United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q



ý☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: March ~~30, 2019~~

28, 2020



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

For the transition period from to l

Commission File Number: 001-31410

~~COTT~~PRIMO WATER CORPORATION

(Exact name of registrant as specified in its charter)



~~CANADA~~

~~98-0154711~~

Canada

98-0154711

(State or Other Jurisdiction of

Incorporation or Organization)

(IRS Employer

Identification No.)

~~1200 BRITANNIA ROAD EAST~~

~~MISSISSAUGA, ONTARIO, CANADA~~

4221 West Boy Scout Boulevard

~~L4W 4T5~~

Suite 400

~~4221 WEST BOY SCOUT BOULEVARD SUITE 400~~

~~TAMPA, FLORIDA, UNITED STATES~~

Tampa,

Florida

33607

United States

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: ~~(905) 795-6500 and~~ (813) 313-1732

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, no par value per share	PRMW	New York Stock Exchange
			Toronto Stock Exchange

Indicate by check mark whether the ~~registrant:~~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 ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ý No ¨

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

Act.

Large ~~accelerated filer~~Accelerated Filer

Accelerated filer

¨☐

Non-accelerated filer

¨☐

Smaller reporting company

¨☐

Emerging growth company

¨☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

~~Securities registered pursuant to Section 12(b) of the Act:~~



~~Title of each class~~	~~Trading Symbol(s)~~	~~Name of each exchange on which registered~~
~~Common Shares, no par value per share~~	~~COT~~ ~~BCB~~	~~New York Stock Exchange~~ ~~Toronto Stock Exchange~~

☒

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 May ~~2, 2019~~4, 2020
Common Shares, no par value per share						~~135,997,194 shares~~159,843,106

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION



Item 1.			Financial Statements (unaudited)

~~Cott~~Primo Water Corporation

Consolidated Statements of Operations

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

Unaudited


	For the Three Months Ended
	March 28, 2020		March 30, 2019
Revenue, net	$	474.2	$	427.7
Cost of sales	200.9		184.6
Gross profit	273.3		243.1
Selling, general and administrative expenses	255.1		235.8
Loss on disposal of property, plant and equipment, net	1.4		1.9
Acquisition and integration expenses	20.8		4.7
Operating (loss) income	(4.0)		0.7
Other expense, net	7.0		5.5
Interest expense, net	19.7		19.3
Loss from continuing operations before income taxes	(30.7)		(24.1)
Income tax benefit	(3.3)		(1.4)
Net loss from continuing operations	$	(27.4)	$	(22.7)
Net income from discontinued operations, net of income taxes	30.9		3.0
Net income (loss)	$	3.5	$	(19.7)
Net income (loss) per common share
Basic:
Continuing operations	$	(0.19)	$	(0.17)
Discontinued operations	$	0.22	$	0.03
Net income (loss)	$	0.02	$	(0.14)
Diluted:
Continuing operations	$	(0.19)	$	(0.17)
Discontinued operations	$	0.22	$	0.03
Net income (loss)	$	0.02	$	(0.14)
Weighted average common shares outstanding (in thousands)
Basic	141,139		135,948
Diluted	141,139		135,948

For the Three Months Ended
March 30, 2019 March 31, 2018
Revenue, net $ 574.1
560.8
Cost of sales 291.2
287.3
Gross profit 282.9
273.5
Selling, general and administrative expenses 272.1
261.1
Loss on disposal of property, plant and equipment, net 1.9
1.3
Acquisition and integration expenses 4.8
5.0
Operating income 4.1
6.1
Other expense (income), net 5.5
(20.2 )
Interest expense, net 19.3
20.8
(Loss) income from continuing operations before income taxes (20.7 ) 5.5
Income tax (benefit) expense (1.0 ) 0.9
Net (loss) income from continuing operations $ (19.7 ) $ 4.6
Net income from discontinued operations, net of income taxes —
357.4
Net (loss) income $ (19.7 ) $ 362.0
Less: Net income attributable to non-controlling interests - discontinued operations —
0.6
Net (loss) income attributable to Cott Corporation $ (19.7 ) $ 361.4
Net (loss) income per common share attributable to Cott Corporation
Basic:
Continuing operations $ (0.14 ) $ 0.03
Discontinued operations $ —
$ 2.55
Net (loss) income $ (0.14 ) $ 2.58
Diluted:
Continuing operations $ (0.14 ) $ 0.03
Discontinued operations $ —
$ 2.51
Net (loss) income $ (0.14 ) $ 2.54
Weighted average common shares outstanding (in thousands)
Basic 135,948
139,953
Diluted 135,948
142,335

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

~~Cott~~

Primo Water Corporation

Condensed Consolidated Statements of Comprehensive ~~(Loss) Income~~Loss

(in millions of U.S. dollars)

Unaudited

For the Three Months Ended
March 30, 2019 March 31, 2018
Net (loss) income $ (19.7 ) $ 362.0
Other comprehensive (loss) income:
Currency translation adjustment 10.6
8.3
Pension benefit plan, net of tax ¹
—
16.9
Loss on derivative instruments, net of tax ²
(5.5 ) (3.8 )
Total other comprehensive income 5.1
21.4
Comprehensive (loss) income $ (14.6 ) $ 383.4
Less: Comprehensive income attributable to non-controlling interests —
0.6
Comprehensive (loss) income attributable to Cott Corporation $ (14.6 ) $ 382.8


	For the Three Months Ended
	March 28, 2020		March 30, 2019
Net income (loss)	$	3.5	$	(19.7)
Other comprehensive (loss) income:
Currency translation adjustment	(18.7)		10.6

Loss on derivative instruments, net of tax ^{1, 2}	(11.2)		(5.5)
Comprehensive loss	$	(26.4)	$	(14.6)

______________________


¹	~~Net of $3.6 million of associated tax impact that resulted in an increase to the gain on sale of discontinued operations for the three months ended March 31, 2018.~~


²	~~Net of the effect of $1.6 million and $0.4 million tax benefit for the three months ended March 30, 2019 and March 31, 2018, respectively.~~

¹ Net of the effect of $3.0 million and $1.6 million tax benefit for the three months ended March 28, 2020 and March 30, 2019, respectively.

² Net of $1.3 million of associated tax impact that resulted in a decrease to the gain on sale of discontinued operations for the three months ended March 28, 2020.

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

~~Cott~~Primo Water Corporation

Consolidated Balance Sheets

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

Unaudited


	March 28, 2020		December 28, 2019
ASSETS
Current assets
Cash and cash equivalents	$	112.2	$	156.9
Accounts receivable, net of allowance of $14.1 ($8.8 as of December 28, 2019)	282.7		216.7
Inventories	75.3		62.9
Prepaid expenses and other current assets	23.9		19.1
Current assets of discontinued operations	—		186.7
Total current assets	494.1		642.3
Property, plant and equipment, net	688.7		558.1
Operating lease right-of-use-assets	181.7		185.7
Goodwill	1,379.8		1,047.5
Intangible assets, net	947.5		597.0

Other long-term assets, net	27.3		20.5
Long-term assets of discontinued operations	—		339.8
Total assets	$	3,719.1	$	3,390.9
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings	$	127.4	$	92.4
Current maturities of long-term debt	9.5		6.9
Accounts payable and accrued liabilities	459.5		370.6
Current operating lease obligations	37.5		36.5
Current liabilities of discontinued operations	—		101.2
Total current liabilities	633.9		607.6
Long-term debt	1,270.9		1,259.1
Operating lease obligations	150.2		155.2
Deferred tax liabilities	124.8		90.6
Other long-term liabilities	58.6		58.7
Long-term liabilities of discontinued operations	—		53.5
Total liabilities	2,238.4		2,224.7
Shareholders' Equity
Common shares, 0 par value - 159,825,718 (December 28, 2019 - 134,803,211) shares issued	1,262.7		892.3
Additional paid-in-capital	71.5		77.4
Retained earnings	244.9		265.0
Accumulated other comprehensive loss	(98.4)		(68.5)
Total shareholders' equity	1,480.7		1,166.2
Total liabilities and shareholders' equity	$	3,719.1	$	3,390.9

March 30, 2019 December 29, 2018
ASSETS
Current assets
Cash and cash equivalents $ 153.9
$ 170.8
Accounts receivable, net of allowance of $7.2 ($9.6 as of December 29, 2018) 289.7
308.3
Inventories 120.1
129.6
Prepaid expenses and other current assets 39.9
27.2
Total current assets 603.6
635.9
Property, plant and equipment, net 625.6
624.7
Operating lease right-of-use assets 210.5
—
Goodwill 1,144.1
1,143.9
Intangible assets, net 716.6
739.2
Deferred tax assets 0.9
0.1
Other long-term assets, net 20.2
31.7
Total assets $ 3,321.5
$ 3,175.5
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings $ 63.1
$ 89.0
Current maturities of long-term debt 3.9
3.0
Accounts payable and accrued liabilities 456.5
469.0
Current operating lease obligations 42.3
—
Total current liabilities 565.8
561.0
Long-term debt 1,250.9
1,250.2
Operating lease obligations 173.9
—
Deferred tax liabilities 125.9
124.3
Other long-term liabilities 54.0
69.6
Total liabilities 2,170.5
2,005.1
Equity
Common shares, no par value - 135,965,923 (December 29, 2018 - 136,195,108) shares issued 899.0
899.4
Additional paid-in-capital 71.3
73.9
Retained earnings 277.3
298.8
Accumulated other comprehensive loss (96.6 ) (101.7 )
Total Cott Corporation equity 1,151.0
1,170.4
Total liabilities and equity $ 3,321.5
$ 3,175.5

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

~~Cott~~Primo Water Corporation

Consolidated Statements of Cash Flows

(in millions of U.S. dollars)

Unaudited


	For the Three Months Ended
	March 28, 2020		March 30, 2019
Cash flows from operating activities of continuing operations:
Net income (loss)	$	3.5	$	(19.7)
Net income from discontinued operations, net of income taxes	30.9		3.0
Net loss from continuing operations	(27.4)		(22.7)
Adjustments to reconcile net loss from continuing operations to cash flows from operating activities:
Depreciation and amortization	45.0		39.7
Amortization of financing fees	0.9		0.8
Share-based compensation expense	2.4		3.3
Benefit for deferred income taxes	(3.5)		(5.2)

Loss on sale of business	—		5.4
Loss on disposal of property, plant and equipment, net	1.4		1.9
Other non-cash items	6.0		0.2
Change in operating assets and liabilities, net of acquisitions:
Accounts receivable	(28.9)		(1.3)
Inventories	(0.6)		(2.8)
Prepaid expenses and other current assets	(1.5)		(1.6)
Other assets	0.7		0.6
Accounts payable and accrued liabilities and other liabilities	10.2		(3.2)
Net cash provided by operating activities from continuing operations	4.7		15.1
Cash flows from investing activities of continuing operations:
Acquisitions, net of cash received	(422.6)		(3.7)
Additions to property, plant and equipment	(34.9)		(22.0)
Additions to intangible assets	(3.0)		(1.9)
Proceeds from sale of property, plant and equipment	0.3		1.1
Proceeds from sale of business, net of cash sold	—		50.5


Net cash (used in) provided by investing activities from continuing operations	(460.2)		24.0

For the Three Months Ended
March 30, 2019 March 31, 2018
Cash flows from operating activities of continuing operations:
Net (loss) income $ (19.7 ) $ 362.0
Net income from discontinued operations, net of income taxes —
357.4
Net (loss) income from continuing operations (19.7 ) 4.6
Adjustments to reconcile net (loss) income from continuing operations to cash flows from operating activities:
Depreciation and amortization 45.2
47.4
Amortization of financing fees 0.8
0.9
Share-based compensation expense 3.5
3.4
Benefit for deferred income taxes (3.2 ) (0.2 )
Gain on extinguishment of debt —
(7.1 )
Loss on sale of business 5.4
—
Loss on disposal of property, plant and equipment, net 1.9
1.3
Other non-cash items 0.4
—
Change in operating assets and liabilities, net of acquisitions:
Accounts receivable 1.6
(12.7 )
Inventories (6.6 ) (9.1 )
Prepaid expenses and other current assets (1.9 ) (4.3 )
Other assets 0.7
1.0
Accounts payable and accrued liabilities and other liabilities (4.5 ) 7.7
Net cash provided by operating activities from continuing operations 23.6
32.9
Cash flows from investing activities of continuing operations:
Acquisitions, net of cash received (21.0 ) (27.8 )
Additions to property, plant and equipment (23.8 ) (29.8 )
Additions to intangible assets (2.3 ) (2.2 )
Proceeds from sale of property, plant and equipment 1.4
1.9
Proceeds from sale of business 50.5
—
Other investing activities 0.1
0.2
Net cash provided by (used in) investing activities from continuing operations 4.9
(57.7 )


Cash flows from financing activities of continuing operations:
Payments of long-term debt	(2.7)		(1.5)

Proceeds from short-term borrowings	135.9		25.0
Payments on short-term borrowings	(109.9)		(52.8)

Issuance of common shares	0.6		0.4
Common shares repurchased and canceled	(31.9)		(11.0)
Financing fees	(2.5)		—
Equity issuance fees	(1.1)		—
Dividends paid to common shareholders	(9.8)		(8.2)
Payment of deferred consideration for acquisitions	(0.2)		—
Other financing activities	8.8		1.4
Net cash used in financing activities from continuing operations	(12.8)		(46.7)
Cash flows from discontinued operations:
Operating activities of discontinued operations	(17.3)		8.5
Investing activities of discontinued operations	394.5		(19.1)
Financing activities of discontinued operations	(0.1)		—
Net cash provided by (used in) discontinued operations	377.1		(10.6)
Effect of exchange rate changes on cash	(2.1)		1.3
Net decrease in cash, cash equivalents and restricted cash	(93.3)		(16.9)
Cash and cash equivalents and restricted cash, beginning of period	205.5		170.8
Cash and cash equivalents and restricted cash, end of period	112.2		153.9
Cash and cash equivalents and restricted cash from discontinued operations, end of period	—		31.0
Cash and cash equivalents and restricted cash from continuing operations, end of period	$	112.2	$	122.9
Supplemental Non-cash Investing and Financing Activities:
Shares issued in connection with business combination	$	377.6	$	—
Accrued deferred financing fees	0.8		—
Dividends payable issued through accounts payable and accrued liabilities	0.2		—
Additions to property, plant and equipment through accounts payable and accrued liabilities and other liabilities	11.5		14.8
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	15.7	$	15.1
Cash paid for income taxes, net	2.4		1.0

Cash flows from financing activities of continuing operations:
Payments of long-term debt (1.5 ) (262.7 )
Borrowings under ABL 25.0
0.6
Payments under ABL (52.8 ) (0.6 )
Premiums and costs paid upon extinguishment of long-term debt —
(12.5 )
Issuance of common shares 0.4
1.8
Common shares repurchased and canceled (11.0 ) (5.6 )
Financing fees —
(1.5 )
Dividends paid to common shareholders (8.2 ) (8.4 )
Other financing activities 1.4
(1.3 )
Net cash used in financing activities from continuing operations (46.7 ) (290.2 )
Cash flows from discontinued operations:
Operating activities of discontinued operations —
(84.7 )
Investing activities of discontinued operations —
1,228.6
Financing activities of discontinued operations —
(769.7 )
Net cash provided by discontinued operations —
374.2
Effect of exchange rate changes on cash 1.3
(4.8 )
Net (decrease) increase in cash, cash equivalents and restricted cash (16.9 ) 54.4
Cash and cash equivalents and restricted cash, beginning of period 170.8
157.9
Cash and cash equivalents and restricted cash from continuing operations, end of period $ 153.9
$ 212.3
Supplemental Non-cash Investing and Financing Activities:
Dividends payable $ —
$ 0.1
Additions to property, plant and equipment through accounts payable and accrued liabilities and other liabilities $ 14.8
$ 9.9
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest $ 15.1
$ 10.7
Cash paid for income taxes, net $ 1.0
$ 1.4

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

~~Cott~~

Primo Water Corporation

Consolidated Statements of Equity

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

Unaudited


																						Number of Common Shares (In thousands)	Common Shares		Additional Paid-in-Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
Balance at December 29, 2018																					Balance at December 29, 2018	136,195	$	899.4	$	73.9	$	298.8	$	(101.7)	$	1,170.4
Cumulative effect of changes in accounting principle, net of taxes																					Cumulative effect of changes in accounting principle, net of taxes	—	—		—		10.5		—		10.5
Net loss																					Net loss	—	—		—		(19.7)		—		(19.7)
Other comprehensive income, net of tax																					Other comprehensive income, net of tax	—	—		—		—		5.1		5.1
Common shares dividends ($0.06 per common share)																					Common shares dividends ($0.06 per common share)	—	—		—		(8.2)		—		(8.2)
Share-based compensation																					Share-based compensation	—	—		3.5		—		—		3.5
Common shares repurchased and canceled																					Common shares repurchased and canceled	(770)	(6.9)		—		(4.1)		—		(11.0)
Common shares issued - Equity Incentive Plan																					Common shares issued - Equity Incentive Plan	519	6.1		(6.1)		—		—		—

Common shares issued - Employee Stock Purchase Plan																					Common shares issued - Employee Stock Purchase Plan	22	0.4		—		—		—		0.4
Balance at March 30, 2019																					Balance at March 30, 2019	135,966	$	899.0	$	71.3	$	277.3	$	(96.6)	$	1,151.0
	Cott Corporation Equity
	Number of Common Shares (In thousands)		Common Shares			Additional Paid-in- Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Non- Controlling Interests			Total Equity				Number of Common Shares (In thousands)	Common Shares		Additional Paid-in-Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
Balance at December 30, 2017	139,489		$	917.1		$	69.1		$	(12.2	)	$	(94.4	)	$	6.1		$	885.7
Common shares repurchased and canceled	(355	)	(5.6		)	—			—			—			—			(5.6		)
Common shares issued - Equity Incentive Plan	992		10.3			(8.8		)	—			—			—			1.5
Common shares issued - Dividend Reinvestment Plan	8		0.1			—			—			—			—			0.1
Common shares issued - Employee Stock Purchase Plan	26		0.3			(0.1		)	—			—			—			0.2
Balance at December 28, 2019																					Balance at December 28, 2019	134,803	$	892.3	$	77.4	$	265.0	$	(68.5)	$	1,166.2
Cumulative effect of changes in accounting principle, net of taxes																					Cumulative effect of changes in accounting principle, net of taxes	—	—		—		(4.3)		—		(4.3)
Net income																					Net income	—	—		—		3.5		—		3.5
Other comprehensive loss, net of tax																					Other comprehensive loss, net of tax	—	—		—		—		(29.9)		(29.9)
Common shares dividends ($0.06 per common share)																					Common shares dividends ($0.06 per common share)	—	—		—		(9.6)		—		(9.6)
Share-based compensation	—		—			3.4			—			—			—			3.4			Share-based compensation	—	—		3.1		—		—		3.1
Common shares dividends ($0.06 per common share)	—		—			—			(8.5		)	—			—			(8.5		)
Distributions to non-controlling interests	—		—			—			—			—			(0.9		)	(0.9		)
Sale of subsidiary shares of non-controlling interest	—		—			—			—			—			(5.8		)	(5.8		)
Comprehensive income (loss)
Currency translation adjustment	—		—			—			—			8.3			—			8.3
Pension benefit plan, net of tax	—		—			—			—			16.9			—			16.9
Loss on derivative instruments, net of tax	—		—			—			—			(3.8		)	—			(3.8		)
Net income	—		—			—			361.4			—			0.6			362.0
Balance at March 31, 2018	140,160		$	922.2		$	63.6		$	340.7		$	(73.0	)	$	—		$	1,253.5

Balance at December 29, 2018	136,195		$	899.4		$	73.9		$	298.8		$	(101.7	)	$	—		$	1,170.4
Cumulative effect adjustment	—		—			—			10.5			—			—			10.5
Common shares issued in connection of business combination and assumed awards, net of equity issuance costs of $1.1 million																					Common shares issued in connection of business combination and assumed awards, net of equity issuance costs of $1.1 million	26,497	376.5		2.9		—		—		379.4
Common shares repurchased and canceled	(770	)	(6.9		)	—			(4.1		)	—			—			(11.0		)	Common shares repurchased and canceled	(2,776)	(22.2)		—		(9.7)		—		(31.9)
Common shares issued - Equity Incentive Plan	519		6.1			(6.1		)	—			—			—			—			Common shares issued - Equity Incentive Plan	1,277	15.7		(11.8)		—		—		3.9
Common shares issued - Employee Stock Purchase Plan	22		0.4			—			—			—			—			0.4			Common shares issued - Employee Stock Purchase Plan	25	0.4		(0.1)		—		—		0.3
Share-based compensation	—		—			3.5			—			—			—			3.5
Common shares dividends ($0.06 per common share)	—		—			—			(8.2		)	—			—			(8.2		)
Comprehensive income (loss)
Currency translation adjustment	—		—			—			—			10.6			—			10.6
Pension benefit plan, net of tax	—		—			—			—			—			—			—
Loss on derivative instruments, net of tax	—		—			—			—			(5.5		)	—			(5.5		)
Net loss	—		—			—			(19.7		)	—			—			(19.7		)
Balance at March 30, 2019	135,966		$	899.0		$	71.3		$	277.3		$	(96.6	)	$	—		$	1,151.0

Balance at March 28, 2020																					Balance at March 28, 2020	159,826	$	1,262.7	$	71.5	$	244.9	$	(98.4)	$	1,480.7

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

~~Cott~~Primo Water Corporation

Notes to the Consolidated Financial Statements

Unaudited

Note 1—Business and Recent Accounting Pronouncements

Description of Business

On March 2, 2020, Cott Corporation completed the acquisition of Primo Water Corporation (“Legacy Primo” and such transaction, the “Legacy Primo Acquisition”). In connection with the closing of the Legacy Primo Acquisition, Cott Corporation changed its corporate name to Primo Water Corporation and its ticker symbol on the New York Stock Exchange and Toronto Stock Exchange to “PRMW”. The Legacy Primo Acquisition is consistent with our strategy of transitioning to a pure-play water solutions provider.

As used herein, ~~“Cott,~~“Primo,” “the Company,” “our Company,” ~~“Cott~~“Primo Water Corporation,” “we,” “us,” or “our” refers to ~~Cott~~Primo Water Corporation, together with its consolidated subsidiaries. ~~Cott~~Primo is a leading pure-play water ~~coffee, tea, extracts and filtration service company with a leading volume-based national presence~~solutions provider in the North American and European home and office delivery industry for bottled water, and a leader in custom coffee roasting, iced tea blending, and extract solutions for the U.S. foodservice industry. Our platform reaches over 2.5 million customers or delivery points across North America, ~~and~~ Europe and Israel. Primo operates largely under a recurring razor/razorblade revenue model. The razor in Primo’s revenue model is ~~supported by strategically located sales~~its industry leading line-up of sleek and ~~distribution facilities~~innovative water dispensers, which are sold through major retailers and ~~fleets,~~online at various price points or leased to customers. The dispensers help increase household penetration which drives recurring purchases of Primo’s razorblade offering. Primo’s razorblade offering is comprised of Water Direct, Water Exchange, and Water Refill. Through its market leading Water Direct business, Primo delivers sustainable hydration solutions across its 21-country footprint direct to the customer’s door, whether at home or to commercial businesses. Through its market leading Water Exchange and Water Refill businesses, Primo offers pre-filled and reusable containers at over 13,000 locations and water refill units at approximately 22,000 locations, respectively. Primo also offers water filtration units across its 21-country footprint representing a top five position.

Primo’s water solutions expand consumer access to purified, spring and mineral water to promote a healthier, more sustainable lifestyle while simultaneously reducing plastic waste and pollution. Primo is committed to its water stewardship standards and is proud to partner with the International Bottled Water Association in North America as well as ~~wholesalers~~with Watercoolers Europe, which ensure strict adherence to safety, quality, sanitation and ~~distributors. This enables us to efficiently service residences, businesses, restaurant chains, hotels and motels, small and large retailers, and healthcare facilities.~~

On February 8, 2019, we sold all of the outstanding equity of Cott Beverages LLC, which operated our soft drink concentrate production business and our Royal Crown International (“RCI”) division, to Refresco Group B.V., a Dutch beverage manufacturer (“Refresco”). The aggregate deal consideration paid at closing was $50.0 million, subject to post-closing adjustments for working capital, indebtedness and other customary items. The sale of Cott Beverages LLC resulted in a loss of approximately $5.4 million that was recorded to other expense (income), net in the Consolidated Statement of Operationsregulatory standards for the ~~three months ended March 30, 2019. The Company used the proceeds~~benefit of ~~this transaction to repay a portion of the outstanding borrowings under our asset-based lending credit facility (the “ABL facility”).~~consumer protection.

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. In the opinion of management, all adjustments (consisting of normal recurring adjustments) 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. The Consolidated Balance Sheet as of December ~~29, 2018~~28, 2019 included herein was derived from the audited ~~consolidated financial statements~~Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December ~~29, 2018~~28, 2019 (our ~~“2018~~“2019 Annual Report”). This Quarterly Report on Form 10-Q should be read in conjunction with the annual audited Consolidated Financial Statements and accompanying notes in our ~~2018~~2019 Annual Report. 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 GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes.

Changes in Presentation

~~Certain prior period amounts have been reclassified to conform to~~ On February 28, 2020, we completed the ~~current period presentation in the accompanying Consolidated Statements~~sale of ~~Cash Flows. These reclassifications had no effect on net cash provided by operating activities.~~

~~During the first quarter of 2019, we reviewed~~our coffee, tea and ~~realigned our reporting segments to reflect how the~~extract solutions business, will be managed and results will be reviewed by the Chief Executive Officer, who is the Company’s chief operating decision maker. Following such review, we realigned our three reporting segments as follows: Route Based Services (which includes our DS Services of America, Inc. (“DSS”), Aquaterra Corporation (“Aquaterra”), Mountain Valley Spring Company (“Mountain Valley”), Eden Springs Europe B.V. (“Eden”) and Aimia Foods (“Aimia”) businesses), Coffee, Tea & Extract Solutions (which includes our S. & D. Coffee, Inc. (“S&D”) ~~business)~~for $405.0 million in cash, subject to customary post-closing adjustments. As a result of this transaction representing a strategic shift in our operations, the Company has reclassified the financial results of our discontinued operations to net income from discontinued operations, net of income taxes in the Consolidated Statement of Operations for the three months ended March 30, 2019. The assets and ~~All Other (which includes our Cott Beverages LLC business and other miscellaneous expenses). Our segment reporting results~~liabilities associated with S&D have been ~~recast~~reflected as current and long-term assets and liabilities of discontinued operations in the Consolidated Balance Sheet as of December 28, 2019. Cash flows from our discontinued operations are presented in the Consolidated Statement of Cash Flows for the three months ended March 30, 2019. The Notes to Consolidated Financial Statements are presented on a continuing operations basis unless otherwise noted. See Note 2 to the Consolidated Financial Statements for additional information on discontinued operations.

On March 2, 2020, we completed the Legacy Primo Acquisition. This business was added to our existing Route Based Services reporting segment, which was renamed “Water Solutions” to reflect ~~these changes~~our strategy of transitioning to a pure-play water solutions provider. Other than the change in name, there was no impact on prior period results for ~~all periods presented.~~this reporting segment.

Significant Accounting Policies

Included in Note 1 of our ~~2018~~2019 Annual Report is a summary of the Company’s significant accounting policies. Provided below is a summary of additional accounting policies that are significant to the financial results of the Company.

Cost of sales

We record costs associated with the manufacturing of our products in cost of sales. Shipping and handling costs incurred to store, prepare and move products between production facilities or from production facilities to branch locations or storage facilities are recorded in cost of sales. Shipping and handling costs incurred to deliver products from our ~~Route Based Services and Coffee, Tea and Extract~~Water Solutions reporting segment branch locations to the end-user consumer of those products are recorded in selling, general and administrative (“SG&A”) expenses. All other costs incurred in the shipment of products from our production facilities to customer locations are reflected in cost of sales. Shipping and handling costs included in SG&A expenses were ~~$118.5~~$120.0 million and ~~$113.8~~$115.0 million for the three months ended March ~~30, 2019~~28, 2020 and March ~~31, 2018,~~30, 2019, respectively. Finished goods inventory costs include the cost of direct labor and materials and the applicable share of overhead expense chargeable to production.

~~Leases~~Allowance for Credit Losses

We ~~have operating~~estimate an allowance for credit losses based on historical loss experience, adverse situations that may affect a customer's ability to pay, current conditions, reasonable and ~~finance leases for manufacturing~~supportable forecasts and ~~production facilities, branch distribution~~current economic outlook. Customer demographic, such as large commercial customers as compared to small businesses or individual customers, and ~~warehouse facilities, vehicles and machinery and equipment. At inception, we determine whether an agreement represents~~the customer’s geographic market are also considered when estimating credit losses. Historical loss experience was based on actual loss rates over a ~~lease and, at commencement,~~one year period. Additionally, we evaluate ~~each lease agreement~~current conditions and review third-party economic forecasts on a quarterly basis to determine ~~whether~~ the lease constitutes an operating or financing lease. Some of our lease agreements have renewal options, tenant improvement allowances, rent holidays and rent escalation clauses. As described below under “Recently adopted accounting pronouncements,” we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-02 - Leases as of December 30, 2018.

With the adoption of ASU 2016-02, we recorded operating lease right-of-use assets and operating lease obligations on our balance sheet. Right-of-use lease assets represent our right to use the underlying asset for the lease term, and the operating lease obligation represents our commitment to make the lease payments arising from the lease. We have elected not to recognize on the balance sheet leases with terms of one-year or less. Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, we utilize the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received. The lease term may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms.

~~Recently adopted accounting pronouncements~~

~~Update ASU 2016-02 – Leases (Topic 842), amended by Update ASU 2018-11 – Leases—Targeted Improvements (Topic 842) and Update ASU 2019-01 – Leases—Codification Improvements (Topic 842)~~

In February 2016, the FASB issued an update to its guidance on lease accounting for lessees and lessors. This update revises accounting for operating leases by a lessee, among other changes, and requires a lessee to recognize a liability to make lease payments and an asset representing its right to use the underlying asset for the lease term in the balance sheet. The distinction between finance and operating leases has not changed, and the update does not significantly change the effect of finance and operating leases on the Consolidated Statements of Operations and the Consolidated Statements of Cash Flows. Additionally, this update requires both qualitative and specific quantitative disclosures. For public entities, the amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The update requires adoption using a modified retrospective transition approach, with certain practical expedients available, with either 1) periods prior to the adoption date being recast or 2) a cumulative-effect adjustment recognized to the opening balance of retained earnings on the adoption date with prior periods not recast.

The amended guidance also provides lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component, but instead, to account for those components as a single component if the non-lease components otherwise would be accounted for under ASC Topic 606 and both of the following are met: 1) the timing and pattern of transfer of the non-lease component or components and associated lease component are the same; and 2) the lease component, if accounted for separately, would be classified as an operating lease. If the non-lease component or components associated with the lease component are the predominant component of the combined component, an entity is required to account for the combined component in accordance with ASC Topic 606. Otherwise, the entity must account for the combined component as an operating lease in accordance with ASC Topic 842.

Effective December 30, 2018, we adopted the guidance in this amendment using the cumulative-effect adjustment method and elected the package of practical expedients permitted in ASC Topic 842. Accordingly, we accounted for our existing leases as operating or finance leases under the new guidance, without reassessing (a) whether the contracts contain a lease under ASC Topic 842, (b) whether classification of the leases would be different in accordance with ASC Topic 842, or (c) whether the unamortized initial direct costs before transition adjustments (as of December 29, 2018) would have met the definition of initial direct costs in ASC Topic 842 at lease commencement. We also elected to not separate lease components from non-lease components for all fixed payments.

Adoption of the new standard resulted in total operating lease obligations of $234.3 million and operating lease right-of-use assets of $228.0 million as of December 30, 2018. The difference between the initial operating lease obligation and the right-of-use assets is related to previously existing lease liabilities. In addition, the cumulative-effect adjustment recognized to the opening balance of retained earnings was $10.5 million related to unamortized deferred gains associated with sale-leaseback transactions that were previously being amortized over the leaseback term and deferred tax assets associated with these deferred gains. This standard did not have a material impact on the ~~Company’s cash flows~~allowance for credit losses. The assumptions used in determining an estimate of credit losses are inherently subjective and actual results may differ significantly from operations and had no impact on the Company’s operating results. The most significant impact was the recognition of the right-of-use assets and right-of-use liabilities for operating leases. See Note 2 to the Consolidated Financial Statements for additional information on leases.estimated reserves.

The standard also requires lessors to classify leases as sales-type, direct financing or operating leases, similar to existing guidance. We concluded that all of our lessor lease arrangements will continue to be classified as operating leases under the new standard.

~~Update ASU 2017-08 – Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20)~~

In March 2017, the FASB amended its guidance on accounting for debt securities. The amendments shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. We adopted the guidance in this amendment effective December 30, 2018. Adoption of the new standard did not have a material impact on our Consolidated Financial Statements.

~~Update ASU 2018-02 – Income Statement—Reporting Comprehensive Income (Topic 220)~~

In February 2018, the FASB amended its guidance that allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the comprehensive tax legislation enacted by the U.S. government on December 22, 2017 commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) and requires certain disclosures about stranded tax effects. For public entities, the amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted, and may be applied in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate tax rate in the Tax Act is recognized. We adopted the guidance in this amendment effective December 30, 2018. Adoption of the new standard did not have a material impact on our Consolidated Financial Statements.

~~Update ASU 2018-07 – Compensation—Improvements to Nonemployee Share-Based Payment Accounting (Topic 718)~~

In June 2018, the FASB amended its guidance to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amended guidance also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC Topic 606. We adopted the guidance in this amendment effective December 30, 2018. Adoption of the new standard did not have a material impact on our Consolidated Financial Statements.

Recently ~~issued~~adopted accounting pronouncements

Update ASU 2016-13 – Financial Instruments—Credit Losses (Topic 326), Update ASU 2019-05 – Financial Instruments—Credit Losses—Targeted Transition Relief (Topic 326) and Update ASU 2019-11 – Codification Improvements to Financial Instruments—Credit Losses (Topic 326)

In June 2016, the ~~FASB~~Financial Accounting Standards Board (“FASB”) amended its guidance to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Entities will now use forward-looking information to better form their credit loss estimates. The amended guidance also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. ~~The~~In May 2019, the FASB amended the original guidance by providing an option to irrevocably elect the fair value option for certain financial instruments previously measured at amortized cost basis. In November 2019, the FASB provided additional guidance around how to report expected recoveries. For public entities, the amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal ~~years. Early~~years, with early adoption ~~will be permitted for fiscal years beginning after~~permitted.

Effective December ~~15, 2018, including interim periods within those fiscal years. This~~29, 2019, we adopted the guidance ~~will be applied~~in this amendment using ~~a prospective or~~the modified retrospective transition ~~method, depending on~~method. The adoption of this new standard, with the ~~area covered~~impact being the increase in ~~this update. We are currently assessing~~allowance for doubtful accounts related to our trade accounts receivable, resulted in a cumulative-effect adjustment of $4.3 million recognized to the opening balance of retained earnings. The Company will continue to actively monitor the impact of ~~adoption of this standard~~the recent coronavirus (“COVID-19”) pandemic on ~~our Consolidated Financial Statements.~~

expected credit losses.

Update ASU 2018-13 – Fair Value Measurement (Topic 820)

In August 2018, the FASB amended its guidance on disclosure requirements for fair value measurement. The update amends existing fair value measurement disclosure requirements by adding, changing, or removing certain disclosures. The amendments in this update are effective for fiscal years ~~and~~beginning after December 15, 2019, including interim periods within those fiscal years, ~~beginning after December 15, 2019. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. Early~~with early adoption is permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this update while delaying adoption of the additional disclosures until their effective date. We ~~are currently assessing~~adopted the ~~impact~~guidance in this amendment effective December 29, 2019 prospectively. Adoption of ~~adoption of this~~the new standard did not have a material impact on our Consolidated Financial Statements.

Update ASU 2018-15 – Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)

In August 2018, the FASB amended its guidance on a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. This update aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This update also requires customers to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The amendments in this update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. We adopted the guidance in this amendment effective December 29, 2019. Adoption of the new standard did not have a material impact on our Consolidated Financial Statements.

Update ASU 2019-04 – Codification Improvements to Topic 326—Financial Instruments—Credit Losses, Topic 815—Derivative and Hedging, and Topic 825—Financial Instruments

In April 2019, the FASB amended its guidance to clarify and provide narrow-scope amendments for these three recent standards related to financial instruments accounting. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We adopted the guidance in this amendment effective December 29, 2019. Adoption of the new standard did not have a material impact on our Consolidated Financial Statements.

Update ASU 2019-12 – Income Taxes—Simplifying the Accounting for Income Taxes (Topic 740)

In December 2019, the FASB amended its guidance to remove certain exceptions to the general principles in Topic 740 and improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this update are effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We adopted the guidance in this amendment effective December 29, 2019. Adoption of the new standard did not have a material impact on our Consolidated Financial Statements.

Update ASU 2020-03 – Codification Improvements to Financial Instruments

In March 2020, the FASB amended its guidance to clarify or improve the financial instrument topics in the existing guidance. These amendments make the guidance easier to understand and apply by eliminating inconsistencies and providing clarifications. Certain amendments in this update are effective upon issuance of this update. The remaining amendments in this update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. We adopted the guidance in this amendment effective December 29, 2019. Adoption of the new standard did not have a material impact on our Consolidated Financial Statements.

Recently issued accounting pronouncements

Update ASU 2018-14 – Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20)

In August 2018, the FASB amended its guidance on disclosure requirements for defined benefit plans. The update amends existing annual disclosure requirements applicable to all employers that sponsor defined benefit pension and other postretirement plans by adding, removing, and clarifying certain disclosures. The amendments in this update are effective for fiscal years beginning after December 15, 2020, with early adoption permitted, and are to be applied on a retrospective basis to all periods presented. We are currently assessing the impact of adoption of this standard on our Consolidated Financial Statements.

Update ASU ~~2018-15~~2020-04 – ~~Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)~~Reference Rate Reform (Topic 848)

In ~~August 2018,~~March 2020, the FASB ~~amended its~~issued guidance ~~related~~which provides optional expedients and exceptions to ~~a customer’s accounting~~account for ~~implementation costs incurred in a cloud computing arrangement~~contracts, hedging relationships and other transactions that reference LIBOR or any other reference rates expected to be discontinued because of reference rate reform. This guidance is ~~a service contract. This update aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service~~effective as of March 12, 2020 through December 31, 2022 and may be applied prospectively to contract ~~with the requirements for capitalizing implementation costs incurred to develop~~modifications made and hedging relationships entered into or ~~obtain internal-use software. This update also requires customers to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term~~evaluated on or before December 31, 2022. The Company has not adopted any of the hosting arrangement. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted, including adoption in any interim period. The amendments in this update should be applied either retrospectivelyoptional expedients or ~~prospectively~~exceptions through March 28, 2020, but will continue to ~~all implementation costs incurred after~~evaluate the ~~date of adoption. We are currently assessing the impact of~~possible adoption of ~~this standard on our~~any such expedients or exceptions during the effective period as circumstances evolve.

Note 2—Discontinued Operations

On February 28, 2020, the Company completed the sale of S&D to Westrock Coffee Company, LLC, a Delaware limited liability company (“Westrock”), pursuant to which Westrock acquired all of the issued and outstanding equity of S&D from the Company (“S&D Divestiture”). The aggregate deal consideration was $405.0 million, paid at closing in cash, subject to adjustment for indebtedness, working capital and other customary post-closing adjustments.

The Company used the proceeds of the S&D Divestiture to finance a portion of the Legacy Primo Acquisition. See Note 5 to the Consolidated Financial ~~Statements.~~Statements for additional information on the Legacy Primo Acquisition.

The major components of net income from discontinued operations, net of income taxes in the accompanying Consolidated Statements of Operations include the following:


	For the Three Months Ended
(in millions of U.S. dollars)	March 28, 2020		March 30, 2019
Revenue, net ¹	$	97.1	$	148.0
Cost of sales	71.1		108.2
Operating (loss) income from discontinued operations	(0.5)		3.4
Gain on sale of discontinued operations	60.5		—
Net income from discontinued operations, before income taxes	59.8		3.4
Income tax expense ²	28.9		0.4
Net income from discontinued operations, net of income taxes	$	30.9	$	3.0

______________________

¹ Includes $1.0 million and $1.6 million of related party sales to continuing operations for the three months ended March 28, 2020 and March 30, 2019, respectively.

² The S&D Divestiture resulted in tax expense on the gain on sale of $28.5 million and will utilize a significant portion of the existing U.S. net operating loss carry forwards.

Note 2—3—Leases

We have operating and finance leases for manufacturing and production facilities, branch distribution and warehouse facilities, vehicles and machinery and equipment. The remaining ~~term~~terms on our finance leases range from 1 year to 8 years while our operating leases range from 1 year to 22 years, some of which may include options to extend the leases ~~primarily for~~generally between 1 toyear and 10 years, and some of which may include options to terminate the leases within 1 year.

The components of lease expense for the three months ended March 28, 2020 and March 30, 2019, ~~were as follows:~~respectively, is shown in the table below:


	For the Three Months Ended
(in millions of U.S. dollars)	March 28, 2020		March 30, 2019
Operating lease cost	$	12.5	$	11.6
Short-term lease cost	2.3		0.9
Finance lease cost
Amortization of right-of-use assets	$	1.7	$	0.7
Interest on lease liabilities	1.0		0.2
Total finance lease cost	$	2.7	$	0.9
Sublease income	$	0.2	$	0.3

(in millions of U.S. dollars)
Operating lease cost $ 13.3
Short-term lease cost 1.3
Finance lease cost
Amortization of right-of-use assets $ 0.7
Interest on lease liabilities 0.2
Total finance lease cost $ 0.9
Sublease income $ 0.3

Supplemental cash flow information related to leases for the three months ended March 28, 2020 and March 30, 2019, ~~was as follows:~~respectively, is shown in the table below:


				For the Three Months Ended
(in millions of U.S. dollars)			(in millions of U.S. dollars)	March 28, 2020		March 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:			Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	14.5	Operating cash flows from operating leases	$	12.6	$	12.9
Operating cash flows from finance leases	0.1		Operating cash flows from finance leases	0.9		0.1
Financing cash flows from finance leases	0.8		Financing cash flows from finance leases	1.4		0.7
Right-of-use assets obtained in exchange for lease obligations:			Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	1.5	Operating leases	$	7.3	$	1.3
Finance leases	9.2		Finance leases	21.7		9.2

Supplemental balance sheet information related to leases ~~was~~ as ~~follows:~~of March 28, 2020 and December 28, 2019, respectively, is shown in the table below:


(in millions of U.S. dollars, except lease term and discount rate)	March 28, 2020		December 28, 2019
Operating leases
Operating lease right-of-use assets	$	181.7	$	185.7
Current operating lease obligations	37.5		36.5
Operating lease obligations	150.2		155.2
Total operating lease obligations	$	187.7	$	191.7

Financing leases
Property, plant and equipment, net	$	50.1	$	30.4
Current maturities of long-term debt	9.0		5.7
Long-term debt	40.5		23.7
Total finance lease obligations	$	49.5	$	29.4


Weighted Average Remaining Lease Term	March 28, 2020		December 28, 2019
Operating leases	8.5		8.7
Finance leases	5.8		5.6

Weighted Average Discount Rate
Operating leases	6.7	%	6.2	%
Finance leases	5.6	%	6.3	%

(in millions of U.S. dollars, except lease term and discount rate) March 30, 2019
Operating leases
Operating lease right-of-use assets $ 210.5
Current operating lease obligations 42.3
Operating lease obligations 173.9
Total operating lease obligations $ 216.2

Finance leases
Property, plant and equipment, net $ 13.3
Current maturities of long-term debt 2.9
Long-term debt 10.7
Total finance lease obligations $ 13.6

Weighted Average Remaining Lease Term
Operating leases 8.4 years
Finance leases 5.6 years



~~Weighted Average Discount Rate~~
~~Operating leases~~	~~6.2~~	%
~~Finance leases~~	~~6.3~~	%

Maturities of operating lease obligations ~~as of March 30, 2019~~ were as follows:


(in millions of U.S. dollars)	March 28, 2020		December 28, 2019
Remainder of 2020	$	37.7	$	47.8
2021	39.5		38.4
2022	30.6		29.6
2023	26.2		25.3
2024	21.1		20.6
Thereafter	93.9		93.5
Total lease payments	249.0		255.2
Less imputed interest	(61.3)		(63.5)
Present value of lease obligations	$	187.7	$	191.7

(in millions of U.S. dollars) Operating Leases Finance Leases
2019 $ 39.2
$ 2.9
2020 48.6
3.3
2021 37.8
2.6
2022 29.1
2.2
2023 24.6
2.1
Thereafter 109.7
3.4
Total lease payments 289.0
16.5
Less imputed interest (72.8 ) (2.9 )
Present value of lease obligations $ 216.2
$ 13.6

~~Leases (Topic 840) Disclosures~~

~~On December 30, 2018, we adopted the new~~Maturities of finance lease standard using a modified-retrospective approach by recognizing and measuring leases at the adoption date with accumulative effect of initially applying the guidance recognized at the date of initial application and did not restate the prior periods presented in our Consolidated Financial Statements. As such, prior periods presented in our Consolidated Financial Statements continue to be in accordance with the former lease standard, Topic 840 Leases. See Note 1 to the Consolidated Financial Statements for additional information on our recently adopted accounting pronouncement.

~~Operating Leases~~

Under the previous lease standard, we leased buildings, machinery and equipment, computer hardware and furniture and fixtures. All contractual increases and rent-free periods included in the lease contract were taken into account when calculating the minimum lease payment and were recognized on a straight-line basis over the lease term. Certain leases had renewal periods and contingent rentals, which were not included in the table below. As of December 29, 2018, the minimum annual payments under operating leasesobligations were as follows:


(in millions of U.S. dollars)	Operating Leases		(in millions of U.S. dollars)	March 28, 2020		December 28, 2019
2019	$	51.6
2020	42.9
Remainder of 2020			Remainder of 2020	$	9.5	$	6.8
2021	36.2		2021	10.8		6.1
2022	29.2		2022	9.8		5.7
2023	23.4		2023	8.9		5.4
2024			2024	7.3		4.6
Thereafter	106.9		Thereafter	11.5		6.4
Total lease payments			Total lease payments	57.8		35.0
Less imputed interest			Less imputed interest	(8.3)		(5.6)
Present value of lease obligations			Present value of lease obligations	$	49.5	$	29.4

~~Total rent expense under operating leases was $14.6 million for the three months ended March 31, 2018 which is net of sublease income of $0.2 million.~~

~~Capital Leases~~

As of December 29, 2018 we had capital lease assets and accumulated depreciation of $6.7 million and $1.0 million, respectively, which were included in property, plant and equipment, net on the Consolidated Balance Sheet.

~~In addition, as of December 29, 2018, the future minimum payments required under capital leases over their remaining terms are summarized below:~~

(in millions of U.S. dollars) Capital Leases
2019 $ 1.9
2020 1.4
2021 0.7
2022 0.5
2023 0.4
Thereafter 0.1

Note 3—4—Revenue

~~We are a water, coffee, tea, extracts and filtration service company.~~ Our principal ~~source~~sources of revenue isare from bottled water delivery direct to ~~residential and business customers~~consumers primarily in North America and Europe and ~~the manufacture~~from providing multi-gallon purified bottled water, self-service refill drinking water and ~~distribution of coffee, tea and extracts to institutional and commercial customers~~water dispensers through major retailers in ~~the United States.~~North America. Revenue is recognized, net of sales returns, when a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services. We measure revenue based on the consideration specified in the client arrangement, and revenue is recognized when the performance obligations in the client arrangement are satisfied. A performance obligation is a contractual promise to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when the customer receives the benefit of the performance obligation. Clients typically receive the benefit of our services as they are performed. Substantially all our client contracts require that we be compensated for services performed to date. This may be upon shipment of goods or upon delivery to the customer, depending on contractual terms. Shipping and handling costs paid by the customer to us are included in revenue and costs incurred by us for shipping and handling activities that are performed after a customer obtains control of the product are accounted for as fulfillment costs. In addition, we exclude from net revenue and cost of sales taxes assessed by governmental authorities on revenue-producing transactions. Although we occasionally accept returns of products from our customers, historically returns have not been material.

Contract Estimates

The nature of certain of our contracts give rise to variable consideration including cash discounts, volume-based rebates, point of sale promotions, and other promotional discounts to certain customers. For all promotional programs and discounts, we estimate the rebate or discount that will be granted to the customer and ~~records~~record an accrual upon invoicing. These estimated rebates or discounts are included in the transaction price of our contracts with customers as a reduction to net revenues and are included as accrued sales incentives in accounts payable and accrued liabilities in the Consolidated Balance Sheets. Accrued sales incentives were ~~$10.0~~$6.2 million and ~~$10.5~~$7.0 million at March ~~30,~~28, 2020 and December 28, 2019, ~~and~~ ~~December 29, 2018~~, respectively.

We do not disclose the value of unsatisfied performance obligations for contracts (i) with an original expected length of one year or less or (ii) for which we recognize revenue at the amount in which it has the right to invoice as the product is delivered.

Contract Balances

Contract liabilities relate primarily to advances received from our customers before revenue is recognized. These amounts are recorded as deferred revenue and are included in accounts payable and accrued liabilities in the Consolidated Balance Sheets. The advances are expected to be earned as revenue within one year of receipt. Deferred revenues at March ~~30,~~28, 2020 and December 28, 2019 were $21.8 million and ~~December 29, 2018~~ ~~were~~ ~~$20.7 million~~ ~~and $22.0~~$23.6 million, respectively. The amount of revenue recognized in the three months ended March ~~30, 2019~~28, 2020 that was included in the December ~~29, 2018~~28, 2019 deferred revenue balance was ~~$11.2~~$11.1 million.

We do not have any material contract assets as of March ~~30, 2019.~~

28, 2020.

Disaggregated Revenue

In general, our business segmentation is aligned according to the nature and economic characteristics of our products and customer relationships and provides meaningful disaggregation of each business segment’s results of operations.

Further disaggregation of net revenue to external customers by geographic area based on customer location is as follows:


	For the Three Months Ended
(in millions of U.S. dollars)	March 28, 2020		March 30, 2019
United States	$	334.6	$	289.6
United Kingdom	42.5		46.1
Canada	16.1		15.8
All other countries	81.0		76.2
Total	$	474.2	$	427.7

For the Three Months Ended
(in millions of U.S. dollars) March 30, 2019 March 31, 2018
United States $ 436.0
$ 418.6
United Kingdom 46.1
43.6
Canada 15.8
15.2
All other countries 76.2
83.4
Total $ 574.1
$ 560.8

Note 4—5—Acquisitions

~~Mountain Valley~~Legacy Primo Acquisition

~~In October 2018, DSS acquired Mountain Valley, a growing American brand~~On March 2, 2020, the Company completed the Legacy Primo Acquisition, adding North America’s leading single source provider of ~~spring and sparkling~~multi-gallon purified bottled water, ~~delivered~~self-service refill drinking water and water dispensers sold through major retailers to ~~homes~~the Company’s catalog of home and ~~offices throughout~~office bottled water delivery businesses in North America and Europe. Primo is a familiar name in sustainable water solutions that will help drive the ~~United States (the “Mountain Valley Acquisition”).~~visibility of our water businesses, moving us towards a pure-play water solutions company. The ~~initial~~Legacy Primo Acquisition broadens our capabilities and our portfolio, creating new cross-selling opportunities and vertical integration across home and office delivery, retail, filtration, refill and exchange services. Integrating Legacy Primo with our DS Services of America, Inc. business will enable us to combine the expertise and innovation of these two growing companies with complementary business models. The integration gives us the ability to expand Legacy Primo’s products and services across our 21-country footprint.

The Legacy Primo Acquisition was structured as an exchange offer to purchase ~~price paid by DSS~~all of the outstanding shares of common stock of Legacy Primo, in exchange, per Legacy Primo share for (i) $14.00 in cash, (ii) 1.0229 Cott Corporation common shares plus cash in lieu of any fractional Cott Corporation common share, or (iii) $5.04 in cash and 0.6549 Cott Corporation common shares, at the election of Legacy Primo’s stockholders, subject to the proration procedures set forth in the ~~Mountain Valley Acquisition was $80.4 million on a debt and cash free basis. The post-closing working capital adjustment was resolved in February 2019 by~~merger agreement. Immediately following the ~~payment~~consummation of ~~$0.4 million made by~~ the ~~former owners of Mountain Valley to DSS. The Mountain Valley Acquisition was funded~~exchange offer, Cott Corporation indirectly acquired the remaining Legacy Primo shares through a ~~combination~~merger between Legacy Primo and a wholly-owned subsidiary of ~~incremental borrowings under the Company’s ABL facility and cash on hand.~~Cott Corporation.

The total cash and stock consideration paid by ~~DSS~~us in the ~~Mountain Valley~~Legacy Primo Acquisition is summarized below:

(in millions of U.S. dollars)
Cash paid to sellers $ 62.5
Cash paid on behalf of sellers for sellers' transaction expenses 1.8
Cash paid to retire outstanding debt on behalf of sellers 16.1
Working capital settlement (0.4 )
Total consideration $ 80.0


(in millions of U.S. dollars, except share and per share amounts)
Fair value of common shares issued to holders of Legacy Primo common stock (26,497,015 shares issued at $14.25 per share)	$	377.6
Cash to holders of Legacy Primo common stock¹	216.1
Cash paid to retire outstanding indebtedness on behalf of Legacy Primo	196.9
Settlement of pre-existing relationship	4.7
Fair value of replacement common share options and restricted stock units for Legacy Primo awards	2.9
Total consideration	$	798.2

~~The Mountain Valley Acquisition supported~~______________________

¹ Cash to holders of Legacy Primo common stock includes $11.5 million of cash consideration that was paid on March 30, 2020 and is accrued in accounts payable and accrued liabilities on the Company’s strategy to expand its existing home and office bottled water category into premium spring, sparkling and flavored water. The Company has accounted for this transaction as a business combination, which requires that assets acquired and liabilities assumed be measured at their acquisition date fair values.

~~The adjusted purchase price of $80.0 million has been allocated to the assets acquired and liabilities assumed based on management’s estimates of their fair values~~Consolidated Balance Sheet as of ~~the acquisition date. The excess of the adjusted purchase price over the aggregate fair values was recorded as goodwill.~~

March 28, 2020.

The table below presents the preliminary purchase price allocation of the estimated acquisition date fair values of the assets acquired and the liabilities assumed:


(in millions of U.S. dollars)	Acquired Value
Cash and cash equivalents	$	1.3
Accounts receivable	21.9
Inventory	12.7
Prepaid expenses and other current assets	4.3
Property, plant and equipment	119.0
Operating lease right-of-use-assets	4.9
Goodwill	337.4
Intangible assets	361.3
Other assets	3.9
Current maturities of long-term debt	(2.2)
Accounts payable and accrued liabilities	(41.6)
Current operating lease obligations	(1.8)
Long-term debt	(5.8)
Operating lease obligations	(3.1)
Deferred tax liabilities	(11.7)
Other long-term liabilities	(2.3)
Total	$	798.2

(in millions of U.S. dollars) Originally Reported Measurement Period Adjustments Acquired Value
Cash and cash equivalents $ 8.2
$ —
$ 8.2
Accounts receivable 4.2
—
4.2
Inventory 2.3
—
2.3
Prepaid expenses and other assets 0.2
—
0.2
Property, plant and equipment 38.5
—
38.5
Goodwill 20.5
(0.4 ) 20.1
Intangible assets 25.8
—
25.8
Accounts payable and accrued liabilities (19.3 ) —
(19.3 )
Total $ 80.4
$ (0.4 ) $ 80.0

The assets and liabilities acquired ~~with~~in the ~~Mountain Valley~~Legacy Primo Acquisition are recorded at their estimated fair values per preliminary valuations and management estimates and are subject to change when formal valuations and other studies are finalized. ~~The~~Estimated fair values ~~of acquired property, plant~~for deferred tax balances are preliminary and ~~equipment, customer relationships, and deferred taxes~~ are ~~provisional pending validation and receipt of~~also subject to change based on the final ~~valuations for those assets. The fair value of the assumed customer bottle deposit liability included in accounts payable and accrued liabilities is provisional pending management review.~~valuation results. In addition, consideration for potential loss contingencies ~~including uncertain tax positions, is~~are still under review.

~~Crystal Rock~~The amount of revenues and net loss related to the Legacy Primo Acquisition included in the Company’s Consolidated Statement of Operations for the period from the Legacy Primo Acquisition date through March 28, 2020 were $32.1 million and $0.6 million, respectively. The Company incurred $18.8 million of acquisition-related costs associated with the Legacy Primo Acquisition, which are included in acquisition and integration expenses in the Consolidated Statement of Operations for the three months ended March 28, 2020.

Intangible Assets

In ~~March 2018,~~our determination of the ~~Company completed~~fair value of intangible assets, we consider, among other factors, the ~~acquisition~~best use of ~~Crystal Rock, a direct-to-consumer home~~acquired assets, analysis of historical financial performance and ~~office water, coffee~~estimates of future performance of the acquired business’ products. The estimated fair values of identified intangible assets are calculated considering both market participant expectations, using an income approach, as well as estimates and ~~filtration~~assumptions provided by Primo management and management of the acquired business. Assumptions include, but are not limited to, expected revenue growth, weighted-average terminal growth rates, risk adjusted discount rate and fair value royalty rate.

The estimated fair value of customer relationships represents future after-tax discounted cash flows that will be derived from sales to existing customers of the acquired business ~~serving customers throughout New York~~as of the date of acquisition.

The estimated fair value of trademarks and ~~New England. The transaction was structured~~trade names represents the future projected cost savings associated with the premium and brand image obtained as a ~~merger following a cash tender offer for all outstanding shares~~result of ~~Crystal Rock, with Crystal Rock becoming a wholly-owned indirect subsidiary~~owning the trademark or trade name as opposed to obtaining the benefit of the ~~Company (the “Crystal Rock Acquisition”).~~ trademark or trade name through a royalty or rental fee.

The ~~aggregate consideration paid~~following table sets forth the components of identified intangible assets associated with the Legacy Primo Acquisition and their estimated weighted average useful lives:


(in millions of U.S. Dollars)	Estimated Fair Market Value	Estimated Useful Life
Customer relationships	220.0	20 years
Trade names	140.0	Indefinite
Software	1.3	3 years
Total	361.3

Goodwill

The principal factor that resulted in recognition of goodwill was ~~$37.7 million and includes~~the basis of the purchase price ~~paid to~~for the ~~Crystal Rock shareholders~~Legacy Primo Acquisition, in part, on cash flow projections assuming the reduction of ~~$20.7 million, $0.8 million in~~administration costs ~~paid~~and the integration of acquired customers and products into our operations, which is of greater value than on ~~behalf~~a standalone basis. The goodwill recognized as part of the ~~sellers for the seller’s transaction costs and $16.2 million of assumed debt and accrued interest obligations of the acquired company that was paid by the Company.~~

~~The total consideration paid by the Company in the Crystal Rock~~Legacy Primo Acquisition ~~is summarized below:~~

(in millions of U.S. dollars)
Cash paid to sellers $ 20.7
Cash paid on behalf of sellers for sellers’ transaction expenses 0.8
Total consideration $ 21.5

The Crystal Rock Acquisition strengthens the Company’s presence in New York and New England. The Company has accounted for this transaction as a business combination, which requires that assets acquired and liabilities assumed be measured at their acquisition date fair values.

~~The purchase price of $21.5 million, net of debt,~~ was allocated to the ~~assets acquired~~Water Solutions reporting segment, a portion of which is expected to be tax deductible.

Supplemental Pro Forma Data (unaudited)

The following unaudited pro forma financial information for the three months ended March 28, 2020 and ~~liabilities assumed based on their estimated fair values as of~~March 30, 2019, respectively, represent the acquisition date. The excess of the purchase price over the aggregate fair values was recorded as goodwill. Measurement period adjustments include adjustments to property, plant and equipment and intangible assets based on review of valuations, adjustments to deferred taxes and other long-term liabilities based on analysis of certain tax positions, as well as adjustments to accounts receivable, inventory, prepaid expenses, other assets and accounts payable and accrued liabilities based on review of their fair values as of the acquisition date. These measurement period adjustments did not have a material effect on ourcombined results of our operations ~~in prior periods.~~as if the Legacy Primo Acquisition had occurred on December 30, 2018.


	For the Three Months Ended
(in millions of U.S. dollars, except per share amounts)	March 28, 2020		March 30, 2019
Revenue	$	514.7	$	486.9
Net loss from continuing operations	$	(13.0)	$	(36.9)
Net income (loss)	$	17.9	$	(33.9)
Net loss per common share from continuing operations, diluted	$	(0.09)	$	(0.23)
Net income (loss) per common share, diluted	$	0.13	$	(0.21)

The table below summarizes the originally reported estimated acquisition date fair values, measurement period adjustments recorded and the final purchase price allocation of the assets acquired and liabilities assumed:

(in millions of U.S. dollars) Originally Reported Measurement Period Adjustments Acquired Value
Cash and cash equivalents $ 1.6
$ —
$ 1.6
Accounts receivable 6.5
(0.1 ) 6.4
Inventory 2.3
(0.1 ) 2.2
Prepaid expenses and other current assets 1.2
1.0
2.2
Property, plant and equipment 9.4
(0.5 ) 8.9
Goodwill 16.7
(2.5 ) 14.2
Intangible assets 13.3
(0.7 ) 12.6
Other assets 0.8
(0.7 ) 0.1
Short-term borrowings (4.1 ) —
(4.1 )
Current maturities of long-term debt (1.6 ) —
(1.6 )
Accounts payable and accrued liabilities (5.2 ) (1.5 ) (6.7 )
Long-term debt (10.4 ) —
(10.4 )
Deferred tax liabilities (6.5 ) 3.5
(3.0 )
Other long-term liabilities (2.5 ) 1.6
(0.9 )
Total $ 21.5
$ —
$ 21.5

~~During the second quarter of 2018, Crystal Rock was integrated within our DSS business.~~

Note 5—6—Income Taxes

Income tax benefit was ~~$1.0~~$3.3 million and $1.4 million on pre-tax loss from continuing operations of ~~$20.7~~$30.7 million and $24.1 million for the three months ended March 28, 2020 and March 30, 2019, ~~as compared to income tax expense of $0.9 million on pre-tax income from continuing operations of $5.5 million for the three months ended March 31, 2018,~~ respectively. The effective income tax rates were ~~4.8%~~10.7% and ~~16.4%~~5.8% for the three months ended March ~~30, 2019~~28, 2020 and March ~~31, 2018,~~30, 2019, respectively.

The effective tax rate for the three months ended March ~~30, 2019~~28, 2020 varied from the effective tax rate for the three months ended March ~~31, 2018~~30, 2019 due primarily to ~~increased losses incurred~~a release of uncertain tax positions in ~~jurisdictions for which no tax benefit is recognized.~~the first quarter of 2020.

The Tax Cuts and Jobs Act enacted new Section 163(j) interest expense limitation rules on December 22, 2017. On November 26, 2018, the U.S. Department of the Treasury released proposed regulations to provide interpretative guidance for the new Section 163(j) rules, with early adoption ~~permitted. The proposed~~permitted, but such regulations ~~were open to public comment until the end of February 2019 and~~ have not ~~yet~~ been finalized. We have not adopted the proposed ~~regulations for our 2019 tax year.~~regulations. If the proposed regulations are finalized as currently written, they could have a material impact to our Consolidated Financial Statements in the year in which they are finalized.

Note 6—7—Common Shares and Net Income (Loss) ~~Income~~ per Common Share

Common Shares

On December 11, ~~2018,~~2019, our Board of Directors approved a share repurchase program for up to $50.0 million of our outstanding common shares over a 12-month period commencing on December ~~14, 2018~~16, 2019 (the “Repurchase Plan”). The Repurchase Plan replaced the then-existing share repurchase program, which was scheduled to expire on May 6, 2019. As of December 29, 2018, the maximum approximate amount of common shares available to be purchased under the Repurchase Plan was $27.8 million. For the three months ended March ~~30, 2019,~~28, 2020, we repurchased ~~570,000~~2,316,835 common shares for ~~$7.8~~$25.0 million through open market transactions under the Repurchase Plan. Shares purchased under the Repurchase Plan were subsequently canceled.

~~We are unable~~ There can be no assurance as to ~~predict~~ the precise number of shares, if any, that ~~ultimately~~ will be repurchased under the Repurchase Plan in the future, or the aggregate dollar amount of ~~the~~ shares to be purchased in future periods. We may discontinue purchases at any time, subject to compliance with applicable regulatory requirements.

On March 2, 2020, the Company completed the Legacy Primo Acquisition, with the fair value of the 26,497,015 common shares issued at $14.25 per share to holders of Legacy Primo (see Note 5 to the Consolidated Financial Statements).

Net Income (Loss) ~~Income~~ per Common Share

Basic net income (loss) ~~income~~ per common share is calculated by dividing net income (loss) ~~income~~ attributable to ~~Cott~~Primo Water Corporation by the weighted average number of common shares outstanding during the periods presented. Diluted net income (loss) ~~income~~ per common share is calculated by dividing net income (loss) ~~income~~ attributable to ~~Cott~~Primo Water Corporation by 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 during the periods presented. Set forth below is a reconciliation of the numerator and denominator for the diluted net income (loss) ~~income~~ per common share computations for the periods indicated:


	For the Three Months Ended						For the Three Months Ended
	March 30, 2019			March 31, 2018			March 28, 2020		March 30, 2019
Numerator (in millions of U.S. dollars):						Numerator (in millions of U.S. dollars):
Net (loss) income attributable to Cott Corporation
Continuing operations	$	(19.7	)	$	4.6
Discontinued operations	—			356.8
Net (loss) income	(19.7		)	361.4
Net loss from continuing operations						Net loss from continuing operations	$	(27.4)	$	(22.7)
Net income from discontinued operations						Net income from discontinued operations	30.9		3.0
Net income (loss)						Net income (loss)	3.5		(19.7)
Basic Earnings Per Share						Basic Earnings Per Share
Denominator (in thousands):						Denominator (in thousands):
Weighted average common shares outstanding - basic	135,948			139,953		Weighted average common shares outstanding - basic	141,139		135,948
Basic Earnings Per Share:						Basic Earnings Per Share:
Continuing operations	(0.14		)	0.03		Continuing operations	(0.19)		(0.17)
Discontinued operations	—			2.55		Discontinued operations	0.22		0.03
Net (loss) income	(0.14		)	2.58
Net income (loss)						Net income (loss)	0.02		(0.14)
Diluted Earnings Per Share						Diluted Earnings Per Share
Denominator (in thousands):						Denominator (in thousands):
Weighted average common shares outstanding - basic	135,948			139,953		Weighted average common shares outstanding - basic	141,139		135,948
Dilutive effect of Stock Options	—			1,339		Dilutive effect of Stock Options	—		—
Dilutive effect of Performance-based RSUs	—			821		Dilutive effect of Performance-based RSUs	—		—
Dilutive effect of Time-based RSUs	—			222		Dilutive effect of Time-based RSUs	—		—
Weighted average common shares outstanding - diluted	135,948			142,335		Weighted average common shares outstanding - diluted	141,139		135,948
Diluted Earnings Per Share:						Diluted Earnings Per Share:
Continuing operations	(0.14		)	0.03		Continuing operations	(0.19)		(0.17)
Discontinued operations	—			2.51		Discontinued operations	0.22		0.03
Net (loss) income	(0.14		)	2.54
Net income (loss)						Net income (loss)	0.02		(0.14)

The following table summarizes anti-dilutive securities excluded from the computation of diluted net income (loss) ~~income~~ per common share for the periods indicated:


	For the Three Months Ended			For the Three Months Ended
(in thousands)	March 30, 2019	March 31, 2018	(in thousands)	March 28, 2020	March 30, 2019
Stock Options	5,378	914	Stock Options	6,477	5,378
Performance-based RSUs ¹	1,252	627	Performance-based RSUs ¹	750	1,252
Time-based RSUs	374	90	Time-based RSUs	557	374

______________________


¹	~~Performance-based RSUs represent the number of shares expected to be issued based primarily on the estimated achievement of cumulative pre-tax income targets for these awards.~~

¹ Performance-based RSUs represent the number of shares expected to be issued based primarily on the estimated achievement of cumulative pre-tax income targets for these awards.

Note 7—8—Segment Reporting

Our broad portfolio of products includes bottled water, ~~coffee, brewed tea,~~ water dispensers, ~~coffee~~purified bottled water, self-service refill drinking water, premium spring, sparkling and tea brewers, specialty coffee, liquid coffee or tea concentrate, single cup coffee, cold brewed coffee, iced blend coffee or tea beverages, blended teas, hot tea, sparkling tea, coffee or tea extract solutions,flavored water, mineral water, filtration equipment, coffee, hot chocolate, soups, malt drinks, creamers/whiteners ~~cereals, beverage concentrates, premium spring, sparkling~~ and ~~flavored water, and mineral water.~~cereals.

We operate through three reporting segments: Route Based Services; Coffee, Tea and Extract Solutions; and All Other (which includes our Cott Beverages LLC business and other miscellaneous expenses). Our corporate oversight function is not treated as a segment; it includes certain general and administrative costs that are not allocated to any of the reporting segments.

During the first quarter of ~~2019,~~2020, we ~~reviewed and realigned~~completed the Legacy Primo Acquisition. This business was added to our reporting segments to reflect how the business will be managed and results will be reviewed by the Chief Executive Officer, who is the Company’s chief operating decision maker. Following such review, we realigned our three reporting segments as follows:existing Route Based Services (which includes our DSS, Aquaterra, Mountain Valley, Eden and Aimia businesses), Coffee, Tea & Extract Solutions (which includes our S&D business) and All Other (which includes our Cott Beverages LLC business and other miscellaneous expenses). Ourreporting segment, ~~reporting results have been recast~~which was renamed “Water Solutions” to reflect ~~these changes~~our strategy of transitioning to a pure-play water solutions provider. Other than the change in name, there was no impact on prior period results for ~~all periods presented.~~ this reporting segment.


(in millions of U.S. dollars)	Route Based Services		Coffee, Tea and Extract Solutions		All Other			Eliminations			Total		(in millions of U.S. dollars)	Water Solutions		All Other		Total
For the Three Months Ended March 30, 2019
Revenue, net ¹	$	420.5	$	148.0	$	7.2		$	(1.6	)	$	574.1
For the Three Months Ended March 28, 2020													For the Three Months Ended March 28, 2020
Revenue, net													Revenue, net	$	474.2	$	—	$	474.2
Depreciation and amortization	39.6		5.5		0.1			—			45.2		Depreciation and amortization	44.9		0.1		$	45.0
Operating income (loss)	14.0		3.4		(13.3		)	—			4.1		Operating income (loss)	21.5		(25.5)		$	(4.0)
Additions to property, plant and equipment	21.9		1.8		0.1			—			23.8		Additions to property, plant and equipment	34.9		—		$	34.9
As of March 30, 2019
Total assets ²	$	2,770.6	$	499.3	$	51.6		$	—		$	3,321.5
As of March 28, 2020													As of March 28, 2020
Total assets ¹													Total assets ¹	$	3,663.4	$	55.7	$	3,719.1

______________________

¹ Excludes intersegment receivables, investments and notes receivable.


(in millions of U.S. dollars)	Water Solutions		All Other		Total
For the Three Months Ended March 30, 2019
Revenue, net	$	420.5	$	7.2	$	427.7
Depreciation and amortization	39.6		0.1		39.7
Operating income (loss)	14.0		(13.3)		0.7
Additions to property, plant and equipment	21.9		0.1		22.0
As of December 28, 2019
Total assets ¹	$	2,816.1	$	48.3	$	2,864.4

______________________

¹ Excludes intersegment receivables, investments and notes receivable.


¹ (in millions of U.S. dollars)			~~Intersegment revenue between the Coffee, Tea and Extract Solutions and the Route Based Services reporting segments was $1.6 million for the three months ended March 30, 2019.~~

	December 28, 2019
Segment assets ²¹			~~Excludes intersegment receivables, investments and notes receivable.~~

(in millions of U.S. dollars)
Route
Based
Services

Coffee, Tea
and Extract
Solutions

All
Other
Eliminations Total
For the Three Months Ended March 31, 2018
Revenue, net ^1,2
$ 398.1
$ 146.1
$ 17.7
$ (1.1 ) $ 560.8
Depreciation and amortization 41.4
5.7
0.3
—
47.4
Operating income (loss) 14.0
4.0
(11.9 ) —
6.1
Additions to property, plant and equipment 27.1
2.1
0.6
—
29.8
As of December 29, 2018
Total assets ³
$ 2,579.0
$ 464.8
$ 131.7
$ —
$ 3,175.5

~~______________________~~

$	2,864.4
¹			~~All Other includes $4.2 million~~Assets of ~~related party concentrate sales to~~ discontinued operations ~~for the three months ended March 31, 2018, respectively.~~

¹	526.5
² Total assets			~~Intersegment revenue between the Coffee, Tea and Extract Solutions and the Route Based Services reporting segments was $1.1 million for the three months ended March 31, 2018.~~$	3,390.9


³ ______________________ ¹ Excludes intersegment receivables, investments and notes receivable.	~~Excludes intersegment receivables, investments and notes receivable.~~

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

The impact of the COVID-19 pandemic may impact the ability of such customers to meet obligations to us. The full extent to which the COVID-19 pandemic will negatively affect our results of operations, financial condition and cash flows will depend on future developments that are ~~not currently aware~~highly uncertain and cannot be predicted, including the scope and duration of ~~any facts that would create a material credit risk.~~the pandemic and actions taken by governmental authorities in the markets in which we operate and other third parties in response to the pandemic.

Revenues by channel by reporting segment were as follows:


	For the Three Months Ended March 28, 2020
(in millions of U.S. dollars)	Water Solutions		All Other		Total
Revenue, net
Water Direct/Water Exchange	$	295.2	$	—	$	295.2
Water Refill/Water Filtration	30.8		—		30.8
Water Retail	55.4		—		55.4
Water Dispensers	5.9		—		5.9
Other	86.9		—		86.9
Total	$	474.2	$	—	$	474.2

For the Three Months Ended March 30, 2019
(in millions of U.S. dollars)
Route
Based
Services

Coffee, Tea
and Extract
Solutions

All
Other
Eliminations Total
Revenue, net
Home and office bottled water delivery $ 258.6
$ —
$ —
$ —
$ 258.6
Coffee and tea services 48.6
120.2
—
(1.6 ) 167.2
Retail 70.9
—
—
—
70.9
Other 42.4
27.8
7.2
—
77.4
Total $ 420.5
$ 148.0
$ 7.2
$ (1.6 ) $ 574.1

For the Three Months Ended March 31, 2018
(in millions of U.S. dollars)
Route
Based
Services

Coffee, Tea
and Extract
Solutions

All
Other
Eliminations Total
Revenue, net
Home and office bottled water delivery ¹
$ 245.5
$ —
$ —
$ —
$ 245.5
Coffee and tea services 47.0
117.2
—
(1.0 ) 163.2
Retail ¹
66.6
—
—
—
66.6
Other ¹
39.0
28.9
17.7
(0.1 ) 85.5
Total $ 398.1
$ 146.1
$ 17.7
$ (1.1 ) $ 560.8


	For the For the Three Months Ended March 30, 2019
(in millions of U.S. dollars)	Water Solutions ¹		All Other		Total
Revenue, net
Water Direct/Water Exchange	$	264.2	$	—	$	264.2
Water Refill/Water Filtration	15.3		—		15.3
Water Retail	50.8		—		50.8
Water Dispensers	—		—		—
Other	90.2		7.2		97.4
Total	$	420.5	$	7.2	$	427.7

~~____________________________~~

Revenues by channel of our Route Based Services reporting segment for the three months ended March 31, 2018 were revised to reclassify $16.6 million of revenues from the other channel to the home and office bottled water delivery channel as these activities are associated with the home and office bottled water delivery channel. In addition, we reclassified $3.5 million out of the retail channel and into the other channel in order to better align the activities of a recent acquisition with those of our U.S. route based services business.

______________________

¹ Revenues by channel of our Water Solutions reporting segment for the three months ended March 30, 2019 had $15.3 million of revenues reclassified from “other” to “water refill/water filtration” and $5.6 million of revenues reclassified from “other” to “water direct/water exchange” in order to better align the activities after the Legacy Primo Acquisition. In addition, we reclassified $48.6 million of revenues from “coffee and tea services” and $20.1 million of revenues from “retail” into “other” in order to better align with our strategy of transitioning to a pure-play water solutions provider.

Note 8—9—Inventories

The following table summarizes inventories as of March 28, 2020 and December 28, 2019:


(in millions of U.S. dollars)	March 28, 2020		December 28, 2019
Raw materials	$	25.8	$	23.8
Finished goods	33.0		24.2
Resale items	15.5		14.0
Other	1.0		0.9
Total	$	75.3	$	62.9

Note 10—Property, Plant and Equipment, Net

The following table summarizes property, plant and equipment, net as of March 28, 2020 and December 28, 2019:


		March 28, 2020										December 28, 2019
(in millions of U.S. dollars)	Estimated Useful Life in Years	Cost		Accumulated Depreciation		Net		Cost		Accumulated Depreciation		Net
Land	n/a	$	95.3	$	—	$	95.3	$	95.3	$	—	$	95.3
Buildings	10-40	89.9		27.9		62.0		88.9		26.9		62.0
Machinery and equipment	5-15	255.5		68.6		186.9		146.8		66.0		80.8
Plates, films and molds	1-10	1.6		0.6		1.0		1.5		0.6		0.9
Vehicles and transportation equipment	3-15	90.2		60.7		29.5		90.3		59.5		30.8
Leasehold improvements ¹		18.6		11.3		7.3		19.8		10.7		9.1
IT Systems	3-7	17.1		10.3		6.8		15.6		9.9		5.7
Furniture and fixtures	3-10	11.4		8.5		2.9		12.0		8.6		3.4
Customer equipment ²	3-7	352.6		153.2		199.4		339.7		144.9		194.8
Returnable bottles ³	3-5	83.9		36.4		47.5		82.0		37.1		44.9
Finance leases ⁴		59.1		9.0		50.1		37.6		7.2		30.4
Total		$	1,075.2	$	386.5	$	688.7	$	929.5	$	371.4	$	558.1

______________________

¹ Leasehold improvements are amortized over the shorter of their estimated useful lives or the related lease life.

² Customer equipment consists of coolers, brewers, refrigerators, water purification devices and storage racks held on site at customer locations.

³ Returnable bottles are those bottles on site at our Water Solutions customer locations.

⁴ Our recorded assets under finance leases relate to IT systems, customer equipment and vehicles and transportation equipment.

The amounts above include construction-in-progress of $9.2 million and $2.4 million as of March 28, 2020 and December 28, 2019, respectively.

Depreciation expense, which includes depreciation recorded for assets under finance leases, for the three months ended March 28, 2020 and March 30, 2019 was $30.6 million and ~~December 29, 2018:~~$26.4 million, respectively.

(in millions of U.S. dollars) March 30, 2019 December 29, 2018
Raw materials $ 58.1
$ 68.5
Finished goods 38.1
36.3
Resale items 20.4
21.5
Other 3.5
3.3
Total $ 120.1
$ 129.6

Note 9—11—Intangible Assets, Net

The following table summarizes intangible assets, net as of March ~~30, 2019~~28, 2020 and December ~~29, 2018:~~28, 2019:


	March 30, 2019						December 29, 2018							March 28, 2020										December 28, 2019
(in millions of U.S. dollars)	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net		(in millions of U.S. dollars)	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Intangible Assets													Intangible Assets
Not subject to amortization													Not subject to amortization
Rights	$	—	$	—	$	—	$	24.5	$	—	$	24.5
Trademarks	283.1		—		283.1		282.3		—		282.3		Trademarks	$	423.9	$	—	$	423.9	$	287.1	$	—	$	287.1
Total intangible assets not subject to amortization	283.1		—		283.1		306.8		—		306.8		Total intangible assets not subject to amortization	423.9		—		423.9		287.1		—		287.1
Subject to amortization													Subject to amortization
Customer relationships	616.3		224.2		392.1		603.1		211.1		392.0		Customer relationships	752.2		276.3		475.9		534.9		267.4		267.5
Patents	15.2		2.9		12.3		15.2		2.5		12.7		Patents	19.0		4.4		14.6		15.2		4.0		11.2
Software	40.7		21.7		19.0		38.0		20.5		17.5		Software	54.0		29.8		24.2		49.3		28.0		21.3
Other	17.1		7.0		10.1		16.6		6.4		10.2		Other	13.9		5.0		8.9		14.9		5.0		9.9
Total intangible assets subject to amortization	689.3		255.8		433.5		672.9		240.5		432.4		Total intangible assets subject to amortization	839.1		315.5		523.6		614.3		304.4		309.9
Total intangible assets	$	972.4	$	255.8	$	716.6	$	979.7	$	240.5	$	739.2	Total intangible assets	$	1,263.0	$	315.5	$	947.5	$	901.4	$	304.4	$	597.0

Amortization expense of intangible assets was ~~$15.4~~$14.4 million and ~~$17.0~~$13.3 million for the three months ended March 28, 2020 and March 30, 2019, ~~and March 31, 2018,~~ respectively.

The estimated amortization expense for intangible assets over the next five years and thereafter is:


(in millions of U.S. dollars)			(in millions of U.S. dollars)
Remainder of 2019	$	50.4
2020	60.1
Remainder of 2020			Remainder of 2020	$	49.3
2021	52.1		2021	58.1
2022	42.2		2022	51.8
2023	35.0		2023	43.5
2024			2024	36.6
Thereafter	193.7		Thereafter	284.3
Total	$	433.5	Total	$	523.6

Note ~~10—~~12—Debt

Revolving Credit Facility and Liquidity

On March 6, 2020 (the “Closing Date”), the Company entered into a credit agreement (the “Credit Agreement”) among the Company, as parent borrower, Cott Holdings Inc. and Eden Springs Nederland B.V. (“Eden”), each as subsidiary borrowers, certain other subsidiaries of the Company from time to time designated as subsidiary borrowers, Bank of America, N.A., as administrative agent and collateral agent, and the lenders from time to time party thereto.

The Credit Agreement provides for a senior secured revolving credit facility in an initial aggregate committed amount of $350.0 million (the “Revolving Credit Facility”), which may be increased by incremental credit extensions from time to time in the form of term loans or additional revolving credit commitments. The Revolving Credit Facility will mature five years from the Closing Date and includes letter of credit and swing line loan subfacilities.

Borrowings under the Revolving Credit Facility were used on the Closing Date to refinance in full and terminate our previously existing asset-based lending credit facility, governed by the Second Amended and Restated Credit Agreement, dated January 30, 2019, by and among the Company, the other loan parties party thereto from time to time, JPMorgan Chase Bank, N.A., as administrative agent and as collateral agent, and the lenders from time to time party thereto (as amended, the “ABL Credit Agreement”). Certain letters of credit outstanding under the ABL Credit Agreement were rolled over under the Revolving Credit Facility on the Closing Date. We incurred approximately $3.4 million of financing fees in connection with the Revolving Credit Facility. The Revolving Credit Facility was considered to be a modification of the ABL Credit Agreement under GAAP. These new financing fees along with $1.8 million of unamortized deferred costs of the ABL Credit Agreement are being amortized using the straight-line method over the duration of the Revolving Credit Facility.

As of March 28, 2020, the outstanding borrowings under the Revolving Credit Facility were $118.0 million and was recorded in short-term borrowings on the Consolidated Balance Sheet. Outstanding letters of credit totaled $43.3 million resulting in total utilization under the Revolving Credit Facility of $161.3 million. Accordingly, unused availability under the Revolving Credit Facility as of March 28, 2020 amounted to $188.7 million.

Borrowings under the Credit Agreement will bear interest at a rate per annum equal to either: (a) a eurocurrency rate as determined under the Credit Agreement, plus the applicable margin, or (b) a base rate equal to the highest of (i) Bank of America’s prime rate, (ii) 0.5% per annum above the federal funds rate, and (iii) the eurocurrency rate, as determined under the Credit Agreement, for a one month interest period, plus 1.0%, plus the applicable margin. Prior to delivery of financial statements and a compliance certificate for the full fiscal quarter following the Closing Date, the applicable margin for eurocurrency rate loans will be 150 basis points and the applicable margin for base rate loans will be 50 basis points. Thereafter, the applicable margin for eurocurrency rate loans ranges from 137.5 to 200 basis points and the applicable margin for base rate loans ranges from 37.5 to 100 basis points, in each case depending on our consolidated total leverage ratio. Unutilized commitments under the Credit Agreement are subject to a commitment fee ranging from 20 to 30 basis points per annum depending on our consolidated total leverage ratio, payable on a quarterly basis.

Affirmative Covenants and Ratios

The Credit Agreement has 2 financial covenants, a consolidated secured leverage ratio and an interest coverage ratio. The consolidated secured leverage ratio must not be more than 3.50 to 1.00, with an allowable temporary increase to 4.00 to 1.00 for the quarter in which the Company consummates a material acquisition with a price not less than $125.0 million, for three quarters. The interest coverage ratio must not be less than 3.00 to 1.00. Per the Credit Agreement, the Company is required to calculate these 2 financial covenants commencing with the initial test period ending June 27, 2020.

In addition, the Credit Agreement has certain non-financial covenants, such as covenants regarding indebtedness, investments, and asset dispositions. The Company was in compliance with all covenants as of March 28, 2020.

Note 13—Accumulated Other Comprehensive (Loss) Income

With the sale of our North America, United Kingdom and Mexico business units (including the Canadian business) and our RCI finished goods export business in January 2018, the foreign currency translation balances associated with these businesses were recognized in earnings in the period of disposition. Changes in accumulated other comprehensive (loss) income (“AOCI”) by component for the three months ended March ~~30, 2019~~28, 2020 and March ~~31, 2018~~30, 2019 were as follows:


(in millions of U.S. dollars) ¹	Gains and Losses on Derivative Instruments			Pension Benefit Plan Items			Currency Translation Adjustment Items			Total			(in millions of U.S. dollars) ¹	Gains and Losses on Derivative Instruments		Pension Benefit Plan Items		Currency Translation Adjustment Items		Total
Beginning balance December 30, 2017	$	(1.4	)	$	(16.8	)	$	(76.2	)	$	(94.4	)
OCI before reclassifications	(4.7		)	—			(1.1		)	(5.8		)
Amounts reclassified from AOCI	0.9			16.9			9.4			27.2
Net current-period OCI	(3.8		)	16.9			8.3			21.4
Ending balance March 31, 2018	$	(5.2	)	$	0.1		$	(67.9	)	$	(73.0	)
Beginning balance December 29, 2018	$	(9.7	)	$	0.3		$	(92.3	)	$	(101.7	)	Beginning balance December 29, 2018	$	(9.7)	$	0.3	$	(92.3)	$	(101.7)
OCI before reclassifications	(8.1		)	—			10.6			2.5			OCI before reclassifications	(8.1)		—		10.6		2.5
Amounts reclassified from AOCI	2.6			—			—			2.6			Amounts reclassified from AOCI	2.6		—		—		2.6
Net current-period OCI	(5.5		)	—			10.6			5.1			Net current-period OCI	(5.5)		—		10.6		5.1
Ending balance March 30, 2019	$	(15.2	)	$	0.3		$	(81.7	)	$	(96.6	)	Ending balance March 30, 2019	$	(15.2)	$	0.3	$	(81.7)	$	(96.6)

Beginning balance December 28, 2019													Beginning balance December 28, 2019	$	11.2	$	(1.0)	$	(78.7)	$	(68.5)
OCI before reclassifications													OCI before reclassifications	(8.7)		—		(18.7)		(27.4)
Amounts reclassified from AOCI													Amounts reclassified from AOCI	(2.5)		—		—		(2.5)
Net current-period OCI													Net current-period OCI	(11.2)		—		(18.7)		(29.9)
Ending Balance March 28, 2020													Ending Balance March 28, 2020	$	—	$	(1.0)	$	(97.4)	$	(98.4)

______________________


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

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

The following table summarizes the amounts reclassified from AOCI for the three months ended March 28, 2020 and March 30, 2019, ~~and March 31, 2018,~~ respectively:


(in millions of U.S. dollars)	For the Three Months Ended						Affected Line Item in the Statement Where Net Income Is Presented	(in millions of U.S. dollars)	For the Three Months Ended						Affected Line Item in the Statement Where Net Income Is Presented
Details About AOCI Components ¹	March 30, 2019			March 31, 2018				Details About AOCI Components ¹	March 28, 2020		March 30, 2019			Affected Line Item in the Statement Where Net Income Is Presented
Gains and losses on derivative instruments								Gains and losses on derivative instruments
Foreign currency and commodity hedges	$	(2.6	)	$	(0.9	)	Cost of sales	Foreign currency and commodity hedges	$	0.1	$	(2.6)	Cost of sales
Commodity hedges²								Commodity hedges²	2.4		—		Gain on sale of discontinued operations
	(2.6		)	(0.9		)	Total before taxes		2.5		(2.6)		Total before taxes
	—			—			Tax expense or (benefit)		—		—		Tax expense or (benefit)
	$	(2.6	)	$	(0.9	)	Net of tax		$	2.5	$	(2.6)	Net of tax
Amortization of pension benefit plan items								Amortization of pension benefit plan items
Recognized net actuarial loss ²	$	—		$	(16.9	)	Gain on sale of discontinued operations
Prior service costs	—			—			Cost of sales
Actuarial (losses)/gains ³								Actuarial (losses)/gains ³	—		—
Prior service costs ³								Prior service costs ³	$	—	$	—
	—			(16.9		)	Total before taxes		—		—		Total before taxes
	—			—			Tax expense or (benefit)		—		—		Tax expense or (benefit)
	$	—		$	(16.9	)	Net of tax		$	—	$	—	Net of tax
Foreign currency translation adjustments	$	—		$	(9.4	)	Gain on sale of discontinued operations
Total reclassifications for the period	$	(2.6	)	$	(27.2	)	Net of tax	Total reclassifications for the period	$	2.5	$	(2.6)	Net of tax

______________________


¹	~~Amounts in parentheses indicate debits.~~


²	~~Net of $3.6 million of associated tax impact that resulted in an increase to the gain on the sale of discontinued operations for the three months ended March 31, 2018.~~

¹ Amounts in parentheses indicate debits.

² Net of $1.3 million of associated tax impact that resulted in a decrease to the gain on the sale of discontinued operations for the three months ended March 28, 2020.

³ These AOCI components are included in the computation of net periodic pension cost.

Note ~~11—~~14—Commitments and Contingencies

We are subject to various claims and legal proceedings with respect to matters such as governmental regulations and other actions arising out of the normal course of business. Management believes that the resolution of these matters will not have a material adverse effect on our financial position, results of operations, or cash flow.

In ~~addition,~~April 2020, the Company agreed to a settlement of $27.2 million related to a personal injury matter. The loss contingency of $27.2 million was accrued in accounts payable and accrued liabilities in the Consolidated Balance Sheet as of March 28, 2020. The Company has also recorded a receivable of $27.0 million for proceeds we will receive from our insurance providers in connection with the claim. The receivable is recorded in accounts receivable, net in the Consolidated Balance Sheet as of March 28, 2020.

Also, the Israeli Ministry of Environmental Protection (the “Ministry”) has alleged that a non-profit recycling corporation, which collects and recycles bottles sold by manufacturers, including Eden, failed to meet recycling quotas in 2016, in violation of Israeli law. The law imposes liability directly on manufacturers, and the Ministry has asserted that the manufacturers involved with the corporation owe a fine. Eden received a notice from the Ministry on June 21, 2018. Eden has since undertaken an administrative appeal process and intends to proceed to litigation. Although we cannot predict the outcome of any potential proceedings at this early stage, Eden may be subject to a fine in excess of $0.1 million. Management believes, however, that the resolution of this matter will not be material to our financial position, results of operations, or cash flows.

We had ~~$46.1~~$43.3 million in standby letters of credit outstanding as of March ~~30, 2019~~28, 2020 ($~~46.1 million—~~47.4 million as of December ~~29, 2018)~~28, 2019).

Guarantees

After the sale of our North America, United Kingdom and Mexico business units (including the Canadian business) and our RCI finished goods export business in January 2018, ~~the Company has~~we have continued to provide contractual payment guarantees to ~~three~~3 third-party lessors of certain real property used in these businesses. The leases were conveyed to Refresco as part of the sale, but ~~the Company’s~~our guarantee was not released by the landlord. The ~~three~~3 lease agreements mature in 2027, 2028 and 2029. The maximum potential amount of undiscounted future payments under the guarantee of approximately ~~$31.6~~$27.7 million as of March ~~30, 2019~~28, 2020 ($~~32.2~~29.4 million—December ~~29, 2018)~~28, 2019) was calculated based on the minimum lease payments of the leases over the remaining term of the agreements. The sale documents require Refresco to pay all post-closing obligations under these conveyed leases, and to reimburse ~~the Company~~us if the landlord calls on a guarantee. Refresco has also agreed to a covenant to negotiate with the landlords for a release of ~~the Company’s~~our guarantees. Discussions with the landlords are ongoing. ~~The Company~~We currently ~~does~~do not believe it is probable itwe would be required to perform under any of these guarantees or any of the underlying obligations.

Note ~~12—Hedging Transactions and Derivative Financial Instruments~~

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

We use various types of derivative instruments including, but not limited to, forward contracts, futures contracts and swap agreements for certain commodities. Forward and futures contracts are agreements to buy or sell a quantity of a currency at a predetermined future date, and at a predetermined rate or price. Forward contracts are traded over-the-counter whereas future contracts are traded on an exchange. A swap agreement is a contract between two parties to exchange cash flows based on specified underlying notional amounts, assets and/or indices.

All derivatives are carried at fair value in the Consolidated Balance Sheets in the line item accounts receivable, net or accounts payable and accrued liabilities. The carrying values of the derivatives reflect the impact of legally enforceable agreements with the same counterparties. These agreements 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 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. We classify cash inflows and outflows related to derivative and hedging instruments within the appropriate cash flows section associated with the item being hedged.

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 highly effective at offsetting changes in either the fair values or cash flows of the related underlying exposures.

We estimate the fair values of our derivatives based on quoted market prices or pricing models using current market rates (see Note 13 to the Consolidated Financial Statements). The notional amounts of the derivative financial instruments do not necessarily represent amounts exchanged by the parties and, therefore, are not a direct measure of our exposure to the financial risks described above. The amounts exchanged are calculated by reference to the notional amounts and by other terms of the derivatives, such as interest rates, foreign currency exchange rates or other financial indices. We do not view the fair values of our derivatives in isolation, but rather in relation to the fair values or cash flows of the underlying hedged transactions. All of our derivatives are 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 counterparty 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 counterparty default to be minimal.

~~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 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 three months ended March 30, 2019 or March 31, 2018, respectively.

We have entered into coffee futures contracts to hedge our exposure to price fluctuations on green coffee associated with fixed-price sales contracts with customers, which generally range from 2 to 21 months in length. These derivative instruments have been designated and qualified as a part of our commodity cash flow hedging program effective January 1, 2017. The objective of this hedging program is to reduce the variability of cash flows associated with future purchases of green coffee.

The notional amount for the coffee futures contracts that were designated and qualified for our commodity cash flow hedging program was 104.7 million pounds and 73.3 million pounds as of March 30, 2019 and ~~December 29, 2018~~, respectively. Approximately $2.6 million and $0.9 million of realized losses, representing the effective portion of the cash-flow hedge, were subsequently reclassified from AOCI to earnings and recognized in cost of sales in the Consolidated Statements of Operations for the three months ended March 30, 2019 and March 31, 2018, respectively. As of March 30, 2019, the estimated net amount of losses reported in AOCI that is expected to be reclassified to the Consolidated Statements of Operations within the next twelve months is $16.2 million.

The fair value of the Company’s net derivative liabilities included in accounts payable and accrued liabilities was $17.1 million and $10.9 million as of March 30, 2019 and December 29, 2018, respectively. We had no derivative assets as of March 30, 2019 and December 29, 2018. Set forth below is a reconciliation of our derivatives by contract type for the periods indicated:

(in millions of U.S. dollars) March 30, 2019 December 29, 2018
Derivative Contract Assets Liabilities Assets Liabilities
Coffee futures¹
$ —
$ (17.1 ) $ —
$ (10.9 )

~~______________________~~

The fair value of the coffee futures excludes amounts in the related margin accounts. We are required to maintain margin accounts in accordance with futures market and broker regulations. As of March 30, 2019 and December 29, 2018, the aggregate margin account balances were $14.6 million and $12.9 million, respectively, and are included in cash and cash equivalents on the Consolidated Balance Sheets.

Coffee futures are subject to enforceable master netting arrangements and are presented net in the reconciliation above. The fair value of the coffee futures assets and liabilities, which are shown on a net basis, are reconciled in the table below:

(in millions of U.S. dollars) March 30, 2019 December 29, 2018
Coffee futures assets $ —
$ 0.1
Coffee futures liabilities (17.1 ) (11.0 )
Net asset (liability) $ (17.1 ) $ (10.9 )

The location and amount of gains or losses recognized in the Consolidated Statements of Operations for cash flow hedging relationships, presented on a pre-tax basis, for the three months ended March 30, 2019 and March 31, 2018, respectively, is shown in the table below:

For the Three Months Ended
March 30, 2019 March 31, 2018
(in millions of U.S. dollars) Cost of sales
Total amounts of income and expense line items presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded $ 291.2
$ 287.3
Loss on cash flow hedging relationship

Coffee futures:

Loss reclassified from AOCI into expense $ 2.6
$ 0.9

~~The settlement of our derivative instruments resulted in a debit to cost of sales of $2.6 million and $0.9 million for the three months ended March 30, 2019 and March 31, 2018, respectively.~~

~~Note 13—~~15—Fair Value Measurements

FASB Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, 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 GAAP.~~

Our derivative assets and liabilities represent Level 2 instruments. Level 2 instruments are valued based on observable inputs for quoted prices for similar assets and liabilities in active markets. The fair value for the net derivative liabilities as of March 30, 2019 and December 29, 2018 was $17.1 million and $10.9 million, respectively. We had no derivative assets as of March 30, 2019 and December 29, 2018.

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 March ~~30, 2019~~28, 2020 and December ~~29, 2018~~28, 2019 were as follows:


	March 30, 2019				December 29, 2018					March 28, 2020						December 28, 2019
(in millions of U.S. dollars)	Carrying Value		Fair Value		Carrying Value		Fair Value		(in millions of U.S. dollars)	Carrying Value		Fair Value		Carrying Value		Fair Value
5.500% senior notes due in 2024 ^{1, 2}	$	499.0	$	524.6	$	505.9	$	521.7	5.500% senior notes due in 2024 ^{1, 2}	488.1		484.4		493.5		514.5
5.500% senior notes due in 2025 ^{1, 2}	740.9		747.4		740.2		695.8		5.500% senior notes due in 2025 ^{1, 2}	742.1		695.7		741.8		775.3
Total	$	1,239.9	$	1,272.0	$	1,246.1	$	1,217.5	Total	$	1,230.2	$	1,180.1	$	1,235.3	$	1,289.8

______________________


¹	~~The fair values were based on the trading levels and bid/offer prices observed by a market participant and are considered Level 2 financial instruments.~~


²	~~Carrying value of our significant outstanding debt is net of unamortized debt issuance costs as of March 30, 2019 and December 29, 2018.~~

¹ The fair values were based on the trading levels and bid/offer prices observed by a market participant and are considered Level 2 financial instruments.

² Carrying value of our significant outstanding debt is net of unamortized debt issuance costs as of March 28, 2020 and December 28, 2019.

Note ~~14—~~16—Subsequent Events

On April ~~30, 2019,~~3, 2020, the Company borrowed approximately $170.0 million (the “Borrowings”) under the Revolving Credit Facility. After giving effect to the Borrowings, the current balance of loans under the Revolving Credit Facility is $306.0 million, along with $43.3 million being utilized for letters of credit. The Borrowings are scheduled to mature five years from the Closing Date and may be repaid at any time without penalty. We have elected to draw down on our Revolving Credit Facility as a precautionary measure to increase our cash position and preserve financial flexibility considering current uncertainty in the global markets resulting from the COVID-19 pandemic.

On May 5, 2020, our Board of Directors declared a dividend of $0.06 per share on common shares, payable in cash on June ~~12, 2019~~17, 2020 to shareowners of record at the close of business on ~~May 31, 2019.~~June 5, 2020.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to further the reader’s understanding of the consolidated financial condition and results of operations of our Company. It should be read in conjunction with the financial statements included in this ~~quarterly report~~Quarterly Report on Form 10-Q and our ~~annual report~~Annual Report on Form 10-K for the fiscal year ended December ~~29, 2018~~28, 2019 (our ~~“2018~~“2019 Annual Report”). These historical financial statements may not be indicative of our future performance. This discussion contains a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks referred to under “Risk Factors” in Part I, Item 1A in our ~~2018~~2019 Annual ~~Report.~~Report and under “Risk Factors” in Part II, Item 1A in this Quarterly Report on Form 10-Q. As used herein, ~~“Cott,~~“Primo,” “the Company,” ~~“Cott~~“Primo Water Corporation,” “we,” “us,” or “our” refers to ~~Cott~~Primo Water Corporation, together with its consolidated subsidiaries.

Overview

~~Cott~~ Primo is a leading pure-play water ~~coffee, tea, extracts and filtration service company with a leading volume-based national presence~~solutions provider in the North American and European home and office delivery industry for bottled water, and a leader in custom coffee roasting, iced tea blending, and extract solutions for the U.S. foodservice industry. Our platform reaches over 2.5 million customers or delivery points across North America, ~~and~~ Europe and Israel. Primo operates largely under a recurring razor/razorblade revenue model. The razor in Primo’s revenue model is ~~supported by strategically located sales~~its industry leading line-up of sleek and ~~distribution facilities~~innovative water dispensers, which are sold through major retailers and ~~fleets,~~online at various price points or leased to customers. The dispensers help increase household penetration which drives recurring purchases of Primo’s razorblade offering. Primo’s razorblade offering is comprised of Water Direct, Water Exchange, and Water Refill. Through its market leading Water Direct business, Primo delivers sustainable hydration solutions across its 21-country footprint direct to the customer’s door, whether at home or to commercial businesses. Through its market leading Water Exchange and Water Refill businesses, Primo offers pre-filled and reusable containers at over 13,000 locations and water refill units at approximately 22,000 locations, respectively. Primo also offers water filtration units across its 21-country footprint representing a top five position.

Primo’s water solutions expand consumer access to purified, spring and mineral water to promote a healthier, more sustainable lifestyle while simultaneously reducing plastic waste and pollution. Primo is committed to its water stewardship standards and is proud to partner with the International Bottled Water Association in North America as well as ~~wholesalers~~with Watercoolers Europe, which ensure strict adherence to safety, quality, sanitation and ~~distributors. This enables us~~regulatory standards for the benefit of consumer protection.

The market in which we operate is subject to ~~efficiently service residences, businesses, restaurant chains, hotels~~some seasonal variations. Our water delivery sales are generally higher during the warmer months. Our purchases of raw materials and ~~motels, small and large retailers, and healthcare facilities.~~

~~Ingredient and packaging costs represent a significant portion~~related accounts payable fluctuate based upon the demand for our products. The seasonality of our ~~cost of sales. These costs are subject~~sales volume causes our working capital needs to global and regional commodity price trends. Our most significant commodities are green coffee, tea, polyethylene terephthalate resin, high-density polyethylene and polycarbonate bottles, caps and preforms, labels and cartons and trays. We attempt to manage our exposure to fluctuations in ingredient and packaging costs by entering into fixed price commitments for a portion of our ingredient and packaging requirements and implementing price increases as needed.fluctuate throughout the year.

We conduct operations in countries involving transactions denominated in a variety of currencies. We are subject to currency exchange risks to the extent that our costs are denominated in currencies other than those in which we earn revenues. As our financial statements are denominated in U.S. dollars, fluctuations in currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have an impact on our results of operations.

During the first quarter of ~~2019,~~2020, we ~~reviewed and realigned~~completed the Legacy Primo Acquisition (defined below). This business was added to our reporting segments to reflect how the business will be managed and results will be reviewed by the Chief Executive Officer, who is the Company’s chief operating decision maker. Following such review, we realigned our three reporting segments as follows:existing Route Based Services ~~(which includes~~reporting segment, which was renamed “Water Solutions” to reflect our ~~DS Services~~strategy of transitioning to a pure-play water solutions provider. Other than the change in name, there was no impact on prior period results for this reporting segment.

COVID-19

We have implemented safety protocols at our facilities and have been working and will continue to work closely with our business partners on contingency planning in an effort to maintain supply. To date, we have not experienced a material disruption to our operations or supply chain.

While we have deployed and implemented and continue to develop and implement health and safety protocols, business continuity plans and crisis management protocols and have taken other operational actions in an effort to try to mitigate the negative impact of COVID-19 to our employees and our business, the extent of the impact of the pandemic on our business and financial results will depend on numerous evolving factors that we are not able to accurately predict and that all will vary by market, including the duration and scope of the pandemic, global economic conditions during and after the pandemic, governmental actions that have been taken, or may be taken in the future, in response to the pandemic and changes in customer behavior in response to the pandemic, some of which may be more than just temporary.

As we deliver bottled water to residential and business customers across a 21-country footprint and provide multi-gallon purified bottled water, self-service refill drinking water and water dispensers to customers through major retailers in North America, the profile of the services we provide and the products we sell, and the amount of revenue attributable to such services and products, varies by jurisdiction and changes in demand as a result of COVID-19 will vary in scope and timing across these markets. For example, to date, we have seen an increase in volumes in our residential water direct business and a decrease in volumes in our commercial water direct business as a result of the COVID-19 pandemic. Any continued economic uncertainty can adversely affect our customers’ financial condition, resulting in an inability to pay for our services or products, reduced or canceled orders of our services or products, or our business partners’ inability to supply us with the items necessary for us to make, manufacture, distribute or sell our products. Such adverse changes in our customers’ or business partners’ financial condition may also result in our recording impairment charges for our inability to recover or collect any accounts receivable. In addition, economic uncertainty associated with COVID-19 pandemic has resulted in volatility in the global capital and credit markets, which can impair our ability to access these markets on terms commercially acceptable to us, or at all.

Divestiture, Acquisition and Financing Transactions

On March 6, 2020 (the “Closing Date”), we entered into a credit agreement among the Company, as parent borrower, Cott Holdings Inc. and Eden Springs Nederland B.V. (“Eden”), each as subsidiary borrowers, certain other subsidiaries of the Company from time to time designated as subsidiary borrowers, Bank of America, ~~Inc. (“DSS”~~N.A., as administrative agent and collateral agent, and the lenders from time to time party thereto (the “Credit Agreement”).

The Credit Agreement provides for a senior secured revolving credit facility in an initial aggregate committed amount of $350.0 million (the “Revolving Credit Facility”), ~~Aquaterra~~which may be increased by incremental credit extensions from time to time in the form of term loans or additional revolving credit commitments. The Revolving Credit Facility will mature five years from the Closing Date and includes letter of credit and swing line loan subfacilities. Borrowings under the Revolving Credit Facility were used on the Closing Date to refinance in full and terminate our previously existing asset-based lending credit facility.

On March 2, 2020, pursuant to the terms and conditions of the Agreement and Plan of Merger entered into on January 13, 2020, Cott Corporation completed the acquisition of Primo Water Corporation (“~~Aquaterra”), Mountain Valley Spring Company (“Mountain Valley”), Eden Springs Europe B.V. (“Eden”)~~Legacy Primo” and ~~Aimia Foods (“Aimia”~~such transaction, the “Legacy Primo Acquisition”) ~~businesses), Coffee, Tea & Extract Solutions (which~~. The aggregate consideration paid in the Legacy Primo Acquisition was approximately $798.2 million and includes $377.6 million of our common shares issued by us to holders of Legacy Primo common stock, $216.1 million paid in cash by us to holders of Legacy Primo common stock, $196.9 million of cash paid to retire outstanding indebtedness on behalf of Legacy Primo, $4.7 million to settle a pre-existing liability and $2.9 million in fair value of replacement common share options and restricted stock units for vested Legacy Primo awards. The Legacy Primo Acquisition is consistent with our strategy of transitioning to a pure-play water solutions provider.

In connection with the closing of the Legacy Primo Acquisition, Cott Corporation changed its corporate name to Primo Water Corporation and its ticker symbol on the New York Stock Exchange and Toronto Stock Exchange to “PRMW”.

On February 28, 2020, we completed the sale of our coffee, tea and extract solutions business, S. & D. Coffee, Inc. (“S&D”) ~~business) and All Other (which includes our Cott Beverages~~, to Westrock Coffee Company, LLC, ~~business and other miscellaneous expenses). Our segment reporting results have been recast~~a Delaware limited liability company (“Westrock”), pursuant to ~~reflect these changes for all periods presented.~~

~~Divestiture Transaction~~

~~On February 8, 2019, we sold~~which Westrock acquired all of the issued and outstanding equity of ~~Cott Beverages LLC, which operated our soft drink concentrate production business and our Royal Crown International~~S&D from the Company (“~~RCI”) division, to Refresco Group B.V., a Dutch beverage manufacturer (“Refresco”~~S&D Divestiture”). The aggregate deal consideration was $405.0 million, paid at closing ~~was $50.0 million,~~in cash, subject to ~~post-closing adjustments~~adjustment for indebtedness, working capital ~~indebtedness~~ and other customary items. The sale of Cott Beverages LLC resulted in a loss of approximately $5.4 million that was recorded to other expense (income), net in the Consolidated Statement of Operations for the three months ended March 30, 2019.post-closing adjustments. We used the proceeds of ~~this~~the transaction to ~~repay~~finance a portion of the ~~outstanding borrowings under~~Legacy Primo Acquisition.

As a result of the S&D Divestiture, the operating results associated with S&D have been presented as discontinued operations for all periods presented. The following discussion and analysis of financial condition and results of operations are those of our ~~asset-based lending credit facility (the “ABL facility”).~~continuing operations unless otherwise indicated. For additional information regarding our discontinued operations, see Note 2 to the Consolidated Financial Statements.

Forward-Looking Statements

In addition to historical information, this report, and any documents incorporated in this report by reference, may contain statements relating to future events and future results. These statements are “forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation and involve known and unknown risks, uncertainties, future expectations and other factors that may cause actual results, performance or achievements of ~~Cott~~Primo Water Corporation to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such statements include, but are not limited to, statements that relate to projections of sales, cash flows, capital expenditures or other financial items, statements regarding our intentions to pay regular quarterly dividends on our common shares, and discussions of estimated future revenue enhancements and cost savings. These statements also relate to our business strategy, goals and expectations concerning our market position, future operations, margins, profitability, liquidity and capital resources. Generally, words such as “anticipate,” “believe,” “continue,” “could,” “endeavor,” “estimate,” “expect,” “intend,” “may,” “will,” “plan,” “predict,” “project,” “should” and similar terms and phrases are used to identify forward-looking statements in this report and any documents incorporated in this report by reference. These forward-looking statements reflect current expectations regarding future events and operating performance and are made only as of the date of this report.

The forward-looking statements are not guarantees of future performance or events and, by their nature, are based on certain estimates and assumptions regarding interest and foreign exchange rates, expected growth, results of operations, performance, business prospects and opportunities and effective income tax rates, which are subject to inherent risks and uncertainties. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in forward-looking statements may include, but are not limited to, assumptions regarding management’s current plans and estimates. Although we believe the assumptions underlying these forward-looking statements are reasonable, any of these assumptions could prove to be inaccurate and, as a result, the forward-looking statements based on those assumptions could prove to be incorrect. Our operations involve risks and uncertainties, many of which are outside of our control, and any one or any combination of these risks and uncertainties could also affect whether the forward-looking statements ultimately prove to be correct. These risks and uncertainties include, but are not limited to, those described in Part I, Item ~~1A.~~1A “Risk Factors” in our ~~2018~~2019 Annual Report and in Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q, and those described from time to time in our future reports filed with the U.S. Securities and Exchange Commission (“SEC”) and Canadian securities regulatory authorities.

The following are some of the factors that could affect our financial performance, including but not limited to, sales, earnings and cash flows, or could cause actual results to differ materially from estimates contained in or underlying the forward-looking statements:

•our ability to compete successfully in the markets in which we operate;

•fluctuations in commodity prices and our ability to pass on increased costs to our customers or hedge against such rising costs, and the impact of those increased prices on our volumes;

•our ability to manage our operations successfully;

•the impact of national, regional and global events, including those of a political, economic, business and competitive nature;

•the impact of the spread of COVID-19 on our business, financial condition and results of operations;

•our ability to fully realize the potential benefit of ~~acquisitions~~transactions (including the Legacy Primo Acquisition and the S&D Divestiture) or other strategic opportunities that we pursue;

•potential liabilities associated with ~~the sale of~~ our ~~North America, United Kingdom and Mexico business units (including the Canadian business) and our RCI finished goods export business;~~recent divestitures;

•our ability to realize ~~the revenue and~~ cost synergies of our acquisitions ~~because of~~due to integration difficulties and other challenges;

•our limited indemnification rights in connection with the Legacy Primo Acquisition;

•our exposure to intangible asset risk;

•currency fluctuations that adversely affect the exchange between the U.S. dollar and the British pound sterling, the exchange between the Euro, the Canadian dollar and other currencies and the exchange between the British pound sterling and the Euro;

•our ability to maintain favorable arrangements and relationships with our suppliers;

•our ability to meet our obligations under our debt agreements, and risks of further increases to our indebtedness;

•our ability to maintain compliance with the covenants and conditions under our debt agreements;

•fluctuations in interest rates, which could increase our borrowing costs;

•the incurrence of substantial indebtedness to finance our ~~acquisitions;~~acquisitions, including the Legacy Primo Acquisition;

•the impact ~~of global financial events~~ on our financial results from uncertainty in the financial markets and other adverse changes in general economic conditions;

•any disruption to production at our manufacturing facilities;

•our ability to maintain access to our water sources;

•our ability to protect our intellectual property;

•compliance with product health and safety standards;

•liability for injury or illness caused by the consumption of contaminated products;

•liability and damage to our reputation as a result of litigation or legal proceedings;

•changes in the legal and regulatory environment in which we operate;

•the seasonal nature of our business and the effect of adverse weather conditions;

~~the impact of national, regional and global events, including those of a political, economic, business and competitive nature;~~

•our ability to recruit, retain and integrate new management;

•our ability to renew our collective bargaining agreements on satisfactory terms;

•disruptions in our information systems;

•our ability to securely maintain our customers’ confidential or credit card information, or other private data relating to our employees or our company;

•our ability to maintain our quarterly dividend;

•our ability to adequately address the challenges and risks associated with our international operations and address difficulties in complying with laws and regulations including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act of 2010;

•increased tax liabilities in the various jurisdictions in which we operate;

•our ability to utilize tax attributes to offset future taxable income;

•the impact of the 2017 Tax Cuts and Jobs Act on our tax obligations and effective tax rate; or

•credit rating changes.

We undertake no obligation to update any information contained in this report or to publicly release the results of any revisions to forward-looking statements to reflect events or circumstances of which we may become aware of after the date of this report. Undue reliance should not be placed on forward-looking statements, and all future written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing.

Non-GAAP Measures

In this report, we supplement our reporting of financial measures determined in accordance with U.S. generally accepted accounting principles (“GAAP”) by utilizing certain non-GAAP financial measures that exclude certain items to make period-over-period comparisons for our underlying operations before material changes. We exclude these items to better understand trends in the business. We exclude the impact of foreign exchange to separate the impact of currency exchange rate changes from our results of operations.

We also utilize earnings (loss) ~~earnings~~ before interest expense, taxes, depreciation and amortization (“EBITDA”), which is GAAP net income (loss) ~~income~~ from continuing operations before interest expense, net, ~~(benefit)~~ expense for income taxes and depreciation and amortization. We consider EBITDA to be an indicator of operating performance. We also use EBITDA, as do analysts, lenders, investors and others, because it excludes certain items that can vary widely across different industries or among companies within the same industry. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies. We also utilize adjusted EBITDA, which is EBITDA excluding acquisition and integration costs, share-based compensation costs, ~~loss on sale of business, loss on commodity hedging instruments, net,~~ foreign exchange and other losses, ~~(gains),~~ net, loss on disposal of property, plant and equipment, net, ~~gain~~loss on ~~extinguishment~~sale of ~~long-term debt, operations of Cott Beverages LLC,~~business and other adjustments, net, as the case may be (“Adjusted EBITDA”). We consider Adjusted EBITDA to be an indicator of our operating performance.

Because we use these adjusted financial results in the management of our business and to understand underlying business performance, we believe this supplemental information is useful to investors for their independent evaluation and understanding of our business performance and the performance of our management. The non-GAAP financial measures described above are in addition to, and not meant to be considered superior to, or a substitute for, our financial statements prepared in accordance with GAAP. In addition, the non-GAAP financial measures included in this report reflect our judgment of particular items, and may be different from, and therefore may not be comparable to, similarly titled measures reported by other companies.

Summary Financial Results

Net loss from continuing operations for the three months ended March ~~30, 2019~~28, 2020 (the “first quarter”) was ~~$19.7~~$27.4 million or ~~$0.14~~$0.19 per diluted common share, compared with net ~~income~~loss from continuing operations of ~~$4.6~~$22.7 million or ~~$0.03~~$0.17 per diluted common share for the three months ended March ~~31, 2018.~~30, 2019.

The following items of significance affected our financial results for the first three months of ~~2019~~:2020:

•Net revenue increased ~~$13.3~~$46.5 million, or ~~2.4%~~10.9%, from the prior year period due primarily to the addition of revenues from the ~~Mountain Valley and Crystal Rock businesses,~~Legacy Primo business, pricing initiatives, ~~growth within our home and office water delivery operations,~~ and growth in ~~retail in our Route Based Services reporting segment, growth in coffee~~water consumption and volumes ~~and growth in liquid coffee and extracts in our Coffee, Tea and Extract Solutions reporting segment,~~due to increased consumer demand, partially offset by ~~the impact of unfavorable foreign exchange rates and~~ a ~~decrease~~decline in ~~revenues contributed by our PolyCycle Solutions ("PCS") business that was sold during the second quarter of 2018 in our Route Based Services reporting segment, lower green~~office coffee ~~commodity prices and a change in customer mix, as well as a decrease in other product sales in our Coffee, Tea and Extract Solutions reporting segment,~~service volumes and a decrease in revenues contributed by our Cott Beverages LLC business that was sold during the first ~~quarter;~~quarter of 2019;

•Gross profit increased to ~~$282.9~~$273.3 million from ~~$273.5~~$243.1 million in the prior year period due primarily to the addition of the ~~Mountain Valley and Crystal Rock businesses,~~Legacy Primo business, pricing initiatives ~~growth within our home and office water delivery operations, and growth retail in our Route Based Services reporting segment, growth in coffee volumes~~ and growth in ~~liquid coffee~~water consumption and ~~extracts in our Coffee, Tea and Extract Solutions reporting segment, partially offset by the unfavorable impact of foreign exchange rates and~~volumes due to increased overtime costs in our Route Based Services reporting segment, lower green coffee commodity prices and a change in customer mix in our Coffee, Tea, and Extract Solutions reporting segment, as well as a decrease in gross profit contributed by our Cott Beverages LLC business that was sold during the first quarter.consumer demand. Gross profit as a percentage of net revenue was ~~49.3%~~57.6% compared to ~~48.8%~~56.8% in the prior year period;

•Selling, general and administrative (“SG&A”) expenses increased to ~~$272.1~~$255.1 million from ~~$261.1~~$235.8 million in the prior year period due primarily to the addition of the ~~Mountain Valley and Crystal Rock businesses in our Route Based Services reporting segment and~~Legacy Primo business as well as an increase in selling and services costs due to the increase in ~~our Coffee, Tea and Extract Solutions reporting segment,~~volumes, partially offset by ~~less~~lower SG&A expenses incurred by our Cott Beverages LLC business that was sold during the first quarter ~~and the favorable impact~~ of ~~foreign exchange rates within our Route Based Services reporting segment.~~2019. SG&A expenses as a percentage of net revenue was ~~47.4%~~53.8% compared to ~~46.6%~~55.1% in the prior year period;

~~Other expense, net was $5.5~~•Acquisition and integration expenses increased to $20.8 million ~~compared to other income, net of $20.2~~from $4.7 million in the prior year period due primarily to the addition of the Legacy Primo business, partially offset by lower acquisition and integration expenses related to our Mountain Valley and Crystal Rock businesses. Acquisition and integration expenses as a percentage of revenue was 4.4% compared to 1.1% in the prior year period;

•Other expense, net was $7.0 million compared to $5.5 million in the prior year period due primarily to an increase of net losses on foreign currency transactions in the first quarter, partially offset by the loss recognized on the sale of our Cott Beverages LLC business in the first quarter, partially offset by the gain recognized on the redemption of the 10.000% senior secured notes due 2021 (the “DSS Notes”) and an increase of net gains on foreign currency transactions in the prior year period;

•Income tax benefit was ~~$1.0~~$3.3 million on pre-tax loss from continuing operations of ~~$20.7~~$30.7 million compared to income tax ~~expense~~benefit of ~~$0.9~~$1.4 million on pre-tax ~~income~~loss from continuing operations of ~~$5.5~~$24.1 million in the prior year period due primarily to ~~increased losses incurred~~a release of uncertain tax positions in ~~jurisdictions for which no tax benefit is recognized;~~the first quarter;

•Adjusted EBITDA ~~decreased~~increased to ~~$62.9~~$70.4 million compared to ~~$64.0~~$53.7 million in the prior year period due to the items listed above; and

•Cash flows provided by operating activities from continuing operations was ~~$23.6~~$4.7 million compared to ~~$32.9~~$15.1 million in the prior year period. The ~~$9.3~~$10.4 million decrease was due primarily to the ~~decrease~~increase in net ~~(loss) income, partially offset by~~loss from continuing operations and the change in working capital ~~account~~ balances relative to the prior year period.

Results of Operations

The following table summarizes our Consolidated Statements of Operations as a percentage of revenue for the three months ended March ~~30, 2019~~28, 2020 and March ~~31, 2018:~~30, 2019:


	For the Three Months Ended									For the Three Months Ended
	March 30, 2019				March 31, 2018					March 28, 2020			March 30, 2019
(in millions of U.S. dollars)	$		%		$		%		(in millions of U.S. dollars)	$	%	$	%
Revenue, net	574.1		100.0		560.8		100.0		Revenue, net	474.2	100.0	427.7	100.0
Cost of sales	291.2		50.7		287.3		51.2		Cost of sales	200.9	42.4	184.6	43.2
Gross profit	282.9		49.3		273.5		48.8		Gross profit	273.3	57.6	243.1	56.8
Selling, general and administrative expenses	272.1		47.4		261.1		46.6		Selling, general and administrative expenses	255.1	53.8	235.8	55.1
Loss on disposal of property, plant and equipment, net	1.9		0.3		1.3		0.2		Loss on disposal of property, plant and equipment, net	1.4	0.3	1.9	0.4
Acquisition and integration expenses	4.8		0.8		5.0		0.9		Acquisition and integration expenses	20.8	4.4	4.7	1.1
Operating income	4.1		0.7		6.1		1.1
Other expense (income), net	5.5		1.0		(20.2	)	(3.6	)
Operating (loss) income									Operating (loss) income	(4.0)	(0.8)	0.7	0.2
Other expense, net									Other expense, net	7.0	1.5	5.5	1.3
Interest expense, net	19.3		3.4		20.8		3.7		Interest expense, net	19.7	4.2	19.3	4.5
(Loss) income from continuing operations before income taxes	(20.7	)	(3.6	)	5.5		1.0
Income tax (benefit) expense	(1.0	)	(0.2	)	0.9		0.2
Net (loss) income from continuing operations	(19.7	)	(3.4	)	4.6		0.8
Loss from continuing operations before income taxes									Loss from continuing operations before income taxes	(30.7)	(6.5)	(24.1)	(5.6)
Income tax benefit									Income tax benefit	(3.3)	(0.7)	(1.4)	(0.3)
Net loss from continuing operations									Net loss from continuing operations	(27.4)	(5.8)	(22.7)	(5.3)
Net income from discontinued operations, net of income taxes	—		—		357.4		63.7		Net income from discontinued operations, net of income taxes	30.9	6.5	3.0	0.7
Net (loss) income	(19.7	)	(3.4	)	362.0		64.5
Less: Net income attributable to non-controlling interests - discontinued operations	—		—		0.6		0.1
Net (loss) income attributable to Cott Corporation	(19.7	)	(3.4	)	361.4		64.4
Net income (loss)									Net income (loss)	3.5	0.7	(19.7)	(4.6)
Depreciation & amortization	45.2		7.9		47.4		8.5		Depreciation & amortization	45.0	9.5	39.7	9.3

The following table summarizes the change in revenue by reporting segment for the three months ended March ~~30, 2019:~~28, 2020:


	For the Three Months Ended March 30, 2019																For the Three Months Ended March 28, 2020
(in millions of U.S. dollars, except percentage amounts)	Route Based Services			Coffee, Tea and Extract Solutions			All Other			Eliminations			Total			(in millions of U.S. dollars, except percentage amounts)	Water Solutions			All Other			Eliminations			Total
Change in revenue	$	22.4		$	1.9		$	(10.5	)	$	(0.5	)	$	13.3		Change in revenue	$	53.7		$	(7.2)		$	—		$	46.5
Impact of foreign exchange ¹	11.9			—			—			—			11.9			Impact of foreign exchange ¹	0.2			—			—			0.2
Change excluding foreign exchange	$	34.3		$	1.9		$	(10.5	)	$	(0.5	)	$	25.2		Change excluding foreign exchange	$	53.9		$	(7.2)		$	—		$	46.7
Percentage change in revenue	5.6		%	1.3		%	(59.3		)%	45.5		%	2.4		%	Percentage change in revenue	12.8		%	(100.0)		%	—		%	10.9		%
Percentage change in revenue excluding foreign exchange	8.6		%	1.3		%	(59.3		)%	45.5		%	4.5		%	Percentage change in revenue excluding foreign exchange	12.8		%	(100.0)		%	—		%	10.9		%

______________________

¹ Impact of foreign exchange is the difference between the current period revenue translated utilizing the current period average foreign exchange rates less the current period revenue translated utilizing the prior period average foreign exchange rates.

The following table summarizes the change in gross profit by reporting segment for the three months ended March 28, 2020:


	For the Three Months Ended March 28, 2020
(in millions of U.S. dollars, except percentage amounts)	Water Solutions			All Other			Eliminations			Total
Change in gross profit	$	30.5		$	(0.3)		$	—		$	30.2
Impact of foreign exchange ¹	0.1			—			—			0.1
Change excluding foreign exchange	$	30.6		$	(0.3)		$	—		$	30.3
Percentage change in gross profit	12.6		%	(100.0)		%	—		%	12.4		%
Percentage change in gross profit excluding foreign exchange	12.6		%	(100.0)		%	—		%	12.5		%

______________________

¹ Impact of foreign exchange is the difference between the current period gross profit translated utilizing the current period average foreign exchange rates less the current period gross profit translated utilizing the prior period average foreign exchange rates.

Impact of foreign exchange is the difference between the current period revenue translated utilizing the current period average foreign exchange rates less the current period revenue translated utilizing the prior period average foreign exchange rates.

Our corporate oversight function is not treated as a segment; it includes certain general and administrative costs that are ~~not allocated to any of the reporting segments. During the second quarter of~~ ~~2018, we combined and~~ disclosed ~~the corporate oversight function~~ in the All Other category. ~~Our segment reporting results have been recast to reflect these changes for all periods presented.~~

Subsequent to the sale of our North America, United Kingdom and Mexico business units (including the Canadian business) and our RCI finished goods export business in January 2018, management re-evaluated the measure of profit for our reportable segments and determined that excluding corporate allocations from segment operating income was appropriate as these costs are not considered by management when evaluating performance. Operating income (loss) for the prior periods have been recast to reflect this change.

The following table summarizes our net revenue, gross profit, SG&A expenses and operating income (loss) by reporting segment for the three months ended March ~~30, 2019~~28, 2020 and March ~~31, 2018:~~30, 2019:


	For the Three Months Ended
(in millions of U.S. dollars)	March 28, 2020		March 30, 2019
Revenue, net
Water Solutions	$	474.2	$	420.5
All Other	—		7.2
Total	$	474.2	$	427.7
Gross profit
Water Solutions	$	273.3	$	242.8
All Other	—		0.3
Total	$	273.3	$	243.1
Selling, general and administrative expenses
Water Solutions	$	245.3	$	224.5
All Other	9.8		11.3
Total	$	255.1	$	235.8
Operating income (loss)
Water Solutions	$	21.5	$	14.0
All Other	(25.5)		(13.3)
Total	$	(4.0)	$	0.7

For the Three Months Ended
(in millions of U.S. dollars) March 30, 2019 March 31, 2018
Revenue, net
Route Based Services $ 420.5
$ 398.1
Coffee, Tea and Extract Solutions 148.0
146.1
All Other 7.2
17.7
Eliminations (1.6 ) (1.1 )
Total $ 574.1
$ 560.8
Gross profit
Route Based Services $ 242.8
$ 232.5
Coffee, Tea and Extract Solutions 39.8
38.7
All Other 0.3
2.3
Total $ 282.9
$ 273.5
Operating income (loss)
Route Based Services $ 14.0
$ 14.0
Coffee, Tea and Extract Solutions 3.4
4.0
All Other (13.3 ) (11.9 )
Total $ 4.1
$ 6.1

The following tables summarize net revenue by channel for the three months ended March 28, 2020 and March 30, 2019:


	For the Three Months Ended March 28, 2020
(in millions of U.S. dollars)	Water Solutions		All Other		Total
Revenue, net
Water Direct/Water Exchange	$	295.2	$	—	$	295.2
Water Refill/Water Filtration	30.8		—		30.8
Water Retail	55.4		—		55.4
Water Dispensers	5.9		—		5.9
Other	86.9		—		86.9
Total	$	474.2	$	—	$	474.2


	For the Three Months Ended March 30, 2019
(in millions of U.S. dollars)	Water Solutions		All Other		Total
Revenue, net
Water Direct/Water Exchange	$	264.2	$	—	$	264.2
Water Refill/Water Filtration	15.3		—		15.3
Water Retail	50.8		—		50.8
Water Dispensers	—		—		—
Other	90.2		7.2		97.4
Total	$	420.5	$	7.2	$	427.7

______________________

The following tables summarize gross margin by channel for the three months ended March 28, 2020 and March ~~31, 2018:~~30, 2019:


	For the Three Months Ended March 28, 2020
(in millions of U.S. dollars)	Water Solutions		All Other		Total
Gross margin
Water Direct/Water Exchange	72.1	%	—	%	72.1	%
Water Refill/Water Filtration	72.1	%	—	%	72.1	%
Water Retail	14.6	%	—	%	14.6	%
Water Dispensers	3.4	%	—	%	3.4	%
Other	34.5	%	—	%	34.5	%
Total	57.6	%	—	%	57.6	%


	For the Three Months Ended March 30, 2019
(in millions of U.S. dollars)	Water Solutions		All Other		Total
Gross margin
Water Direct/Water Exchange	72.8	%	—	%	72.8	%
Water Refill/Water Filtration	86.9	%	—	%	86.9	%
Water Retail	12.0	%	—	%	12.0	%
Water Dispensers	—	%	—	%	—	%
Other	34.5	%	4.2	%	32.2	%
Total	57.7	%	4.2	%	56.8	%

~~____________________________~~

The following table summarizes our EBITDA and Adjusted EBITDA for the three months ended March 28, 2020 and March 30, 2019:


	For the Three Months Ended
(in millions of U.S. dollars)	March 28, 2020		March 30, 2019
Net loss from continuing operations	$	(27.4)	$	(22.7)
Interest expense, net	19.7		19.3
Income tax benefit	(3.3)		(1.4)
Depreciation and amortization	45.0		39.7
EBITDA	$	34.0	$	34.9
Acquisition and integration costs ¹	20.8		4.7
Share-based compensation costs	2.4		3.1
Foreign exchange and other losses, net	6.3		1.0
Loss on disposal of property, plant and equipment, net	1.4		1.9
Loss on sale of business	—		5.4
Other adjustments, net	5.5		2.7
Adjusted EBITDA	$	70.4	$	53.7

______________________

¹ Includes $0.2 million of share-based compensation costs for the three months ended March 30, 2019 ~~and March 31, 2018:~~related to awards granted in connection with the acquisition of our Eden business.

For the Three Months Ended
(in millions of U.S. dollars) March 30, 2019
March 31, 2018
Net (loss) income from continuing operations $ (19.7 )
$ 4.6
Interest expense, net 19.3

20.8
Income tax (benefit) expense (1.0 )
0.9
Depreciation and amortization 45.2

47.4
EBITDA $ 43.8

$ 73.7
Acquisition and integration costs ¹
4.8

5.0
Share-based compensation costs 3.3

2.4
Loss on sale of business 5.4
—
Commodity hedging loss, net —

0.3
Foreign exchange and other losses (gains), net 1.0

(8.2 )
Loss on disposal of property, plant and equipment, net 1.9

1.3
Gain on extinguishment of long-term debt —

(7.1 )
Cott Beverages LLC ²
0.4
(0.5 )
Other adjustments, net 2.3

(2.9 )
Adjusted EBITDA $ 62.9

$ 64.0

~~______________________~~


¹	Includes $0.2 million and $1.0 million of share-based compensation costs for the three months ended March 30, 2019 and March 31, 2018, respectively, related to awards granted in connection with the acquisition of our S&D and Eden businesses.


²	~~Impact on our operations related to the Cott Beverages LLC business, which was sold on February 8, 2019.~~

Three Months Ended March ~~30, 2019~~28, 2020 Compared to Three Months Ended March ~~31, 2018~~30, 2019

Revenue, Net

Net revenue increased ~~$13.3~~$46.5 million, or ~~2.4%~~10.9%, in the first quarter from the comparable prior year period.

~~Route Based Services~~Water Solutions net revenue increased ~~$22.4~~$53.7 million, or ~~5.6%~~12.8%, in the first quarter from the comparable prior year period due primarily to the addition of revenues from the ~~Mountain Valley and Crystal Rock businesses of $23.2 million,~~Legacy Primo business, pricing initiatives, and growth ~~within our home~~in water consumption and ~~office water delivery operations of $8.8 million, and growth in retail of $4.1 million,~~volumes due to increased consumer demand, partially offset by ~~the unfavorable impact of foreign exchange rates of $11.9 million and less revenue of $2.2 million contributed by our PCS business due to the sale of such business~~a decline in ~~the second quarter of 2018.~~

~~Coffee, Tea and Extract Solutions net revenue increased $1.9 million, or 1.3%, in the first quarter from the comparable prior year period due primarily to growth in~~office coffee volumes and growth in liquid coffee and extracts of $9.7 million, partially offset by lower green coffee commodity prices and a change in customer mix of $4.6 million, as well as decrease in other product sales of $3.2 million.service volumes.

All Other net revenue decreased ~~$10.5~~$7.2 million, or ~~59.3%~~100.0%, in the first quarter from the comparable prior year period due primarily to less revenue contributed by our Cott Beverages LLC business, ~~due to the sale of such business~~which was sold in the first ~~quarter.~~quarter of 2019.

Gross Profit

Gross profit increased to ~~$282.9~~$273.3 million in the first quarter from ~~$273.5~~$243.1 million in the comparable prior year period. Gross profit as a percentage of revenue was ~~49.3%~~57.6% in the first quarter compared to ~~48.8%~~56.8% in the comparable prior year period.

~~Route Based Services~~Water Solutions gross profit increased to ~~$242.8~~$273.3 million in the first quarter from ~~$232.5~~$242.8 million in the comparable prior year period due primarily to the addition of the ~~Mountain Valley and Crystal Rock businesses,~~Legacy Primo business, pricing initiatives and growth ~~within our home~~in water consumption and ~~office water delivery operations, and growth in retail, partially offset by the unfavorable impact of foreign exchange rates and~~volumes due to increased ~~overtime costs.~~

Coffee, Tea and Extract Solutions gross profit increased to $39.8 million in the first quarter from $38.7 million in the comparable prior year period due primarily to growth in coffee volumes and growth in liquid coffee and extracts, partially offset by lower green coffee commodity prices and a change in customer mix.consumer demand.

All Other gross profit decreased to ~~$0.3 million~~nil in the first quarter from ~~$2.3~~$0.3 million in the comparable prior year period due primarily to less gross profit contributed by our Cott Beverages LLC business, ~~due to the sale of such business~~which was sold in the first ~~quarter.~~quarter of 2019.

Selling, General and Administrative Expenses

SG&A expenses increased to ~~$272.1~~$255.1 million in the first quarter from ~~$261.1~~$235.8 million in the comparable prior year period. SG&A expenses as a percentage of revenue was ~~47.4%~~53.8% in the first quarter compared to ~~46.6%~~55.1% in the comparable prior year period.

~~Route Based Services~~Water Solutions SG&A expenses increased to ~~$224.5~~$245.3 million in the first quarter from ~~$214.9~~$224.5 million in the comparable prior year period due primarily to the addition of the ~~Mountain Valley~~Legacy Primo business as well as an increase in selling and ~~Crystal Rock businesses, partially offset by~~services costs due to the ~~favorable impact of foreign exchange rates.~~increase in volumes.

~~Coffee, Tea and Extract Solutions~~All Other SG&A expenses ~~increased~~decreased to ~~$36.3~~$9.8 million in the first quarter from ~~$34.4~~$11.3 million in the comparable prior year period due primarily to ~~an increase in selling costs.~~

~~All Other~~lower SG&A expenses ~~decreased~~incurred by our Cott Beverages LLC business, which was sold in the first quarter of 2019.

Acquisition and Integration Expenses

Acquisition and integration expenses increased to ~~$11.3~~$20.8 million in the first quarter from ~~$11.8~~$4.7 million in the comparable prior year period. Acquisition and integration expenses as a percentage of revenue was 4.4% in the first quarter compared to 1.1% in the comparable prior year period.

Water Solutions acquisition and integration expenses increased to $5.2 million in the first quarter from $2.4 million in the comparable prior year period due primarily to ~~less SG&A expenses incurred by our Cott Beverages LLC~~the addition of the Legacy Primo business, ~~due to the sale of such business in the first quarter,~~ partially offset by ~~an increase in professional fees.~~lower acquisition and integration expenses related to our Mountain Valley and Crystal Rock businesses.

~~Operating Income~~

~~Operating income decreased~~All Other acquisition and integration expenses increased to ~~$4.1~~$15.6 million in the first quarter from ~~$6.1~~$2.3 million in the comparable prior year period due primarily to the addition of the Legacy Primo business, partially offset by lower acquisition and integration expenses related to our Mountain Valley and Crystal Rock businesses.

Operating (Loss) Income

Operating loss was $4.0 million in the first quarter compared to operating income of $0.7 million in the comparable prior year period.

~~Route Based Services~~Water Solutions operating income ~~remained unchanged at $14.0~~increased to $21.5 million in the first quarter from ~~the comparable prior year period due to the items discussed above.~~

~~Coffee, Tea and Extract Solutions operating income decreased to $3.4 million in the first quarter from $4.0~~$14.0 million in the comparable prior year period due to the items discussed above.

All Other operating loss increased to ~~$13.3~~$25.5 million in the first quarter from ~~$11.9~~$13.3 million in the comparable prior year period due to the items discussed above.

Other Expense, ~~(Income),~~ Net

Other expense, net was ~~$5.5~~$7.0 million for the first quarter compared to ~~other income, net of $20.2~~$5.5 million in the comparable prior year period due primarily to an increase of net losses on foreign currency transactions in the first quarter, partially offset by the loss recognized on the sale of our Cott Beverages LLC business in the ~~first quarter, partially offset by the gain recognized on the redemption of the DSS Notes and an increase of net gains on foreign currency transactions in the~~ prior year period.

Income Taxes

Income tax benefit was ~~$1.0~~$3.3 million in the first quarter compared to ~~income tax expense of $0.9~~$1.4 million in the comparable prior year period. The effective tax rate for the first quarter was ~~4.8%~~10.7% compared to ~~16.4%~~5.8% in the comparable prior year period.

The effective tax rate for the first quarter varied from the effective tax rate from the comparable prior year period due primarily to ~~increased losses incurred~~a release of uncertain tax positions in ~~jurisdictions for which no tax benefit is recognized.~~the first quarter.

Liquidity and Capital Resources

As of March ~~30, 2019,~~28, 2020, we had total debt of ~~$1,317.9~~$1,407.8 million and ~~$153.9~~$112.2 million of cash and cash equivalents compared to ~~$1,342.2~~$1,358.4 million of debt and ~~$170.8~~$156.9 million of cash and cash equivalents as of December ~~29, 2018.~~28, 2019. Our cash and cash equivalents balance as of March ~~30, 2019~~28, 2020 and December ~~29, 2018~~28, 2019 includes ~~$12.5~~$12.4 million of cash proceeds received from the sale of our North America, United Kingdom and Mexico business units (including the Canadian business) and our ~~RCI~~Royal Crown International finished goods export business that are being held in escrow by a third party escrow agent to secure potential indemnification claims. ~~The escrow will be released, subject to any amounts for pending indemnification claims, on the eighteen month anniversary of the transaction closing date, which was January 30, 2018.~~ Our cash and cash equivalents balance as of March ~~30,~~28, 2020 and December 28, 2019 also includes $0.5 million of cash proceeds received from the sale of our Cott Beverages LLC business that are being held in escrow by a third party escrow agent to secure potential indemnification claims.

The ~~escrow will be released, subject to any amounts for pending indemnification claims, on the eighteen month anniversary~~recent COVID-19 pandemic has disrupted our business. The extent of the ~~transaction closing date,~~impact of the COVID-19 pandemic on our business and financial results will depend on numerous evolving factors that we are not able to accurately predict and that all will vary by market, including the duration and scope of the pandemic, global economic conditions during and after the pandemic, governmental actions that have been taken, or may be taken in the future, in response to the pandemic, and changes in customer behavior in response to the pandemic, some of which ~~was February 8, 2019.~~may be more than just temporary. In ~~addition,~~response to the COVID-19 pandemic, we have taken certain measures to preserve our liquidity. For example, on April 3, 2020, we borrowed $170.0 million under the Revolving Credit Facility as a precautionary measure to increase our cash position and cash equivalents balances as of March 30, 2019 and December 29, 2018, include margin account balances related to our coffee futures of $14.6 million and $12.9 million, respectively. We are required to maintain margin account balancespreserve financial flexibility considering current uncertainty in ~~accordance with futures market and broker regulations.~~the global markets resulting from the COVID-19 pandemic.

We believe that our level of resources, which includes cash on hand, ~~available~~ borrowings under our ~~ABL facility~~Revolving Credit Facility and funds provided by our operations, will be adequate to meet our expenses, capital expenditures, and debt service obligations for the next twelve months. Our ability to generate cash to meet our current expenses and debt service obligations will depend on our future performance. If we do not have enough cash to pay our debt service obligations, or if the ~~ABL facility~~Revolving Credit Facility or our outstanding notes were to become currently due, either at maturity or as a result of a breach, we may be required to take actions such as amending our ~~ABL facility~~Credit Agreement or the indentures governing our outstanding notes, refinancing all or part of our existing debt, selling assets, incurring additional indebtedness or raising equity. The ABL facility is secured by substantially all of our assets and those of the respective guarantor subsidiaries. If the ABL facility were to become currently due, the lenders may have the right to foreclose on such assets. If we need to seek additional financing, there is no assurance that this additional financing will be available on favorable terms or at all.

As of March ~~30, 2019,~~28, 2020, our total availability under the ABL facility was $217.9 million, which was based on our borrowing base (accounts receivables, inventory, and fixed assets as of the March 2019 month-end under the terms of the credit agreement governing the ABL facility). We had $53.3 million of outstanding borrowings under the ~~ABL facility~~Revolving Credit Facility were $118.0 million and ~~$46.1 million in~~ outstanding letters of ~~credit. As a result, our excess~~credit totaled $43.3 million resulting in total utilization under the Revolving Credit Facility of $161.3 million. Accordingly, unused availability under the ~~ABL facility was $118.5~~Revolving Credit Facility as of March 28, 2020 amounted to $188.7 million. ~~Each month’s borrowing base is not effective until submitted to the lenders, which typically occurs on the fifteenth day of the following month.~~

We earn a portion of our consolidated operating income in subsidiaries located outside of Canada. We have not provided for federal, state and foreign deferred income taxes on the undistributed earnings of our non-Canadian subsidiaries. We expect that these earnings will be permanently reinvested by such subsidiaries except in certain instances where repatriation attributable to current earnings results in minimal or no tax consequences.

We expect our existing cash and cash equivalents, cash flows and the issuance of debt to continue to be sufficient to fund our operating, investing and financing activities. In addition, we expect our existing cash and cash equivalents and cash flows outside of Canada to continue to be sufficient to fund the operating activities of our ~~subsidiary operating activities.~~subsidiaries.

A future change to our assertion that foreign earnings will be permanently reinvested could result in additional income taxes and/or withholding taxes payable, where applicable. Therefore, a higher effective tax rate could occur during the period of repatriation.

We may, from time to time, depending on market conditions, including without limitation whether our outstanding notes are then trading at a discount to their face amount, repurchase our outstanding notes for cash and/or in exchange for our common shares, warrants, preferred shares, debt or other consideration, in each case in open market purchases and/or privately negotiated transactions. The amounts involved in any such transactions, individually or in the aggregate, may be material. However, the covenants in our ~~ABL facility~~Revolving Credit Facility subject such purchases to certain limitations and conditions.

A dividend of $0.06 per common share was declared during the first quarter of ~~2019~~2020 for an aggregate dividend payment of approximately ~~$8.2~~$9.6 million.

The following table summarizes our cash flows for the three months ended March ~~30, 2019~~28, 2020 and March ~~31, 2018,~~30, 2019, as reported in our Consolidated Statements of Cash Flows in the accompanying Consolidated Financial Statements:


	For the Three Months Ended							For the Three Months Ended
(in millions of U.S. dollars)	March 30, 2019			March 31, 2018			(in millions of U.S. dollars)	March 28, 2020		March 30, 2019
Net cash provided by operating activities from continuing operations	$	23.6		$	32.9		Net cash provided by operating activities from continuing operations	$	4.7	$	15.1
Net cash provided by (used in) investing activities from continuing operations	4.9			(57.7		)
Net cash (used in) provided by investing activities from continuing operations							Net cash (used in) provided by investing activities from continuing operations	(460.2)		24.0
Net cash used in financing activities from continuing operations	(46.7		)	(290.2		)	Net cash used in financing activities from continuing operations	(12.8)		(46.7)
Cash flows from discontinued operations:							Cash flows from discontinued operations:
Net cash used in operating activities from discontinued operations	—			(84.7		)
Net cash provided by investing activities from discontinued operations	—			1,228.6
Net cash (used in) provided by operating activities from discontinued operations							Net cash (used in) provided by operating activities from discontinued operations	(17.3)		8.5
Net cash provided by (used in) investing activities from discontinued operations							Net cash provided by (used in) investing activities from discontinued operations	394.5		(19.1)
Net cash used in financing activities from discontinued operations	—			(769.7		)	Net cash used in financing activities from discontinued operations	(0.1)		—
Effect of exchange rate changes on cash	1.3			(4.8		)	Effect of exchange rate changes on cash	(2.1)		1.3
Net (decrease) increase in cash, cash equivalents and restricted cash	(16.9		)	54.4
Net decrease in cash, cash equivalents and restricted cash							Net decrease in cash, cash equivalents and restricted cash	(93.3)		(16.9)
Cash and cash equivalents and restricted cash, beginning of period	170.8			157.9			Cash and cash equivalents and restricted cash, beginning of period	205.5		170.8
Cash and cash equivalents and restricted cash from continuing operations, end of period	$	153.9		$	212.3		Cash and cash equivalents and restricted cash from continuing operations, end of period	$	112.2	$	153.9

Operating Activities

Cash provided by operating activities from continuing operations was ~~$23.6~~$4.7 million year to date compared to ~~$32.9~~$15.1 million in the comparable prior year period. The ~~$9.3~~$10.4 million decrease was due primarily to the ~~decrease~~increase in net ~~(loss) income, partially offset by~~loss from continuing operations and the change in working capital ~~account~~ balances relative to the prior year period.

Investing Activities

Cash used in investing activities from continuing operations was $460.2 million year to date compared to cash provided by investing activities from continuing operations ~~was $4.9 million year to date compared to cash used in investing activities from continuing operations~~ of ~~$57.7~~$24.0 million in the comparable prior year period. The ~~$62.6~~$484.2 million increase was due primarily to the cash used to acquire our Legacy Primo business, an increase in additions to property, plant and equipment relative to the prior year period, and cash received from the sale of our Cott Beverages LLC business ~~as well as a decrease~~ in ~~additions to property, plant and equipment and a decrease in cash used to finance acquisitions relative to~~ the prior year period.

Financing Activities

Cash used in financing activities from continuing operations was ~~$46.7~~$12.8 million year to date compared to ~~$290.2~~$46.7 million in the comparable prior year period. The ~~$243.5~~$33.9 million decrease was due primarily to ~~the redemption of the DSS Notes~~an increase in short-term borrowings relative to the prior year period, partially offset by an increase in ~~payments under our ABL facility.~~common shares repurchased relative to the prior year period.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements as defined under Item 303(a)(4) of Regulation S-K as of March ~~30, 2019.~~28, 2020.

Contractual Obligations

We have no material changes to the disclosure on this matter made in our ~~2018~~2019 Annual Report.

Credit Ratings and Covenant Compliance

Credit Ratings

We have no material changes to the disclosure on this matter made in our ~~2018~~2019 Annual Report.

Covenant Compliance

Indentures governing our outstanding notes

Under the indentures governing our outstanding notes, we are subject to a number of covenants, including covenants that limit our and certain of our subsidiaries’ ability, subject to certain exceptions and qualifications, to (i) pay dividends or make distributions, repurchase equity securities, prepay subordinated debt or make certain investments, (ii) incur additional debt or issue certain disqualified stock or preferred stock, (iii) create or incur liens on assets securing indebtedness, (iv) merge or consolidate with another company or sell all or substantially all of our assets taken as a whole, (v) enter into transactions with affiliates and (vi) sell assets. The covenants are substantially similar across the series of notes. As of March ~~30, 2019,~~28, 2020, we were in compliance with all of the covenants under each series of notes. There have been no amendments to any such covenants of our outstanding notes since the date of their ~~issuance or assumption, as applicable.~~issuance.

~~ABL~~Revolving Credit Facility

Under the ~~credit agreement~~Credit Agreement governing the ~~ABL facility, as amended~~Revolving Credit Facility, we and ~~restated to date, Cott and its~~our restricted subsidiaries are subject to a number of business and financial covenants, including a ~~minimum fixed charge~~consolidated secured leverage ratio and an interest coverage ratio. The consolidated secured leverage ratio must not be more than 3.50 to 1.00, with an allowable temporary increase to 4.00 to 1.00 for the quarter in which we consummate a material acquisition with a price not less than $125.0 million, for three quarters. The interest coverage ratio ~~which measures our ability to cover financing expenses. The minimum fixed charge coverage ratio of 1.0 to 1.0 is effective if and when there exists an event of default or our aggregate availability is~~must not be less than 3.00 to 1.00. Per the ~~greater of 10% of~~Credit Agreement, we are required to calculate these two financial covenants commencing with the ~~Line Cap under~~initial test period ending June 27, 2020.

In addition, the ~~ABL facility or $22.5 million. Line Cap is defined~~Credit Agreement has certain non-financial covenants, such as an amount equal to the lesser of the lenders’ commitments or the borrowing base at such time. If an event of default exists or the excess availability is less than the greater of 10% of the aggregate availability under the ABL facility or $22.5 million, the lenders will take dominion over the cashcovenants regarding indebtedness, investments, and ~~will apply the excess cash to reduce amounts owing under the facility.~~asset dispositions. We were in compliance with all of the applicable covenants ~~under the ABL facility~~ as of March ~~30, 2019.~~28, 2020.

Issuer Purchases of Equity Securities

Common Share Repurchase Program

On December 11, ~~2018,~~2019, our Board of Directors approved a share repurchase program for up to $50.0 million of our outstanding common shares over a 12-month period commencing on December ~~14, 2018~~16, 2019 (the “Repurchase Plan”). ~~As of December 29, 2018, the maximum approximate amount of common shares available to be purchased under the Repurchase Plan was $27.8 million.~~ For the three months ended March ~~30, 2019,~~28, 2020, we repurchased ~~570,000~~2,316,835 common shares for ~~$7.8~~$25.0 million through open market transactions under the Repurchase Plan. Shares purchased under the Repurchase Plan were subsequently canceled. ~~Please refer~~There can be no assurance as to the ~~table in Part II, Item 2 of this Quarterly Report on Form 10-Q.~~

~~We are unable to predict the~~precise number of shares, if any, that ~~ultimately~~ will be repurchased under the Repurchase Plan in the future, or the aggregate dollar amount of ~~the~~ shares to be purchased in future periods. We may discontinue purchases at any time, subject to compliance with applicable regulatory requirements.

Please refer to the table in Part II, Item 2 of this Quarterly Report on Form 10-Q.

Tax Withholding

In the first quarter of 2020, an aggregate of 458,972 common shares were withheld from delivery to our employees to satisfy their respective tax obligations related to share-based awards. In the first quarter of 2019, an aggregate of 200,309 common shares were withheld from delivery to our employees to satisfy their respective tax obligations related to share-based awards. ~~In the first quarter of 2018, an aggregate of 354,593 common shares were withheld from delivery to our employees to satisfy their respective tax obligations related to share-based awards.~~

Please refer to the table in Part II, Item 2 of this Quarterly Report on Form 10-Q.

Capital Structure

Since December ~~29, 2018,~~28, 2019, our equity has ~~decreased~~increased by ~~$19.4~~$314.5 million. The ~~decrease~~increase was due primarily to ~~a net loss~~the issuance of ~~$19.7~~common shares of $383.6 million and ~~a common share dividend payment~~net income of ~~$8.2~~$3.5 million, partially offset by ~~currency translation adjustments~~common shares repurchased and canceled of ~~$10.6~~$31.9 million, other comprehensive loss, net of tax of $29.9 million and common share dividend payments of $9.6 million.

Dividend Payments

Common Share Dividend

On February ~~21, 2019,~~19, 2020, the Board of Directors declared a dividend of $0.06 per share on common shares, payable in cash on March ~~27, 2019~~25, 2020 to shareowners of record at the close of business on March ~~12, 2019.~~10, 2020. On ~~April 30, 2019,~~May 5, 2020, the Board of Directors declared a dividend of $0.06 per share on common shares, payable in cash on June ~~12, 2019~~17, 2020 to shareowners of record at the close of business on ~~May 31, 2019. Cott intends~~June 5, 2020. We intend to pay a regular quarterly dividend on ~~its~~our common shares subject to, among other things, the best interests of ~~its~~our shareowners, ~~Cott’s~~our results of continuing operations, cash balances and future cash requirements, financial condition, statutory regulations and covenants set forth in the ~~ABL facility~~Revolving Credit Facility and indentures governing our outstanding notes as well as other factors that the Board of Directors may deem relevant from time to time.

Critical Accounting Policies

Our critical accounting policies require management to make estimates and assumptions that affect the reported amounts in the Consolidated Financial Statements and the accompanying notes. These estimates are based on historical experience, the advice of external experts or on other assumptions management believes to be reasonable. Where actual amounts differ from estimates, revisions are included in the results for the period in which actual amounts become known. Historically, differences between estimates and actual amounts have not had a significant impact on our Consolidated Financial Statements.

Critical accounting policies and estimates used to prepare the Consolidated Financial Statements are discussed with the Audit Committee of our Board of Directors as they are implemented and on an annual basis.

WeWWe have no material changes to our Critical Accounting Policies and Estimates disclosure as filed in our ~~2018~~2019 Annual Report.

Recent Accounting Pronouncements

See Note 1 to the Consolidated Financial Statements for a discussion of recent accounting guidance.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

In the ordinary course of business, we are exposed to foreign currency, interest rate and commodity price risks. We hedge firm commitments or anticipated transactions and do not enter into derivatives for speculative purposes. We do not hold financial instruments for trading purposes. We have no material changes to our Quantitative and Qualitative Disclosures about Market Risk as filed in our ~~2018~~2019 Annual Report.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Due to the COVID-19 pandemic, a significant portion of our employees are now working from home, while also under shelter-in-place orders or other restrictions. Established business continuity plans were activated in order to mitigate the impact to our control environment, operating procedures, data and internal controls. The design of our processes and controls allow for remote execution with accessibility to secure data.

The Company maintains disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial and Administrative Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March ~~30, 2019.~~28, 2020. Based upon this evaluation, the Company’s Chief Executive Officer and Chief Financial and Administrative Officer concluded that, as of March ~~30, 2019,~~28, 2020, the Company’s disclosure controls and procedures are functioning effectively to ensure that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in ~~the~~SEC rules and forms, ~~promulgated by the Securities and Exchange Commission,~~ and accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial and Administrative Officer, to allow timely decisions regarding required disclosure.

In addition, our management carried out an evaluation, as required by Rule 13a-15(d) of the Exchange Act, with the participation of our Chief Executive Officer and our Chief Financial and Administrative Officer, of changes in our internal control over financial reporting. Based on this evaluation, the Chief Executive Officer and the Chief Financial and Administrative Officer concluded that ~~except as described below,~~ there have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~In connection with the adoption on December 30, 2018 of new accounting guidance for leases, we implemented new processes, software and internal controls related to our leases.~~

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Reference is made to the legal ~~proceeding~~proceedings described ~~in our 2018 Annual Report.~~Note 14 to the Consolidated Financial Statements.

Item 1A. Risk Factors

~~There has been no material change~~The Company’s business, financial condition, results of operations and cash flows are subject to various risks, which could cause actual results to vary materially from anticipated results. The risk factor described below supplements the risk factors disclosed in Part 1, Item 1A Risk Factors in our 2019 Annual Report. The risk factor set forth below should be read together with other information included in this Quarterly Report on Form 10-Q, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

The impact of the spread of COVID-19 is creating significant uncertainty for our business, financial condition and results of operations.

The extent of the impact of the COVID-19 pandemic on our business and financial results will depend on numerous evolving factors ~~since December 29, 2018. Please refer~~that we are not able to accurately predict and that all will vary by market, including the duration and scope of the pandemic, global economic conditions during and after the pandemic, government actions that have been taken, or may be taken in the future, in response to the pandemic, and changes in customer behavior in response to the pandemic, some of which may be more than just temporary.

Our global operations expose us to risks associated with the COVID-19 pandemic, which has resulted in challenging operating environments. COVID-19 has spread across the globe to all of the countries in which we operate. Authorities in many of these markets have implemented numerous measures to stall the spread of COVID-19, including travel bans and restrictions, quarantines, curfews, shelter in place orders, and business shutdowns. These measures have impacted and will further impact us, our customers, employees, distributors, suppliers and other third parties with whom we do business. There is considerable uncertainty regarding how these measures and future measures in response to the pandemic will impact our business, including whether they will result in further changes in demand for our services and products, further increases in operating costs (whether as a result of changes to our ~~2018~~ ~~Annual Report.~~supply chain or increases in employee costs or otherwise), and how they will further impact our supply chain, each or all of which can impact our ability to make, manufacture, distribute and sell our products. In addition, measures that impact our ability to access our offices, plants, warehouses, distribution centers or other facilities, or that impact the ability of our customers, employees, distributors, suppliers and other third parties to do the same, may impact the availability of our and their employees, many of whom are not able to perform their job functions remotely. If a significant percentage of our workforce is unable to work, including because of illness, facility closures, quarantine, curfews, shelter in place orders, travel restrictions or other governmental restrictions, our operations will be negatively impacted. Any sustained interruption in our business operations, distribution network or supply chain or any significant continuous shortage of raw materials or other supplies as a result of these measures, restrictions or disruptions can impair our ability to make, manufacture, distribute or sell our products. Compliance with governmental measures imposed in response to COVID-19 has caused and may continue to cause us to incur additional costs, and any inability to comply with such measures can subject us to restrictions on our business activities, fines, and other penalties, any of which can adversely affect our business. In addition, the ~~Israeli Ministry~~increase in certain of ~~Environmental Protection (the "Ministry")~~our employees working remotely has ~~alleged that~~amplified certain risks to our business, including increased demand on our information technology resources and systems, increased phishing and other cybersecurity attacks as cybercriminals try to exploit the uncertainty surrounding the COVID-19 pandemic, and an increase in the number of points of potential attack, such as laptops and mobile devices (both of which are now being used in increased numbers), to be secured, and any failure to effectively manage these risks, including any failure to timely identify and appropriately respond to any cyberattacks, may adversely affect our business.

As we deliver bottled water to residential and business customers across a ~~non-profit recycling corporation, which collects~~21-country footprint and ~~recycles bottles sold by manufacturers, including Eden, failed~~provide multi-gallon purified bottled water, self-service refill drinking water and water dispensers to ~~meet recycling quotas~~customers through major retailers in ~~2016, in violation~~North America, the profile of ~~Israeli law. The law imposes liability directly on manufacturers,~~the services we provide and the ~~Ministry has asserted that~~products we sell, and the ~~manufacturers involved~~amount of revenue attributable to such services and products, varies by jurisdiction and changes in demand as a result of COVID-19 will vary in scope and timing across these markets. For example, to date, we have seen an increase in volumes in our residential water direct business and a decrease in volumes in our commercial water direct business as a result of the COVID-19 pandemic. Any continued economic uncertainty can adversely affect our customers’ financial condition, resulting in an inability to pay for our services or products, reduced or canceled orders of our services or products, or our business partners’ inability to supply us with the ~~corporation owe~~items necessary for us to make, manufacture, distribute or sell our products. Such adverse changes in our customers’ or business partners’ financial condition may also result in our recording impairment charges for our inability to recover or collect any accounts receivable. In addition, economic uncertainty associated with COVID-19 pandemic has resulted in volatility in the global capital and credit markets, which can impair our ability to access these markets on terms commercially acceptable to us, or at all.

While we have developed and implemented and continue to develop and implement health and safety protocols, business continuity plans and crisis management protocols and other operational actions in an effort to try to mitigate the negative impact of COVID-19 on our employees and our business, there can be no assurance that we will be successful in our efforts, and as a ~~fine. Eden received a notice from the Ministry in June 2018. Eden has since undertaken an administrative appeal process~~result, our business, financial condition and intends to proceed to litigation. Although we cannot predict the outcome of any potential proceedings at this early stage, Eden may be subject to a fine in excess of $0.1 million. Management believes, however, that the resolution of this matter will not be material to our financial position, results of operations ~~or cash flow.~~and the prices of our publicly traded securities may be adversely affected.

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

Common Share Repurchase Program

On December 11, ~~2018,~~2019, our Board of Directors approved a share repurchase program for up to $50.0 million of our outstanding common shares over a 12-month period commencing on December ~~14, 2018~~16, 2019 (the “Repurchase Plan”). ~~The Repurchase Plan replaced the then-existing share repurchase program, which was scheduled to expire on May 6, 2019.~~

The following table summarizes the repurchase activity under the Repurchase Plan during the first quarter of ~~2019:~~2020:

Total
Number of
Common Shares
Purchased

Average Price
Paid per
Common Share

Total Number of
Common Shares
Purchased as
Part of Publicly
Announced Plans
or Programs

Maximum Number
(or Approximate Dollar Value) of
Common Shares
that May Yet Be
Purchased Under the
Plans or Programs
December 30, 2018 - January 31, 2019 570,000
$ 13.77
570,000
$ 20,001,105
February 1 - February 28, 2019 —
$ —
—
$ —
March 1 - March 30, 2019 —
$ —
—
$ —
Total 570,000
570,000


	Total Number of Common Shares Purchased	Average Price Paid per Common Share		Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Common Shares that May Yet Be Purchased Under the Plans or Programs
December 29, 2019 - January 31, 2020	—	$	—	—	$	—
February 1, 2020 - February 29, 2020	—	$	—	—	$	—
March 1, 2020 - March 28, 2020	2,316,835	$	10.79	2,316,835	$	25,009,946
Total	2,316,835			2,316,835

Tax ~~Withholdings~~Withholding

The following table contains information about common shares that we withheld from delivering to employees during the first quarter of ~~2019~~2020 to satisfy their respective tax obligations related to share-based awards.


	Total Number of Common Shares Purchased	Average Price Paid per Common Share		Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Common Shares that May Yet Be Purchased Under the Plans or Programs
December 29, 2019 - January 31, 2020	1,917	$	15.28	N/A	N/A
February 1, 2020 - February 29, 2020	418,562	$	15.35	N/A	N/A
March 1, 2020 - March 28, 2020	38,493	$	12.58	N/A	N/A
Total	458,972

Total
Number of
Common Shares
Purchased

Average Price
Paid per
Common Share

Total Number of
Common Shares
Purchased as
Part of Publicly
Announced Plans
or Programs

Maximum Number
(or Approximate Dollar Value) of
Common Shares
that May Yet Be
Purchased Under the
Plans or Programs
December 30, 2018 - January 31, 2019 5,307
$ 14.74
N/A N/A
February 1 - February 28, 2019 195,002
$ 15.50
N/A N/A
March 1 - March 30, 2019 —
$ —
N/A N/A
Total 200,309

Item 6. Exhibits

Incorporated by Reference

Filed or Furnished Herewith

Exhibit No.

Description of Exhibit

Form

Exhibit

Filing Date

File No.

2.1 ⁽¹⁾

Agreement and Plan of Merger, dated as of January 13, 2020, by and among Cott Corporation, Cott Holdings Inc., Fore Acquisition Corporation, Fore Merger LLC and Primo Water Corporation.

8-K

2.1

1/13/2020

001-31410

2.2

Amendment No. 1 to Agreement and Plan of Merger, dated as of January 28, 2020, by and among Cott Corporation, Cott Holdings Inc., Fore Merger LLC, Fore Acquisition Corporation and Primo Water Corporation (incorporated by reference to the copy included as Annex A-2 to Part I of Cott ’s Registration Statement on Form S-4, filed on January 28, 2020).

S-4

2.2

1/28/2020

333-236122

2.3 ⁽¹⁾

Stock Purchase Agreement, dated as of January 30, 2020, by and among Cott Corporation, Cott Holdings Inc., S. & D. Coffee, Inc. and Westrock Coffee Company, LLC.

8-K

2.1

2/3/2020

001-31410

3.1

Articles of Amendment to Articles of Amalgamation of Cott Corporation .

8-K

3.1

3/5/2020

001-31410

3.2

By-laws of Cott Corporation, as amended.

8-A

3.2

5/4/2018

001-31410

10.1

Form of Tender and Support Agreement, dated as of January 13, 2020, by and among Cott Corporation, Fore Acquisition Corporation and certain stockholders of Primo Water Corporation.

8-K

10.1

1/13/2020

001-31410

10.2

Form of Side Letter, dated as of January 13, 2020, by and among Cott Corporation, Fore Acquisition Corporation and certain stockholders of Primo Water Corporation.

8-K

10.2

1/13/2020

001-31410

10.3 ⁽²⁾

Commitment Letter, dated as of January 13, 2020, by and among Cott Corporation and Deutsche Bank AG, New York Branch.

8-K

10.3

1/13/2020

001-31410

10.4

Amendment No. 1 to Second Amended and Restated Credit Agreement, dated as of February 7, 2020, and among Cott Corporation, Cott Holdings Inc., DS Services of America, Inc., S. & D. Coffee, Inc., Aimia Foods Limited, Aquaterra Corporation and the other Loan Parties party thereto, the Lenders party thereto, as 2020 consenting lenders, JPMorgan Chase Bank, N.A., as administrative agent and administrative collateral agent, and each of the other parties party thereto.

8-K

10.1

2/11/2020

001-31410

10.5 ⁽³⁾

Credit Agreement, dated as of March 6, 2020, by and among Primo Water Corporation, as parent borrower, Cott Holdings Inc. and Eden Springs Nederland B.V., as subsidiary borrowers, certain other subsidiaries of the Company designated as subsidiary borrowers from time to time, Bank of America, N.A., as administrative agent, collateral agent, lead arranger and bookrunner, and the lenders party thereto .

8-K

10.1

3/10/2020

001-31410

10.6 ⁽⁴⁾

Amendment No. 3 to the Amended and Restated Cott Corporation Equity Incentive Plan, dated March 13, 2020 .

Incorporated by Reference Filed or Furnished Herewith
Exhibit No. Description of Exhibit Form Exhibit Filing Date File No.
3.1
Articles of Amalgamation of Cott Corporation, as amended
10-K 3.1 2/27/2019 001-31410
3.2
By-laws of Cott Corporation, as amended
8-A 3.2 5/4/2018 001-31410
4.1
Tenth Supplemental Indenture, dated as of April 1, 2019, governing the 5.50% Senior Notes due 2024, by and among Cott Corporation, Wallingford Holding, Inc. and Wallingford Coffee Mills Inc., and BNY Trust Company of Canada, as Canadian co-trustee, and The Bank of New York Mellon, as U.S. co-trustee.
*
4.2
Seventh Supplemental Indenture, dated as of April 1, 2019, governing the 5.50% Senior Notes due 2025, by and among Cott Holdings Inc., Wallingford Holding, Inc. and Wallingford Coffee Mills Inc., and BNY Trust Company of Canada, as Canadian co-trustee, and The Bank of New York Mellon, as U.S. co-trustee.
*
10.1 ⁽¹⁾
Employment Offer Letter to William Jamieson, dated January 15, 2019.
*
31.1
Certification of the Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended March 30, 2019.
*
31.2
Certification of the Chief Financial and Administrative Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended March 30, 2019.
*
32.1
Certification of the Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended March 30, 2019.
*
32.2
Certification of the Chief Financial and Administrative Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended March 30, 2019.
*
101 The following financial statements from Cott Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2019, filed May 9, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive (Loss) Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Equity, (vi) Notes to the Consolidated Financial Statements. *

10.7 ⁽⁴⁾

Amendment No. 1 to the Cott Corporation 2018 Equity Incentive Plan, dated March 13, 2020 .

10.8 ⁽⁴⁾

Amendment No. 2 to the Cott Corporation Severance and Non-Competition Plan, dated March 13, 2020.

31.1

Certification of the Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended March 28, 2020.

31.2

Certification of the Chief Financial and Administrative Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended March 28, 2020.

32.1

Certification of the Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended March 28, 2020.

32.2

Certification of the Chief Financial and Administrative Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended March 28, 2020.

101

The following financial statements from Primo Water Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2020, filed May 7, 2020, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Loss, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Equity, (vi) Notes to the Consolidated Financial Statements.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

______________________

¹ Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant hereby agrees to supplementally furnish to the Securities and Exchange Commission upon request any omitted schedule or exhibit to the Agreement and Plan of Merger or the Stock Purchase Agreement, as applicable.

² Portions of this exhibit have been omitted because they are both (i) not material and (ii) would be competitively harmful if publicly disclosed.

³ Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished to the Securities and Exchange Commission upon request.

⁴ Indicates a management contract or compensatory plan.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		PRIMO WATER CORPORATION
		(Registrant)

		~~COTT CORPORATION~~
	~~(Registrant)~~

Date: May ~~9, 2019~~7, 2020	/s/ Jay Wells
		Jay Wells
		Chief Financial and Administrative Officer
		(On behalf of the Company)

Date: May ~~9, 2019~~7, 2020		/s/ Jason Ausher
		Jason Ausher
		Chief Accounting Officer
		(Principal Accounting Officer)



PART I – FINANCIAL INFORMATION			3
Item 1. Financial Statements (unaudited)			3
Consolidated Statements of Operations			3
Condensed Consolidated Statements of Comprehensive ~~(Loss) Income~~Loss			4
Consolidated Balance Sheets			5
Consolidated Statements of Cash Flows			6
Consolidated Statements of Equity			8
Notes to the Consolidated Financial Statements			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosures about Market Risk			42
Item 4. Controls and Procedures			42
PART II. OTHER INFORMATION			43
Item 1. Legal Proceedings			43
Item 1A. Risk Factors			43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4344
Item 6. Exhibits			4445
SIGNATURES			4547



Cash flows from financing activities of continuing operations:
Payments of long-term debt	(1.5		)	(262.7		)
Borrowings under ABL	25.0			0.6
Payments under ABL	(52.8		)	(0.6		)
Premiums and costs paid upon extinguishment of long-term debt	—			(12.5		)
Issuance of common shares	0.4			1.8
Common shares repurchased and canceled	(11.0		)	(5.6		)
Financing fees	—			(1.5		)
Dividends paid to common shareholders	(8.2		)	(8.4		)
Other financing activities	1.4			(1.3		)
Net cash used in financing activities from continuing operations	(46.7		)	(290.2		)
Cash flows from discontinued operations:
Operating activities of discontinued operations	—			(84.7		)
Investing activities of discontinued operations	—			1,228.6
Financing activities of discontinued operations	—			(769.7		)
Net cash provided by discontinued operations	—			374.2
Effect of exchange rate changes on cash	1.3			(4.8		)
Net (decrease) increase in cash, cash equivalents and restricted cash	(16.9		)	54.4
Cash and cash equivalents and restricted cash, beginning of period	170.8			157.9
Cash and cash equivalents and restricted cash from continuing operations, end of period	$	153.9		$	212.3
Supplemental Non-cash Investing and Financing Activities:
Dividends payable	$	—		$	0.1
Additions to property, plant and equipment through accounts payable and accrued liabilities and other liabilities	$	14.8		$	9.9
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	15.1		$	10.7
Cash paid for income taxes, net	$	1.0		$	1.4



(in millions of U.S. dollars)	Capital Leases
2019	$	1.9
2020	1.4
2021	0.7
2022	0.5
2023	0.4
Thereafter	0.1



(in millions of U.S. dollars)
Cash paid to sellers	$	62.5
Cash paid on behalf of sellers for sellers' transaction expenses	1.8
Cash paid to retire outstanding debt on behalf of sellers	16.1
Working capital settlement	(0.4		)
Total consideration	$	80.0



(in millions of U.S. dollars)	Originally Reported			Measurement Period Adjustments			Acquired Value
Cash and cash equivalents	$	8.2		$	—		$	8.2
Accounts receivable	4.2			—			4.2
Inventory	2.3			—			2.3
Prepaid expenses and other assets	0.2			—			0.2
Property, plant and equipment	38.5			—			38.5
Goodwill	20.5			(0.4		)	20.1
Intangible assets	25.8			—			25.8
Accounts payable and accrued liabilities	(19.3		)	—			(19.3		)
Total	$	80.4		$	(0.4	)	$	80.0



(in millions of U.S. dollars)
Cash paid to sellers	$	20.7
Cash paid on behalf of sellers for sellers’ transaction expenses	0.8
Total consideration	$	21.5