pension benefit plan, net of tax

    —          —          —          —          —          —          0.4        —          0.4   

Unrealized loss on derivative instruments, net of tax

    —          —          —          —          —          —          —          —          —     

Net income

    —          —          —          —          —          16.5        —          2.6        19.1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 29, 2013

    94,773        —        $ 394.9      $ —        $ 42.9      $ 188.7      $ (28.8   $ 10.9      $ 608.6   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

7


Cott Corporation

Notes to the Consolidated Financial Statements

Unaudited

Note 1 – Business and Recent Accounting Pronouncements

Description of Business

Cott Corporation, together with its consolidated subsidiaries (“Cott,” “the Company,” “our Company,” “Cott Corporation,” “we,” “us,” or “our”), is one of the world’s largest producers of beverages on behalf of retailers, brand owners and distributors. Our product lines include carbonated soft drinks (“CSDs”), 100% shelf stable juice and juice-based products, clear, still and sparkling flavored waters, energy products, sports products, new age beverages and ready-to-drink teas, as well as alcoholic beverages for brand owners.

Basis of Presentation

The accompanying interim unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting. 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, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of our results of operations for the interim periods reported and of our financial condition as of the date of the interim balance sheet have been included. This Quarterly Report on Form 10-Q should be read in conjunction with the annual audited consolidated financial statements and accompanying notes in our Annual Report on Form 10-K for the year ended December 29, 2012. The accounting policies used in these interim consolidated financial statements are consistent with those used in the annual consolidated financial statements.

The presentation of these interim consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

Recent Accounting Pronouncements

Update ASU 2013-02—Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income

In February 2013, the Financial Accounting Standards Board (“FASB”) amended its guidance regarding the information provided in relation to the amounts reclassified out of accumulated other comprehensive income. The amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. For public entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2012. We have adopted this guidance, and the required disclosure is set forth in Note 11.

Note 2 – Acquisitions

During June 2013, our United Kingdom (“U.K.”) reporting segment acquired 100 percent of the share capital of Cooke Bros. Holdings Limited, which includes the subsidiary companies Calypso Soft Drinks Limited and Mr. Freeze (Europe) Limited (together, “Calypso Soft Drinks”). Calypso Soft Drinks is in the business of producing fruit juices, juice drinks, soft drinks, and freeze products using natural spring and mineral waters in the United Kingdom. The aggregate purchase price for the acquisition of Calypso Soft Drinks (the “Calypso Soft Drinks Acquisition”) was $12.1 million which includes deferred payments for approximately $2.3 million and $3.0 million to be paid on the first and second anniversary of the closing date of the Calypso Soft Drinks Acquisition, respectively, and was funded from available cash.

 

8


The total consideration paid by us in the Calypso Soft Drinks Acquisition, subject to final working capital adjustments, is summarized below:

 

(in millions of U.S. dollars)

      

Cash

   $ 7.0   

Deferred consideration*

     5.1   
  

 

 

 

Total consideration

   $ 12.1   
  

 

 

 

 

* Principal amount of $5.3 million discounted to be paid on the first and second anniversary of the completion date.

Our primary reasons for the Calypso Soft Drinks Acquisition were to expand Cott’s product portfolio and enhance our customer offering and growth prospects.

The Calypso Soft Drinks Acquisition is being accounted for as a business combination which, among other things, requires that assets acquired and liabilities assumed be measured at their acquisition date fair values. Identified intangible assets, goodwill and property, plant and equipment are recorded at their estimated fair values per preliminary valuations and may change based on the final valuation results including, for example, the process of physically validating fixed assets. The results of operations of Calypso Soft Drinks have been included in our operating results beginning as of the acquisition date. We allocated the purchase price of the Calypso Soft Drinks Acquisition to tangible assets, liabilities and identifiable intangible assets acquired based on their estimated fair values. The excess of the purchase price over the aggregate fair values was recorded as goodwill. The fair value assigned to identifiable intangible assets acquired was based on estimates and assumptions made by management. Intangible assets are amortized using a method that reflects the pattern in which economic benefits of the intangible asset are consumed using a straight-line amortization method.

The following table summarizes the estimated allocation of the purchase price to the fair value of the assets acquired and liabilities assumed in connection with the Calypso Soft Drinks Acquisition. The allocation of the purchase price is based on a preliminary valuation that is expected to be completed in the third quarter of 2013. Any adjustment may affect the total purchase price and goodwill.

 

(in millions of U.S. dollars)

   Acquired Value  

Cash

   $ 0.5   

Accounts receivable

     15.1   

Inventory

     7.5   

Prepaid expenses and other assets

     0.6   

Property, plant and equipment

     9.7   

Goodwill

     10.5   

Intangibles and other assets

     14.8   

Accounts payable and accrued liabilities

     (14.1

Shareholder loans

     (1.6

Deferred tax liabilities

     (4.7

Other long-term liabilities

     (26.2
  

 

 

 

Total

   $ 12.1   
  

 

 

 

The Company recognized $1.5 million of acquisition related costs associated with the Calypso Soft Drinks Acquisition that were expensed during the six month period ended June 29, 2013. These costs are included in the selling, general, and administrative expenses of our Consolidated Statements of Operations in accordance with ASC 805, “Business Combinations.”

Intangible Assets

In our preliminary determination of the fair value of the intangible assets, we considered, among other factors, the best use of acquired assets, analysis of historical financial performance and estimates of future performance of Calypso Soft Drink’s products. The estimated fair values of identified intangible assets were calculated considering market participant expectations and using an income approach and estimates and assumptions provided by Calypso Soft Drink’s and our management. The following table sets forth the components of identified intangible assets associated with the Calypso Soft Drinks Acquisition and their estimated weighted average useful lives:

 

(in millions of U.S. dollars)

   Estimated
Fair Market
Value
     Estimated
Useful
Life

Customer relationships

   $ 10.5       15 years

Trademarks and trade names

     3.0       20 years

Non-competition agreements

     1.3       5 years
  

 

 

    

Total

   $ 14.8      
  

 

 

    

 

9


Customer relationships represent future projected revenue that will be derived from sales to existing customers of Calypso Soft Drinks.

Trademarks and trade names represent the future projected cost savings associated with the premium and brand image obtained as a result of owning the trademark or trade name as opposed to obtaining the benefit of the trademark or trade name through a royalty or rental fee.

In conjunction with the closing of the Calypso Soft Drinks Acquisition, certain key employees of Calypso Soft Drinks executed non-competition agreements, which prevent those employees from competing with us in the specified restricted territories for a period of time from the acquisition date. The value of the Calypso Soft Drinks business could be materially diminished without these noncompetition agreements.

Goodwill

The principal factor that resulted in recognition of goodwill was that the purchase price for the Calypso Soft Drinks Acquisition was based in part on cash flow projections assuming the reduction of administration costs and the integration of acquired customers and products into our operations, which is of greater value than on a standalone basis.

Selected Financial Data

The following unaudited financial information for the three week period ended June 29, 2013 represents the activity of Calypso Soft Drinks that has been combined with our operations as of the date of acquisition.

 

(in millions of U.S. dollars)

   For the Three Week Period
Ended June 29, 2013
 

Revenue

   $ 4.2   

Net income

     0.1   

In March of 2012, our U.K. reporting segment acquired a beverage and wholesale business based in Scotland for approximately $5.0 million. The business was purchased from a company in administration and is expected to provide a number of benefits to our U.K. reporting segment, including increased product offerings, logistical synergies and access to an additional production line. The acquisition has been accounted for using the purchase method of accounting for business combinations, and related operating results are included in the Consolidated Statements of Operations for the periods subsequent to the acquisition. The identified assets, which included inventory, property, plant and equipment, trade names and customer lists, were recorded at their estimated fair values, which exceeded the fair value of the purchase price of the business. Accordingly, the acquisition has been accounted for as a bargain purchase and, as a result, we recognized a gain of approximately $0.9 million associated with the acquisition during the second quarter of 2012.

On August 17, 2010, we completed the acquisition of substantially all of the assets and liabilities of Cliffstar Corporation (“Cliffstar”) and its affiliated companies for approximately $503.0 million in cash, $14.0 million in deferred consideration payable in equal installments over three years and contingent consideration of up to $55.0 million (the “Cliffstar Acquisition”). The first $15.0 million of the contingent consideration was paid upon the achievement of milestones in certain expansion projects in 2010. The remainder of the contingent consideration was to be calculated based on the achievement of certain performance measures during the fiscal year ended January 1, 2011.

In 2011, the seller of Cliffstar raised certain objections to the performance measures used to calculate the contingent consideration, and the parties commenced the dispute resolution mechanism provided for in the asset purchase agreement. During 2011, Cott made interim payments to the seller equal to $29.6 million, which was net of a $4.7 million refund due to

 

10


Cott and included $0.9 million in settlement of certain of the seller’s objections to the calculation of the contingent consideration. The seller’s claims for an additional $12.1 million in contingent consideration were submitted to binding arbitration pursuant to the asset purchase agreement and favorably resolved by payment by Cott in February 2013 of approximately $0.6 million.

Note 3 – Restructuring

The Company implements restructuring programs from time to time that are designed to improve operating effectiveness and lower costs. When the Company implements these programs, it incurs various charges, including severance and other employment related costs. During June 2013, the Company implemented one such program (“the 2013 Restructuring Plan”), which consisted primarily of headcount reductions. For the six months ended June 29, 2013, the Company incurred charges of approximately $2.0 million related primarily to employee redundancy costs.

The following table summarizes restructuring charges for the period ended June 29, 2013:

 

(in millions of U.S. dollars)

   June 29, 2013  

North America

   $ 1.0   

United Kingdom

     0.7   

Mexico

     0.3   
  

 

 

 

Total

   $ 2.0   
  

 

 

 

Note 4 – Share-Based Compensation

The table below summarizes the share-based compensation expense for the three and six months ended June 29, 2013 and June 30, 2012, respectively. This share-based compensation expense was recorded in selling, general, and administrative expenses in our Consolidated Statements of Operations. As used below: (i) “Performance-based RSUs” mean restricted share units with performance-based vesting granted under the Company’s 2010 Equity Incentive Plan (the “2010 Equity Incentive Plan”) or Amended and Restated Equity Incentive Plan (as defined below), as the case may be, (ii) “Time-based RSUs” mean restricted share units with time-based vesting granted under the 2010 Equity Incentive Plan or Amended and Restated Equity Incentive Plan, as the case may be, and (iii) “Stock options” mean non-qualified stock options granted under the Amended and Restated Equity Incentive Plan, the 2010 Equity Incentive Plan, or the Restated 1986 Common Share Option Plan (the “1986 Option Plan”), as the case may be.

 

     For the Three Months Ended      For the Six Months Ended  

(in millions of U.S. dollars)

   June 29, 2013      June 30, 2012      June 29, 2013      June 30, 2012  

Stock options

   $ 0.3       $ 0.1       $ 0.4       $ 0.2   

Directors’ share award

     0.8         0.7         0.8         0.7   

Performance-based RSUs

     0.2         0.2         0.4         0.2   

Time-based RSUs

     0.5         0.4         0.9         1.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1.8       $ 1.4       $ 2.5       $ 2.2   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

11


As of June 29, 2013, the unrecognized share-based compensation expense and years we expect to recognize the future compensation expense were as follows:

 

(in millions of U.S. dollars, except years)

   Unrecognized share-based
compensation expense as
of June 29, 2013
     Weighted average years
expected to recognize
compensation
 

Stock options

   $ 2.2         2.2   

Performance-based RSUs

     3.3         2.2   

Time-based RSUs

     4.8         2.1   
  

 

 

    

Total

   $ 10.3      
  

 

 

    

Stock option activity for the six months ended June 29, 2013 was as follows:

 

     Shares
(in  thousands)
     Weighted average
exercise price
(Canadian $)
 

Balance at December 29, 2012

     468       $ 7.28   

Awarded

     392         9.36   

Exercised

     —           —     

Forfeited or expired

     —           —     
  

 

 

    

 

 

 

Outstanding at June 29, 2013

     860       $ 8.23   
  

 

 

    

 

 

 
     
  

 

 

    

 

 

 

Exercisable at June 29, 2013

     125       $ 9.49   
  

 

 

    

 

 

 

During the six months ended June 29, 2013 Performance-based RSU and Time-based RSU activity was as follows:

 

(in thousands of shares)

   Number of
Performance-

based RSUs
    Number of
Time-based
RSUs
 

Balance at December 29, 2012

     825        529   

Awarded

     247        382   

Issued

     —          (7

Forfeited

     (21     (22
  

 

 

   

 

 

 

Outstanding at June 29, 2013

     1,051        882   
  

 

 

   

 

 

 

On February 14, 2013, our board of directors adopted an amendment and restatement of the 2010 Equity Incentive Plan (the “Amended and Restated Equity Plan”), pursuant to which the 2010 Equity Incentive Plan was amended and restated to, among other things, increase the number of shares that may be issued under the plan to 12,000,000 shares and to provide that the number of shares available for issuance will be reduced 2.0 shares for each share issued pursuant to a “full-value” award after the effective date of the amendment and restatement (i.e. an award other than an option or stock appreciation right). The Amended and Restated Equity Plan was approved by Cott’s shareowners on April 30, 2013.

Certain outstanding stock options were granted under the 1986 Option Plan. Our board of directors terminated the 1986 Option Plan as of February 23, 2011. In connection with the termination of the 1986 Option Plan, outstanding options will continue in accordance with the terms of the 1986 Option Plan until exercised, forfeited or terminated, as applicable. No further awards will be granted under the 1986 Option Plan.

 

12


Average Canadian to U.S. Dollar Exchange Rate for the Six Months Ended June 29, 2013

The weighted-average exercise prices for options in this Note 4 are disclosed in Canadian dollars. The table below represents the average Canadian dollar to U.S. dollar exchange rate for the six months ended June 29, 2013:

 

     For the Six Months Ended  
     June 29, 2013  

Average exchange rate

   $ 0.986   

Note 5 – Income Taxes

Income tax expense was $2.2 million on pretax income of $21.3 million for the six months ended June 29, 2013, as compared to income tax expense of $4.3 million on pretax income of $37.4 million for the six months ended June 30, 2012. The year to date income tax expense was reduced as a result of lower pretax income relative to the comparable prior year period.

Note 6 – 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, if dilutive, of the exercise of in-the-money stock options, Performance-based RSUs and Time-based RSUs.

A reconciliation of the denominators of the basic and diluted net income per common share computations is as follows:

 

     For the Three Months Ended      For the Six Months Ended  

(in thousands of shares)

   June 29, 2013      June 30, 2012      June 29, 2013      June 30, 2012  

Weighted average number of shares outstanding - basic

     95,159         94,469         95,265         94,448   

Dilutive effect of Stock options

     62         31         55         31   

Dilutive effect of Performance-based RSUs

     275         30         266         21   

Dilutive effect of Time-based RSUs

     485         985         462         979   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted weighted average number of shares outstanding - diluted

     95,981         95,515         96,048         95,479   
  

 

 

    

 

 

    

 

 

    

 

 

 

At June 29, 2013, we excluded 442,131 (June 30, 2012 – 183,500) stock options from the computation of diluted net income per share because the options’ exercise price was greater than the average market price of the common shares. Shares purchased on the open market and held by independent trusts are categorized as treasury shares under applicable accounting rules. We excluded 674,397 treasury shares held in various trusts in the calculation of basic and diluted earnings per share for the six months ended June 30, 2012.

 

13


Note 7 – Segment Reporting

Our product lines include CSDs, 100% shelf stable juice and juice-based products, clear, still and sparkling flavored waters, energy products, sports products, new age beverages, and ready-to-drink teas, as well as alcoholic beverages for brand owners. Our business operates through five reporting segments: North America (which includes our U.S. operating segment and Canada operating segment), U.K. (which includes our United Kingdom reporting unit and our Continental European reporting unit), Mexico, Royal Crown International (“RCI”) and All Other. The primary measures used in evaluating our reporting segments are revenues, operating income (loss), and additions to property, plant and equipment, which have been included as part of our segment disclosures listed below.

 

(in millions of U.S. dollars)

   North
America
     United
Kingdom
     Mexico     RCI      All Other      Total  

For the Three Months Ended June 29, 2013

                

External revenue1

   $ 418.1       $ 127.9       $ 7.7      $ 10.1       $ —         $ 563.8   

Depreciation and amortization

     21.1         3.3         0.5        —           —           24.9   

Operating income (loss)

     20.9         9.1         0.3        2.3         —           32.6   

Additions to property, plant & equipment

     10.4         3.7         0.5        —           —           14.6   

For the Six Months Ended June 29, 2013

                

External revenue1

   $ 811.3       $ 225.3       $ 15.1      $ 17.5       $ —         $ 1,069.2   

Depreciation and amortization

     42.1         6.5         1.0        —           —           49.6   

Operating income (loss)

     34.7         9.1         (0.4     4.3         —           47.7   

Additions to property, plant & equipment

     24.9         8.3         1.3        —           —           34.5   

As of June 29, 2013

                

Property, plant & equipment

   $ 376.8       $ 105.3       $ 10.1      $ —         $ —         $ 492.2   

Goodwill

     124.4         10.5         —          4.5         —           139.4   

Intangibles and other assets

     286.4         26.9         0.3        —           —           313.6   

Total assets2

     1,195.8         307.3         26.0        16.2         0.8         1,546.1   

 

1 

Intersegment revenue between North America and the other reporting segments was $5.4 million and $9.2 million for the three and six months ended June 29, 2013, respectively.

2 

Excludes intersegment receivables, investments and notes receivable.

 

14


(in millions of U.S. dollars)

   North
America
     United
Kingdom
     Mexico     RCI      All Other      Total  

For the Three Months Ended June 30, 2012

                

External revenue1

   $ 475.7       $ 131.5       $ 10.2      $ 8.4       $ —         $ 625.8   

Depreciation and amortization

     20.1         3.1         0.5        —           —           23.7   

Operating income (loss)

     31.2         10.5         (0.9     2.4         —           43.2   

Additions to property, plant & equipment

     16.4         3.1         0.2        —           —           19.7   

For the Six Months Ended June 30, 2012

                

External revenue1

   $ 883.8       $ 230.7       $ 19.3      $ 15.8       $ —         $ 1,149.6   

Depreciation and amortization

     40.2         6.4         0.9        —           —           47.5   

Operating income (loss)

     48.5         13.7         (2.2     4.2         —           64.2   

Additions to property, plant & equipment

     29.0         8.1         0.3        —           —           37.4   

As of June 30, 2012

                

Property, plant & equipment

   $ 385.1       $ 94.6       $ 9.1      $ —         $ —         $ 488.8   

Goodwill

     125.1         —           —          4.5         —           129.6   

Intangibles and other assets

     314.5         14.2         0.4        —           —           329.1   

Total assets2

     1,236.9         248.1         29.8        13.2         0.7         1,528.7   

 

1 

Intersegment revenue between North America and the other reporting segments was $4.0 million and $8.1 million for the three and six months ended June 30, 2012, respectively.

2 

Excludes intersegment receivables, investments and notes receivable.

For the six months ended June 29, 2013, sales to Walmart accounted for 30.7% of our total revenues (June 30, 2012 – 31.8%), 36.1% of our North America reporting segment revenues (June 30, 2012 – 36.8%), 14.8% of our U.K. reporting segment revenues (June 30, 2012 – 15.5%), and 11.7% of our Mexico reporting segment revenues (June 30, 2012 – 22.4%).

Credit risk arises from the potential default of a customer in meeting its financial obligations to us. Concentrations of credit exposure may arise with a group of customers that have similar economic characteristics or that are located in the same geographic region. The ability of such customers to meet obligations would be similarly affected by changing economic, political or other conditions. We are not currently aware of any facts that would create a material credit risk.

Revenues are attributed to operating segments based on the location of the customer. Revenues by operating segment were as follows:

 

     For the Three Months Ended     For the Six Months Ended  

(in millions of U.S. dollars)

   June 29, 2013     June 30, 2012     June 29, 2013     June 30, 2012  

United States

   $ 367.8      $ 414.8      $ 722.6      $ 781.0   

Canada

     62.1        73.3        109.6        127.1   

United Kingdom

     127.9        131.5        225.3        230.7   

Mexico

     7.7        10.2        15.1        19.3   

RCI

     10.1        8.4        17.5        15.8   

Elimination1

     (11.8     (12.4     (20.9     (24.3
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 563.8      $ 625.8      $ 1,069.2      $ 1,149.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

1 

Represents intersegment revenue among our operating segments, of which $5.4 million and $9.2 million represents intersegment revenue between the North America reporting segment and our other operating segments for the three and six months ended June 29, 2013, respectively, compared to $4.0 million and $8.1 million for the three and six months ended June 30, 2012, respectively.

 

15


Revenues by product were as follows:

 

For the Three Months Ended June 29, 2013

 

(in millions of U.S. dollars)

   North
America
     United
Kingdom
     Mexico      RCI      Total  

Revenue

              

Carbonated soft drinks

   $ 157.1       $ 40.0       $ 3.7       $ 0.1       $ 200.9   

Juice

     124.4         5.6         —           0.9         130.9   

Concentrate

     2.8         0.6         —           7.3         10.7   

All other products

     133.8         81.7         4.0         1.8         221.3   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 418.1       $ 127.9       $ 7.7       $ 10.1       $ 563.8   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

For the Six Months Ended June 29, 2013

 

(in millions of U.S. dollars)

   North
America
     United
Kingdom
     Mexico      RCI      Total  

Revenue

              

Carbonated soft drinks

   $ 308.5       $ 72.7       $ 7.2       $ 0.2       $ 388.6   

Juice

     259.4         8.7         —           1.4         269.5   

Concentrate

     5.9         1.2         —           14.1         21.2   

All other products

     237.5         142.7         7.9         1.8         389.9   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 811.3       $ 225.3       $ 15.1       $ 17.5       $ 1,069.2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

For the Three Months Ended June 29, 2013

 

(in millions of physical cases)

   North
America
     United
Kingdom
     Mexico      RCI      Total  

Volume - 8 oz equivalent cases - Total Beverage (including concentrate)

              

Carbonated soft drinks

     72.1         20.3         2.2         —           94.6   

Juice

     28.7         1.5         0.1         0.1         30.4   

Concentrate

     18.5         4.4         —           66.9         89.8   

All other products

     55.7         28.2         2.5         0.2         86.6   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     175.0         54.4         4.8         67.2         301.4   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

For the Six Months Ended June 29, 2013

 

(in millions of physical cases)

   North
America
     United
Kingdom
     Mexico      RCI      Total  

Volume - 8 oz equivalent cases - Total Beverage (including concentrate)

              

Carbonated soft drinks

     138.9         37.7         4.5         0.1         181.2   

Juice

     59.5         2.3         0.1         0.2         62.1   

Concentrate

     43.1         8.8         —           130.2         182.1   

All other products

     106.1         50.1         5.1         0.2         161.5   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     347.6         98.9         9.7         130.7         586.9   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

16


Property, plant and equipment, net by operating segment as of June 29, 2013 and December 29, 2012 was as follows:

 

(in millions of U.S. dollars)

   June 29, 2013      December 29, 2012  

United States

   $ 330.5       $ 333.7   

Canada

     46.3         48.4   

United Kingdom

     105.3         99.5   

Mexico

     10.1         9.3   
  

 

 

    

 

 

 

Total

   $ 492.2       $ 490.9   
  

 

 

    

 

 

 

Note 8 – Inventories

The following table summarizes inventories as of June 29, 2013 and December 29, 2012:

 

(in millions of U.S. dollars)

   June 29, 2013      December 29, 2012  

Raw materials

   $ 92.2       $ 93.4   

Finished goods

     126.7         111.6   

Other

     21.1         19.8   
  

 

 

    

 

 

 

Total

   $ 240.0       $ 224.8   
  

 

 

    

 

 

 

Note 9 – Intangibles and Other Assets

The following table summarizes intangibles and other assets as of June 29, 2013:

 

     June 29, 2013  

(in millions of U.S. dollars)

   Cost      Accumulated
Amortization
     Net  

Intangibles

        

Not subject to amortization

        

Rights

   $ 45.0       $ —         $ 45.0   
  

 

 

    

 

 

    

 

 

 

Subject to amortization

        

Customer relationships

   $ 376.8       $ 154.1       $ 222.7   

Trademarks

     31.7         24.1         7.6   

Information technology

     66.3         51.3         15.0   

Other

     13.1         9.9         3.2   
  

 

 

    

 

 

    

 

 

 
     487.9         239.4         248.5   
  

 

 

    

 

 

    

 

 

 
     532.9         239.4         293.5   
  

 

 

    

 

 

    

 

 

 

Other Assets

        

Financing costs

   $ 24.3       $ 12.4       $ 11.9   

Deposits

     7.2         —           7.2   

Other

     1.3         0.3         1.0   
  

 

 

    

 

 

    

 

 

 
     32.8         12.7         20.1   
  

 

 

    

 

 

    

 

 

 

Total Intangibles & Other Assets

   $ 565.7       $ 252.1       $ 313.6   
  

 

 

    

 

 

    

 

 

 

Our only intangible asset with an indefinite life relates to the 2001 acquisition of intellectual property from Royal Crown Company, Inc., including the right to manufacture our concentrates, with all related inventions, processes, technologies, technical and manufacturing information, know-how and the use of the Royal Crown brand outside of North America and Mexico (the “Rights”).

Amortization expense of intangible and other assets was $8.7 million and $17.3 million for the three and six months ended June 29, 2013, respectively, compared to $8.8 million and $17.8 million for the comparable prior year periods.

 

17


The estimated amortization expense for intangibles over the next five years is:

 

(in millions of U.S. dollars)

      

Remainder of 2013

   $ 16.7   

2014

     30.4   

2015

     28.0   

2016

     24.5   

2017

     21.3   

Thereafter

     127.6   
  

 

 

 
   $ 248.5   
  

 

 

 

Note 10 – Debt

Our total debt as of June 29, 2013 and December 29, 2012 was as follows:

 

(in millions of U.S. dollars)

   June 29, 2013     December 29, 2012  

8.375% senior notes due in 20171

   $ 215.0      $ 215.0   

8.125% senior notes due in 2018

     375.0        375.0   

GE obligation

     9.5        9.9   

Other capital leases

     5.9        4.6   

Other debt

     1.2        1.3   
  

 

 

   

 

 

 

Total debt

     606.6        605.8   

Less: Current debt

    

GE obligation - current maturities

     0.9        0.9   

Other capital leases - current maturities

     1.4        0.8   

Other debt - current maturities

     0.3        0.2   
  

 

 

   

 

 

 

Total current debt

     2.6        1.9   

Long-term debt before discount

     604.0        603.9   

Less discount on 8.375% notes

     (1.9     (2.1
  

 

 

   

 

 

 

Total long-term debt

   $ 602.1      $ 601.8   
  

 

 

   

 

 

 

 

1 

Our 8.375% senior notes were issued at a discount of 1.425% on November 13, 2009.

Debt

Asset-Based Lending Credit Facility

On March 31, 2008, we entered into a credit agreement with JPMorgan Chase Bank N.A. as Agent that created an asset-based lending credit facility (the “ABL facility”) to provide financing for our North America, U.K. and Mexico reporting segments. In connection with the Cliffstar Acquisition, we refinanced the ABL facility on August 17, 2010 to, among other things, provide for the Cliffstar Acquisition, the issuance of $375.0 million of 8.125% senior notes that are due on September 1, 2018 (the “2018 Notes”) and the application of net proceeds therefrom, the underwritten public offering of 13,340,000 common shares at a price of $5.67 per share and the application of net proceeds therefrom and to increase the amount available for borrowings to $275.0 million. We drew down a portion of the indebtedness under the ABL facility in order to fund the Cliffstar Acquisition. We incurred $5.4 million of financing fees in connection with the refinancing of the ABL facility.

On July 19, 2012, we amended the ABL facility to, among other things, extend the maturity date to either July 19, 2017 or, if we have not redeemed, repurchased or refinanced our 8.375% senior notes due 2017 (the “2017 Notes”) by May 1, 2017, May 15, 2017. We incurred $1.2 million of financing fees in connection with the amendment of the ABL facility.

The financing fees incurred in connection with the refinancing of the ABL facility on August 17, 2010, along with the financing fees incurred in connection with the amendment of the ABL facility on July 19, 2012, are being amortized using the straight line method over the duration of the amended ABL facility.

As of June 29, 2013, we had no outstanding borrowings under the ABL facility. The commitment fee was 0.375% per annum of the unused commitment, which, taking into account $11.5 million of letters of credit, was $263.5 million as of June 29, 2013.

 

18


8.375% Senior Notes due in 2017

On November 13, 2009, we issued the 2017 Notes. The 2017 Notes were issued at a $3.1 million discount. The issuer of the 2017 Notes is our wholly-owned U.S. subsidiary Cott Beverages Inc., and we and most of our U.S., Canadian and U.K. subsidiaries guarantee the 2017 Notes. The interest on the 2017 Notes is payable semi-annually on May 15th and November 15th of each year.

We incurred $5.1 million of financing fees in connection with the 2017 Notes. The financing fees are being amortized using the effective interest method over an eight-year period, which represents the duration of the 2017 Notes.

8.125% Senior Notes due in 2018

On August 17, 2010, we issued the 2018 Notes. The issuer of the 2018 Notes is our wholly-owned U.S. subsidiary Cott Beverages Inc., and we and most of our U.S., Canadian and U.K. subsidiaries guarantee the 2018 Notes. The interest on the 2018 Notes is payable semi-annually on March 1st and September 1st of each year.

We incurred $8.6 million of financing fees in connection with the issuance of the 2018 Notes. The financing fees are being amortized using the effective interest method over an eight-year period, which represents the duration of the 2018 Notes.

Note 11 – Accumulated Other Comprehensive (Loss) Income

Changes in accumulated other comprehensive (loss) income by component1 for the six months ended June 29, 2013 were as follows:

 

(in millions of U.S. dollars)

   June 29, 2013  
     Gains and
Losses on
Derivative
Instruments
    Pension
Benefit
Plan Items
    Currency
Translation
Adjustment
Items
    Total  

Beginning balance December 29, 2012

   $ 0.2      $ (9.1   $ (3.5   $ (12.4
  

 

 

   

 

 

   

 

 

   

 

 

 

OCI before reclassifications

     0.2        (0.3     (16.8     (16.9

Amounts reclassified from AOCI

     (0.2     0.7        —          0.5   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period OCI

     —          0.4        (16.8     (16.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance June 29, 2013

   $ 0.2      $ (8.7   $ (20.3   $ (28.8
  

 

 

   

 

 

   

 

 

   

 

 

 

 

1 

All amounts are net of tax. Amounts in parentheses indicate debits.

 

19


The following table summarizes the amounts reclassified from accumulated other comprehensive (loss) income1 for the three and six months ended June 29, 2013.

 

(in millions of U.S. dollars)

   Amounts Reclassified From AOCI

Details About AOCI Components

   For the Three
Months Ended
June 29, 2013
    For the Six
Months Ended
June 29, 2013
   

Affected Line Item in the

Statement Where Net Income
Is Presented

Gains and losses on derivative instruments

      

Foreign currency hedges

   $ 0.1      $ 0.2      Cost of sales
  

 

 

   

 

 

   
   $ 0.1      $ 0.2      Total before taxes
     —          —        Tax (expense) or benefit
  

 

 

   

 

 

   
   $ 0.1      $ 0.2      Net of tax
  

 

 

   

 

 

   

Amortization of pension benefit plan items

      

Prior-service costs2

   $ (0.2   $ (0.3  

Actuarial adjustments2

     —          (0.1  

Actuarial gains/(losses)2

     (0.1     (0.1  
  

 

 

   

 

 

   
     (0.3     (0.5   Total before tax
     (0.2     (0.2   Tax (expense) or benefit
  

 

 

   

 

 

   
   $ (0.5   $ (0.7   Net of tax
  

 

 

   

 

 

   

Total reclassifications for the period

   $ (0.4   $ (0.5   Net of tax
  

 

 

   

 

 

   

 

1 

Amounts in parentheses indicate debits.

2 

These AOCI components are included in the computation of net periodic pension cost.

Note 12 – Commitments and Contingencies

We are subject to various claims and legal proceedings with respect to matters such as governmental regulations, 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 our financial position, results of operations, or cash flow.

On August 17, 2010, we completed the Cliffstar Acquisition which included contingent consideration of up to $55.0 million. The first $15.0 million of the contingent consideration was paid upon the achievement of milestones in certain expansion projects in 2010. The remainder of the contingent consideration was to be calculated based on the achievement of certain performance measures during the fiscal year ended January 1, 2011. During 2011, Cott made interim payments to the seller equal to $29.6 million, which was net of a $4.7 million refund due to Cott and included $0.9 million in settlement of certain of the seller’s objections to the calculation of the contingent consideration.

In 2011, the seller of Cliffstar raised certain objections to the performance measures used to calculate the contingent consideration, and the parties commenced the dispute resolution mechanism provided for in the asset purchase agreement. The seller’s claims for an additional $12.1 million in contingent consideration were submitted to binding arbitration pursuant to the asset purchase agreement and favorably resolved by payment by Cott in February 2013 of approximately $0.6 million.

We had $11.5 million in standby letters of credit outstanding as of June 29, 2013 (June 30, 2012 – $11.0 million).

Note 13 – Shares Held in Trust Treated as Treasury Shares and Share Repurchase Program

In May 2008, an independent trustee acting on behalf of certain of our benefit plans purchased 2.3 million of our common shares to be used to satisfy future liabilities under the Amended and Restated Performance Share Unit Plan and the Restated Executive Incentive Share Purchase Plan. During the year ended December 29, 2012, we distributed the remaining 0.7 million shares from the trust to satisfy certain 2010 Equity Incentive Plan obligations that had vested during the last quarter of 2012. As of December 29, 2012, there were no shares held in trust that were accounted for as treasury shares.

On May 1, 2012, our board of directors authorized the repurchase of up to $35.0 million of our common shares in the open market or through privately negotiated transactions over a 12-month period through either a 10b5-1 automatic trading plan or at management’s discretion in compliance with regulatory requirements, and given market, cost and other considerations. During the second quarter of 2012, we repurchased 35,272 shares of common stock for approximately $0.3 million through open market transactions. No additional repurchases were made under the program.

 

20


On April 30, 2013, our board of directors renewed our share repurchase program for up to 5% of Cott’s outstanding common shares over a 12-month period commencing upon the expiration of the prior share repurchase program on May 21, 2013. We are unable to predict the number of shares that will be repurchased under the share repurchase program, or the aggregate dollar amount of the shares actually purchased. We may discontinue purchases at any time, subject to compliance with applicable regulatory requirements. We repurchased 690,258 shares of common stock for approximately $5.5 million during the second quarter ended June 29, 2013 under the share repurchase program through open market transactions.

Note 14 – Hedging Transactions and Derivative Financial Instruments

We are directly and indirectly affected by changes in foreign currency market conditions. These changes in market conditions may adversely impact our financial performance and are referred to as market risks. When deemed appropriate by management, we use derivatives as a risk management tool to mitigate the potential impact of foreign currency market risks.

We purchase forward contract derivative instruments. Forward contracts are agreements to buy or sell a quantity of a currency at a predetermined future date, and at a predetermined rate or price. We do not enter into derivative financial instruments for trading purposes.

All derivatives are carried at fair value in the Consolidated Balance Sheets in the line item other receivables or other payables. The carrying values of the derivatives reflect the impact of legally enforceable agreements with the same counterparties. These allow us to net settle positive and negative positions (assets and liabilities) arising from different transactions with the same counterparty.

The accounting for gains and losses that result from changes in the fair values of derivative instruments depends on whether the derivatives have been designated and qualify as hedging instruments and the types of hedging relationships. The changes in fair values of derivatives that have been designated and qualify as cash flow hedges are recorded in accumulated other comprehensive income (loss) (“AOCI”) and are reclassified into the line item in the Consolidated Statements of Operations in which the hedged items are recorded in the same period the hedged items affect earnings. Due to the high degree of effectiveness between the hedging instruments and the underlying exposures being hedged, fluctuations in the value of the derivative instruments are generally offset by changes in the fair values or cash flows of the underlying exposures being hedged.

We formally designate and document, at inception, the financial instrument as a hedge of a specific underlying exposure, the risk management objective and the strategy for undertaking the hedge transaction. In addition, we formally assess both at the inception and at least quarterly thereafter, whether the financial instruments used in hedging transactions are effective at offsetting changes in either the fair values or cash flows of the related underlying exposures. Any ineffective portion of a financial instrument’s change in fair value is immediately recognized into earnings.

We estimate the fair values of our derivatives based on quoted market prices or pricing models using current market rates (refer to Note 15). The notional amounts of the derivative financial instruments do not necessarily represent amounts exchanged by the parties and, therefore, are not a direct measure of our exposure to the financial risks described above. The amounts exchanged are calculated by reference to the notional amounts and by other terms of the derivatives, such as interest rates, foreign currency exchange rates or other financial indices. We do not view the fair values of our derivatives in isolation, but rather in relation to the fair values or cash flows of the underlying hedged transactions. All of our derivatives are straight-forward over-the-counter instruments with liquid markets.

Credit Risk Associated with Derivatives

We have established strict counterparty credit guidelines and enter into transactions only with financial institutions of investment grade or better. We mitigate pre-settlement risk by being permitted to net settle for transactions with the same counterparty.

Cash Flow Hedging Strategy

We use cash flow hedges to minimize the variability in cash flows of assets or liabilities or forecasted transactions caused by fluctuations in foreign currency exchange rates. The changes in the fair values of derivatives designated as cash flow hedges are recorded in AOCI and are reclassified into the line item in the Consolidated Statements of Operations in which the hedged items are recorded in the same period the hedged items affect earnings. The changes in fair values of hedges that are determined to be ineffective are immediately reclassified from AOCI into earnings. We did not discontinue any cash flow hedging relationships during the three months ended June 29, 2013. The maximum length of time over which we hedge our exposure to future cash flows is typically one year.

 

21


We maintain a foreign currency cash flow hedging program to reduce the risk that our procurement activities will be adversely affected by changes in foreign currency exchange rates. We enter into forward contracts to hedge certain portions of forecasted cash flows denominated in foreign currencies. The total notional value of derivatives that have been designated and qualify for our foreign currency cash flow hedging program as of June 29, 2013 was approximately $3.0 million.

The fair value of the Company’s derivative instruments was $0.2 million and $0.1 million as of June 29, 2013 and December 29, 2012, respectively.

The settlement of our derivative instruments resulted in a credit to cost of sales of approximately $0.3 million and $0.4 million for the three and six months ended June 29, 2013, respectively, compared to a charge to cost of sales of $0.2 million and $0.1 million for the comparable prior year periods.

Note 15 – Fair Value Measurements

ASC No. 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Additionally, the inputs used to measure fair value are prioritized based on a three-level hierarchy. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs.

The three levels of inputs used to measure fair value are as follows:

 

   

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

   

Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

   

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

We have certain assets and liabilities that are required to be recorded at fair value on a recurring basis in accordance with U.S. GAAP.

 

     June 29, 2013  

(in millions of U.S. dollars)

   Level 1      Level 2      Level 3      Fair Value Measurements  

Assets

           

Money market

   $ 10.0       $ —         $ —         $ 10.0   

Derivatives

     —           0.2         —           0.2   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Assets

   $ 10.0       $ 0.2       $ —         $ 10.2   
  

 

 

    

 

 

    

 

 

    

 

 

 
     December 29, 2012  

(in millions of U.S. dollars)

   Level 1      Level 2      Level 3      Fair Value Measurements  

Assets

           

Derivatives

   $ —         $ 0.1       $ —         $ 0.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Assets

   $ —         $ 0.1       $ —         $ 0.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Fair Value of Financial Instruments

The carrying amounts reflected in the Consolidated Balance Sheets for cash, receivables, payables, short-term borrowings and long-term debt approximate their respective fair values, except as otherwise indicated. The carrying values and estimated fair values of our significant outstanding debt as of June 29, 2013 and December 29, 2012 were as follows:

 

     June 29, 2013      December 29, 2012  

(in millions of U.S. dollars)

   Carrying Value      Fair Value      Carrying Value      Fair Value  

8.375% senior notes due in 20171

   $ 215.0         226.6       $ 215.0         234.4   

8.125% senior notes due in 20181

     375.0         403.1         375.0         414.8   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 590.0       $ 629.7       $ 590.0       $ 649.2   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

1 

The fair values are based on the trading levels and bid/offer prices observed by a market participant and are considered Level 1 inputs.

 

22


Note 16 – Guarantor Subsidiaries

The 2017 Notes and 2018 Notes issued by our one-hundred percent owned subsidiary, Cott Beverages, Inc., are unconditionally guaranteed on a senior basis pursuant to guarantees by Cott Corporation and certain other one-hundred percent owned subsidiaries (the “Guarantor Subsidiaries”). The guarantees of the Guarantor Subsidiaries are subject to release in limited circumstances only upon the occurrence of certain customary conditions.

We have not presented separate financial statements and separate disclosures have not been provided concerning subsidiary guarantors because management has determined such information is not material to the holders of the above-mentioned notes.

The following supplemental financial information sets forth on an unconsolidated basis, our Balance Sheets, Statements of Operations and Cash Flows for Cott Corporation, Cott Beverages Inc., Guarantor Subsidiaries and our other subsidiaries (the “Non-guarantor Subsidiaries”). The supplemental financial information reflects our investments and those of Cott Beverages Inc. in their respective subsidiaries using the equity method of accounting. In the third quarter of 2012, we revised the financial statements of certain Non-guarantor Subsidiaries to properly reflect their capitalization and subsequent investment in certain Guarantor Subsidiaries resulting from a reorganization completed in connection with the Cliffstar Acquisition. These Non-guarantor Subsidiaries, which have no business operations and no operating assets, hold, directly or indirectly, our investments in substantially all of the Guarantor Subsidiaries and therefore may be viewed for purposes of this disclosure as in-substance Guarantor Subsidiaries themselves. We have therefore included these Non-guarantor Subsidiaries as Guarantor Subsidiaries in the supplemental financial information below for all periods presented.

 

23


Condensed Consolidating Statements of Operations

 

(in millions of U.S. dollars)

Unaudited

 

     For the Three Months Ended June 29, 2013  
     Cott
Corporation
    Cott
Beverages Inc.
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Elimination
Entries
    Consolidated  

Revenue, net

   $ 50.4      $ 212.6      $ 266.1      $ 41.5      $ (6.8   $ 563.8   

Cost of sales

     41.5        181.4        235.3        35.8        (6.8     487.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     8.9        31.2        30.8        5.7        —          76.6   

Selling, general and administrative expenses

     8.4        18.7        12.6        2.0        —          41.7   

Loss on disposal of property, plant & equipment

     —          0.3        —          —          —          0.3   

Restructuring

     0.5        0.5        0.7        0.3        —          2.0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     —          11.7        17.5        3.4        —          32.6   

Other (income) expense, net

     (0.2     —          0.3        (0.1     —          —     

Intercompany interest (income) expense, net

     —          (2.8     2.8        —          —          —     

Interest expense, net

     —          12.7        0.1        —          —          12.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense (benefit) and equity income

     0.2        1.8        14.3        3.5        —          19.8   

Income tax expense (benefit)

     0.4        1.7        (0.5     0.1        —          1.7   

Equity income

     16.7        1.5        1.5        —          (19.7     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 16.5      $ 1.6      $ 16.3      $ 3.4      $ (19.7   $ 18.1   

Less: Net income attributable to non-controlling interests

     —          —          —          1.6        —          1.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributed to Cott Corporation

   $ 16.5      $ 1.6      $ 16.3      $ 1.8      $ (19.7   $ 16.5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributed to Cott Corporation

   $ 12.1      $ 3.0      $ 16.7      $ 3.5      $ (23.2   $ 12.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

24


Condensed Consolidating Statements of Operations

 

(in millions of U.S. dollars)

Unaudited

 

     For the Six Months Ended June 29, 2013  
     Cott
Corporation
    Cott
Beverages Inc.
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
     Elimination
Entries
    Consolidated  

Revenue, net

   $ 89.4      $ 407.9      $ 505.9      $ 78.6       $ (12.6   $ 1,069.2   

Cost of sales

     75.3        349.6        454.6        69.3         (12.6     936.2   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Gross profit

     14.1        58.3        51.3        9.3         —          133.0   

Selling, general and administrative expenses

     15.5        38.9        24.5        4.1         —          83.0   

Loss on disposal of property, plant & equipment

     —          0.3        —          —           —          0.3   

Restructuring

     0.5        0.5        0.7        0.3         —          2.0   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Operating (loss) income

     (1.9     18.6        26.1        4.9         —          47.7   

Other expense, net

     —          —          0.3        —           —          0.3   

Intercompany interest (income) expense, net

     —          (5.7     5.7        —           —          —     

Interest (income) expense, net

     (0.1     26.0        0.2        —           —          26.1   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

(Loss) income before income tax expense (benefit) and equity income (loss)

     (1.8     (1.7     19.9        4.9         —          21.3   

Income tax expense (benefit)

     0.7        1.6        (0.3     0.2         —          2.2   

Equity income (loss)

     19.0        2.6        (0.6     —           (21.0     —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss)

   $ 16.5      $ (0.7   $ 19.6      $ 4.7       $ (21.0   $ 19.1   

Less: Net income attributable to non-controlling interests

     —          —          —          2.6         —          2.6   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss) attributed to Cott Corporation

   $ 16.5      $ (0.7   $ 19.6      $ 2.1       $ (21.0   $ 16.5   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Comprehensive income (loss) attributed to Cott Corporation

   $ 0.1      $ (31.0   $ 2.7      $ 4.1       $ 24.2      $ 0.1   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

25


Condensed Consolidating Statements of Operations

 

(in millions of U.S. dollars)

Unaudited

 

     For the Three Months Ended June 30, 2012  
     Cott
Corporation
     Cott
Beverages Inc.
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Elimination
Entries
    Consolidated  

Revenue, net

   $ 61.3       $ 241.6      $ 287.0      $ 44.9      $ (9.0   $ 625.8   

Cost of sales

     46.9         201.0        254.5        40.1        (9.0     533.5   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     14.4         40.6        32.5        4.8        —          92.3   

Selling, general and administrative expenses

     6.6         24.1        15.0        3.1        —          48.8   

Loss on disposal of property, plant & equipment

     —           —          0.3        —          —          0.3   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     7.8         16.5        17.2        1.7        —          43.2   

Other expense (income), net

     0.6         —          (0.9     (0.2     —          (0.5

Intercompany interest (income) expense, net

     —           (2.4     2.4        —          —          —     

Interest expense, net

     0.1         13.3        0.1        —          —          13.5   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense (benefit) and equity income

     7.1         5.6        15.6        1.9        —          30.2   

Income tax expense (benefit)

     3.7         (0.1     0.5        (0.2     —          3.9   

Equity income

     21.7         1.3        6.7        —          (29.7     —     
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 25.1       $ 7.0      $ 21.8      $ 2.1      $ (29.7   $ 26.3   

Less: Net income attributable to non-controlling interests

     —           —          —          1.2        —          1.2   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributed to Cott Corporation

   $ 25.1       $ 7.0      $ 21.8      $ 0.9      $ (29.7   $ 25.1   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributed to Cott Corporation

   $ 18.2       $ (4.5   $ 12.7      $ 2.5      $ (10.7   $ 18.2   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

26


Condensed Consolidating Statements of Operations

 

(in millions of U.S. dollars)

Unaudited

 

     For the Six Months Ended June 30, 2012  
     Cott
Corporation
     Cott
Beverages Inc.
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Elimination
Entries
    Consolidated  

Revenue, net

   $ 105.0       $ 449.7      $ 527.5      $ 84.6      $ (17.2   $ 1,149.6   

Cost of sales

     84.6         377.2        472.7        76.6        (17.2     993.9   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     20.4         72.5        54.8        8.0        —          155.7   

Selling, general and administrative expenses

     15.3         39.7        30.0        5.6        —          90.6   

Loss on disposal of property, plant & equipment

     —           0.4        0.5        —          —          0.9   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     5.1         32.4        24.3        2.4        —          64.2   

Other expense (income), net

     0.5         0.1        (0.9     (0.4     —          (0.7

Intercompany interest (income) expense, net

     —           (4.7     4.7        —          —          —     

Interest expense, net

     0.2         27.0        0.3        —          —          27.5   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense (benefit) and equity income

     4.4         10.0        20.2        2.8        —          37.4   

Income tax expense (benefit)

     3.2         0.6        0.6        (0.1     —          4.3   

Equity income

     29.8         2.3        11.8        —          (43.9     —     
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 31.0       $ 11.7      $ 31.4      $ 2.9      $ (43.9   $ 33.1   

Less: Net income attributable to non-controlling interests

     —           —          —          2.1        —          2.1   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributed to Cott Corporation

   $ 31.0       $ 11.7      $ 31.4      $ 0.8      $ (43.9   $ 31.0   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributed to Cott Corporation

   $ 31.6       $ 17.4      $ (62.6   $ (0.1   $ 45.3      $ 31.6   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

27


Consolidating Balance Sheets

 

(in millions of U.S. dollars)

Unaudited

 

     As of June 29, 2013  
     Cott
Corporation
    Cott
Beverages
Inc.
    Guarantor
Subsidiaries
    Non-
Guarantor
Subsidiaries
    Elimination
Entries
    Consolidated  

ASSETS

            

Current assets

            

Cash & cash equivalents

   $ 33.3      $ 13.5      $ 12.6      $ 7.4      $ —        $ 66.8   

Accounts receivable, net of allowance

     21.0        140.4        203.7        16.8        (115.2     266.7   

Income taxes recoverable

     —          0.6        0.2        —          —          0.8   

Inventories

     21.2        79.4        131.5        7.9        —          240.0   

Prepaid expenses and other assets

     2.1        14.3        6.2        0.1        —          22.7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     77.6        248.2        354.2        32.2        (115.2     597.0   

Property, plant & equipment, net

     49.8        193.0        238.8        10.6        —          492.2   

Goodwill

     26.1        4.6        108.7        —          —          139.4   

Intangibles and other assets, net

     0.9        97.0        203.1        12.6        —          313.6   

Deferred income taxes

     2.1        —          —          0.6        —          2.7   

Other tax receivable

     0.5        0.1        0.6        —          —          1.2   

Due from affiliates

     39.7        166.2        78.0        41.9        (325.8     —     

Investments in subsidiaries

     474.5        370.5        758.6        —          (1,603.6     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 671.2      $ 1,079.6      $ 1,742.0      $ 97.9      $ (2,044.6   $ 1,546.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

            

Current liabilities

            

Current maturities of long-term debt

   $ —        $ 1.4      $ 0.6      $ 0.6      $ —        $ 2.6   

Accounts payable and accrued liabilities

     29.9        140.0        199.7        10.2        (115.2     264.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     29.9        141.4        200.3        10.8        (115.2     267.2   

Long-term debt

     0.2        598.1        2.3        1.5        —          602.1   

Deferred income taxes

     0.1        31.6        11.7        1.0        —          44.4   

Other long-term liabilities

     0.2        3.7        19.5        0.4        —          23.8   

Due to affiliates

     43.1        76.7        168.6        37.4        (325.8     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     73.5        851.5        402.4        51.1        (441.0     937.5   

Equity

            

Capital stock, no par

     394.9        574.6        1,676.7        81.2        (2,332.5     394.9   

Additional paid-in-capital

     42.9        —          —          —          —          42.9   

Retained earnings (deficit)

     188.7        (329.4     (329.6     (46.5     705.5        188.7   

Accumulated other comprehensive (loss) income

     (28.8     (17.1     (7.5     1.2        23.4        (28.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Cott Corporation equity

     597.7        228.1        1,339.6        35.9        (1,603.6     597.7   

Non-controlling interests

     —          —          —          10.9        —          10.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

     597.7        228.1        1,339.6        46.8        (1,603.6     608.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 671.2      $ 1,079.6      $ 1,742.0      $ 97.9      $ (2,044.6   $ 1,546.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

28


Consolidating Balance Sheets

 

(in millions of U.S. dollars)

 

     As of December 29, 2012  
     Cott
Corporation
    Cott
Beverages
Inc.
    Guarantor
Subsidiaries
    Non-
Guarantor
Subsidiaries
    Elimination
Entries
    Consolidated  

ASSETS

            

Current assets

            

Cash & cash equivalents

   $ 39.8      $ 37.5      $ 96.4      $ 5.7      $ —        $ 179.4   

Accounts receivable, net of allowance

     18.4        111.5        122.3        16.2        (69.0     199.4   

Income taxes recoverable

     —          0.9        0.2        0.1        —          1.2   

Inventories

     21.1        65.9        130.8        7.0        —          224.8   

Prepaid expenses and other assets

     2.5        13.4        4.3        0.1        —          20.3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     81.8        229.2        354.0        29.1        (69.0     625.1   

Property, plant & equipment, net

     50.7        188.4        242.0        9.8        —          490.9   

Goodwill

     27.5        4.5        98.3        —          —          130.3   

Intangibles and other assets, net

     1.0        101.4        198.4        14.6        —          315.4   

Deferred income taxes

     2.9        —          —          0.4        —          3.3   

Other tax receivable

     0.2        0.1        0.6        —          —          0.9   

Due from affiliates

     40.0        175.2        78.0        41.9        (335.1     —     

Investments in subsidiaries

     487.5        389.7        820.0        —          (1,697.2     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 691.6      $ 1,088.5      $ 1,791.3      $ 95.8      $ (2,101.3   $ 1,565.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

            

Current liabilities

            

Current maturities of long-term debt

   $ —        $ 1.3      $ 0.2      $ 0.4      $ —        $ 1.9   

Accounts payable and accrued liabilities

     36.2        119.5        193.1        7.9        (69.0     287.7