10-Q 1 d775293d10q.htm FORM 10-Q Form 10-Q
Table of Contents

 

 

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: September 27, 2014

 

¨ 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, CANADA

  L4V 1H6

5519 WEST IDLEWILD AVENUE

TAMPA, FLORIDA, UNITED STATES

  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. (Check one):

 

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 October 30, 2014

Common Stock, no par value per share    93,022,420 shares

 

 

 


Table of Contents

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION

     3   

Item 1. Financial Statements (unaudited)

     3   

Consolidated Statements of Operations

     3   

Condensed Consolidated Statements of Comprehensive (Loss) 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

     39   

Overview

     39   

Results of Operations

     49   

Liquidity and Capital Resources

     55   

Item 3. Quantitative and Qualitative Disclosures about Market Risk

     60   

Item 4. Controls and Procedures

     60   

PART II. OTHER INFORMATION

     61   

Item 1. Legal Proceedings

     61   

Item 1A. Risk Factors

     61   

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     61   

Item 6. Exhibits

     62   

SIGNATURES

     63   

 

2


Table of Contents

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements (unaudited)

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 Nine Months Ended  
     September 27,
2014
    September 28,
2013
    September 27,
2014
    September 28,
2013
 

Revenue, net

   $ 535.0      $ 543.2      $ 1,561.0      $ 1,612.4   

Cost of sales

     471.5        478.2        1,373.4        1,414.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     63.5        65.0        187.6        198.0   

Selling, general and administrative expenses

     45.0        37.9        134.2        120.9   

Loss on disposal of property, plant & equipment

     0.7        1.1        1.2        1.4   

Restructuring and asset impairments

        

Restructuring

     0.1        —          2.4        2.0   

Asset impairments

     (0.2     —          1.7        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     17.9        26.0        48.1        73.7   

Other expense (income), net

     5.4        (0.7     22.9        (0.4

Interest expense, net

     9.0        13.3        27.2        39.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     3.5        13.4        (2.0     34.7   

Income tax expense

     1.8        0.1        3.4        2.3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 1.7      $ 13.3      $ (5.4   $ 32.4   

Less: Net income attributable to non-controlling interests

     1.3        1.3        4.1        3.9   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributed to Cott Corporation

   $ 0.4      $ 12.0      $ (9.5   $ 28.5   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per common share attributed to Cott Corporation

        

Basic

   $ —        $ 0.13      $ (0.10   $ 0.30   

Diluted

     —          0.13        (0.10     0.30   

Weighted average outstanding shares (thousands) attributed to Cott Corporation

        

Basic

     93,607        94,235        94,053        94,922   

Diluted

     94,348        94,772        94,053        95,755   

Dividends declared per share

   $ 0.06      $ 0.06      $ 0.18      $ 0.18   

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

 

3


Table of Contents

Cott Corporation

Condensed Consolidated Statements of Comprehensive (Loss) Income

(in millions of U.S. dollars)

Unaudited

 

          For the Three Months Ended     For the Nine Months Ended  
          September 27,
2014
    September 28,
2013
    September 27,
2014
    September 28,
2013
 

Net income (loss)

      $ 1.7      $ 13.3      $ (5.4   $ 32.4   

Other comprehensive (loss) income:

           

Currency translation adjustment

        (16.3     12.0        (9.5     (4.8

Pension benefit plan, net of tax1

        0.1        (0.1     (0.2     0.3   

Unrealized gain (loss) on derivative instruments, net of tax2

        0.4        (0.1     0.6        (0.1
     

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive (loss) income

        (15.8     11.8        (9.1     (4.6
     

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive (loss) income

      $ (14.1   $ 25.1      $ (14.5   $ 27.8   

Less: Comprehensive income attributable to non-controlling interests

        1.4        1.3        4.2        3.9   
     

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive (loss) income attributed to Cott Corporation

      $ (15.5   $ 23.8      $ (18.7   $ 23.9   
     

 

 

   

 

 

   

 

 

   

 

 

 

 

1. Net of the effect of $0.1 million and $0.2 million tax expense for the three and nine months ended September 27, 2014, respectively, and net of the effect of nil and $0.2 million tax expense for the three and nine months ended September 28, 2013, respectively.
2. Net of the effect of $0.1 million and $0.2 million tax expense for the three and nine months ended September 27, 2014, respectively, and net of the effect of nil tax benefit for the three and nine months ended September 28, 2013, respectively.

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

 

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Cott Corporation

Consolidated Balance Sheets

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

Unaudited

 

     September 27,     December 28,  
     2014     2013  

ASSETS

    

Current assets

    

Cash & cash equivalents

   $ 47.4      $ 47.2   

Accounts receivable, net of allowance of $5.4 ($5.8 as of December 28, 2013)

     250.2        204.4   

Income taxes recoverable

     1.0        1.1   

Inventories

     230.9        233.1   

Prepaid expenses and other current assets

     24.1        19.3   
  

 

 

   

 

 

 

Total current assets

     553.6        505.1   

Property, plant & equipment, net

     462.5        483.7   

Goodwill

     187.1        137.3   

Intangibles and other assets, net

     364.6        296.2   

Deferred income taxes

     5.4        3.6   

Other tax receivable

     0.3        0.2   
  

 

 

   

 

 

 

Total assets

   $ 1,573.5      $ 1,426.1   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Current liabilities

    

Short-term borrowings

   $ 69.3      $ 50.8   

Current maturities of long-term debt

     4.1        3.9   

Accounts payable and accrued liabilities

     297.5        298.2   
  

 

 

   

 

 

 

Total current liabilities

     370.9        352.9   

Long-term debt

     535.5        403.5   

Deferred income taxes

     63.1        41.5   

Other long-term liabilities

     38.8        22.3   
  

 

 

   

 

 

 

Total liabilities

     1,008.3        820.2   

Equity

    

Capital stock, no par—93,438,440 (December 28, 2013—94,238,190) shares issued

     389.4        392.8   

Additional paid-in-capital

     47.9        44.1   

Retained earnings

     147.4        176.3   

Accumulated other comprehensive loss

     (26.0     (16.8
  

 

 

   

 

 

 

Total Cott Corporation equity

     558.7        596.4   

Non-controlling interests

     6.5        9.5   
  

 

 

   

 

 

 

Total equity

     565.2        605.9   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 1,573.5      $ 1,426.1   
  

 

 

   

 

 

 

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

 

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Cott Corporation

Consolidated Statements of Cash Flows

(in millions of U.S. dollars)

Unaudited

 

     For the Three Months Ended     For the Nine Months Ended  
     September 27,     September 28,     September 27,     September 28,  
     2014     2013     2014     2013  

Operating Activities

        

Net income (loss)

   $ 1.7      $ 13.3      $ (5.4   $ 32.4   

Depreciation & amortization

     27.2        25.1        78.5        74.7   

Amortization of financing fees

     0.7        0.7        1.9        2.2   

Share-based compensation expense

     1.5        1.1        4.9        3.6   

Increase in deferred income taxes

     2.2        0.3        3.7        1.9   

Write-off of financing fees and discount

     0.8        —          4.1        —     

Loss on disposal of property, plant & equipment

     0.7        1.1        1.2        1.4   

Asset impairments

     (0.2     —          1.7        —     

Other non-cash items

     —          —          (0.7     0.2   

Change in operating assets and liabilities, net of acquisitions:

        

Accounts receivable

     27.2        19.0        (39.1     (38.8

Inventories

     17.4        26.6        9.8        15.8   

Prepaid expenses and other current assets

     (0.5     —          (1.5     (2.0

Other assets

     —          6.1        (0.2     6.0   

Accounts payable and accrued liabilities, and other liabilities

     (17.5     (6.0     (20.2     (34.9

Income taxes recoverable

     (0.7     0.1        (1.1     0.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     60.5        87.4        37.6        62.9   
  

 

 

   

 

 

   

 

 

   

 

 

 

Investing Activities

        

Acquisitions, net of cash received

     —          (4.7     (80.8     (11.2

Additions to property, plant & equipment

     (10.8     (10.2     (31.4     (44.7

Additions to intangibles and other assets

     (1.5     (2.1     (4.3     (4.0

Proceeds from sale of property, plant & equipment

     1.6        0.2        1.6        0.2   

Proceeds from insurance recoveries

     —          —          —          0.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (10.7     (16.8     (114.9     (59.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Financing Activities

        

Payments of long-term debt

     (80.1     (0.6     (392.6     (20.2

Issuance of long-term debt

     —          —          525.0        —     

Borrowings under ABL

     191.1        —          474.3        —     

Payments under ABL

     (156.0     —          (455.4     —     

Distributions to non-controlling interests

     (2.4     (2.2     (7.2     (5.0

Financing fees

     (1.2     (0.1     (9.1     (0.1

Common shares repurchased and cancelled

     (4.6     (4.5     (7.7     (12.9

Dividends to shareholders

     (5.6     (5.5     (16.4     (16.7

Payment of deferred consideration for acquisitions

     (32.4     —          (32.4     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (91.2     (12.9     78.5        (54.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes on cash

     (2.1     1.3        (1.0     (2.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (decrease) increase in cash & cash equivalents

     (43.5     59.0        0.2        (53.6

Cash & cash equivalents, beginning of period

     90.9        66.8        47.2        179.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash & cash equivalents, end of period

   $ 47.4      $ 125.8      $ 47.4      $ 125.8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Supplemental Non-cash Investing and Financing Activities:

        

Acquisition related deferred consideration

   $ —        $ —        $ 19.0      $ 5.1   

Financing fees

   $ —        $ —        $ 0.2      $ —     

Supplemental Disclosures of Cash Flow Information:

        

Cash paid for interest

   $ 3.9      $ 15.9      $ 28.9      $ 41.0   

Cash paid (received) for income taxes, net

   $ 1.0      $ (0.2   $ 1.3      $ 0.1   

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

 

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Table of Contents

Cott Corporation

Consolidated Statements of Equity

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

Unaudited

 

     Cott Corporation Equity              
     Number of
Common
Shares

(In thousands)
    Common
Shares
    Additional
Paid-in-
Capital
    Retained
Earnings
    Accumulated
Other
Comprehensive
(Loss) Income
    Non-
Controlling
Interests
    Total
Equity
 

Balance at December 29, 2012

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

Common shares issued—Director Share Awards

     87        —          0.8        —          —          —          0.8   

Common shares repurchased and cancelled

     (1,248     (5.2     —          (4.8     —          —          (10.0

Common shares issued - Time-based RSUs

     16        0.1        (0.1     —          —          —          —     

Share-based compensation

     —          —          2.8        —          —          —          2.8   

Dividend payment

     —          —          —          (16.7     —          —          (16.7

Distributions to non-controlling interests

     —          —          —          —          —          (5.0     (5.0

Comprehensive (loss) income

              

Currency translation adjustment

     —          —          —          —          (4.8     —          (4.8

Pension benefit plan, net of tax

     —          —          —          —          0.3        —          0.3   

Unrealized loss on derivative instruments, net of tax

     —          —          —          —          (0.1     —          (0.1

Net income

     —          —          —          28.5        —          3.9        32.4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 28, 2013

     94,226      $ 392.7      $ 43.9      $ 193.0      $ (17.0   $ 10.0      $ 622.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 28, 2013

     94,238      $ 392.8      $ 44.1      $ 176.3      $ (16.8   $ 9.5      $ 605.9   

Common shares issued—Director Share Awards

     112        —          0.8        —          —          —          0.8   

Common shares repurchased and cancelled

     (1,073     (4.7     —          (3.0     —          —          (7.7

Common shares issued - Time-based RSUs

     161        1.3        (1.3     —          —          —          —     

Share-based compensation

     —          —          4.3        —          —          —          4.3   

Dividend payment

     —          —          —          (16.4     —          —          (16.4

Distributions to non-controlling interests

     —          —          —          —          —          (7.2     (7.2

Comprehensive income (loss)

              

Currency translation adjustment

     —          —          —          —          (9.6     0.1        (9.5

Pension benefit plan, net of tax

     —          —          —          —          (0.2     —          (0.2

Unrealized gain on derivative instruments, net of tax

     —          —          —          —          0.6        —          0.6   

Net (loss) income

     —          —          —          (9.5     —          4.1        (5.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 27, 2014

     93,438      $ 389.4      $ 47.9      $ 147.4      $ (26.0   $ 6.5      $ 565.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

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Table of Contents

Cott Corporation

Notes to the Consolidated Financial Statements

Unaudited

Note 1Business 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 drinks and shots, sports products, new age beverages, ready-to-drink teas, beverage concentrates, liquid enhancers, freezables and ready-to-drink alcoholic beverages, as well as hot chocolate, coffee, malt drinks, creamers/whiteners and cereals.

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 28, 2013. 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.

During the nine months ended September 27, 2014, we recorded out-of -period adjustments that decreased net income by approximately $1.1 million, which adjustments related to 2013 and were associated primarily with fixed assets and accrued liabilities. We evaluated the total out-of-period adjustments in relation to the current period, which is when the adjustments were recorded, as well as the period in which they originated, and concluded that these adjustments are not material to either the consolidated quarterly or annual financial statements for the impacted periods.

Recent Accounting Pronouncements

Update ASU 2013-11 – Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists

In July 2013, the Financial Accounting Standards Board (“FASB”) amended its guidance regarding the information provided in relation to the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. For public entities, the amendments are effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. We have adopted this guidance and incorporated it into the presentation of our consolidated financial statements.

 

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Update ASU 2014-09 – Revenue from Contracts with Customers (Topic 606)

In May 2014, the FASB amended its guidance regarding revenue recognition and created a new Topic 606, Revenue from Contracts with Customers. The objectives for creating Topic 606 were to remove inconsistencies and weaknesses in revenue recognition, provide a more robust framework for addressing revenue issues, provide more useful information to users of the financial statements through improved disclosure requirements, simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer, and improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. The core principal of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve the core principle, an entity should apply the following steps: 1) identify the contract(s) with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations in the contract; and 5) recognize revenue when (or as) the entity satisfies a performance obligation. For public entities, the amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The amendments may be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the amendment recognized at the date of initial application. We are currently assessing the impact of adoption of this standard on our consolidated financial statements.

Update ASU 2014-12 – Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period

In June 2014, the FASB amended its guidance regarding accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. The stated vesting period (which includes the period in which the performance target could be achieved) may differ from the requisite service period. For public entities, the amendments are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. The amendments may be applied prospectively to all awards granted or modified after the effective date or retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. We believe that the adoption of these amendments will not have a material impact on our consolidated financial statements.

Note 2Acquisitions

Aimia Acquisition

On May 30, 2014 (the “Acquisition Date”), our United Kingdom (“U.K.”) reporting segment acquired 100 percent of the share capital of Aimia Foods (Holdings) Limited (the “Aimia Acquisition”), which includes its operating subsidiary company, Aimia Foods Limited (together referred as “Aimia”) pursuant to a Share Purchase Agreement dated May 30, 2014. Aimia produces and distributes hot chocolate, coffee and cold cereal products primarily through food service, vending and retail channels. The aggregate purchase price for the Aimia Acquisition was £52.1 million ($87.6 million) payable in cash, which included a payment for estimated closing balance sheet working capital, £19.9 million ($33.5 million) in deferred consideration paid on September 15, 2014, and aggregate contingent consideration of up to £16.0 million ($26.9 million), which is payable upon the achievement of certain measures related to Aimia’s performance during the twelve months ending July 1, 2016 (the “Earn Out Period”).

 

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The total consideration paid by us for the Aimia Acquisition is summarized below:

 

(in millions of U.S. dollars)

      

Cash

   $ 80.4   

Deferred consideration

     33.5   

Contingent consideration1

     17.9   

Working capital payment

     7.2   
  

 

 

 

Total consideration

   $ 139.0   
  

 

 

 

 

1. Represents the estimated present value of the contingent consideration based on probability of achievement of performance targets recorded at fair value.

Our primary reasons for the Aimia Acquisition were to diversify Cott’s product portfolio, packaging formats and channel mix, and enhance our customer offering and growth prospects.

The Aimia 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 valuations. The results of operations of Aimia have been included in our operating results beginning as of the Acquisition Date. We allocated the total purchase price 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 sellers are entitled to contingent consideration of up to a maximum of £16.0 million ($26.9 million), based on the exchange rate on the Acquisition Date, which will become due by us if Aimia meets certain targets relating to net income plus interest, income taxes, depreciation and amortization (“EBITDA”) for the twelve months ending July 1, 2016. We estimated the fair value of the contingent consideration based on financial projections of the acquired business and estimated probabilities of achievement of the EBITDA targets. We believe that our estimates and assumptions are reasonable, but there is significant judgment involved. Changes in the fair value of contingent consideration liabilities subsequent to the acquisition will be recorded in our Consolidated Statements of Operations. The fair value of the contingent consideration was determined to be £10.6 million ($17.9 million) using a present valued probability-weighted income approach. Key assumptions include probability-adjusted EBITDA amounts with discount rates consistent with the level of risk of achievement.

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 Aimia Acquisition. The allocation of the purchase price is based on a preliminary valuation that is expected to be completed by the end of 2014.

 

     As reported at           As reported at  

(in millions of U.S. dollars)

   June 28, 2014     Adjustments     September 27, 2014  

Cash

   $ 9.5      $ —        $ 9.5   

Accounts receivable

     11.0        —          11.0   

Inventories

     9.6        —          9.6   

Prepaid expenses and other assets

     1.9        —          1.9   

Property, plant & equipment

     10.5        0.4        10.9   

Goodwill

     52.8        (0.3     52.5   

Intangibles and other assets

     86.2        —          86.2   

Accounts payable and accrued liabilities

     (25.4     —          (25.4

Deferred tax liabilities

     (17.1     (0.1     (17.2
  

 

 

   

 

 

   

 

 

 

Total

   $ 139.0      $ —        $ 139.0   
  

 

 

   

 

 

   

 

 

 

 

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The Company recognized $2.1 million of acquisition related costs associated with the Aimia Acquisition that were expensed during the nine month period ended September 27, 2014. 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 Aimia’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 Aimia’s and our management. The following table sets forth the components of identified intangible assets associated with the Aimia Acquisition and their estimated weighted average useful lives:

 

     Estimated Fair      Estimated  

(in millions of U.S. dollars)

   Market Value      Useful Life  

Customer relationships

   $ 76.5         15 years   

Trademarks and trade names

     1.5         20 years   

Non-competition agreements

     2.9         5 years   
  

 

 

    

 

 

 

Total

   $ 80.9      
  

 

 

    

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

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 Aimia Acquisition, certain key employees of Aimia executed non-competition agreements, which prevent those employees from competing with us in the specified restricted territories for a period of time after the Acquisition Date. The value of the Aimia 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 Aimia 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. The goodwill recognized as part of the Aimia Acquisition was allocated to the U.K. reporting segment, none of which is expected to be tax deductible.

Selected Financial Data (unaudited)

The following unaudited financial information from the Acquisition Date through September 27, 2014 represents the activity of Aimia that has been combined with our operations as of the Acquisition Date.

 

     For the period from May 30, 2014  

(in millions of U.S. dollars)

   through September 27, 2014  

Revenue

   $ 31.8   

Net income

     0.3   

Calypso Acquisition

In June 2013, our U.K. reporting segment acquired 100 percent of the share capital of Cooke Bros. Holdings Limited (the “Calypso Acquisition”), which includes its subsidiary companies Calypso Soft Drinks Limited and Mr. Freeze (Europe) Limited (together, “Calypso”). Calypso produces fruit juices, juice drinks, soft drinks, and freezable products in the United

 

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Kingdom. The aggregate purchase price for the acquisition of Calypso was $12.1 million, which includes approximately $7.0 million paid at closing, a deferred payment of approximately $2.3 million paid on the first anniversary of the closing date, and a deferred payment of approximately $3.0 million to be paid on the second anniversary of the closing date. In connection with the Calypso Acquisition, we paid $18.5 million of outstanding debt of the acquired companies. The closing payment and the first deferred payment were funded from available cash.

The total consideration paid by us in the Calypso Acquisition is summarized below:

 

(in millions of U.S. dollars)

      

Cash

   $ 7.0   

Deferred consideration 1

     5.1   
  

 

 

 

Total consideration

   $ 12.1   
  

 

 

 

 

1.  Principal amount of $5.3 million discounted to present value.

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

Supplemental Pro Forma Data (unaudited)

The following unaudited pro forma financial information for the three and nine months ended September 27, 2014 and September 28, 2013, respectively, represent the combined results of our operations as if the Aimia Acquisition and the Calypso Acquisition had occurred on December 30, 2012. The unaudited pro forma results reflect certain adjustments related to these acquisitions such as increased amortization expense on acquired intangible assets resulting from the preliminary fair valuation of assets acquired. The unaudited pro forma financial information does not necessarily reflect the results of operations that would have occurred had we operated as a single entity during such periods.

 

     For the Three Months Ended      For the Nine Months Ended  

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

   September 27,
2014
     September 28,
2013
     September 27,
2014
    September 28,
2013
 

Revenue

   $ 535.0       $ 565.9       $ 1,607.8      $ 1,706.7   

Net income (loss)

     0.4         13.2         (3.5     34.4   

Net income (loss) per common share, diluted

   $ —         $ 0.14       $ (0.04   $ 0.36   

Cliffstar Acquisition

On August 17, 2010, we completed the acquisition of substantially all of the assets and liabilities of Cliffstar Corporation (“Cliffstar”) and its affiliated companies (the “Cliffstar Acquisition”) 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. Contingent consideration of $34.9 million was ultimately paid to the seller of Cliffstar, and all claims for contingent consideration have been resolved as of December 28, 2013.

 

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Note 3—Restructuring and Asset Impairments

We implement restructuring programs from time to time that are designed to improve operating effectiveness and lower costs. When we implement these programs, we incur various charges, including severance, asset impairments, and other employment related costs. During the first quarter of 2014, we implemented one such program, which involved the closure of two of our smaller plants, one located in North America and another one located in the United Kingdom (the “2014 Restructuring Plan”). The plant closures are expected to be completed by the end of our 2014 fiscal year and will result in cash charges associated with employee redundancy costs and relocation of assets, and non-cash charges related to asset impairments and accelerated depreciation on property, plant and equipment. In connection with the 2014 Restructuring Plan, we expect to incur total charges of approximately $4.5 million to $5.5 million. We also implemented a restructuring plan in June 2013, which consisted primarily of headcount reductions.

The following table summarizes restructuring charges for the three and nine months ended September 27, 2014 and September 28, 2013, respectively:

 

     For the Three Months Ended      For the Nine Months Ended  

(in millions of U.S. dollars)

   September 27,
2014
     September 28,
2013
     September 27,
2014
     September 28,
2013
 

North America

   $ 0.1       $ —         $ 2.3       $ 1.0   

United Kingdom

     —           —           0.1         0.7   

Mexico

     —           —           —           0.3   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 0.1       $ —         $ 2.4       $ 2.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

There were no asset impairment charges for the three and nine months ended September 28, 2013. The following table summarizes asset impairment charges for the three and nine months ended September 27, 2014:

 

(in millions of U.S. dollars)

   For the Three Months Ended
September 27, 2014
    For the Nine Months Ended
September 27, 2014
 

North America

   $ —        $ 0.9   

United Kingdom

     (0.2     0.8   
  

 

 

   

 

 

 

Total

   $ (0.2   $ 1.7   
  

 

 

   

 

 

 

The following tables summarize our restructuring liability as of September 27, 2014, along with charges to costs and expenses and cash payments:

2014 Restructuring Plan:

 

     North America  

(in millions of U.S. dollars)

   Balance at
December 28,
2013
     Charges to costs
and expenses
     Cash payments     Balance at
September 27,
2014
 

Restructuring liability

   $ —         $ 2.3       $ (2.3   $ —     
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ —         $ 2.3       $ (2.3   $ —     
  

 

 

    

 

 

    

 

 

   

 

 

 
     United Kingdom  

(in millions of U.S. dollars)

   Balance at
December 28,
2013
     Charges to costs
and expenses
     Cash payments     Balance at
September 27,
2014
 

Restructuring liability

   $ —         $ 0.1       $ (0.1   $ —     
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ —         $ 0.1       $ (0.1   $ —     
  

 

 

    

 

 

    

 

 

   

 

 

 

 

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Note 4Share-Based Compensation

The table below summarizes the share-based compensation expense for the three and nine months ended September 27, 2014 and September 28, 2013, 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 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 Plan, as the case may be, (iii) “Stock options” mean non-qualified stock options granted under the Amended and Restated Equity Plan, the 2010 Equity Incentive Plan, or the Restated 1986 Common Share Option Plan, as amended (the “Option Plan”), as the case may be, and (iv) “Director share awards” mean common shares issued in consideration of the annual board retainer fee to non-management members of our board of directors under the 2010 Equity Incentive Plan or Amended and Restated Equity Plan, as the case may be.

 

     For the Three Months Ended      For the Nine Months Ended  

(in millions of U.S. dollars)

   September 27,
2014
     September 28,
2013
     September 27,
2014
     September 28,
2013
 

Stock options

   $ 0.4       $ 0.2       $ 1.2       $ 0.6   

Performance-based RSUs

     0.2         0.3         1.0         0.7   

Time-based RSUs

     0.7         0.6         2.1         1.5   

Director share awards

     0.2         —           0.6         0.8   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1.5       $ 1.1       $ 4.9       $ 3.6   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of September 27, 2014, the unrecognized share-based compensation expense and years we expect to recognize it as compensation expense were as follows:

 

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

   Unrecognized share-based
compensation expense
as of September 27, 2014
     Weighted average years
expected to recognize
compensation
 

Stock options

   $ 2.1         1.8   

Performance-based RSUs

     1.8         2.1   

Time-based RSUs

     3.7         1.8   

Director share awards

     0.2         0.3   
  

 

 

    

Total

   $ 7.8      
  

 

 

    

Stock option activity for the nine months ended September 27, 2014 was as follows:

 

     Shares
(in thousands)
    Weighted average
exercise price
 

Balance at December 28, 2013

     830      $ 8.17   

Awarded

     441        8.00   

Forfeited or expired

     (50     16.45   
  

 

 

   

 

 

 

Outstanding at September 27, 2014

     1,221      $ 7.77   
  

 

 

   

 

 

 

Exercisable at September 27, 2014

     113      $ 4.94   
  

 

 

   

 

 

 

 

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During the nine months ended September 27, 2014, Performance-based RSU and Time-based RSU activity was as follows:

 

     Number of
Performance-
based RSUs
(in thousands)
    Weighted
Average
Grant-Date
Fair Value
     Number of
Time-based
RSUs
(in thousands)
    Weighted
Average
Grant-Date
Fair Value
 

Balance at December 28, 2013

     534      $ 7.81         831      $ 8.04   

Awarded

     274        8.00         368        8.00   

Issued

     —          —           (161     8.20   

Forfeited

     (31     7.90         (68     8.25   
  

 

 

   

 

 

    

 

 

   

 

 

 

Outstanding at September 27, 2014

     777      $ 7.87         970      $ 7.98   
  

 

 

   

 

 

    

 

 

   

 

 

 

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 (i.e., an award other than an option or stock appreciation right) after the effective date of the amendment and restatement. The Amended and Restated Equity Plan was approved by Cott’s shareowners on April 30, 2013. Awards made in 2011 and 2012 prior to the amendment and restatement are generally governed by the terms of the 2010 Equity Incentive Plan without giving effect to these restrictions.

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

Note 5Income Taxes

Income tax expense was $3.4 million on pre-tax loss of $2.0 million for the nine months ended September 27, 2014, as compared to an income tax expense of $2.3 million on pre-tax income of $34.7 million for the nine months ended September 28, 2013. This is the result of pre-tax income in certain jurisdictions that is not offset by pre-tax losses in other jurisdictions that have valuation allowances.

Note 6Net (Loss) Income Per Common Share

Basic net (loss) income per common share is computed by dividing net (loss) 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. Diluted net loss per common share is equivalent to basic net loss per common share.

 

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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 Nine Months Ended  

(in thousands)

   September 27,
2014
     September 28,
2013
     September 27,
2014
     September 28,
2013
 

Weighted average number of shares outstanding—basic

     93,607         94,235         94,053         94,922   

Dilutive effect of stock options

     39         53         —           53   

Dilutive effect of Performance-based RSUs

     276         167         —           283   

Dilutive effect of Time-based RSUs

     426         317         —           497   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted weighted average number of shares outstanding—diluted

     94,348         94,772         94,053         95,755   
  

 

 

    

 

 

    

 

 

    

 

 

 

At September 27, 2014, we excluded 832,951 (September 28, 2013—442,131) stock options from the computation of diluted net (loss) income per share because the options’ exercise price was greater than the average market price of the common shares. In addition, we excluded the impact of the remaining stock options, Performance-based RSUs and Time-based RSUs from the computation of diluted net loss per share for the nine months ended September 27, 2014 as they were considered anti-dilutive for purposes of calculating loss per share.

Note 7Segment Reporting

Our product lines include CSDs, 100% shelf stable juice and juice-based products, clear, still and sparkling flavored waters, energy drinks and shots, sports products, new age beverages, ready-to-drink teas, beverage concentrates, liquid enhancers, freezables and ready-to-drink alcoholic beverages, as well as hot chocolate, coffee, malt drinks, creamers/whiteners and cereal. Our business operates through three reporting segments—North America (United States and Canada), United Kingdom, and All Other (which includes our Mexico operating segment, our Royal Crown International (“RCI”) operating segment and other Miscellaneous Expenses). Our corporate oversight function (“Corporate”) is not treated as a segment; it includes certain general and administrative costs that are not allocated to any of the reporting segments. 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. During the fourth quarter of 2013, management reviewed our reporting segments and subsequently combined our Mexico and RCI reporting segments with the segment previously classified as All Other into one segment classified as All Other. Prior year information has been updated to reflect the change in our reporting segments.

 

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     North      United      All               

(in millions of U.S. dollars)

   America      Kingdom      Other      Corporate     Total  

For the Three Months Ended September 27, 2014

             

External revenue1

   $ 346.2       $ 172.0       $ 16.8       $ —        $ 535.0   

Depreciation and amortization

     20.7         6.1         0.4         —          27.2   

Operating income (loss)

     8.2         10.3         2.4         (3.0     17.9   

Additions to property, plant and equipment

     7.9         2.5         0.4         —          10.8   

For the Nine Months Ended September 27, 2014

             

External revenue1

   $ 1,064.4       $ 446.7       $ 49.9       $ —        $ 1,561.0   

Depreciation and amortization

     62.2         15.0         1.3         —          78.5   

Operating income (loss)

     25.6         23.3         8.0         (8.8     48.1   

Additions to property, plant and equipment

     20.9         10.1         0.4         —          31.4   

As of September 27, 2014

             

Property, plant and equipment

     337.1         117.0         8.4         —          462.5   

Goodwill

     122.9         59.7         4.5         —          187.1   

Intangibles and other assets

     257.8         106.6         0.2         —          364.6   

Total assets2

     1,049.1         488.0         36.4         —          1,573.5   

 

1.  Intersegment revenue between North America and the other reporting segments was $5.5 million and $17.7 million for the three and nine months ended September 27, 2014, respectively. Intersegment revenue between United Kingdom and the other reporting segments was $0.3 million and $0.3 million for the three and nine months ended September 27, 2014, respectively.
2.  Excludes intersegment receivables, investments and notes receivable.

 

     North      United      All               

(in millions of U.S. dollars)

   America      Kingdom      Other      Corporate     Total  

For the Three Months Ended September 28, 2013

             

External revenue1

   $ 383.3       $ 142.9       $ 17.0       $ —        $ 543.2   

Depreciation and amortization

     20.8         3.8         0.5         —          25.1   

Operating income (loss)

     17.6         9.5         1.9         (3.0     26.0   

Additions to property, plant and equipment

     9.0         1.2         —           —          10.2   

For the Nine Months Ended September 28, 2013

             

External revenue1

   $ 1,194.6       $ 368.2       $ 49.6       $ —        $ 1,612.4   

Depreciation and amortization

     62.9         10.3         1.5         —          74.7   

Operating income (loss)

     58.1         18.6         5.8         (8.8     73.7   

Additions to property, plant and equipment

     33.9         9.5         1.3         —          44.7   

As of December 28, 2013

             

Property, plant and equipment

     363.3         111.0         9.4         —          483.7   

Goodwill

     124.0         8.8         4.5         —          137.3   

Intangibles and other assets

     268.2         27.7         0.3         —          296.2   

Total assets2

     1,089.5         296.3         40.3         —          1,426.1   

 

1.  Intersegment revenue between North America and the other reporting segments was $5.6 million and $14.8 million for the three and nine months ended September 28, 2013, respectively.
2.  Excludes intersegment receivables, investments and notes receivable.

 

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For the nine months ended September 27, 2014, sales to Walmart accounted for 26.3% (September 28, 2013—29.9%) of our total revenue, 33.0% of our North America reporting segment revenue (September 28, 2013—35.9%), 12.9% of our U.K. reporting segment revenue (September 28, 2013—14.1%) and 3.1% of our All Other reporting segment revenue (September 28, 2013—4.3%).

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 attributed to external customers located outside of Canada are displayed separately within the United Kingdom and All Other reporting segments above with the exception of revenues attributed to external customers located in the United States, which are reported within the North America reporting segment. Revenues generated from sales to external customers in the United States were as follows:

 

     For the Three Months Ended      For the Nine Months Ended  
     September 27,      September 28,      September 27,      September 28,  

(in millions of U.S. dollars)

   2014      2013      2014      2013  

United States

   $ 307.4       $ 337.5       $ 946.1       $ 1,047.9   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 307.4       $ 337.5       $ 946.1       $ 1,047.9   
  

 

 

    

 

 

    

 

 

    

 

 

 

During 2014, we reclassified certain products in our North America reporting segment which impacts revenue by product but does not impact revenue within the North America reporting segment. Prior year reported revenue by product for our North America reporting segment has been revised to reflect this reclassification. Revenues by product by reporting segment were as follows:

 

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For the Three Months Ended September 27, 2014

 
     North      United                

(in millions of U.S. dollars)

   America      Kingdom      All Other      Total  
Revenue                            

Carbonated soft drinks

   $ 135.2       $ 49.4       $ 1.9       $ 186.5   

Juice and drinks

     99.8         10.2         1.0         111.0   

Concentrate

     2.1         0.3         7.8         10.2   

Sparkling Waters/Mixers

     77.4         21.7         0.7         99.8   

Energy

     7.6         36.1         2.2         45.9   

All other products

     24.1         54.3         3.2         81.6   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 346.2       $ 172.0       $ 16.8       $ 535.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

For the Nine Months Ended September 27, 2014

 
     North      United                

(in millions of U.S. dollars)

   America      Kingdom      All Other      Total  
Revenue                            

Carbonated soft drinks

   $ 394.6       $ 135.4       $ 5.5       $ 535.5   

Juice and drinks

     326.6         35.7         2.7         365.0   

Concentrate

     7.7         1.5         21.3         30.5   

Sparkling Waters/Mixers

     236.8         59.9         2.3         299.0   

Energy

     21.3         97.6         6.8         125.7   

All other products

     77.4         116.6         11.3         205.3   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,064.4       $ 446.7       $ 49.9       $ 1,561.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

For the Three Months Ended September 28, 2013

 
     North      United                

(in millions of U.S. dollars)

   America      Kingdom      All Other      Total  
Revenue                            

Carbonated soft drinks

   $ 151.6       $ 46.7       $ 2.4       $ 200.7   

Juice and drinks

     117.3         11.2         0.6         129.1   

Concentrate

     2.0         0.5         7.1         9.6   

Sparkling Waters/Mixers

     77.4         20.5         0.4         98.3   

Energy

     7.5         32.7         2.3         42.5   

All other products

     27.5         31.3         4.2         63.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 383.3       $ 142.9       $ 17.0       $ 543.2   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

For the Nine Months Ended September 28, 2013

 
     North      United                

(in millions of U.S. dollars)

   America      Kingdom      All Other      Total  
Revenue                            

Carbonated soft drinks

   $ 462.5       $ 119.4       $ 9.8       $ 591.7   

Juice and drinks

     379.9         19.9         2.0         401.8   

Concentrate

     6.6         1.7         21.2         29.5   

Sparkling Waters/Mixers

     232.3         53.6         2.7         288.6   

Energy

     21.0         97.5         5.4         123.9   

All other products

     92.3         76.1         8.5         176.9   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,194.6       $ 368.2       $ 49.6       $ 1,612.4   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Property, plant and equipment, net by geographic area as of September 27, 2014 and December 28, 2013 were as follows:

 

     September 27,      December 28,  

(in millions of U.S. dollars)

   2014      2013  

North America

   $ 337.1       $ 363.3   

United Kingdom

     117.0         111.0   

All Other

     8.4         9.4   
  

 

 

    

 

 

 

Total

   $ 462.5       $ 483.7   
  

 

 

    

 

 

 

Note 8Inventories

The following table summarizes inventories as of September 27, 2014 and December 28, 2013:

 

     September 27,      December 28,  

(in millions of U.S. dollars)

   2014      2013  

Raw materials

   $ 83.5       $ 89.0   

Finished goods

     129.0         126.3   

Other

     18.4         17.8   
  

 

 

    

 

 

 

Total

   $ 230.9       $ 233.1   
  

 

 

    

 

 

 

Note 9Intangibles and Other Assets

The following table summarizes intangibles and other assets as of September 27, 2014:

 

     September 27, 2014  
            Accumulated         

(in millions of U.S. dollars)

   Cost      Amortization      Net  

Intangibles

        

Not subject to amortization

        

Rights

   $ 45.0       $ —         $ 45.0   
  

 

 

    

 

 

    

 

 

 

Subject to amortization

        

Customer relationships

     453.3         188.0         265.3   

Trademarks

     34.0         26.6         7.4   

Information technology

     54.4         32.2         22.2   

Other

     9.1         4.5         4.6   
  

 

 

    

 

 

    

 

 

 
     550.8         251.3         299.5   
  

 

 

    

 

 

    

 

 

 
     595.8         251.3         344.5   
  

 

 

    

 

 

    

 

 

 

Other Assets

        

Financing costs

     21.6         8.2         13.4   

Deposits

     1.0         —           1.0   

Other

     5.8         0.1         5.7   
  

 

 

    

 

 

    

 

 

 
     28.4         8.3         20.1   
  

 

 

    

 

 

    

 

 

 

Total Intangibles & Other Assets

   $ 624.2       $ 259.6       $ 364.6   
  

 

 

    

 

 

    

 

 

 

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.

 

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Amortization expense of intangible and other assets was $9.8 million and $27.0 million for the three and nine months ended September 27, 2014, respectively, compared to $8.6 million and $25.9 million for the comparable prior year periods.

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

 

(in millions of U.S. dollars)

      

Remainder of 2014

   $ 9.1   

2015

     35.4   

2016

     32.0   

2017

     28.7   

2018

     27.6   

Thereafter

     166.7   
  

 

 

 

Total

   $ 299.5   
  

 

 

 

Note 10Debt

Our total debt as of September 27, 2014 and December 28, 2013 was as follows:

 

(in millions of U.S. dollars)

   September 27,
2014
     December 28,
2013
 

8.375% senior notes due in 20171

   $ —         $ 15.0   

8.125% senior notes due in 2018

     —           375.0   

5.375% senior notes due in 2022

     525.0         —     

ABL facility

     69.3         50.8   

GE Term Loan

     8.9         10.3   

Capital leases and other debt financing

     5.7         7.2   
  

 

 

    

 

 

 

Total debt

     608.9         458.3   

Less: Short-term borrowings and current debt:

     

ABL facility

     69.3         50.8   
  

 

 

    

 

 

 

Total short-term borrowings

     69.3         50.8   

GE Term Loan—current maturities

     2.0         1.9   

Capital leases and other financing—current maturities

     2.1         2.0   
  

 

 

    

 

 

 

Total current debt

     73.4         54.7   

Long-term debt before discount

     535.5         403.6   

Less discount on 8.375% notes

     —           (0.1
  

 

 

    

 

 

 

Total long-term debt

   $ 535.5       $ 403.5   
  

 

 

    

 

 

 

 

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

Asset-Based Lending 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 facility (the “ABL facility”) to provide financing for our North America, U.K. and Mexico operations. 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.

 

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On July 19, 2012, we amended the ABL facility to, among other things, extend the maturity date to July 19, 2017. We incurred $1.2 million of financing fees in connection with the amendment of the ABL facility.

On October 22, 2013, we amended the ABL facility to, among other things, (1) provide for an increase in the lenders’ commitments under the ABL facility to $300.0 million, as well as to increase the accordion feature, which permits us to increase the lenders’ commitments under the ABL facility to $350.0 million, subject to certain conditions, (2) extend the maturity date to October 22, 2018, and (3) provide for greater flexibility under certain covenants. We incurred approximately $0.7 million of financing fees in connection with the amendment of the ABL facility.

On May 28, 2014, we amended the ABL facility to increase our ability to incur certain unsecured debt and earnout consideration for permitted acquisitions, as well as to allow us to add additional borrowers and to designate additional guarantors to be included in the borrowing base calculation. We incurred approximately $0.2 million of financing fees in connection with the amendment of the ABL facility. These costs are included in the selling, general, and administrative expenses of our Consolidated Statements of Operations.

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 amendments of the ABL facility, other than the amendment on May 28, 2014, are being amortized using the straight-line method over the duration of the amended ABL facility. Each of the amendments, with the exception of the amendment on May 28, 2014, was considered to be a modification of the original agreement under GAAP.

As of September 27, 2014, our total availability under the ABL facility was $265.2 million, which was based on our borrowing base (accounts receivables, inventory, and fixed assets) as of October 15, 2014 (the September month-end under the terms of the credit agreement governing our ABL facility). We had $69.3 million of outstanding borrowings under the ABL facility and $6.9 million in outstanding letters of credit. As a result, our excess availability under the ABL facility was $189.0 million. The commitment fee was 0.375% per annum of the unused commitment of $223.8 million, which was based on our total ABL facility commitment of $300.0 million excluding outstanding borrowings and outstanding letters of credit. Each month’s borrowing base is not effective until submitted to the lenders, which usually occurs on the fifteenth day of the following month.

5.375% Senior Notes due in 2022

On June 24, 2014, we issued $525.0 million of our 5.375% senior notes due 2022 (the “2022 Notes”) to qualified purchasers in a private placement under Rule 144A and Regulation S under the Securities Act of 1933. The issuer of the 2022 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 2022 Notes. The interest on the 2022 Notes is payable semi-annually on January 1st and July 1st of each year commencing on January 1, 2015.

We incurred $9.2 million of financing fees in connection with the issuance of the 2022 Notes. The financing fees are being amortized using the effective interest method over an eight-year period, which represents the term to maturity of the 2022 Notes.

8.125% Senior Notes due in 2018

On August 17, 2010, we issued the 2018 Notes. The issuer of the 2018 Notes was our wholly-owned U.S. subsidiary Cott Beverages Inc., and we and most of our U.S., Canadian and U.K. subsidiaries guaranteed the 2018 Notes. The interest on the 2018 Notes was 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.

On June 24, 2014, we used a portion of the proceeds from our issuance of the 2022 Notes to purchase $295.9 million aggregate principal amount of our 2018 Notes in a cash tender offer. The tender offer included approximately $16.2 million in premium payments as well as accrued interest of $7.5 million, the write off of approximately $3.0 million in deferred financing fees, and other costs of approximately $0.2 million.

On July 9, 2014 and July 24, 2014, we redeemed all of the remaining $79.1 million aggregate principal amount of our 2018 Notes. The redemption included approximately $3.8 million in premium payments as well as accrued interest of approximately $2.5 million and the write off of approximately $0.8 million in deferred financing fees.

 

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8.375% Senior Notes due in 2017

On November 13, 2009, we issued $215.0 million of our 8.375% senior notes due 2017 (the “2017 Notes”). The 2017 Notes were issued at a $3.1 million discount. The issuer of the 2017 Notes was our wholly-owned U.S. subsidiary Cott Beverages Inc., and we and most of our U.S., Canadian and U.K. subsidiaries guaranteed the 2017 Notes. The interest on the 2017 Notes was 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.

On November 15, 2013, we redeemed $200.0 million aggregate principal amount of our 2017 Notes at 104.118% of par. The redemption included approximately $8.2 million in premium payments, the write off of approximately $4.0 million in deferred financing fees and discount charges, and other costs of approximately $0.5 million.

On February 19, 2014, we redeemed all of the remaining $15.0 million aggregate principal amount of the 2017 Notes at 104.118% of par. The redemption included approximately $0.6 million in premium payments as well as the write off of approximately $0.3 million in deferred financing fees and discount charges.

GE Term Loan

In January 2008, we entered into a capital lease finance arrangement with General Electric Capital Corporation (“GE Capital”) for the lease of equipment. In September 2013, we purchased the equipment subject to the lease for an aggregate purchase price of $10.7 million, with the financing for such purchase provided by GE Capital at 5.23% interest.

Note 11Accumulated Other Comprehensive (Loss) Income

Changes in accumulated other comprehensive (loss) income by component1 for the nine months ended September 27, 2014 were as follows:

 

     September 27, 2014  
     Gains and Losses     Pension     Currency        
     on Derivative     Benefit     Translation        

(in millions of U.S. dollars)

   Instruments     Plan Items     Adjustment Items     Total  

Beginning balance December 28, 2013

   $ 0.2      $ (8.4   $ (8.6   $ (16.8
  

 

 

   

 

 

   

 

 

   

 

 

 

OCI before reclassifications

     0.7        (0.5     (9.6     (9.4

Amounts reclassified from AOCI

     (0.1     0.3        —          0.2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period OCI

     0.6        (0.2     (9.6     (9.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance September 27, 2014

   $ 0.8      $ (8.6   $ (18.2   $ (26.0
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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

The following table summarizes the amounts reclassified from accumulated other comprehensive (loss) income1 for the three and nine months ended September 27, 2014 and September 28, 2013, respectively.

 

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(in millions of U.S. dollars)

   For the Three Months Ended      For the Nine Months Ended     Affected Line Item in
Details About AOCI    September 27,     September 28,      September 27,     September 28,     the Statement Where

Components

   2014     2013      2014     2013    

Net Income Is Presented

Gains and losses on derivative instruments

           

Foreign currency and commodity hedges

   $ (0.1   $ 0.1       $ 0.1      $ 0.3      Cost of sales
  

 

 

   

 

 

    

 

 

   

 

 

   
   $ (0.1   $ 0.1       $ 0.1      $ 0.3      Total before taxes
     —          —           —          —        Tax (expense) or benefit
  

 

 

   

 

 

    

 

 

   

 

 

   
   $ (0.1   $ 0.1       $ 0.1      $ 0.3      Net of tax
  

 

 

   

 

 

    

 

 

   

 

 

   

Amortization of pension benefit plan items

           

Prior service costs2

   $ (0.1   $ 0.1       $ (0.3   $ (0.2  

Actuarial adjustments2

     —          —           —          (0.1  

Actuarial losses2

     —          —           —          (0.1  
  

 

 

   

 

 

    

 

 

   

 

 

   
     (0.1     0.1         (0.3     (0.4   Total before taxes
     —          —           —          (0.2   Tax (expense) or benefit
  

 

 

   

 

 

    

 

 

   

 

 

   
   $ (0.1   $ 0.1       $ (0.3   $ (0.6   Net of tax
  

 

 

   

 

 

    

 

 

   

 

 

   

Total reclassifications for the period

   $ (0.2   $ 0.2       $ (0.2   $ (0.3   Net of tax
  

 

 

   

 

 

    

 

 

   

 

 

   

 

1. Amounts in parentheses indicate debits.
2. These AOCI components are included in the computation of net periodic pension cost.

Note 12Commitments 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.

In June 2013, we completed the Calypso Acquisition, which included a deferred payment of approximately $2.3 million paid on the first anniversary of the closing date, and a deferred payment of approximately $3.0 million to be paid on the second anniversary of the closing date.

We had $6.9 million in standby letters of credit outstanding as of September 27, 2014 (September 28, 2013—$7.5 million).

In March 2014, we had a favorable legal settlement in the amount of $3.5 million, of which $3.0 million was collected in April 2014 and the remaining $0.5 million is due in January 2015.

In May 2014, we completed the Aimia Acquisition, which included deferred consideration of £19.9 million ($33.5 million), which was paid by us on September 15, 2014 and aggregate contingent consideration of up to £16.0 million ($26.9 million), which is payable upon achievement of certain measures related to Aimia’s performance during the twelve months ending July 1, 2016.

Note 13Share Repurchase Program

On May 6, 2014, our board of directors approved the renewal of our share repurchase program for up to 5% of Cott’s outstanding common shares over a 12-month period commencing upon the expiration of Cott’s then-effective share repurchase program on May 21, 2014. During the third quarter ended September 27, 2014, we repurchased 642,680 common shares for approximately $4.6 million through open market transactions. We are unable to predict the number of shares that ultimately 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. Shares purchased by us under the share repurchase program are cancelled.

 

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Note 14Hedging 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 certain market risks.

We use various types of derivative instruments including, but not limited to, forward contracts and swap agreements for certain commodities. 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. A swap agreement is a contract between two parties to exchange cash flows based on specified underlying notional amounts, assets and/or indices. 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. Derivatives can be designated as fair value hedges, cash flow hedges or hedges of net investments in foreign operations. The changes in the fair values of derivatives that have been designated and qualify for fair value hedge accounting are recorded in the same line item in our Consolidated Statements of Operations as the changes in the fair value of the hedged items attributable to the risk being hedged. 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. The changes in fair values of derivatives that were not designated and/or did not qualify as hedging instruments are immediately recognized into earnings.

For derivatives that will be accounted for as hedging instruments, 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. Ineffectiveness was not material for all periods presented.

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 or other exposures. 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 monitor counterparty exposures regularly and review promptly any downgrade in credit rating. We mitigate pre-settlement risk by being permitted to net settle for transactions with the same counterparty. To minimize the concentration of credit risk, we enter into derivative transactions with a portfolio of financial institutions. Based on these factors, we consider the risk of the counterparty default to be minimal.

 

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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 and commodity prices. 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 nine months ended September 27, 2014 or September 28, 2013, respectively. These foreign exchange contracts typically have maturities of less than eighteen months.

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 values of derivatives that were designated and qualified for our foreign currency cash flow hedging program were $1.8 million and $3.6 million as of September 27, 2014 and December 28, 2013, respectively.

We have entered into commodity swaps on aluminum to mitigate the price risk associated with forecasted purchases of materials used in our manufacturing process. These derivative instruments have been designated and qualify as a part of our commodity cash flow hedging program. The objective of this hedging program is to reduce the variability of cash flows associated with future purchases of aluminum. The total notional values of derivatives that were designated and qualified for our commodity cash flow hedging program were $43.0 million and nil as of September 27, 2014 and December 28, 2013, respectively.

The fair value of the Company’s derivative assets was $0.9 million and $0.3 million as of September 27, 2014 and December 28, 2013, respectively. The fair value of the Company’s derivative liabilities was nil as of September 27, 2014 and December 28, 2013, respectively.

The settlement of our derivative instruments resulted in a charge to cost of sales of approximately $0.1 million and a credit to cost of sales of approximately $0.1 million for the three and nine months ended September 27, 2014, respectively, compared to a credit to cost of sales of approximately $0.1 million and $0.5 million for the comparable prior year periods.

Note 15Fair Value Measurements

Accounting Standards Codification 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, such as our derivative instruments, that are required to be recorded at fair value on a recurring basis in accordance with U.S. GAAP.

The fair value of our derivative instruments represents a Level 2 instrument. Level 2 instruments are valued based on observable inputs for quoted prices for similar assets and liabilities in active markets. The fair value of the derivative assets as of September 27, 2014 and December 28, 2013 was $0.9 million and $0.3 million, respectively. The fair value of the derivative liabilities as of September 27, 2014 and December 28, 2013 was nil, respectively.

 

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Fair Value of Financial Instruments

The carrying amounts reflected in the Consolidated Balance Sheets for cash and cash equivalents, 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 September 27, 2014 and December 28, 2013 were as follows:

 

     September 27, 2014      December 28, 2013  
     Carrying      Fair      Carrying      Fair  

(in millions of U.S. dollars)

   Value      Value      Value      Value  

8.375% senior notes due in 20171

   $ —         $ —         $ 15.0       $ 15.6   

8.125% senior notes due in 20181

     —           —           375.0         404.1   

5.375% senior notes due in 20221

     525.0         510.8         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 525.0       $ 510.8       $ 390.0       $ 419.7   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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

Note 16Guarantor Subsidiaries

The 2022 Notes issued by our 100% owned subsidiary, Cott Beverages Inc., are, and the 2017 Notes and 2018 Notes prior to their retirement were, guaranteed on a senior basis pursuant to guarantees by Cott Corporation and certain other 100% owned direct and indirect subsidiaries (the “Guarantor Subsidiaries”). Cott Beverages Inc. and each Guarantor Subsidiary is 100% owned by Cott Corporation. The guarantees of the 2017 Notes, 2018 Notes and 2022 Notes by Cott Corporation and the Guarantor Subsidiaries are full and unconditional, and all such guarantees are joint and several. 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 Guarantor Subsidiaries due to the presentation of condensed consolidating financial information set forth in this Note, consistent with the Securities and Exchange Commission (the “SEC”) interpretations governing reporting of subsidiary financial information.

The following supplemental financial information sets forth on a consolidating 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.

We reclassified certain intercompany dividends and advances to affiliates previously reported in the Condensed Consolidating Statement of Cash Flows for the nine months ended September 28, 2013 included in our Quarterly Report on Form 10-Q. The intercompany dividends represented transactions between Cott Corporation, Cott Beverages, Inc., the Guarantors and Non-Guarantors and the cash flows related to these transactions should have been classified as financing activities. The advances to affiliates represented activity between Cott Corporation and Non-Guarantors that should not have impacted the Condensed Consolidating Statement of Cash Flow because they represented non-cash charges. These reclassifications do not change the total cash flows reported in each column presented in the Condensed Consolidating Statement of Cash Flows. We assessed the materiality of these items on our previously issued annual report and quarterly financial statements in accordance with SEC Staff Accounting Bulletin No. 99, and concluded that the errors were not material to the consolidated financial statements taken as a whole. The statements of cash flows presented below for the three and nine months ended September 28, 2013 as revised, reflect the correct classification of these items.

 

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Condensed Consolidating Statement of Operations

(in millions of U.S. dollars)

Unaudited

 

     For the Three Months Ended September 27, 2014  
     Cott     Cott     Guarantor     Non-Guarantor      Elimination        
     Corporation     Beverages Inc.     Subsidiaries     Subsidiaries      Entries     Consolidated  

Revenue, net

   $ 42.4      $ 187.1      $ 282.6      $ 35.7       $ (12.8   $ 535.0   

Cost of sales

     36.2        162.6        254.6        30.9         (12.8     471.5   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Gross profit

     6.2        24.5        28.0        4.8         —          63.5   

Selling, general and administrative expenses

     5.8        24.1        13.1        2.0         —          45.0   

Loss on disposal of property, plant & equipment

     0.2        0.3        0.2        —           —          0.7   

Restructuring and asset impairments

             

Restructuring

     0.1        —          —          —           —          0.1   

Asset impairments

     —          —          (0.2     —           —          (0.2
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Operating income

     0.1        0.1        14.9        2.8         —          17.9   

Other expense, net

     0.4        4.6        0.4        —           —          5.4   

Intercompany interest (income) expense, net

     —          (4.6     4.6        —           —          —     

Interest expense, net

     0.1        8.5        0.3        0.1         —          9.0   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

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

     (0.4     (8.4     9.6        2.7         —          3.5   

Income tax expense

     —          1.7        0.1        —           —          1.8   

Equity income (loss)

     0.8        1.4        1.8        —           (4.0     —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss)

   $ 0.4      $ (8.7   $ 11.3      $ 2.7       $ (4.0   $ 1.7   

Less: Net income attributable to non-controlling interests

     —          —          —          1.3         —          1.3   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss) attributed to Cott Corporation

   $ 0.4      $ (8.7   $ 11.3      $ 1.4       $ (4.0   $ 0.4   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Comprehensive (loss) income attributed to Cott Corporation

   $ (15.5   $ (36.0   $ 4.3      $ 3.0       $ 28.7      $ (15.5
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

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Condensed Consolidating Statement of Operations

(in millions of U.S. dollars)

Unaudited

 

     For the Nine Months Ended September 27, 2014  
     Cott     Cott     Guarantor      Non-Guarantor      Elimination        
     Corporation     Beverages Inc.     Subsidiaries      Subsidiaries      Entries     Consolidated  

Revenue, net

   $ 129.4      $ 562.0      $ 803.2       $ 104.0       $ (37.6   $ 1,561.0   

Cost of sales

     111.7        487.4        722.7         89.2         (37.6     1,373.4   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Gross profit

     17.7        74.6        80.5         14.8         —          187.6   

Selling, general and administrative expenses

     18.4        74.0        35.4         6.4         —          134.2   

Loss on disposal of property, plant & equipment

     0.2        0.8        0.2         —           —          1.2   

Restructuring and asset impairments

              

Restructuring

     2.1        0.2        0.1         —           —          2.4   

Asset impairments

     0.9        —          0.8         —           —          1.7   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Operating (loss) income

     (3.9     (0.4     44.0         8.4         —          48.1   

Other (income) expense, net

     (9.1     21.7        10.2         0.1         —          22.9   

Intercompany interest (income) expense, net

     —          (12.0     12.0         —           —          —     

Interest expense, net

     0.2        26.0        0.9         0.1         —          27.2   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

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

     5.0        (36.1     20.9         8.2         —          (2.0

Income tax (benefit) expense

     (1.4     4.6        0.1         0.1         —          3.4   

Equity (loss) income

     (15.9     4.1        8.8         —           3.0        —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Net (loss) income

   $ (9.5   $ (36.6   $ 29.6       $ 8.1       $ 3.0      $ (5.4

Less: Net income attributable to non-controlling interests

     —          —          —           4.1         —          4.1   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Net (loss) income attributed to Cott Corporation

   $ (9.5   $ (36.6   $ 29.6       $ 4.0       $ 3.0      $ (9.5
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Comprehensive (loss) income attributed to Cott Corporation

   $ (18.7   $ (42.7   $ 57.8       $ 4.8       $ (19.9   $ (18.7
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

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Condensed Consolidating Statement of Operations

(in millions of U.S. dollars)

Unaudited

 

     For the Three Months Ended September 28, 2013  
     Cott     Cott     Guarantor     Non-Guarantor     Elimination        
     Corporation     Beverages Inc.     Subsidiaries     Subsidiaries     Entries     Consolidated  

Revenue, net

   $ 42.5      $ 197.6      $ 271.5      $ 37.4      $ (5.8   $ 543.2   

Cost of sales

     39.2        170.5        241.3        33.0        (5.8     478.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     3.3        27.1        30.2        4.4        —          65.0   

Selling, general and administrative expenses

     6.8        14.9        13.2        3.0        —          37.9   

Loss on disposal of property, plant & equipment

     0.1        0.4        0.6        —          —          1.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss) income

     (3.6     11.8        16.4        1.4        —          26.0   

Other income, net

     (0.1     —          (0.6     —          —          (0.7

Intercompany interest (income) expense, net

     —          (3.0     3.0        —          —          —     

Interest (income) expense, net

     (0.1     13.1        0.2        0.1        —          13.3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

     (3.4     1.7        13.8        1.3        —          13.4   

Income tax (benefit) expense

     (2.8     3.9        (1.2     0.2        —          0.1   

Equity income (loss)

     12.6        1.3        (0.3     —          (13.6     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 12.0      $ (0.9   $ 14.7      $ 1.1      $ (13.6   $ 13.3   

Less: Net income attributable to non-controlling interests

     —          —          —          1.3        —          1.3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributed to Cott Corporation

   $ 12.0      $ (0.9   $ 14.7      $ (0.2   $ (13.6   $ 12.0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributed to Cott Corporation

   $ 23.8      $ 28.9      $ 30.6      $ —        $ (59.5   $ 23.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Condensed Consolidating Statement of Operations

(in millions of U.S. dollars)

Unaudited

 

     For the Nine Months Ended September 28, 2013  
     Cott     Cott     Guarantor     Non-Guarantor      Elimination        
     Corporation     Beverages Inc.     Subsidiaries     Subsidiaries      Entries     Consolidated  

Revenue, net

   $ 131.9      $ 605.5      $ 777.4      $ 116.0       $ (18.4   $ 1,612.4   

Cost of sales

     114.5        520.1        695.9        102.3         (18.4     1,414.4   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Gross profit

     17.4        85.4        81.5        13.7         —          198.0   

Selling, general and administrative expenses

     22.3        53.8        37.7        7.1         —          120.9   

Loss on disposal of property, plant & equipment

     0.1        0.7        0.6        —           —          1.4   

Restructuring

     0.5        0.5        0.7        0.3         —          2.0   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Operating (loss) income

     (5.5     30.4        42.5        6.3         —          73.7   

Other (income), net

     (0.1     —          (0.3     —           —          (0.4

Intercompany interest (income) expense, net

     —          (8.7     8.7        —           —          —     

Interest (income) expense, net

     (0.2     39.1        0.4        0.1         —          39.4   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

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

     (5.2     —          33.7        6.2         —          34.7   

Income tax (benefit) expense

     (2.1     5.5        (1.5     0.4         —          2.3   

Equity income (loss)

     31.6        3.9        (0.9     —           (34.6     —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss)

   $ 28.5      $ (1.6   $ 34.3      $ 5.8       $ (34.6   $ 32.4   

Less: Net income attributable to non-controlling interests

     —          —          —          3.9         —          3.9   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss) attributed to Cott Corporation

   $ 28.5      $ (1.6   $ 34.3      $ 1.9       $ (34.6   $ 28.5   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Comprehensive income (loss) attributed to Cott Corporation

   $ 23.9      $ (2.1   $ 33.3      $ 4.1       $ (35.3   $ 23.9   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

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Consolidating Balance Sheets

(in millions of U.S. dollars)

Unaudited

 

     As of September 27, 2014  
     Cott     Cott     Guarantor     Non-Guarantor     Elimination        
     Corporation     Beverages Inc.     Subsidiaries     Subsidiaries     Entries     Consolidated  

ASSETS

            

Current assets

            

Cash & cash equivalents

   $ 5.7      $ 1.9      $ 32.1      $ 7.7      $ —        $ 47.4   

Accounts receivable, net of allowance

     17.5        134.6        258.5        13.8        (174.2     250.2   

Income taxes recoverable

     0.4        0.6        —          —          —          1.0   

Inventories

     14.9        75.7        133.5        6.8        —          230.9   

Prepaid expenses and other assets

     3.2        11.3        9.5        0.1        —          24.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     41.7        224.1        433.6        28.4        (174.2     553.6   

Property, plant & equipment, net

     40.5        180.5        232.7        8.8        —          462.5   

Goodwill

     24.6        4.6        157.9        —          —          187.1   

Intangibles and other assets, net

     1.2        91.1        264.6        7.7        —          364.6   

Deferred income taxes

     4.6        —          —          0.8        —          5.4   

Other tax receivable

     0.2        0.1        —          —          —          0.3   

Due from affiliates

     38.6        173.2        3.0        —          (214.8     —     

Investments in subsidiaries

     435.9        286.4        697.9        —          (1,420.2     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 587.3      $ 960.0      $ 1,789.7      $ 45.7      $ (1,809.2   $ 1,573.5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

            

Current liabilities

            

Short-term borrowings

   $ —        $ 40.0      $ 29.3      $ —        $ —        $ 69.3   

Current maturities of long-term debt

     0.1        2.5        0.5        1.0        —          4.1   

Accounts payable and accrued liabilities

     27.0        202.2        231.8        10.7        (174.2     297.5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     27.1        244.7        261.6        11.7        (174.2     370.9   

Long-term debt

     —          532.9        1.8        0.8        —          535.5   

Deferred income taxes

     —          36.3        25.5        1.3        —          63.1   

Other long-term liabilities

     0.1        5.5        33.2        —          —          38.8   

Due to affiliates

     1.4        1.6        175.5        36.3        (214.8     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     28.6        821.0        497.6        50.1        (389.0     1,008.3   

Equity

            

Capital stock, no par

     389.4        509.4        1,632.9        40.4        (2,182.7     389.4   

Additional paid-in-capital

     47.9        —          —          —          —          47.9   

Retained earnings (deficit)

     147.4        (388.3     (362.3     (53.6     804.2        147.4   

Accumulated other comprehensive (loss) income

     (26.0     17.9        21.5        2.3        (41.7     (26.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Cott Corporation equity

     558.7        139.0        1,292.1        (10.9     (1,420.2     558.7   

Non-controlling interests

     —          —          —          6.5        —          6.5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

     558.7        139.0        1,292.1        (4.4     (1,420.2     565.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 587.3      $ 960.0      $ 1,789.7      $ 45.7      $ (1,809.2   $ 1,573.5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

32


Table of Contents

Consolidating Balance Sheets

(in millions of U.S. dollars)

 

     As of December 28, 2013  
     Cott     Cott     Guarantor     Non-Guarantor     Elimination        
     Corporation     Beverages Inc.     Subsidiaries     Subsidiaries     Entries     Consolidated  

ASSETS

            

Current assets

            

Cash & cash equivalents

   $ 1.5      $ 1.1      $ 39.1      $ 5.5      $ —        $ 47.2   

Accounts receivable, net of allowance

     19.0        114.1        229.8        15.5        (174.0     204.4   

Income taxes recoverable

     0.4        0.7        —          —          —          1.1   

Inventories

     16.2        77.0        132.9        7.0        —          233.1   

Prepaid expenses and other assets

     2.1        10.1        7.0        0.1        —          19.3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     39.2        203.0        408.8        28.1        (174.0     505.1   

Property, plant & equipment, net

     47.9        190.2        235.7        9.9        —          483.7   

Goodwill

     25.8        4.5        107.0        —          —          137.3   

Intangibles and other assets, net

     1.3        88.0        196.2        10.7        —          296.2   

Deferred income taxes

     3.6        —          —          —          —          3.6   

Other tax receivable

     —          0.2        —          —          —          0.2   

Due from affiliates

     39.6        125.7        2.9        41.9        (210.1     —     

Investments in subsidiaries

     507.8        246.7        697.7        —          (1,452.2     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 665.2      $ 858.3      $ 1,648.3      $ 90.6      $ (1,836.3   $ 1,426.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

            

Current liabilities

            

Short-term borrowings

   $ —        $ 16.2      $ 34.6      $ —        $ —        $ 50.8   

Current maturities of long-term debt

     —          2.4        0.6        0.9        —          3.9   

Accounts payable and accrued liabilities

     25.5        214.4        225.6        6.7        (174.0     298.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     25.5        233.0        260.8        7.6        (174.0     352.9   

Long-term debt

     0.1        399.6        2.2        1.6        —          403.5   

Deferred income taxes

     —          32.0        9.1        0.4        —          41.5   

Other long-term liabilities

     0.1        2.8        19.4        —          —          22.3   

Due to affiliates

     43.1        1.6        128.1        37.3        (210.1     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     68.8        669.0        419.6        46.9        (384.1     820.2   

Equity

            

Capital stock, no par

     392.8        509.4        1,557.5        82.5        (2,149.4     392.8   

Additional paid-in-capital

     44.1        —          —          —          —          44.1   

Retained earnings (deficit)

     176.3        (344.1     (322.1     (49.8     716.0        176.3   

Accumulated other comprehensive (loss) income

     (16.8     24.0        (6.7     1.5        (18.8     (16.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Cott Corporation equity

     596.4        189.3        1,228.7        34.2        (1,452.2     596.4   

Non-controlling interests

     —          —          —          9.5        —          9.5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

     596.4        189.3        1,228.7        43.7        (1,452.2     605.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 665.2      $ 858.3      $ 1,648.3      $ 90.6      $ (1,836.3   $ 1,426.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

33


Table of Contents

Consolidating Statements of Condensed Cash Flows

(in millions of U.S. dollars)

Unaudited

 

     For the Three Months Ended September 27, 2014  
     Cott     Cott     Guarantor     Non-Guarantor     Elimination        
     Corporation     Beverages Inc.     Subsidiaries     Subsidiaries     Entries     Consolidated  

Operating Activities

            

Net income (loss)

   $ 0.4      $ (8.7   $ 11.3      $ 2.7      $ (4.0   $ 1.7   

Depreciation & amortization

     1.7        10.2        13.9        1.4        —          27.2   

Amortization of financing fees

     —          0.7        —          —          —          0.7   

Share-based compensation expense

     0.1        1.1        0.2        0.1        —          1.5   

(Decrease) increase in deferred income taxes

     (0.3     1.8        0.7        —          —          2.2   

Loss on disposal of property, plant & equipment

     0.2        0.3        0.2        —          —          0.7   

Asset impairments

     —          —          (0.2     —          —          (0.2

Write-off of financing fees and discount

     —          0.8        —          —          —          0.8   

Equity income, net of distributions

     (0.8     (1.4     (1.8     —          4.0        —     

Intercompany dividends

     44.2        2.5        —          —          (46.7     —     

Other non-cash items

     (0.2     —          0.2        —          —          —     

Net change in operating assets and liabilities, net of acquisitions

     (36.3     47.1        12.1        3.0        —          25.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     9.0        54.4        36.6        7.2        (46.7     60.5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Investing Activities

            

Additions to property, plant & equipment

     —          (7.8     (2.6     (0.4     —          (10.8

Additions to intangibles and other assets

     —          (1.5     —          —          —          (1.5

Proceeds from sale of property, plant & equipment

     —          1.6        —          —          —          1.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     —          (7.7     (2.6     (0.4     —          (10.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financing Activities

            

Payments of long-term debt

     —          (79.2     (0.1     (0.8     —          (80.1

Borrowings under ABL

     —          191.1        —          —          —          191.1   

Payments under ABL

     —          (156.0     —          —          —          (156.0

Distributions to non-controlling interests

     —          —          —          (2.4     —          (2.4

Financing fees

     —          (1.2     —          —          —          (1.2

Common shares repurchased and cancelled

     (4.6     —          —          —          —          (4.6

Payment of deferred consideration for acquisitions

     —          (32.4     —          —          —          (32.4

Dividends paid to shareholders

     (5.6     —          —          —          —          (5.6

Intercompany dividends

     —          —          (44.2     (2.5     46.7        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

     (10.2     (77.7     (44.3     (5.7     46.7        (91.2

Effect of exchange rate changes on cash

     (0.3     —          (1.7     (0.1     —          (2.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (decrease) increase in cash & cash equivalents

     (1.5     (31.0     (12.0     1.0        —          (43.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash & cash equivalents, beginning of period

     7.2        32.9        44.1        6.7        —          90.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash & cash equivalents, end of period

   $ 5.7      $ 1.9      $ 32.1      $ 7.7      $ —        $ 47.4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

34


Table of Contents

Consolidating Statements of Condensed Cash Flows

(in millions of U.S. dollars)

Unaudited

 

     For the Nine Months Ended September 27, 2014  
     Cott
Corporation
    Cott
Beverages Inc.
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Elimination
Entries
    Consolidated  

Operating Activities

            

Net (loss) income

   $ (9.5   $ (36.6   $ 29.6      $ 8.1      $ 3.0      $ (5.4

Depreciation & amortization

     4.8        30.6        38.8        4.3        —          78.5   

Amortization of financing fees

     0.1        1.7        0.1        —          —          1.9   

Share-based compensation expense

     0.9        3.4        0.5        0.1        —          4.9   

(Decrease) increase in deferred income taxes

     (1.6     4.4        0.9        —          —          3.7   

Loss on disposal of property, plant & equipment

     0.2        0.8        0.2        —          —          1.2   

Asset impairments

     0.9        —          0.8        —          —          1.7   

Write-off of financing fees and discount

     —          4.1        —          —          —          4.1   

Equity loss (income), net of distributions

     15.9        (4.1     (8.8     —          (3.0     —     

Intercompany dividends

     62.4        7.5        9.3        —          (79.2     —     

Other non-cash items

     (0.4     (0.2     (0.1     —          —          (0.7

Net change in operating assets and liabilities, net of acquisitions

     (44.3     (89.8     76.1        5.7        —          (52.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     29.4        (78.2     147.4        18.2        (79.2     37.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Investing Activities

            

Acquisitions, net of cash received

     —          —          (80.8     —          —          (80.8

Additions to property, plant & equipment

     (0.9     (20.0     (10.1     (0.4     —          (31.4

Additions to intangibles and other assets

     —          (4.3     —          —          —          (4.3

Proceeds from sale of property, plant & equipment

     —          1.6        —          —          —          1.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     (0.9     (22.7     (90.9     (0.4     —          (114.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financing Activities

            

Payments of long-term debt

     (0.1     (391.4     (0.3     (0.8     —          (392.6

Issuance of long-term debt

     —          525.0        —          —          —          525.0   

Borrowings under ABL

     —          474.3        —          —          —          474.3   

Payments under ABL

     —          (455.4     —          —          —          (455.4

Distributions to non-controlling interests

     —          —          —          (7.2     —          (7.2

Financing fees

     —          (9.1     —          —          —          (9.1

Common shares repurchased and cancelled

     (7.7     —          —          —          —          (7.7

Dividends paid to shareholders

     (16.4     —          —          —          —          (16.4

Payment of deferred consideration for acquisitions

     —          (32.4     —          —          —          (32.4

Intercompany dividends

     —          (9.3     (62.4     (7.5     79.2        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (24.2     101.7        (62.7     (15.5     79.2        78.5   

Effect of exchange rate changes on cash

     (0.1     —          (0.8     (0.1     —          (1.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash & cash equivalents

     4.2        0.8        (7.0     2.2        —          0.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash & cash equivalents, beginning of period

     1.5        1.1        39.1        5.5        —          47.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash & cash equivalents, end of period

   $ 5.7      $ 1.9      $ 32.1      $ 7.7      $ —        $ 47.4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

35


Table of Contents

Consolidating Statements of Condensed Cash Flows

(in millions of U.S. dollars)

Unaudited

 

     For the Three Months Ended September 28, 2013  
     Cott
Corporation
    Cott
Beverages Inc.
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Elimination
Entries
    Consolidated  

Operating Activities

            

Net income (loss)

   $ 12.0      $ (0.9   $ 14.7      $ 1.1      $ (13.6   $ 13.3   

Depreciation & amortization

     1.6        9.6        12.3        1.6        —          25.1   

Amortization of financing fees

     —          0.7        —          —          —          0.7   

Share-based compensation expense

     0.3        0.7        0.1        —          —          1.1   

(Decrease) increase in deferred income taxes

     (2.5     3.4        (0.5     (0.1     —          0.3   

Loss on disposal of property, plant & equipment

     0.1        0.4        0.6        —          —          1.1   

Equity (income) loss, net of distributions

     (12.6     (1.3     0.3        —          13.6        —     

Intercompany dividends

     2.2        2.4        —          —          (4.6     —     

Other non-cash items

     0.2        (0.2     —          —          —          —     

Net change in operating assets and liabilities, net of acquisition

     (0.7     28.3        18.0        0.2          45.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     0.6        43.1        45.5        2.8        (4.6     87.4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Investing Activities

            

Acquisition, net of cash acquired

     —          (4.7     —          —          —          (4.7

Additions to property, plant & equipment

     (1.1     (7.9     (1.2     —          —          (10.2

Additions to intangibles and other assets

     —          (2.1     —          —          —          (2.1

Proceeds from sale of property, plant & equipment

     —          —          —          0.2        —          0.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     (1.1     (14.7     (1.2     0.2        —          (16.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financing Activities

            

Payments of long-term debt

     —          —          (0.1     (0.5     —          (0.6

Distributions to non-controlling interests

     —          —          —          (2.2     —          (2.2

Common shares repurchased and cancelled

     (4.5     —          —          —          —          (4.5

Financing fees

     (0.1     —          —          —          —          (0.1

Dividends paid to shareholders

     (5.5     —          —          —          —          (5.5

Intercompany dividends

     —          —          (2.2     (2.4     4.6        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

     (10.1     —          (2.3     (5.1     4.6        (12.9

Effect of exchange rate changes on cash

     0.5        —          0.8        —          —          1.3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (decrease) increase in cash & cash equivalents

     (10.1     28.4        42.8        (2.1     —          59.0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash & cash equivalents, beginning of period

     33.3        13.5        12.6        7.4        —          66.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash & cash equivalents, end of period

   $ 23.2      $ 41.9      $ 55.4      $ 5.3      $ —        $ 125.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

36


Table of Contents

Consolidating Statements of Condensed Cash Flows

(in millions of U.S. dollars)

Unaudited

 

     For the Nine Months Ended September 28, 2013  
     Cott     Cott     Guarantor     Non-Guarantor     Elimination        
     Corporation     Beverages Inc.     Subsidiaries     Subsidiaries     Entries     Consolidated  

Operating Activities

            

Net income (loss)

   $ 28.5      $ (1.6   $ 34.3      $ 5.8      $ (34.6   $ 32.4   

Depreciation & amortization

     4.7        29.0        36.4        4.6        —          74.7   

Amortization of financing fees

     0.1        2.0        0.1        —          —          2.2   

Share-based compensation expense

     1.1        2.2        0.3        —          —          3.6   

(Decrease) increase in deferred income taxes

     (2.0     5.2        (1.2     (0.1     —          1.9   

Loss on disposal of property, plant & equipment

     0.1        0.7        0.6        —          —          1.4   

Equity (income) loss, net of distributions

     (31.6     (3.9     0.9        —          34.6        —     

Intercompany dividends

     24.7        5.3        —          —          (30.0     —     

Other non-cash items

     0.2        —          —          —          —          0.2   

Net change in operating assets and liabilities, net of acquisition

     (5.2     2.4        (52.2     1.5        —          (53.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     20.6        41.3        19.2        11.8        (30.0     62.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Investing Activities

            

Acquisition, net of cash acquired

     —          (4.7     (6.5     —          —          (11.2

Additions to property, plant & equipment

     (6.0     (27.9     (9.5     (1.3     —          (44.7

Additions to intangibles and other assets

     —          (4.0     —          —          —          (4.0

Proceeds from sale of property, plant & equipment

     —          —          —          0.2        —          0.2   

Proceeds from insurance recoveries

     —          0.4        —          —          —          0.4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (6.0     (36.2     (16.0     (1.1     —          (59.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financing Activities

            

Payments of long-term debt

     (0.1     (0.7     (18.6     (0.8     —          (20.2

Distributions to non-controlling interests

     —          —          —          (5.0     —          (5.0

Common shares repurchased and cancelled

     (12.9     —          —          —          —          (12.9

Financing fees

     (0.1     —          —          —          —          (0.1

Dividends paid to shareholders

     (16.7     —          —          —          —          (16.7

Intercompany dividends

     —          —          (24.7     (5.3     30.0        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

     (29.8     (0.7     (43.3     (11.1     30.0        (54.9

Effect of exchange rate changes on cash

     (1.4     —          (0.9     —          —          (2.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (decrease) increase in cash & cash equivalents

     (16.6     4.4        (41.0     (0.4     —          (53.6