Cott Reports Fourth Quarter And Fiscal 2015 Results

TORONTO, ON and TAMPA, FL--(Marketwired - Feb 18, 2016) - Cott Corporation today announced its results for the fourth quarter and fiscal year ended January 2, 2016.

Cott continued to focus on its strategic priorities designed to build long-term shareowner value:

• Cott's normalized 2015 free cash flow, after deducting approximately $15 million of lower than expected capital expenditures, was approximately $120 million, which is estimated to grow at a mid-teen compound annual growth rate through 2018.
• On January 4, 2016, Cott acquired Aquaterra for a purchase price of C$62 million. Aquaterra is Canada's oldest and largest direct-to-consumer home and office water delivery business with revenues of approximately C$75 million for the twelve months ended June 30, 2015. This acquisition builds on Cott's strategy of expanding its water, coffee and tea home and office services business, and further diversifies its customer base. The acquisition broadens Cott's customer reach by adding over 70,000 new customers and delivery points while creating cost synergies and a Canadian home and office services platform for continued organic and transaction related expansion.
• DS Services completed the acquisitions of nine small HOD water and coffee businesses during fiscal 2015.
• Cott captured $4 million of synergies related to the acquisition of DS Services during the quarter for a total of $10 million of synergies realized during fiscal 2015, with the goal of $30 million in synergies by the end of 2017. 
• DS Services continued to grow, generating 4% pro forma revenue growth on an adjusted basis during the quarter and fiscal year.
• Volume stabilization within the Cott North America business unit continued during the quarter as contract manufacturing volume grew by 40% and sparkling waters and mixers volume grew by 4% (excluding the 53^rd week in 2014). Cott North America gross margin increased 190 basis points from 10.6% to 12.5% in the quarter and 170 basis points from 11.6% to 13.3% during the fiscal year as a result of stable volumes and cost and efficiency savings.

"I am pleased with the progress made in pursuit of our strategic priorities in 2015 highlighted by our strong free cash flow, full redemption of the preferred shares issued at the time of the DS Services acquisition, successful pursuit of follow-on home and office acquisitions, as well as significant growth in contract manufacturing within our traditional business," commented Jerry Fowden, Cott's Chief Executive Officer. "We believe that the platform we are creating in home and office services for water, coffee and tea both organically and via further synergistic transactions will provide underlying mid-teen annual growth in free cash flow over the coming years," continued Mr. Fowden.

FOURTH QUARTER 2015 GLOBAL PERFORMANCE 

• Adjusted free cash flow was $72 million. Reported free cash flow was $63 million, reflecting $88 million of net cash provided by operating activities less $25 million of capital expenditures. 
• Adjusted EBITDA increased 89% to $81 million due primarily to the addition of the DS Services business and stable volumes within the Cott North America business unit. 
• Revenue increased 29% to $699 million ($711 million excluding the impact of foreign exchange) compared to $544 million. 
• Gross profit increased 208% to $221 million, with a gross margin of 31.6% compared to 13.2%, due primarily to the addition of the DS Services business, stable volumes in the Cott North America business unit and cost and efficiency savings, offset in part by the impact of foreign exchange. 
• Adjusted net income and adjusted net income per diluted share were $3 million and $0.03, respectively, compared to adjusted net income and adjusted net income per diluted share of $34 million and $0.37, respectively. Reported net loss and net loss per diluted share were $4 million and $0.04, respectively, compared to reported net income and net income per diluted share of $19 million and $0.19, respectively. The changes in net income and earnings per share were largely driven by our income tax benefit which was approximately $6 million in the fourth quarter of 2015 compared to an income tax benefit of $65 million due primarily to the release of a valuation allowance in the fourth quarter of 2014.

FOURTH QUARTER 2015 REPORTING SEGMENT PERFORMANCE 

• DS Services pro forma revenue increased 8% to $256 million (4% on an adjusted basis) due primarily to growth in HOD water, single cup coffee delivery, and retail sales as well as the benefit of four additional shipping days during the quarter, offset in part by a reduced energy surcharge as a result of lower diesel fuel prices, and reduced sales in traditional brew basket coffee. 
• Cott North America volume was broadly flat in actual cases and was lower by 4% in servings (excluding the 53^rd week in 2014) as increases in contract manufacturing and other growth areas such as sparkling waters and mixers offset the general market decline in carbonated soft drinks ("CSDs") and private label shelf stable juices ("SSJs"). Revenue was lower by 13% (6% excluding the impact of a 53^rd week in 2014 and foreign exchange) at $305 million due primarily to an overall product mix shift into contract manufacturing and other private label categories. 
• U.K./Europe volume decreased 3% in actual cases and was higher by 2% in servings (excluding the 53^rd week in 2014). Revenue was lower by 14% (6% excluding the impact of a 53^rd week in 2014 and foreign exchange) at $131 million due primarily to an adverse product mix shift out of energy and sports drinks and into other products. 
• All Other revenue excluding the impact of foreign exchange as well as the benefit from a 53^rd week in 2014 was broadly flat. 

FISCAL YEAR 2015 GLOBAL PERFORMANCE 

• Adjusted free cash flow increased 25% to $134 million. Reported free cash flow was $144 million, reflecting $255 million of net cash provided by operating activities less $111 million of capital expenditures. 
• Adjusted EBITDA increased 98% to $357 million ($369 million excluding the impact of foreign exchange) due primarily to the addition of the DS Services and Aimia Foods businesses as well as stable volumes within our Cott North America business unit, offset in part by the competitive environment for CSDs and SSJs in the traditional business. 
• Revenue increased 40% to $2,944 million ($3,014 million excluding the impact of foreign exchange) compared to $2,103 million. 
• Gross profit increased 224% to $896 million, with a gross margin of 30.4% compared to 13.1%. Excluding DS Services, gross margin increased by over 100 basis points to 14.4% driven primarily by stable volumes in the Cott North America business unit, the higher margin profile of the Aimia Foods business, and cost and efficiency savings, offset in part by the impact of foreign exchange and the competitive environment for CSDs and SSJs in the traditional business. 
• Adjusted net income and adjusted net income per diluted share were $23 million and $0.22, respectively, compared to adjusted net income and adjusted net income per diluted share of $57 million and $0.60, respectively. Reported net loss and net loss per diluted share were $3 million and $0.03, respectively, compared to reported net income and net income per diluted share of $10 million and $0.10, respectively. The changes in net income and earnings per share were largely driven by our income tax benefit which was approximately $23 million in fiscal 2015 compared to an income tax benefit of $61 million due primarily to the release of a valuation allowance in 2014. Full report.