United States
Securities and Exchange Commission
Washington, D.C. 20549


FORM 10-Q
 
ýQuarterly 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
 


COTTPRIMO 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,
Florida33607
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 classTrading Symbol(s)Name of each exchange on which registered
Common Shares, no par value per sharePRMWNew 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 filerAccelerated FilerýAccelerated 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 classTrading 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.
ClassOutstanding at May 2, 20194, 2020
Common Shares, no par value per share135,997,194 shares159,843,106







TABLE OF CONTENTS
 




2


PART I – FINANCIAL INFORMATION
 

Item 1.Financial Statements (unaudited)


CottPrimo 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, 2020March 30, 2019
Revenue, net$474.2  $427.7  
Cost of sales200.9  184.6  
Gross profit273.3  243.1  
Selling, general and administrative expenses255.1  235.8  
Loss on disposal of property, plant and equipment, net1.4  1.9  
Acquisition and integration expenses20.8  4.7  
Operating (loss) income(4.0) 0.7  
Other expense, net7.0  5.5  
Interest expense, net19.7  19.3  
Loss from continuing operations before income taxes(30.7) (24.1) 
Income tax benefit(3.3) (1.4) 
Net loss from continuing operations$(27.4) $(22.7) 
Net income from discontinued operations, net of income taxes30.9  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)
Basic141,139  135,948  
Diluted141,139  135,948  
 For the Three Months Ended
 March 30, 2019 March 31, 2018
Revenue, net$574.1
 560.8
Cost of sales291.2
 287.3
Gross profit282.9
 273.5
Selling, general and administrative expenses272.1
 261.1
Loss on disposal of property, plant and equipment, net1.9
 1.3
Acquisition and integration expenses4.8
 5.0
Operating income4.1
 6.1
Other expense (income), net5.5
 (20.2)
Interest expense, net19.3
 20.8
(Loss) income from continuing operations before income taxes(20.7) 5.5
Income tax (benefit) expense(1.0) 0.9
Net (loss) income from continuing operations$(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)   
Basic135,948
 139,953
Diluted135,948
 142,335


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




3
Cott


Primo Water Corporation
Condensed Consolidated Statements of Comprehensive (Loss) IncomeLoss
(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 adjustment10.6
 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 income5.1
 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, 2020March 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.

4



CottPrimo Water Corporation
Consolidated Balance Sheets
(in millions of U.S. dollars, except share amounts)
Unaudited
March 28, 2020December 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  
Inventories75.3  62.9  
Prepaid expenses and other current assets23.9  19.1  
Current assets of discontinued operations—  186.7  
Total current assets494.1  642.3  
Property, plant and equipment, net688.7  558.1  
Operating lease right-of-use-assets181.7  185.7  
Goodwill1,379.8  1,047.5  
Intangible assets, net947.5  597.0  
Other long-term assets, net27.3  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 debt9.5  6.9  
Accounts payable and accrued liabilities459.5  370.6  
Current operating lease obligations37.5  36.5  
Current liabilities of discontinued operations—  101.2  
Total current liabilities633.9  607.6  
Long-term debt1,270.9  1,259.1  
Operating lease obligations150.2  155.2  
Deferred tax liabilities124.8  90.6  
Other long-term liabilities58.6  58.7  
Long-term liabilities of discontinued operations—  53.5  
Total liabilities2,238.4  2,224.7  
Shareholders' Equity
Common shares, 0 par value - 159,825,718 (December 28, 2019 - 134,803,211) shares issued1,262.7  892.3  
Additional paid-in-capital71.5  77.4  
Retained earnings244.9  265.0  
Accumulated other comprehensive loss(98.4) (68.5) 
Total shareholders' equity1,480.7  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
Inventories120.1
 129.6
Prepaid expenses and other current assets39.9
 27.2
Total current assets603.6
 635.9
Property, plant and equipment, net625.6
 624.7
Operating lease right-of-use assets210.5
 
Goodwill1,144.1
 1,143.9
Intangible assets, net716.6
 739.2
Deferred tax assets0.9
 0.1
Other long-term assets, net20.2
 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 debt3.9
 3.0
Accounts payable and accrued liabilities456.5
 469.0
Current operating lease obligations42.3
 
Total current liabilities565.8
 561.0
Long-term debt1,250.9
 1,250.2
Operating lease obligations173.9
 
Deferred tax liabilities125.9
 124.3
Other long-term liabilities54.0
 69.6
Total liabilities2,170.5
 2,005.1
Equity   
Common shares, no par value - 135,965,923 (December 29, 2018 - 136,195,108) shares issued899.0
 899.4
Additional paid-in-capital71.3
 73.9
Retained earnings277.3
 298.8
Accumulated other comprehensive loss(96.6) (101.7)
Total Cott Corporation equity1,151.0
 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.

5




CottPrimo Water Corporation
Consolidated Statements of Cash Flows
(in millions of U.S. dollars)
Unaudited
 For the Three Months Ended
 March 28, 2020March 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 taxes30.9  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 amortization45.0  39.7  
Amortization of financing fees0.9  0.8  
Share-based compensation expense2.4  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, net1.4  1.9  
Other non-cash items6.0  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 assets0.7  0.6  
Accounts payable and accrued liabilities and other liabilities10.2  (3.2) 
Net cash provided by operating activities from continuing operations4.7  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 equipment0.3  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  

6


 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 amortization45.2
 47.4
Amortization of financing fees0.8
 0.9
Share-based compensation expense3.5
 3.4
Benefit for deferred income taxes(3.2) (0.2)
Gain on extinguishment of debt
 (7.1)
Loss on sale of business5.4
 
Loss on disposal of property, plant and equipment, net1.9
 1.3
Other non-cash items0.4
 
Change in operating assets and liabilities, net of acquisitions:   
Accounts receivable1.6
 (12.7)
Inventories(6.6) (9.1)
Prepaid expenses and other current assets(1.9) (4.3)
Other assets0.7
 1.0
Accounts payable and accrued liabilities and other liabilities(4.5) 7.7
Net cash provided by operating activities from continuing operations23.6
 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 equipment1.4
 1.9
Proceeds from sale of business50.5
 
Other investing activities0.1
 0.2
Net cash provided by (used in) investing activities from continuing operations4.9
 (57.7)
Cash flows from financing activities of continuing operations:
Payments of long-term debt(2.7) (1.5) 
Proceeds from short-term borrowings135.9  25.0  
Payments on short-term borrowings(109.9) (52.8) 
Issuance of common shares0.6  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 activities8.8  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 operations394.5  (19.1) 
Financing activities of discontinued operations(0.1) —  
Net cash provided by (used in) discontinued operations377.1  (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 period205.5  170.8  
Cash and cash equivalents and restricted cash, end of period112.2  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 fees0.8  —  
Dividends payable issued through accounts payable and accrued liabilities0.2  —  
Additions to property, plant and equipment through accounts payable and accrued liabilities and other liabilities11.5  14.8  
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest$15.7  $15.1  
Cash paid for income taxes, net2.4  1.0  



Cash flows from financing activities of continuing operations:   
Payments of long-term debt(1.5) (262.7)
Borrowings under ABL25.0
 0.6
Payments under ABL(52.8) (0.6)
Premiums and costs paid upon extinguishment of long-term debt
 (12.5)
Issuance of common shares0.4
 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 activities1.4
 (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 cash1.3
 (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 period170.8
 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.




7
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 SharesAdditional Paid-in-CapitalRetained
Earnings
Accumulated Other Comprehensive LossTotal Shareholders' Equity
Balance at December 29, 2018Balance at December 29, 2018136,195  $899.4  $73.9  $298.8  $(101.7) $1,170.4  
Cumulative effect of changes in accounting principle, net of taxesCumulative effect of changes in accounting principle, net of taxes—  —  —  10.5  —  10.5  
Net lossNet loss—  —  —  (19.7) —  (19.7) 
Other comprehensive income, net of taxOther 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 compensationShare-based compensation—  —  3.5  —  —  3.5  
Common shares repurchased and canceledCommon shares repurchased and canceled(770) (6.9) —  (4.1) —  (11.0) 
Common shares issued - Equity Incentive PlanCommon shares issued - Equity Incentive Plan519  6.1  (6.1) —  —  —  
Common shares issued - Employee Stock Purchase PlanCommon shares issued - Employee Stock Purchase Plan22  0.4  —  —  —  0.4  
Balance at March 30, 2019Balance at March 30, 2019135,966  $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 SharesAdditional Paid-in-CapitalRetained
Earnings
Accumulated Other Comprehensive LossTotal Shareholders' Equity
Balance at December 30, 2017139,489
 $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 Plan992
 10.3
 (8.8) 
 
 
 1.5
Common shares issued - Dividend Reinvestment Plan8
 0.1
 
 
 
 
 0.1
Common shares issued - Employee Stock Purchase Plan26
 0.3
 (0.1) 
 
 
 0.2
Balance at December 28, 2019Balance at December 28, 2019134,803  $892.3  $77.4  $265.0  $(68.5) $1,166.2  
Cumulative effect of changes in accounting principle, net of taxesCumulative effect of changes in accounting principle, net of taxes—  —  —  (4.3) —  (4.3) 
Net incomeNet income—  —  —  3.5  —  3.5  
Other comprehensive loss, net of taxOther 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, 2018140,160
 $922.2
 $63.6
 $340.7
 $(73.0) $
 $1,253.5
             
Balance at December 29, 2018136,195
 $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 millionCommon shares issued in connection of business combination and assumed awards, net of equity issuance costs of $1.1 million26,497  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 Plan519
 6.1
 (6.1) 
 
 
 
Common shares issued - Equity Incentive Plan1,277  15.7  (11.8) —  —  3.9  
Common shares issued - Employee Stock Purchase Plan22
 0.4
 
 
 
 
 0.4
Common shares issued - Employee Stock Purchase Plan25  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, 2019135,966
 $899.0
 $71.3
 $277.3
 $(96.6) $
 $1,151.0
Balance at March 28, 2020Balance at March 28, 2020159,826  $1,262.7  $71.5  $244.9  $(98.4) $1,480.7  




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

8




CottPrimo 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 CottPrimo Water Corporation, together with its consolidated subsidiaries. CottPrimo is a leading pure-play water coffee, tea, extracts and filtration service company with a leading volume-based national presencesolutions 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 salesits industry leading line-up of sleek and distribution facilitiesinnovative 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 wholesalerswith 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 proceedsbenefit 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, 201828, 2019 included herein was derived from the audited consolidated financial statementsConsolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 29, 201828, 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 20182019 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 Statementssale of Cash Flows. These reclassifications had no effect on net cash provided by operating activities.
During the first quarter of 2019, we reviewedour coffee, tea and realigned our reporting segments to reflect how theextract 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 resultsliabilities associated with S&D have been recastreflected 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.
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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 changesour 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 20182019 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 ExtractWater 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, 201928, 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.
LeasesAllowance for Credit Losses
We have operatingestimate 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 manufacturingsupportable forecasts and production facilities, branch distributioncurrent 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 representsthe 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 agreementcurrent 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 flowsallowance 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 issuedadopted 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 FASBFinancial 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. TheIn 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. Earlyyears, with early adoption will be permitted for fiscal years beginning afterpermitted.
        Effective December 15, 2018, including interim periods within those fiscal years. This29, 2019, we adopted the guidance will be appliedin this amendment using a prospective orthe modified retrospective transition method, depending onmethod. The adoption of this new standard, with the area coveredimpact being the increase in this update. We are currently assessingallowance 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 standardthe 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 andbeginning 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. Earlywith 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 assessingadopted the impactguidance in this amendment effective December 29, 2019 prospectively. Adoption of adoption of thisthe new standard did not have a material impact on our Consolidated Financial Statements.
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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 2018-152020-04Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)Reference Rate Reform (Topic 848)
In August 2018,March 2020, the FASB amended itsissued guidance relatedwhich provides optional expedients and exceptions to a customer’s accountingaccount for implementation costs incurred in a cloud computing arrangementcontracts, 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 serviceeffective 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 developmodifications 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 termevaluated 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 prospectivelyexceptions through March 28, 2020, but will continue to all implementation costs incurred afterevaluate the date of adoption. We are currently assessing the impact ofpossible adoption of this standard on ourany such expedients or exceptions during the effective period as circumstances evolve.

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Note 2Discontinued 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, 2020March 30, 2019
Revenue, net 1
$97.1  $148.0  
Cost of sales71.1  108.2  
Operating (loss) income from discontinued operations(0.5) 3.4  
Gain on sale of discontinued operations60.5  —  
Net income from discontinued operations, before income taxes59.8  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—3Leases
We have operating and finance leases for manufacturing and production facilities, branch distribution and warehouse facilities, vehicles and machinery and equipment. The remaining termterms 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 forgenerally 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, 2020March 30, 2019
Operating lease cost$12.5  $11.6  
Short-term lease cost2.3  0.9  
Finance lease cost
Amortization of right-of-use assets$1.7  $0.7  
Interest on lease liabilities1.0  0.2  
Total finance lease cost$2.7  $0.9  
Sublease income$0.2  $0.3  


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(in millions of U.S. dollars) 
Operating lease cost$13.3
Short-term lease cost1.3
Finance lease cost
Amortization of right-of-use assets$0.7
Interest on lease liabilities0.2
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, 2020March 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 leases0.1
Operating cash flows from finance leases0.9  0.1  
Financing cash flows from finance leases0.8
Financing cash flows from finance leases1.4  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 leases9.2
Finance leases21.7  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, 2020December 28, 2019
Operating leases
Operating lease right-of-use assets$181.7  $185.7  
Current operating lease obligations37.5  36.5  
Operating lease obligations150.2  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 debt9.0  5.7  
Long-term debt40.5  23.7  
Total finance lease obligations$49.5  $29.4  

Weighted Average Remaining Lease TermMarch 28, 2020December 28, 2019
Operating leases8.58.7
Finance leases5.85.6
Weighted Average Discount Rate
Operating leases6.7 %6.2 %
Finance leases5.6 %6.3 %
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(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 obligations42.3
Operating lease obligations173.9
Total operating lease obligations$216.2


Finance leases
Property, plant and equipment, net$13.3
Current maturities of long-term debt2.9
Long-term debt10.7
Total finance lease obligations$13.6
  
Weighted Average Remaining Lease Term
Operating leases8.4 years
Finance leases5.6 years





Weighted Average Discount Rate
Operating leases6.2%
Finance leases6.3%
Maturities of operating lease obligations as of March 30, 2019 were as follows:
(in millions of U.S. dollars)March 28, 2020December 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  
Thereafter93.9  93.5  
Total lease payments249.0  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
202048.6
 3.3
202137.8
 2.6
202229.1
 2.2
202324.6
 2.1
Thereafter109.7
 3.4
Total lease payments289.0
 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 newMaturities 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, 2020December 28, 2019
2019$51.6
202042.9
Remainder of 2020Remainder of 2020$9.5  $6.8  
202136.2
202110.8  6.1  
202229.2
20229.8  5.7  
202323.4
20238.9  5.4  
202420247.3  4.6  
Thereafter106.9
Thereafter11.5  6.4  
Total lease paymentsTotal lease payments57.8  35.0  
Less imputed interestLess imputed interest(8.3) (5.6) 
Present value of lease obligationsPresent 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
20201.4
20210.7
20220.5
20230.4
Thereafter0.1

Note 3—4—Revenue
We are a water, coffee, tea, extracts and filtration service company.        Our principal sourcesources of revenue isare from bottled water delivery direct to residential and business customersconsumers primarily in North America and Europe and the manufacturefrom providing multi-gallon purified bottled water, self-service refill drinking water and distribution of coffee, tea and extracts to institutional and commercial customerswater 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 recordsrecord 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.
14


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, 201928, 2020 that was included in the December 29, 201828, 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, 2020March 30, 2019
United States$334.6  $289.6  
United Kingdom42.5  46.1  
Canada16.1  15.8  
All other countries81.0  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 Kingdom46.1
 43.6
Canada15.8
 15.2
All other countries76.2
 83.4
Total$574.1
 $560.8


Note 4—5—Acquisitions
Mountain ValleyLegacy Primo Acquisition
In October 2018, DSS acquired Mountain Valley, a growing American brandOn March 2, 2020, the Company completed the Legacy Primo Acquisition, adding North America’s leading single source provider of spring and sparklingmulti-gallon purified bottled water, deliveredself-service refill drinking water and water dispensers sold through major retailers to homesthe Company’s catalog of home and offices throughoutoffice 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 initialLegacy 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 DSSall 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 bymerger agreement. Immediately following the paymentconsummation of $0.4 million made by the former owners of Mountain Valley to DSS. The Mountain Valley Acquisition was fundedexchange offer, Cott Corporation indirectly acquired the remaining Legacy Primo shares through a combinationmerger between Legacy Primo and a wholly-owned subsidiary of incremental borrowings under the Company’s ABL facility and cash on hand.Cott Corporation.

15


The total cash and stock consideration paid by DSSus in the Mountain ValleyLegacy 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 expenses1.8
Cash paid to retire outstanding debt on behalf of sellers16.1
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 stock 1
216.1 
Cash paid to retire outstanding indebtedness on behalf of Legacy Primo196.9 
Settlement of pre-existing relationship4.7 
Fair value of replacement common share options and restricted stock units for Legacy Primo awards2.9 
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 valuesConsolidated 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 receivable21.9 
Inventory12.7 
Prepaid expenses and other current assets4.3 
Property, plant and equipment119.0 
Operating lease right-of-use-assets4.9 
Goodwill337.4 
Intangible assets361.3 
Other assets3.9 
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 receivable4.2
 
 4.2
Inventory2.3
 
 2.3
Prepaid expenses and other assets0.2
 
 0.2
Property, plant and equipment38.5
 
 38.5
Goodwill20.5
 (0.4) 20.1
Intangible assets25.8
 
 25.8
Accounts payable and accrued liabilities(19.3) 
 (19.3)
Total$80.4
 $(0.4) $80.0

The assets and liabilities acquired within the Mountain ValleyLegacy 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. TheEstimated fair values of acquired property, plantfor deferred tax balances are preliminary and equipment, customer relationships, and deferred taxes are provisional pending validation and receipt ofalso 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, isare still under review.
Crystal RockThe 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.
16


Intangible Assets
In March 2018,our determination of the Company completedfair value of intangible assets, we consider, among other factors, the acquisitionbest use of Crystal Rock, a direct-to-consumer homeacquired assets, analysis of historical financial performance and office water, coffeeestimates 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 filtrationassumptions 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 Yorkas of the date of acquisition.
The estimated fair value of trademarks and New England. The transaction was structuredtrade 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 sharesresult of Crystal Rock, with Crystal Rock becoming a wholly-owned indirect subsidiaryowning 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 paidfollowing 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 ValueEstimated Useful Life
Customer relationships220.020 years
Trade names140.0Indefinite
Software1.33 years
Total361.3

Goodwill
The principal factor that resulted in recognition of goodwill was $37.7 million and includesthe basis of the purchase price paid tofor the Crystal Rock shareholdersLegacy Primo Acquisition, in part, on cash flow projections assuming the reduction of $20.7 million, $0.8 million inadministration costs paidand the integration of acquired customers and products into our operations, which is of greater value than on behalfa 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 RockLegacy 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 expenses0.8
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 acquiredWater 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 ofMarch 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, 2020March 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 receivable6.5
 (0.1) 6.4
Inventory2.3
 (0.1) 2.2
Prepaid expenses and other current assets1.2
 1.0
 2.2
Property, plant and equipment9.4
 (0.5) 8.9
Goodwill16.7
 (2.5) 14.2
Intangible assets13.3
 (0.7) 12.6
Other assets0.8
 (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, 201928, 2020 and March 31, 2018,30, 2019, respectively.
The effective tax rate for the three months ended March 30, 201928, 2020 varied from the effective tax rate for the three months ended March 31, 201830, 2019 due primarily to increased losses incurreda release of uncertain tax positions in jurisdictions for which no tax benefit is recognized.the first quarter of 2020.
17


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 proposedpermitted, 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, 201816, 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 570,0002,316,835 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 CottPrimo 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 CottPrimo 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:


18


For the Three Months Ended For the Three Months Ended
March 30, 2019 March 31, 2018 March 28, 2020March 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) $4.6
Discontinued operations
 356.8
Net (loss) income(19.7) 361.4
Net loss from continuing operationsNet loss from continuing operations$(27.4) $(22.7) 
Net income from discontinued operationsNet income from discontinued operations30.9  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 - basic135,948
 139,953
Weighted average common shares outstanding - basic141,139  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 operations0.22  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 - basic135,948
 139,953
Weighted average common shares outstanding - basic141,139  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 - diluted135,948
 142,335
Weighted average common shares outstanding - diluted141,139  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 operations0.22  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, 2020March 30, 2019
Stock Options5,378
 914
Stock Options6,477  5,378  
Performance-based RSUs 1
1,252
 627
Performance-based RSUs 1
750  1,252  
Time-based RSUs374
 90
Time-based RSUs557  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, coffeepurified 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 realignedcompleted 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 recastwhich was renamed “Water Solutions” to reflect these changesour 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.
19


(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 SolutionsAll OtherTotal
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, 2020For the Three Months Ended March 28, 2020
Revenue, netRevenue, net$474.2  $—  $474.2  
Depreciation and amortization39.6
 5.5
 0.1
 
 45.2
Depreciation and amortization44.9  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 equipment21.9
 1.8
 0.1
 
 23.8
Additions to property, plant and equipment34.9  —  $34.9  
As of March 30, 2019         
Total assets 2
$2,770.6
 $499.3
 $51.6
 $
 $3,321.5
As of March 28, 2020As 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 SolutionsAll OtherTotal
For the Three Months Ended March 30, 2019
Revenue, net$420.5  $7.2  $427.7  
Depreciation and amortization39.6  0.1  39.7  
Operating income (loss)14.0  (13.3) 0.7  
Additions to property, plant and equipment21.9  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 amortization41.4
 5.7
 0.3
 
 47.4
Operating income (loss)14.0
 4.0
 (11.9) 
 6.1
Additions to property, plant and equipment27.1
 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 millionAssets of related party concentrate sales to discontinued operations for the three months ended March 31, 2018, respectively.
1526.5 
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 awarehighly 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.

20



Revenues by channel by reporting segment were as follows:
 For the Three Months Ended March 28, 2020
(in millions of U.S. dollars)Water SolutionsAll OtherTotal
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 services48.6
 120.2
 
 (1.6) 167.2
Retail70.9
 
 
 
 70.9
Other42.4
 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 services47.0
 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 OtherTotal
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  
____________________________
1
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, 2020December 28, 2019
Raw materials$25.8  $23.8  
Finished goods33.0  24.2  
Resale items15.5  14.0  
Other1.0  0.9  
Total$75.3  $62.9  




21


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, 2020December 28, 2019
(in millions of U.S. dollars)Estimated Useful Life in YearsCostAccumulated DepreciationNetCostAccumulated DepreciationNet
Landn/a$95.3  $—  $95.3  $95.3  $—  $95.3  
Buildings10-4089.9  27.9  62.0  88.9  26.9  62.0  
Machinery and equipment5-15255.5  68.6  186.9  146.8  66.0  80.8  
Plates, films and molds1-101.6  0.6  1.0  1.5  0.6  0.9  
Vehicles and transportation equipment3-1590.2  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 Systems3-717.1  10.3  6.8  15.6  9.9  5.7  
Furniture and fixtures3-1011.4  8.5  2.9  12.0  8.6  3.4  
Customer equipment 2
3-7352.6  153.2  199.4  339.7  144.9  194.8  
Returnable bottles 3
3-583.9  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.



22
(in millions of U.S. dollars)March 30, 2019 December 29, 2018
Raw materials$58.1
 $68.5
Finished goods38.1
 36.3
Resale items20.4
 21.5
Other3.5
 3.3
Total$120.1
 $129.6





Note 9—11—Intangible Assets, Net
The following table summarizes intangible assets, net as of March 30, 201928, 2020 and December 29, 2018:28, 2019:

March 30, 2019 December 29, 2018 March 28, 2020December 28, 2019
(in millions of U.S. dollars)Cost 
Accumulated
Amortization
 Net Cost 
Accumulated
Amortization
 Net(in millions of U.S. dollars)CostAccumulated
Amortization
NetCostAccumulated
Amortization
Net
Intangible Assets           Intangible Assets
Not subject to amortization           Not subject to amortization
Rights$
 $
 $
 $24.5
 $
 $24.5
Trademarks283.1
 
 283.1
 282.3
 
 282.3
Trademarks$423.9  $—  $423.9  $287.1  $—  $287.1  
Total intangible assets not subject to amortization283.1
 
 283.1
 306.8
 
 306.8
Total intangible assets not subject to amortization423.9  —  423.9  287.1  —  287.1  
Subject to amortization           Subject to amortization
Customer relationships616.3
 224.2
 392.1
 603.1
 211.1
 392.0
Customer relationships752.2  276.3  475.9  534.9  267.4  267.5  
Patents15.2
 2.9
 12.3
 15.2
 2.5
 12.7
Patents19.0  4.4  14.6  15.2  4.0  11.2  
Software40.7
 21.7
 19.0
 38.0
 20.5
 17.5
Software54.0  29.8  24.2  49.3  28.0  21.3  
Other17.1
 7.0
 10.1
 16.6
 6.4
 10.2
Other13.9  5.0  8.9  14.9  5.0  9.9  
Total intangible assets subject to amortization689.3
 255.8
 433.5
 672.9
 240.5
 432.4
Total intangible assets subject to amortization839.1  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
202060.1
Remainder of 2020Remainder of 2020$49.3  
202152.1
202158.1  
202242.2
202251.8  
202335.0
202343.5  
2024202436.6  
Thereafter193.7
Thereafter284.3  
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.
23


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.

24


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, 201928, 2020 and March 31, 201830, 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) $(94.4)
OCI before reclassifications(4.7) 
 (1.1) (5.8)
Amounts reclassified from AOCI0.9
 16.9
 9.4
 27.2
Net current-period OCI(3.8) 16.9
 8.3
 21.4
Ending balance March 31, 2018$(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 AOCI2.6
 
 
 2.6
Amounts reclassified from AOCI2.6  —  —  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, 2019Beginning balance December 28, 2019$11.2  $(1.0) $(78.7) $(68.5) 
OCI before reclassificationsOCI before reclassifications(8.7) —  (18.7) (27.4) 
Amounts reclassified from AOCIAmounts reclassified from AOCI(2.5) —  —  (2.5) 
Net current-period OCINet current-period OCI(11.2) —  (18.7) (29.9) 
Ending Balance March 28, 2020Ending Balance March 28, 2020$—  $(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 EndedAffected 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, 2020March 30, 2019Affected 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 salesForeign currency and commodity hedges$0.1  $(2.6) Cost of sales
Commodity hedges 2
Commodity hedges 2
2.4  —  Gain on sale of discontinued operations
(2.6) (0.9) Total before taxes2.5  (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 taxTotal 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.

25


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, 201928, 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 haswe have continued to provide contractual payment guarantees to three3 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’sour guarantee was not released by the landlord. The three3 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, 201928, 2020 ($32.229.4 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 Companyus 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’sour guarantees. Discussions with the landlords are ongoing. The CompanyWe currently doesdo 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 ContractAssets Liabilities Assets Liabilities
Coffee futures1
$
 $(17.1) $
 $(10.9)
______________________
1
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.
26





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, 201928, 2020 and December 29, 201828, 2019 were as follows:
March 30, 2019 December 29, 2018 March 28, 2020December 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, 201917, 2020 to shareowners of record at the close of business on May 31, 2019.June 5, 2020.




27


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 reportQuarterly Report on Form 10-Q and our annual reportAnnual Report on Form 10-K for the fiscal year ended December 29, 201828, 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 20182019 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 CottPrimo 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 presencesolutions 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 salesits industry leading line-up of sleek and distribution facilitiesinnovative 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 wholesalerswith Watercoolers Europe, which ensure strict adherence to safety, quality, sanitation and distributors. This enables usregulatory standards for the benefit of consumer protection.
The market in which we operate is subject to efficiently service residences, businesses, restaurant chains, hotelssome 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 portionrelated accounts payable fluctuate based upon the demand for our products. The seasonality of our cost of sales. These costs are subjectsales 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 realignedcompleted 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 includesreporting segment, which was renamed “Water Solutions” to reflect our DS Servicesstrategy 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
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 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.
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.
28


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”), Aquaterrawhich 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 recasta Delaware limited liability company (“Westrock”), pursuant to reflect these changes for all periods presented.
Divestiture Transaction
On February 8, 2019, we soldwhich 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 InternationalS&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 adjustmentsadjustment 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 thisthe transaction to repayfinance a portion of the outstanding borrowings underLegacy 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.

29



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 CottPrimo 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 20182019 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 acquisitionstransactions (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 ofdue 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;
30


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, gainloss on extinguishmentsale 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.
31


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, 201928, 2020 (the “first quarter”) was $19.7$27.4 million or $0.14$0.19 per diluted common share, compared with net incomeloss 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 coffeewater 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 decreasedecline 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 greenoffice 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 coffeewater consumption and extracts in our Coffee, Tea and Extract Solutions reporting segment, partially offset by the unfavorable impact of foreign exchange rates andvolumes 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 andLegacy 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 lesslower 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 $5.5Acquisition and integration expenses increased to $20.8 million compared to other income, net of $20.2from $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 expensebenefit of $0.9$1.4 million on pre-tax incomeloss from continuing operations of $5.5$24.1 million in the prior year period due primarily to increased losses incurreda release of uncertain tax positions in jurisdictions for which no tax benefit is recognized;the first quarter;
Adjusted EBITDA decreasedincreased 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 decreaseincrease in net (loss) income, partially offset byloss from continuing operations and the change in working capital account balances relative to the prior year period.

32





Results of Operations
The following table summarizes our Consolidated Statements of Operations as a percentage of revenue for the three months ended March 30, 201928, 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, 2020March 30, 2019
(in millions of U.S. dollars)$ % $ %(in millions of U.S. dollars)$%$%
Revenue, net574.1
 100.0
 560.8
 100.0
Revenue, net474.2  100.0  427.7  100.0  
Cost of sales291.2
 50.7
 287.3
 51.2
Cost of sales200.9  42.4  184.6  43.2  
Gross profit282.9
 49.3
 273.5
 48.8
Gross profit273.3  57.6  243.1  56.8  
Selling, general and administrative expenses272.1
 47.4
 261.1
 46.6
Selling, general and administrative expenses255.1  53.8  235.8  55.1  
Loss on disposal of property, plant and equipment, net1.9
 0.3
 1.3
 0.2
Loss on disposal of property, plant and equipment, net1.4  0.3  1.9  0.4  
Acquisition and integration expenses4.8
 0.8
 5.0
 0.9
Acquisition and integration expenses20.8  4.4  4.7  1.1  
Operating income4.1
 0.7
 6.1
 1.1
Other expense (income), net5.5
 1.0
 (20.2) (3.6)
Operating (loss) incomeOperating (loss) income(4.0) (0.8) 0.7  0.2  
Other expense, netOther expense, net7.0  1.5  5.5  1.3  
Interest expense, net19.3
 3.4
 20.8
 3.7
Interest expense, net19.7  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 taxesLoss from continuing operations before income taxes(30.7) (6.5) (24.1) (5.6) 
Income tax benefitIncome tax benefit(3.3) (0.7) (1.4) (0.3) 
Net loss from continuing operationsNet 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 taxes30.9  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 & amortization45.2
 7.9
 47.4
 8.5
Depreciation & amortization45.0  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 SolutionsAll
Other
EliminationsTotal
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 revenue5.6% 1.3% (59.3)% 45.5% 2.4%Percentage change in revenue12.8 %(100.0)%— %10.9 %
Percentage change in revenue excluding foreign exchange8.6% 1.3% (59.3)% 45.5% 4.5%Percentage change in revenue excluding foreign exchange12.8 %(100.0)%— %10.9 %
______________________
1
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.

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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 SolutionsAll
Other
EliminationsTotal
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 profit12.6 %(100.0)%— %12.4 %
Percentage change in gross profit excluding foreign exchange12.6 %(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, 201928, 2020 and March 31, 2018:30, 2019:


 For the Three Months Ended
(in millions of U.S. dollars)March 28, 2020March 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 Other9.8  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  

34

 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 Solutions148.0
 146.1
All Other7.2
 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 Solutions39.8
 38.7
All Other0.3
 2.3
Total$282.9
 $273.5
Operating income (loss)   
Route Based Services$14.0
 $14.0
Coffee, Tea and Extract Solutions3.4
 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 SolutionsAll OtherTotal
Revenue, net
Water Direct/Water Exchange$295.2  $—  $295.2  
Water Refill/Water Filtration30.8  —  30.8  
Water Retail55.4  —  55.4  
Water Dispensers5.9  —  5.9  
Other86.9  —  86.9  
Total$474.2  $—  $474.2  

For the Three Months Ended March 30, 2019
(in millions of U.S. dollars)Water SolutionsAll OtherTotal
Revenue, net
Water Direct/Water Exchange$264.2  $—  $264.2  
Water Refill/Water Filtration15.3  —  15.3  
Water Retail50.8  —  50.8  
Water Dispensers—  —  —  
Other90.2  7.2  97.4  
Total$420.5  $7.2  $427.7  
______________________
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.

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 SolutionsAll OtherTotal
Gross margin
Water Direct/Water Exchange72.1 %— %72.1 %
Water Refill/Water Filtration72.1 %— %72.1 %
Water Retail14.6 %— %14.6 %
Water Dispensers3.4 %— %3.4 %
Other34.5 %— %34.5 %
Total57.6 %— %57.6 %

35


 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 services48.6
 120.2
 
 (1.6) 167.2
Retail70.9
 
 
 
 70.9
Other42.4
 27.8
 7.2
 
 77.4
Total$420.5
 $148.0
 $7.2
 $(1.6) $574.1
For the Three Months Ended March 30, 2019
(in millions of U.S. dollars)Water SolutionsAll OtherTotal
Gross margin
Water Direct/Water Exchange72.8 %— %72.8 %
Water Refill/Water Filtration86.9 %— %86.9 %
Water Retail12.0 %— %12.0 %
Water Dispensers— %— %— %
Other34.5 %4.2 %32.2 %
Total57.7 %4.2 %56.8 %

 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 services47.0
 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
____________________________
1
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.




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, 2020March 30, 2019
Net loss from continuing operations$(27.4) $(22.7) 
Interest expense, net19.7  19.3  
Income tax benefit(3.3) (1.4) 
Depreciation and amortization45.0  39.7  
EBITDA$34.0  $34.9  
Acquisition and integration costs 1
20.8  4.7  
Share-based compensation costs2.4  3.1  
Foreign exchange and other losses, net6.3  1.0  
Loss on disposal of property, plant and equipment, net1.4  1.9  
Loss on sale of business—  5.4  
Other adjustments, net5.5  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, net19.3

20.8
Income tax (benefit) expense(1.0)
0.9
Depreciation and amortization45.2

47.4
EBITDA$43.8

$73.7
Acquisition and integration costs 1
4.8

5.0
Share-based compensation costs3.3

2.4
Loss on sale of business5.4
 
Commodity hedging loss, net

0.3
Foreign exchange and other losses (gains), net1.0

(8.2)
Loss on disposal of property, plant and equipment, net1.9

1.3
Gain on extinguishment of long-term debt

(7.1)
Cott Beverages LLC 2
0.4
 (0.5)
Other adjustments, net2.3

(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, 201928, 2020 Compared to Three Months Ended March 31, 201830, 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 ServicesWater 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 homein 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 businessa 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 inoffice 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 businesswhich was sold in the first quarter.quarter of 2019.

36



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 ServicesWater 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 homein water consumption and office water delivery operations, and growth in retail, partially offset by the unfavorable impact of foreign exchange rates andvolumes 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 millionnil 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 businesswhich 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 ServicesWater 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 ValleyLegacy Primo business as well as an increase in selling and Crystal Rock businesses, partially offset byservices costs due to the favorable impact of foreign exchange rates.increase in volumes.
Coffee, Tea and Extract SolutionsAll Other SG&A expenses increaseddecreased 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 Otherlower SG&A expenses decreasedincurred 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 LLCthe 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 decreasedAll 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 ServicesWater Solutions operating income remained unchanged at $14.0increased 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 incurreda release of uncertain tax positions in jurisdictions for which no tax benefit is recognized.the first quarter.



37



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, 201928, 2020 and December 29, 201828, 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 RCIRoyal 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 anniversaryrecent 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 facilityRevolving 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 facilityRevolving 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 facilityCredit 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 facilityRevolving Credit Facility were $118.0 million and $46.1 million in outstanding letters of credit. As a result, our excesscredit 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 $118.5Revolving 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 facilityRevolving 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 20192020 for an aggregate dividend payment of approximately $8.2$9.6 million.

38



The following table summarizes our cash flows for the three months ended March 30, 201928, 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, 2020March 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 operations4.9
 (57.7)
Net cash (used in) provided by investing activities from continuing operationsNet 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 operationsNet cash (used in) provided by operating activities from discontinued operations(17.3) 8.5  
Net cash provided by (used in) investing activities from discontinued operationsNet cash provided by (used in) investing activities from discontinued operations394.5  (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 cash1.3
 (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 cashNet decrease in cash, cash equivalents and restricted cash(93.3) (16.9) 
Cash and cash equivalents and restricted cash, beginning of period170.8
 157.9
Cash and cash equivalents and restricted cash, beginning of period205.5  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 decreaseincrease in net (loss) income, partially offset byloss 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 Notesan 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 20182019 Annual Report.
Credit Ratings and Covenant Compliance
Credit Ratings
We have no material changes to the disclosure on this matter made in our 20182019 Annual Report.

39



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.
ABLRevolving Credit Facility
Under the credit agreementCredit Agreement governing the ABL facility, as amendedRevolving Credit Facility, we and restated to date, Cott and itsour restricted subsidiaries are subject to a number of business and financial covenants, including a minimum fixed chargeconsolidated 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 ismust not be less than 3.00 to 1.00. Per the greater of 10% ofCredit Agreement, we are required to calculate these two financial covenants commencing with the Line Cap underinitial test period ending June 27, 2020.
In addition, the ABL facility or $22.5 million. Line Cap is definedCredit 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, 201816, 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 570,0002,316,835 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 referThere 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 theprecise 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 decreasedincreased by $19.4$314.5 million. The decreaseincrease was due primarily to a net lossthe issuance of $19.7common shares of $383.6 million and a common share dividend paymentnet income of $8.2$3.5 million, partially offset by currency translation adjustmentscommon 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.
40


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, 201925, 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, 201917, 2020 to shareowners of record at the close of business on May 31, 2019. Cott intendsJune 5, 2020. We intend to pay a regular quarterly dividend on itsour common shares subject to, among other things, the best interests of itsour shareowners, Cott’sour results of continuing operations, cash balances and future cash requirements, financial condition, statutory regulations and covenants set forth in the ABL facilityRevolving 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 20182019 Annual Report.
Recent Accounting Pronouncements
See Note 1 to the Consolidated Financial Statements for a discussion of recent accounting guidance.




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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 20182019 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 theSEC 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.

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PART II. OTHER INFORMATION


Item 1. Legal Proceedings
Reference is made to the legal proceedingproceedings described in our 2018 Annual Report.Note 14 to the Consolidated Financial Statements.


Item 1A. Risk Factors
There has been no material changeThe 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 referthat 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 Ministryincrease in certain of Environmental Protection (the "Ministry")our employees working remotely has alleged thatamplified 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 collects21-country footprint and recycles bottles sold by manufacturers, including Eden, failedprovide multi-gallon purified bottled water, self-service refill drinking water and water dispensers to meet recycling quotascustomers through major retailers in 2016, in violationNorth America, the profile of Israeli law. The law imposes liability directly on manufacturers,the services we provide and the Ministry has asserted thatproducts we sell, and the manufacturers involvedamount 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 oweitems 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.
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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 processresult, 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, 201816, 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, 2019570,000
 $13.77
 570,000
 $20,001,105
February 1 - February 28, 2019
 $
 
 $
March 1 - March 30, 2019
 $
 
 $
Total570,000
   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, 20202,316,835  $10.79  2,316,835  $25,009,946  
Total2,316,835  2,316,835  

Tax WithholdingsWithholding
The following table contains information about common shares that we withheld from delivering to employees during the first quarter of 20192020 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, 20201,917  $15.28  N/AN/A
February 1, 2020 - February 29, 2020418,562  $15.35  N/AN/A
March 1, 2020 - March 28, 202038,493  $12.58  N/AN/A
Total458,972  

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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, 20195,307
 $14.74
 N/A N/A
February 1 - February 28, 2019195,002
 $15.50
 N/A N/A
March 1 - March 30, 2019
 $
 N/A N/A
Total200,309
      





Item 6. Exhibits
Incorporated by ReferenceFiled or Furnished Herewith
Exhibit No.Description of ExhibitFormExhibitFiling DateFile No.
2.1 (1)
8-K2.11/13/2020001-31410
2.2  S-42.21/28/2020333-236122
2.3 (1)
8-K2.12/3/2020001-31410
3.1  8-K3.13/5/2020001-31410
3.2  8-A3.25/4/2018001-31410
10.1  8-K10.11/13/2020001-31410
10.2  8-K10.21/13/2020001-31410
10.3 (2)
8-K10.31/13/2020001-31410
10.4  8-K10.12/11/2020001-31410
10.5 (3)
8-K10.13/10/2020001-31410
10.6 (4)
*
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   Incorporated by Reference Filed or Furnished Herewith
Exhibit No.Description of Exhibit FormExhibitFiling DateFile No.  
3.1 10-K3.12/27/2019001-31410  
3.2 8-A3.25/4/2018001-31410  
4.1      *
4.2      *
10.1 (1)
      *
31.1      *
31.2      *
32.1      *
32.2      *
101The 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)
*
10.8 (4)
*
31.1 *
31.2 *
32.1 *
32.2 *
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.

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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, 20197, 2020/s/ Jay Wells
Jay Wells
Chief Financial and Administrative Officer
(On behalf of the Company)
Date: May 9, 20197, 2020/s/ Jason Ausher
Jason Ausher
Chief Accounting Officer
(Principal Accounting Officer)



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