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EXHIBIT 13
[COTT LOGO]
THE LEADER IN PREMIUM RETAILER
BRAND BEVERAGE INNOVATION
[ILLUSTRATION OF CARBONATED SOFT DRINK]
EXPECT MORE
COTT CORPORATION 2000 ANNUAL REPORT
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INSIDE FLAP
[ILLUSTRATION OF CARBONATED SOFT DRINK]
THIS IS COTT
CORPORATE HIGHLIGHTS
FINANCIAL HIGHLIGHTS
2 MANAGEMENT LETTER -- EXPECT MORE LEADERSHIP
6 EXPECT MORE CUSTOMER FOCUS
8 EXPECT MORE QUALITY
10 EXPECT MORE INNOVATION
12 QUARTERLY COMMON STOCK INFORMATION
13 MANAGEMENT'S DISCUSSION AND ANALYSIS
22 REPORT OF MANAGEMENT
22 REPORT OF INDEPENDENT ACCOUNTANTS
23 CONSOLIDATED FINANCIAL STATEMENTS
46 QUARTERLY FINANCIAL INFORMATION
47 SELECTED FINANCIAL DATA
48 DIRECTORS AND OFFICERS
INSIDE BACK COVER
INVESTOR INFORMATION
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THIS IS
[COTT LOGO]
Cott Corporation is the world's largest retailer brand soft drink supplier, with
the leading take home carbonated soft drink market shares in this segment in its
core markets of the U.S., Canada and the U.K.
It provides premium quality carbonated soft drinks, clear sparkling flavored
beverages, juices and juice-based products, lemonade, bottled water and iced tea
to many of the leading retailers in North America and the U.K. These are sold
predominantly under the retailer's own private label, such as Sam's Choice(TM)
at Wal-Mart stores in the U.S., President's Choice(TM) at Loblaws in Canada, and
Sainsbury's Classic(TM) products in the U.K. Cott also sells beverages under its
own trademarks, including Vintage(TM), Vess(TM) and Stars and Stripes(TM).
Cott's customers include many of the largest multi-national, national and
regional grocery, mass merchandiser, drugstore and convenience store chains, as
well as wholesalers, in its core markets.
The Company operates 15 beverage production facilities in the U.S., Canada and
the U.K., as well as a research facility in Columbus, Georgia, U.S. where new
beverages are developed and customized for its customers. Cott is headquartered
in Toronto, Canada and has approximately 2,200 employees worldwide.
2000 CORPORATE HIGHLIGHTS
- - Increased net income per diluted share 36% to $0.38, compared with $0.28 in
1999.
- - Grew sales volume to Cott's 15 core customers by 8% over last year,
significantly outpacing carbonated soft drink category growth.
- - Recorded its 8th straight quarter of profitable results showing improved
margins, positive cash flow and debt reduction.
- - Acquired Concord Beverage manufacturing operation, the largest independent,
stand-alone retailer brand bottling operation in the U.S., adding an annual
40 million equivalent cases, $80 million in sales, and important new
customers to Cott's U.S. operations.
- - Recognized by Wal-Mart, the world's largest retailer, as a "Supplier of the
Quarter" for the 2nd and 3rd quarters of 2000.
- - Continued strong progress on strategies focused on customer service,
product quality and innovation by concentrating on three core geographies
and retailer customers.
ALL AMOUNTS IN U.S. DOLLARS UNLESS OTHERWISE SPECIFIED.
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FINANCIAL HIGHLIGHTS
DECEMBER 30, JANUARY 1, JANUARY 2,
2000 2000 1999
(IN MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS) (52 WEEKS) (52 WEEKS) (48 WEEKS)
--------- --------- ---------
SALES $ 990.6 $ 993.7 $ 961.9
GROSS PROFIT 16.7% 14.7% 10.3%
OPERATING INCOME* 73.8 45.0 8.2
NET INCOME (LOSS) 25.4 18.5 (109.5)
OPERATING CASH FLOW, AFTER CAPITAL EXPENDITURES 67.6 38.4 (46.4)
WORKING CAPITAL 29.1 62.7 77.2
NET DEBT 310.6 322.8 375.8
NET INCOME (LOSS) PER DILUTED SHARE 0.38 0.28 (1.74)
--------- --------- ---------
* BEFORE UNUSUAL ITEMS
EARNINGS PER DILUTED SHARE EARNINGS BEFORE INTEREST, TAXES, OPERATING CASH FLOW PER DILUTED
(U.S. DOLLARS) DEPRECIATION & AMORTIZATION* SHARE (AFTER CAPITAL EXPENDITURES)
(MILLIONS OF U.S. DOLLARS) (U.S. DOLLARS)
[BAR CHART] [BAR CHART] [BAR CHART]
(1.74) 0.28 0.38 51.3 82.5 111.2 (0.74) 0.58 1.02
98 99 00 98 99 00 98 99 00
THE TAKE HOME CARBONATED SOFT DRINK MARKET - 2000
[TOTAL CATEGORY PIE CHART] [SPECIALTY SEGMENT PIE CHART] [RETAILER BRAND PIE CHART]
VOLUME SHARE
Major National Brands 81% Cott Retailer Brand 42% Cott Retailer Brand 60%
Specialty segment 19% Tertiary Brands 31% Non-Cott Retailer Brand 40%
Non-Cott Retailer Brands 27%
RETAIL VALUE
$30 billion $5 billion $3 billion
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EXPECT MORE
[COTT LOGO]
[ILLUSTRATION OF CARBONATED SOFT DRINKS]
Leadership
Customer Focus
Quality
Innovation
FROM THE LEADING
SUPPLIER OF RETAILER
BRAND SOFT DRINKS.
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EXPECT MORE
Leadership
[COTT LOGO]
FELLOW SHAREOWNERS:
Last year, I shared with you that the Cott turnaround was underway, and that our
Company was being revitalized as it pursued its three-pronged strategy to focus
on core, fix the cost structure, and strengthen the "new" Cott. In 2000, we
delivered on that promise. In 2001, you should expect more.
[PHOTO]
FRANK E. WEISE III
PRESIDENT & CHIEF EXECUTIVE OFFICER
FINANCIAL RESULTS UP STRONGLY
Our financial performance in 2000 speaks for itself. By the end of the year Cott
had reported eight straight quarters of profitable results showing improved
margins, positive cash flow and debt reduction. For the year, our net income per
diluted share grew 36% to $0.38 versus $0.28 a year ago. Sales volume to our
core 15 customers grew 8% over last year, and continued to significantly outpace
the carbonated soft drink industry.
Operating income increased 64% to $74 million, up from $45 million in 1999
before unusual items. Gross margins continued to grow to 16.7%, a steady
progression from 1999's 14.7% and 1998's 10.3%. Operating cash flow (less
capital expenditures) was $68 million, up significantly from $38 million a year
ago due to improvements in working capital and tight control over capital
spending. Even with a major acquisition during the year, we continued to reduce
our net debt to $311 million. Finally, cash return on assets, a measure of cash
generated by the assets employed in the business, grew sharply from 13% in 1999
to 18% in 2000, as we reduced costs, increased operating efficiencies, and
improved asset utilization.
Overall net sales of $991 million were comparable to last year, as we focused on
our key customers in key geographies. Sales in the U.S. increased 10%, with
sales volume to the top five customers growing 17%. Sales in Canada were
adversely affected by unseasonably cool weather, but the decline versus 1999 of
1% was also due to discontinuing the low margin spring water and export
businesses. Sales in the U.K.& Europe declined 22% from 1999 due to downward
pressure on prices, customer rationalization and the weakness of the pound
sterling.
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COTT ACQUIRES CONCORD BEVERAGE
A major highlight was our acquisition last October of the Concord Beverage
manufacturing operation in suburban Philadelphia, the largest independent
stand-alone retailer brand bottling operation in the U.S. As part of this
transaction, we also gained the Vintage(TM) brand of seltzer products, an
experienced work-force and a strong management team. The acquisition, which cost
$73 million, is expected to add 40 million equivalent cases or $80 million
annually to Cott's sales, and we expect it to be accretive to earnings in its
first full year as part of Cott. The integration into Cott's U.S. operations is
on track with our expectations.
This acquisition also adds important new supermarket customers not formerly
served by Cott in the New York/Mid Atlantic region, including Pathmark,
Shoprite, A&P, Acme, and Ahold's Giant Carlisle, PA and Landover, MD divisions.
STRATEGY IMPLEMENTATION ADVANCES
In mid 1998, Cott's new management team announced a strategy to make Cott the
preferred supplier of retailer brand carbonated soft drinks in our core markets.
That strategy called for Cott to:
- - Focus on Core,
- - Fix the Cost Structure, and
- - Strengthen the "new" Cott.
Two and a half years later, we are achieving our goals. While there is still
much work to be done and the process of continuous improvement at Cott will
never end, it is worth looking back at how far we have come, before we look
forward to what more you can expect.
FOCUS ON CORE
Since 1998, we have divested a range of non-core businesses, which provided $58
million that was used primarily to pay down debt. We reduced SKUs by almost
one-third, and rationalized business that did not generate a required level of
return, while increasing sales volume from our top customers significantly in
excess of industry growth.
We also focused relentlessly on our customers and achieved customer service
excellence in all markets.
In recent months, we were honored by Wal-Mart Stores, Inc., the world's largest
retailer, as a "Supplier of the Quarter" in both the 2nd and 3rd quarters for
outstanding performance in providing excellence in product, value and service to
Wal-Mart's consumers.
We also strengthened our business with our core customers, increasing sales of
existing products and innovating with new product offerings.
[ILLUSTRATION OF CARBONATED SOFT DRINKS]
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In the U.S., Wal-Mart's Sam's Choice(TM) Limited Edition sparkling lemonade, and
Wegmans 2-Liter sparkling beverages in lemonade, cranberry and pink grapefruit,
enjoyed successful launches. We also worked closely with H.E. Butt to relaunch
its retailer brand soft drink program, with exciting new packaging designs and
new graphics for vending machines.
In Canada, standout product launches included 12-pack lemonade at A&P and
Loblaws; a new cranberry carbonated soft drink beverage for holiday
consumption; and the launch of lemon iced tea and sparkling lemonade at Sobeys,
as well as the relaunch of Sobeys' Big 8(TM) colas.
In the U.K., we added Tesco as a customer with the introduction of a line of
organic carbonated soft drinks and mixer products. Marks & Spencer also joined
our customer group, with carbonated soft drinks in its new Food to Go(TM) line.
FIX THE COST STRUCTURE
Our margins have improved as the result of an aggressive program to reduce costs
and improve efficiency and productivity.
Since beginning this program, we have increased asset utilization by "sweating
the Company's assets" to provide enhanced productivity from the existing
infrastructure and to improve cash flow. We have also implemented greater
financial discipline -- introduced standardized accounting practices, initiated
enterprise-resource planning, clarified reporting systems and prioritized
capital spending.
Better analysis has provided us with actionable data on which management
decisions can be made. A highlight is our Six Sigma continuous improvement
program which helps track and reduce operating variations, and focuses on
operational efficiency. Our analysis also includes Key Performance Indicators
that measure performance in areas such as customer service and asset utilization
at each plant around the world.
STRENGTHEN THE "NEW" COTT
We have spent a great deal of time strengthening the "new" Cott. We rebalanced
the leadership team and brought in talent with sound experience and proven track
records in consumer product businesses.
The organization has been centralized reducing seven business units to three
geographic divisions, which provided consistency and efficiency, and eliminated
redundancies.
[ILLUSTRATION OF CARBONATED SOFT DRINKS]
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EXPECT MORE LEADERSHIP
The acquisition of the Concord Beverage assets in the last quarter of the year
represents a milestone as we begin to make the strategic shift from "Turnaround"
to "Growth". The last two and a half years we focused on getting our house in
order and rebuilding customer relationships. The future is about building sales,
market share and profitability for Cott and for our customers.
As we move into 2001, we are pursuing growth by building on our turnaround. Now
you should expect more as we raise the bar for ourselves. While the future is
difficult to predict, our objective is to continue to accelerate our rate of
growth in sales, earnings and cash flow. We expect to do this by broadening our
strategy to:
- - Focus on Core,
- - Drive Margins and Cash Flow, and
- - Strengthen and Grow.
As we strive to accelerate our growth in the future, we will continue to focus
on core. Our greatest opportunity is working with current customers in building
their retailer brand share and profitability, including product line extensions
such as purified drinking water and energy drinks.
Continuous improvement initiatives, such as broadening our Six Sigma program,
will drive our margins and cash flow. Installing new systems that are more
responsive to our needs, and to those of our customers, will help us reach our
accelerated growth targets.
As we strengthen and build the skill base of our employees we expect to develop
centers of excellence, where the best ideas and solutions are shared across all
operating units, and to create global teams to innovate in the areas of product
development, operations, sales, marketing and administration.
In addition, we plan on pursuing new customers and believe we can gain them by
demonstrating our ability to provide the greatest value in retailer brand
beverages. This value comes from our giving customers the products and packaging
they need, when and where they need them, and working with our customers to
develop exciting merchandising and marketing programs.
Finally, we are seeking out strategically focused acquisitions that will help us
to further strengthen and grow the Company.
SUMMARY
In summary, we have made dramatic strides forward in the past two and a half
years. Together with our 2,200 employees, we have turned our Company around, and
are now beginning to grow the Cott of the future. As we enter 2001 we expect
more from ourselves and you should expect more as a result.
/s/ Frank E. Weise III
- -------------------------------------
Frank E. Weise III
President and Chief Executive Officer March 7, 2001
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EXPECT MORE
Customer Focus
[COTT LOGO]
COTT'S REASON FOR BEING IS TO HELP OUR CUSTOMERS ACHIEVE GREATER SUCCESS THROUGH
THEIR RETAILER BRAND BEVERAGE PROGRAMS. EXPECT MORE.
We produce beverages for major retailers which they sell under their own brands.
The retailer brand segment of the market -- $3 billion in size -- is one of the
fastest growing parts of the $30 billion take home carbonated soft drink
category in the U.S., Canada and the U.K.
Carbonated soft drinks represent the largest category in the supermarket.
National and regional retailers use their own branded products to improve profit
margins, drive overall category volume, enhance their reputation with consumers
and provide them with differentiation in the marketplace. We are dedicated to
helping our customers achieve these goals.
We accomplish this by being focused single-mindedly on our customers' success,
and by having a category management structure that operates across all our
product lines. Our customers demand the highest levels of value, quality,
service, category leadership and innovation.
We are involved from product concept to moving the product off their store
shelves and into consumers' hands. We work together through concept, formulation
and production; packaging; inventory management; order fulfillment and delivery;
promotion; and performance analysis.
Our goal is to create value for our customers, by providing exceptional product
every time, wherever and whenever they need it.
EXPECT MORE...AS WE FURTHER DEPLOY CATEGORY MANAGEMENT AND SUPPLY CHAIN
INITIATIVES TO HELP OUR CUSTOMERS GROW THEIR RETAILER BRAND BEVERAGE PROGRAMS.
[ILLUSTRATION OF OUR COMPLIMENTS (TM) BRAND CARBONATED SOFT DRINKS]
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[ILLUSTRATION OF GROCERY AISLE WITH SOBEY'S AND COTT EMPLOYEES,
FEATURING OUR COMPLIMENTS (TM) LINE OF SOFT DRINKS]
RELENTLESSLY FOCUSING ON CUSTOMER SUCCESS
SERVING AS A LONG-TERM PARTNER
PROVIDING UNPARALLELED VALUE
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EXPECT MORE
Quality
[COTT LOGO]
QUALITY IS EVERYTHING. OUR CUSTOMERS AND CONSUMERS WANT THE SAME PREMIUM QUALITY
AND TASTE FROM A COTT-PRODUCED BEVERAGE EVERY TIME. EXPECT MORE.
Quality to Cott is a continuous process and a relentless quest for perfection,
which helps assure the loyalty of our customers and their consumers. It takes us
into every part of our organization, from raw materials, production lines,
product formulation and manufacturing, to how our employees work, how we and our
customers store and ship product, and how we transact business.
At Cott, continuous improvement comes together in our Six Sigma program. We
began our Six Sigma program in the U.S. in Spring 1999, and extended it to
Canada and the U.K. in Fall of 2000. To date, this intensive program has
included approximately 30% of our employees and several of our suppliers and
customers.
Quality at Cott means giving our customers the same premium taste every time
they drink a Cott-produced beverage. Most of all, it means ensuring that every
product we produce meets the highest expectations of our customers' consumers.
EXPECT MORE...AS WE CONTINUE ON OUR JOURNEY TOWARD ACHIEVING SIX SIGMA QUALITY.
[ILLUSTRATION OF SAM'S CHOICE (TM) SOFT DRINKS AND PURIFIED DRINKING WATER]
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[ILLUSTRATION OF STUDENTS ENJOYING SAM'S CHOICE (TM) PRODUCTS]
PRODUCING HIGH PRODUCT QUALITY EVERY TIME
CONTINUALLY IMPROVING HOW WE WORK
GROWING THE BOTTOM LINE
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EXPECT MORE
Innovation
[COTT LOGO]
COTT IS AN INNOVATOR IN RETAILER BRAND BEVERAGES, WHICH IS CRITICAL TO OUR
SUCCESS AND THAT OF OUR CUSTOMERS. EXPECT MORE.
Cott has always been an innovator, but in the last year things have really taken
off. We think of innovation in its broadest form. It involves product concepts
and formulations, containers, graphics and packaging, along with finished
products and the way our customers go to market with those products.
For example, as a result of U.K. consumers' growing interest in organic
products, Cott successfully launched a range of retailer brand organic
carbonated soft drinks with major customers including Tesco. Cott's U.K.
production facilities meet the U.K. Soil Association's standards for organic
food and farming.
Our goal is to offer our customers a full line of beverages in addition to cola
and other carbonated soft drinks. In the U.S., in response to the rapid growth
of the bottled water market, Cott is investing in building Reverse Osmosis (RO)
water capabilities in our plants. While optimizing our plant efficiencies, RO
water provides Cott with the opportunity to provide our customers a consistent
quality product and partner with them in building a strong retailer brand
presence in bottled water, the fastest growing beverage category.
EXPECT MORE...FROM COTT AS WE CONTINUE TO INNOVATE IN EVERYTHING WE DO.
[ILLUSTRATION OF TESCO ORGANIC SOFT DRINKS]
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[ILLUSTRATION OF FAMILY ENJOYING TESCO ORGANIC SOFT DRINK]
LEADING THE RETAILER BRAND SOFT DRINK BEVERAGE INDUSTRY
BROADENING THE PRODUCT LINE
MEETING CONSUMER DEMAND AND PREFERENCES
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QUARTERLY COMMON STOCK INFORMATION
NASDAQ QUARTERLY COMMON STOCK PRICES TSE QUARTERLY COMMON STOCK PRICES
(IN U.S. DOLLARS) (IN CANADIAN DOLLARS)
[BAR CHART] [BAR CHART]
NASDAQ (AMOUNTS IN U.S. DOLLARS)
2000 Q1 Q2 Q3 Q4 YEAR
- ---- ------------ ----------- ----------- ------------ ------------
High $ 7.00 $ 7.25 $ 6.06 $ 7.88 $ 7.88
Low $ 5.00 $ 4.38 $ 4.88 $ 5.53 $ 4.38
Volume 9,065,800 5,543,800 5,996,800 10,747,000 31,353,400
1999 Q1 Q2 Q3 Q4 YEAR
- ---- ------------ ----------- ----------- ------------ ------------
High $ 4.13 $ 4.94 $ 4.94 $ 6.25 $ 6.25
Low $ 1.97 $ 2.38 $ 3.16 $ 3.97 $ 1.97
Volume 10,202,900 8,947,000 5,221,100 8,711,000 33,082,000
TSE (AMOUNTS IN CANADIAN DOLLARS)
2000 Q1 Q2 Q3 Q4 YEAR
- ---- ------------ ----------- ----------- ------------ ------------
High $ 10.25 $ 9.50 $ 9.20 $ 12.15 $ 12.15
Low $ 7.25 $ 6.60 $ 7.30 $ 8.50 $ 6.60
Volume 6,805,800 4,286,400 4,265,200 7,237,100 22,594,500
1999 Q1 Q2 Q3 Q4 YEAR
- ---- ------------ ----------- ----------- ------------ ------------
High $ 6.20 $ 7.35 $ 6.45 $ 9.00 $ 9.00
Low $ 3.00 $ 3.60 $ 4.70 $ 5.85 $ 3.00
Volume 4,250,300 4,136,800 4,633,600 4,009,100 17,029,800
NASDAQ and TSE high and low prices for Cott Corporation's common shares for each
quarter of 1999 and 2000.
COTT CORPORATION 2000 ANNUAL REPORT
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
COTT CORPORATION IS THE WORLD'S LARGEST SUPPLIER OF RETAILER BRAND SOFT DRINKS,
WITH MANUFACTURING, DISTRIBUTION, MARKETING, PRODUCT DEVELOPMENT AND CUSTOMER
SERVICE FACILITIES IN THE U.S., CANADA AND THE U.K. THE COMPANY IS FOCUSED ON
GROWING SALES AND BUILDING VOLUME WITH KEY CUSTOMERS, REDUCING COSTS AND
IMPROVING MARGINS AND CONTINUING TO DRIVE INNOVATION IN THE RETAILER BRAND
BEVERAGE CATEGORY.
OVERVIEW
During 2000, the Company continued to focus on three main strategies: focus on
core, fix the cost structure and strengthen the "new" Cott. Successful
implementation of these strategies led to the 52% improvement in earnings before
non-recurring items and to the following highlights of the year.
ACQUISITION As part of the focused acquisition strategy, the Company purchased
the assets of the private label beverage and Vintage(TM) brand seltzer water
businesses of the Concord Beverage Company in October 2000 ("the Concord
Acquisition") for $73.4 million, including acquisition costs. The addition of
the Concord business is expected to provide an additional 40 million equivalent
cases and $80 million of sales in the northeastern U.S. annually and to be
accretive to earnings in 2001. The Company may seek out additional strategically
focused acquisitions in the future.
KEY CUSTOMERS The Company is committed to excellence in its customer service
levels and innovation in its product offerings. Reflecting these commitments,
sales volumes to the Company's top 15 customers, representing about 75% of the
business, grew by 7.5% over 1999. The Company also added Tesco and Marks &
Spencer, two well-known U.K. retailers, to its customer portfolio, in part as a
result of product innovations such as organic carbonated soft drinks. In
addition, new customers were added as part of the Concord Acquisition, including
A&P, Shoprite, Pathmark and Ahold's Giant Landover and Giant Carlisle divisions.
STRENGTHENING MARGINS Gross margin was 16.7% of sales in 2000,up from 14.7% in
1999. Gross margin in 1998 was 10.3%. Margins have improved in all three of the
Company's core business segments due primarily to operating efficiencies and to
improvements in customer and product mix.
DIVESTITURES The Company continued its program of divesting of non-core
businesses in 2000 with the disposals of the polyethylene terephthalate ("PET")
preform manufacturing and blow-molding business in the U.S. in April and the PET
preform manufacturing assets in the U.K. in October. Cash proceeds of $18.9
million were used primarily to reduce debt.
The Company has completed its previously announced divestiture program except
for a 7.6% interest in Menu Foods Corporation, the parent company of the private
label pet food producer Menu Foods Limited ("Menu Foods"). Menu Foods
Corporation has the option to purchase all of the Company's remaining shares for
amounts in excess of the carrying value before August 2004.
LOWER NET DEBT The Company continued to reduce its net debt balance despite the
Concord Acquisition. Net debt at the end of 2000 was $310.6 million compared
with $322.8 million and $375.8 million at the end of 1999 and 1998,
respectively.
COTT CORPORATION 2000 ANNUAL REPORT
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
2000 VERSUS 1999
RESULTS OF OPERATIONS
Income from continuing operations in 2000 was $26.6 million or $0.40 per diluted
share as compared with $21.4 million or $0.32 per diluted share in the prior
year. Income from continuing operations, excluding the impact of unusual items
and the 1999 gain on sale of an equity investment in Menu Foods, was $25.1
million or $0.38 per diluted share versus $16.5 million or $0.25 per diluted
share in 1999. Net income was $25.4 million or $0.38 per diluted share compared
with $18.5 million or $0.28 per diluted share in 1999.
SALES Sales in 2000 were $990.6 million compared with $993.7 million in 1999.
Excluding the impact of the Concord Acquisition in 2000 and the divestitures in
1999, sales of $975.7 million were up 0.3% compared with last year. The
Company's focus on core strategy contributed to a 7.5% improvement in volume to
the top 15 customers, representing almost three quarters of the Company's
business.
In the U.S., sales of $657.3 million were up 10.1% from 1999. The Concord
Acquisition added $14.9 million to sales in 2000 and the integration of this
business continues on track. Excluding the impact of the Concord Acquisition,
sales were up 7.6% in the U.S. on a total volume increase of 4.6%. The Company's
take home carbonated soft drink volume in the food, drug and mass merchandise
channel increased 4.4% in 2000,compared to a 2.2% increase for such category
according to IRI 52 week data for the period ending December 2000. Sales volume
to the top 10 customers for 2000 increased 15.5% year over year, with higher
sales to key customers more than offsetting the reduction in sales due to the
rationalization program the Company began in 1998.
As part of the 1998 rationalization program, the Company evaluated its product
offerings and eliminated small and unprofitable product lines, reducing SKU
count by 25% - 35%. Rationalization had an adverse impact on sales but improved
gross margins and helped reduce working capital.
Sales in Canada of $169.7 million were down 1.4% from 1999,primarily due to
rationalization of export and spring water businesses and the impact of an
unseasonably cool summer. Excluding the rationalized businesses, sales increased
4.8%. Equivalent case volume to the top 5 customers, excluding rationalized
water sales, was up 2.0% over the prior year primarily due to sales of new
products.
Sales in the U.K. & Europe were $156.7 million, down 22.4% compared with $201.9
million last year. Sales volume to the top 10 U.K. & Europe customers decreased
7.0%. Excluding 1999 divestitures and the impact of a weaker pound sterling
compared with the U.S. dollar, sales decreased by 14.8%, primarily the result of
continued customer and SKU rationalization and intense price competition.
GROSS PROFIT Gross profit was 16.7% of sales for 2000 compared with 14.7% in
1999. The 2.0 percentage point improvement reflects the Company's success in its
fix the cost structure strategy. This strategy included cutting unprofitable
SKUs, rationalizing the customer base and introducing performance measures and
accountabilities at all levels of the Company. These efforts resulted in better
margins in all three geographic segments.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") SG&A was $91.3 million in
2000,down 9.4% from $100.8 million for 1999. Reductions were primarily due to
lower head count and related costs, improved cost controls, reduction in
uncollectible accounts and the weakness in the pound sterling compared with the
U.S. dollar.
COTT CORPORATION 2000 ANNUAL REPORT
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
UNUSUAL ITEMS In the fourth quarter of 2000, the Company sold its PET preform
operations in the U.K. for proceeds of $2.7 million in cash at closing and $4.4
million payable over the next two years. A gain of $1.7 million was recorded in
unusual items on the disposal of this non-core business. The remaining unusual
gains in the year reflect minor changes in prior year estimates as described in
note 2 to the financial statements.
INTEREST EXPENSE Net interest expense was $30.1 million for the year ended
December 30, 2000 as compared with $34.6 million for 1999. Interest on long-term
debt decreased $2.0 million as a result of lower average long-term debt balances
compared with last year and the early repayment of the U.K. term loan in 2000.
Significant debt repayments were made throughout 1999. The remaining decrease in
net interest results from lower short-term interest expense and higher interest
income as cash flow improvements led to higher average net cash balances over
2000.
INCOME TAXES The Company recorded an income tax provision of $20.6 million on
pretax income of $47.2 million compared with a recovery of $3.8 million in 1999
on pretax income of $16.7 million. In 1999,the Company recorded the tax benefit
of prior period loss carryforwards, not previously recognized, by decreasing the
valuation allowance. The Company expects to be able to utilize these prior
period tax loss carryforwards as a result of a corporate reorganization in 1999.
EXTRAORDINARY ITEM In the fourth quarter of 2000, the Company repaid the $30.6
million remaining balance of its U.K. term loan from cash-on-hand. A charge of
$1.7 million less taxes of $0.5 million was recorded as an extraordinary item in
the financial statements. This charge represents the write-off of the
unamortized balance of deferred financing fees and the cost to unwind a related
interest rate swap agreement.
LIQUIDITY AND CAPITAL RESOURCES
FINANCIAL CONDITION Operating cash flow after capital expenditures was $67.6
million, up $29.2 million from $38.4 million in the prior year. Most of the
improvement was the result of increased earnings. The level of non-cash working
capital continued to improve over the last two years, generating $5.5 million in
cash in 2000 and $8.4 million in 1999.
Operating cash flow, along with proceeds from divestitures, was used to fund the
cash portion of the Concord Acquisition and repay $38.7 million in long-term
debt and $3.0 million in short-term borrowings, excluding borrowings for the
Concord Acquisition. Cash and cash equivalents increased $4.6 million in the
year to $7.2 million as of December 30, 2000.
Under the current committed credit facility, the Company has access to credit of
up to $40.0 million in the U.S. and Canada. The Company also has a $15.0 million
demand facility in the U.K. As of December 30, 2000, credit of $42.3 million was
available under both facilities.
INVESTING ACTIVITIES In 2000, the Company's primary investing activities
included the Concord Acquisition and substantial completion of the previously
announced divestiture program. The Concord Acquisition, including costs, was
funded using $35.0 million from cash-on-hand in the U.S. operation as well as
$20.5 million in borrowings on the Company's existing committed credit facility
and two notes payable to the seller due in October 2001 totaling $17.9 million.
The purchased assets included $15.0 million in working capital and property,
plant and equipment, $18.0 million for trademarks, $25.0 million for a customer
list and $15.4 million in goodwill.
COTT CORPORATION 2000 ANNUAL REPORT
15
20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Divestitures, primarily the PET preform manufacturing and blow-molding
operations in the U.S. and the preform manufacturing operations in the
U.K., generated $18.9 million in cash.
CAPITAL EXPENDITURES Capital expenditures were $23.9 million in 2000 as compared
with $18.5 million in 1999. Major expenditures in 2000 included $3.2 million to
install a new filling line and $1.9 million to upgrade an existing line in
U.S. manufacturing facilities. In addition, $2.0 million was spent in 2000 to
update and standardize information and accounting systems throughout the
Company. Total capital expenditures for 2001 are expected to be $35 million to
$40 million. Tight controls over capital spending will continue to be
maintained, favoring projects with an expected internal rate of return above 30%
and those required for essential maintenance, safety and regulatory compliance.
DIVIDEND PAYMENTS No dividends were paid in 2000 due to restrictions imposed
under the terms of the senior unsecured notes. An increase in shareowners'
equity over $3.4 million is required before dividend payments can be resumed.
While the Company is confident that shareowners' equity will exceed the minimum
required to pay dividends in 2001, resumption of dividend payments is unlikely
as the Company currently intends to use cash for future growth or repayment of
debt.
LONG-TERM DEBT As of December 30, 2000, the long-term debt totaled $281.2
million, consisting of $276.4 million in senior unsecured notes and $4.8 million
of other term debt. On November 30, 2000,the Company repaid the remaining
balance of its term bank loan in the U.K. As a result, none of the Company's
long-term debt is subject to interest at floating rates. The Company closely
monitors interest rates and adopts strategies responsive to the changing
economic environment.
Management believes the Company has the financial resources to meet its ongoing
cash requirements for operations and capital expenditures as well as its other
financial obligations.
1999 VERSUS 1998
1999 covers the year ended January 1, 2000
1998 covers the 11-month period February 1, 1998 to January 2, 1999
Comparable basis covers the period January 1998 to December 1998
RESULTS OF OPERATIONS
Income from continuing operations in 1999 was $21.4 million or $0.32 per diluted
share, versus a loss of $95.8 million or $1.53 per diluted share in the prior
period. Excluding the impact of unusual items and the gain from the sale of an
equity investment in Menu Foods, income from continuing operations was $16.5
million or $0.25 per diluted share compared with a loss of $29.7 million or
$0.47 per diluted share in 1998. Net income was $18.5 million or $0.28 per
diluted share versus a net loss, including discontinued operations and the
cumulative effect of changes in accounting principles, of $109.5 million or
$1.74 per diluted share in 1998.
SALES Sales increased to $993.7 million in 1999 from $961.9 million in 1998. On
a comparable basis, after removing sales by divested units, this was an increase
of 0.7%. Customer service was significantly improved in the core markets
COTT CORPORATION 2000 ANNUAL REPORT
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21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
and the focus on core strategy resulted in a 13% sales volume increase to the
top 15 accounts. This improvement helped offset lost sales resulting from SKU
reductions undertaken during the course of the year.
Sales in the U.S. increased to $596.8 million from $513.1 million in 1998. On a
comparable basis sales were up 6.9%. Sales volume to the top five customers was
up by 20% as the division focused on core accounts helping offset the impact of
a 33% SKU reduction.
Sales in Canada increased to $172.1 million in 1999 from $164.5 million in 1998.
On a comparable basis, sales were down 1.8%, primarily due to lower export
sales.
Sales in the U.K. & Europe declined to $201.9 million from $239.4 million in
1998. On a comparable basis, sales were down 20.2%. This decline reflected a
reduction in volume due to business streamlining efforts in the Company's
manufacturing and customer base. Removing the effect of sales lost as a
consequence of divesting the Featherstone plant, sales decreased 14.8% on a
comparable basis.
GROSS PROFIT Gross profit margin improved 4.4 points to 14.7% of sales in 1999
as compared to 10.3% in 1998. This improvement was the result of continued
efficiency gains at manufacturing facilities, the elimination of unprofitable
product offerings and better inventory management that resulted in fewer
write-offs of product.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES SG&A was $100.8 million in 1999 up
from $91.3 million in 1998. On a comparable basis, SG&A decreased 2.7%. This
reduction was primarily the result of administrative cost reductions arising
from the reorganization of operations in the U.S. and the U.K.
UNUSUAL ITEMS In 1999 all prior period restructuring charges were substantially
completed. A description of the utilization of the unusual items charge
reflected in 1998 is found in note 2 of the financial statements.
SALES OF BUSINESSES In 1999 the Company sold the assets of The Watt Design
Group, a packaging design company; Destination Products International, a frozen
food business; a plant and related business in Featherstone (U.K.) and its
subsidiary, BCB Beverages Australia Pty. Ltd. In addition, the Company divested
most of its minority interest in Menu Foods. The Company retained a 7.6%
investment in Menu Foods Corporation.
These disposals of non-core businesses were aimed at strengthening the Company's
performance and the cash proceeds of $39.1 million were used to reduce debt.
With the exception of Menu Foods on which a gain of $5.9 million ($4.2 million
after tax) was recorded, these divestitures had no significant impact on the
income statement as a charge to write down the assets being sold to net
realizable value was included in 1998 unusual items or discontinued operations.
INTEREST EXPENSE Net interest expense of $34.6 million in 1999 compared to $33.2
million in 1998 and $35.4 million on a comparable basis. Interest expense on
long-term debt decreased $3.0 million on a comparable basis due to the repayment
of long-term debt during the year. However, offsetting this was a $2.3 million
increase in interest expense on net short-term borrowings.
INCOME TAXES In 1999 the Company recorded an income tax benefit of $3.8
million, compared to a $4.0 million benefit in 1998. The 1999 tax benefit was
recorded as a result of a corporate reorganization as a consequence of
COTT CORPORATION 2000 ANNUAL REPORT
17
22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
which the Company now expects to be able to utilize prior period loss
carryforwards to reduce taxes payable in future years. These loss carryforwards
had not been tax effected in prior years.
DISCONTINUED OPERATIONS During 1999 an additional loss, net of tax, of $0.8
million ($3.8 million in 1998), was recorded to reflect the proceeds on
disposition of the assets of Destination Products International. Details of this
divestiture are found in note 7 of the financial statements.
CHANGES IN ACCOUNTING POLICIES The Company adopted Statement of Position (SOP)
98-5, Reporting on the Costs of Start-Up Activities, at the beginning of 1999.
SOP 98-5 requires that costs of start-up activities and organization costs be
expensed as incurred. Initial adoption of this principle was reported as a
cumulative effect of a change in accounting principle and resulted in a charge
of $2.1 million, net of a deferred income tax recovery of $1.2 million.
In 1998,the Company changed its policy and expensed as incurred development
costs and prepaid contract costs. Development costs represented expenditures
incurred in developing labels for new customers and updating designs for
existing customers. Previously, these costs were capitalized and amortized over
three years. Prepaid contract costs, costs associated with entering into
long-term contracts with certain of the Company's customers, were also
previously capitalized and amortized over the term of the related contract. This
change in accounting policy reflected the maturing of the Company's operations
in the industry and its relationships with customers. Net income for 1998
included a charge for the cumulative effect of this change in accounting policy
of $9.9 million, net of a deferred tax recovery of $1.1 million.
LIQUIDITY AND CAPITAL RESOURCES
FINANCIAL CONDITION Cash flow from operations after capital expenditures in 1999
was $38.4 million compared with a cash outflow of $46.4 million in 1998.
Operating cash flow was used to fund restructuring costs, capital expenditures
and to pay out deferred consideration.
Cash and cash equivalents decreased by $25.5 million to $2.6 million in the
course of 1999 primarily due to the repayment of short-term borrowings. At
January 1, 2000, $49.2 million of credit was available.
CAPITAL EXPENDITURES Capital expenditures were $18.5 million compared with $36.7
million in 1998. The lower level of capital spending reflected management's
commitment to make the assets "sweat".
INVESTING ACTIVITIES In November 1999 the Company modified its arrangement with
Premium Beverage Packers Inc. ("Premium"), a Pennsylvania based co-packer
responsible for approximately 15% of the Company's U.S. production. The Company
paid $25.0 million to settle an obligation under the terms of its 1997
acquisition agreement in which the Company purchased a customer list from
Premium and is also committed to use Premium as a co-packer for 10 years. This
amount has been capitalized to customer list and is included in intangibles and
other assets.
DIVIDEND PAYMENTS No dividends were paid in 1999 due to restrictions imposed
under the terms of the senior unsecured notes.
COTT CORPORATION 2000 ANNUAL REPORT
18
23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
LONG-TERM DEBT As at January 1, 2000 the long-term debt, totaled $323.6 million.
Such long-term debt consisted of $280.7 million in senior unsecured notes and
$42.9 million of other term debt. Approximately 1% of total debt was subject to
interest at floating rates.
MARKET CONDITIONS
OUTLOOK The Company expects continued growth in the carbonated soft drinks
category in its three core geographic markets, the U.S., Canada and the U.K. For
2001, the Company intends to build on progress made in the past two and a half
years by broadening its strategies to focus on core, drive margins and cash flow
and strengthen and grow. The Company's ongoing focus is to increase sales,
market share and profitability for the Company and its customers. Facing price
competition from heavily promoted global and regional brands, the Company's
major opportunity for growth depends on management's execution of these critical
strategies and on retailers' continued commitment to their retailer brand soft
drink programs.
RISKS AND UNCERTAINTIES Risks and uncertainties include national brand pricing
strategies, commitment of major customers to retailer brand programs, stability
of procurement costs for items such as sweetener, packaging materials and other
ingredients and fluctuations in currency versus the U.S. dollar.
In comparison to the major national brand soft drink manufacturers, the Company
is a relatively small participant in the industry. The main risk to the
Company's sales and operating income is the highly competitive environment in
which it operates. The Company's profitability in 2001 may be adversely affected
to the extent the national brand manufacturers reduce their selling prices or
increase the frequency of their promotional activities in the markets in which
the Company operates.
Sales to the top two customers in 2000 accounted for 50% (1999 -- 41%) of the
Company's total sales revenues. The loss of a significant customer, or customers
which in the aggregate represent a significant portion of the Company's
sales, could have a material adverse effect on the Company's operating results
and cash flows.
The Company's exposure to raw material price fluctuations is minimized by the
existence of long-term contracts. Replacing key raw material suppliers may
increase or decrease the Company's raw material costs.
The Company is exposed to changes in foreign currency exchange rates. Operations
outside of the U.S., which account for approximately 34% of 2000 sales (1999 --
40%), are concentrated principally in Canada and the U.K.
The information following summarizes the Company's market risks associated with
debt obligations as of December 30, 2000 and January 1, 2000. The table presents
principal cash flows and related interest rates by year of maturity. All debt
obligations bear interest at fixed interest rates in the current year as the
floating rate term loan was extinguished in 2000 along with the related interest
rate swap.
COTT CORPORATION 2000 ANNUAL REPORT
19
24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 30, 2000
-------------------------------------------------------------------------------------------
(in millions of U.S. dollars) 2001 2002 2003 2004 2005 Thereafter Total Fair Value
------ ------ ------ ------ ------- ---------- ------- ----------
DEBT
Fixed Rate $ 1.5 $ 2.7 $ 0.3 $ 0.2 $ 152.4 $ 124.0 $ 281.1 $ 278.9
------ ------ ------ ------ ------- ------- ------- -------
Weighted average interest rate 10.3% 8.8% 11.7% 8.6% 9.4% 8.5% 9.0% --
------ ------ ------ ------ ------- ------- ------- -------
Non-interest bearing $ 0.1 -- -- -- -- -- $ 0.1 $ 0.1
------ ------ ------ ------ ------- ------- ------- -------
FOR THE YEAR ENDED JANUARY 1, 2000
-------------------------------------------------------------------------------------------
(in millions of U.S. dollars) 2000 2001 2002 2003 2004 Thereafter Total Fair Value
------ ------- ------ ------- ------ ---------- -------- ----------
DEBT
Fixed Rate $ 1.5 $ 1.6 $ 2.8 $ 0.3 $ 0.2 $ 280.7 $ 287.1 $ 272.4
------ ------- ------ ------- ------ -------- -------- --------
Weighted average interest rate 11.3% 10.6% 8.8% 12.2% 8.6% 9.0% 9.0% --
------ ------- ------ ------- ------ -------- -------- --------
Variable rate -- $ 9.0 $ 9.1 $ 9.0 $ 9.2 -- $ 36.3 $ 36.3
------ ------- ------ ------- ------ -------- -------- --------
Non-interest bearing $ 0.1 $ 0.1 -- -- -- -- $ 0.2 $ 0.2
------ ------- ------ ------- ------ -------- -------- --------
Weighted average interest rate -- 7.5% 7.5% 7.5% 7.5% -- 7.5% --
------ ------- ------ ------- ------ -------- -------- --------
INTEREST RATE SWAPS
Variable to fixed $ 1.2 $ 31.9 -- -- -- -- $ 33.1 $ (0.3)
------ ------- ------ ------- ------ -------- -------- --------
Average pay rate 7.3% 7.3% -- -- -- -- 7.3% --
------ ------- ------ ------- ------ -------- -------- --------
Average receive rate 5.5% 5.5% -- -- -- -- 5.5% --
------ ------- ------ ------- ------ -------- -------- --------
LEGAL AND ENVIRONMENTAL MATTERS The Environmental Protection Act (Ontario) and
applicable regulations thereunder (collectively the "Ontario Act") provide that
a minimum percentage of a bottler's soft drink sales, by volume, must be made in
refillable containers. Attempts to improve sales in refillable containers have
been undertaken, however, the Company, along with other industry participants,
is not in compliance with the Ontario Act. The requirements under the Ontario
Act are not presently being enforced. If enforced, they could result in reduced
margins in the 750 ml refillable glass package, potential fines and the
prohibition of sales of soft drinks in non-refillable containers in Ontario.
Although the Company continues to work with industry groups to review possible
alternatives, the success of such efforts cannot be predicted and such
requirements are ultimately beyond industry control.
FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995
(the "Act") provides a safe harbor for forward-looking statements made by or on
behalf of the Company. The Company and its representatives may from time to time
make written or verbal forward-looking statements, including statements
contained in this Annual Report and other public filings. Generally, the words
"believe", "expect", "intend", "estimate", "anticipate", "will" and similar
expressions identify forward-looking statements. All statements which address
operating performance, events or developments that the Company expects or
anticipates will occur in the future -- including statements relating to
operations, economic performance, financial condition and achievements of the
Company, statements relating to objectives, business plans or strategies, and
projected or anticipated benefits or other consequences of such plans or
strategies, statements expressing general optimism about future operating
results or of the
COTT CORPORATION 2000 ANNUAL REPORT
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25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
performance of management -- are forward-looking statements within the meaning
of the Act. The forward-looking statements are and will be based on management's
views and assumptions, at the times such statements are made, regarding future
events and operating performance, and speak only as of such times. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
The following are some of the factors that could affect the Company's 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:
- - Increased competitor consolidations, market place competition, particularly
among branded beverage products, and competitive product and pricing
pressures could impact earnings, market share and volume growth;
- - Changes in laws and regulations, including changes in accounting standards,
taxation requirements (including tax rate changes, new tax laws and revised
tax law interpretations) and environmental laws in domestic or foreign
jurisdictions;
- - Fluctuations in the cost and availability of raw materials and ingredients
and the ability to maintain favorable supplier arrangements and
relationships;
- - Interest rate fluctuations and other capital market conditions, including
foreign currency rate fluctuations, which are subject to various factors,
including the impact of changes in worldwide and national economies,
foreign currency movements, pricing fluctuations for products and changes
in interest rates;
- - Retailers' continued commitment to their retailer brand beverage programs;
- - Changes in consumer tastes and preference and market demand for new and
existing products;
- - The ability to integrate acquired businesses into the Company's operations;
- - The uncertainties of litigation, as well as other risks and uncertainties
detailed from time to time in other public filings;
- - Changes in general economic and business conditions;
- - The effectiveness and success of spending programs and acquisition
investments; and
- - Adverse weather conditions, which could reduce demand for products.
The foregoing list of important factors is not exclusive or exhaustive. Many of
these factors are beyond the Company's ability to control or predict. Undue
reliance should not be placed on forward-looking statements.
COTT CORPORATION 2000 ANNUAL REPORT
21
26
REPORT OF MANAGEMENT
The accompanying consolidated financial statements have been prepared by the
management of the Company in conformity with generally accepted accounting
principles to reflect the financial position of the Company and its operating
results. Financial information appearing throughout this Annual Report is
consistent with that in the consolidated financial statements. Management is
responsible for the information and representations in such financial
statements, including the estimates and judgments required for their
preparation.
In order to meet its responsibility, management maintains internal controls
including policies and procedures, which are designed to assure that assets are
safeguarded and reliable financial records are maintained.
The report of PricewaterhouseCoopers LLP, the Company's independent
accountants, covering their audit of the consolidated financial statements, is
included in this Annual Report. Their independent audit of the Company's
financial statements includes a review of internal accounting controls to the
extent they consider necessary as required by generally accepted auditing
standards.
The Board of Directors annually appoints an Audit Committee, consisting of at
least three outside directors. The Committee meets with management and the
independent accountants to review any significant accounting and auditing
matters and to discuss the results of audit examinations. The Audit Committee
also reviews the consolidated financial statements, the Report of Independent
Accountants and other information in the Annual Report and recommends their
approval to the Board of Directors.
/s/ Frank E. Weise III /s/ Raymond P. Silcock
--------------------------- ----------------------------
Frank E. Weise III Raymond P. Silcock
President and Executive Vice President and
Chief Executive Officer Chief Financial Officer
-----------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS TO THE SHAREOWNERS OF COTT CORPORATION
We have audited the consolidated balance sheets of Cott Corporation as of
December 30, 2000 and January 1, 2000 and the consolidated statements of
income, shareowners' equity and cash flows for the years then ended and for the
period from February 1, 1998 to January 2, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 30, 2000
and January 1, 2000 and the results of its operations and its cash flows for the
years then ended and for the period from February 1, 1998 to January 2, 1999 in
accordance with generally accepted accounting principles in the United States.
On February 7, 2001 we reported separately, in accordance with generally
accepted auditing standards in Canada, to the shareowners of Cott Corporation on
consolidated financial statements for the two years ended December 30, 2000,
prepared in accordance with generally accepted accounting principles in Canada.
/s/ PricewaterhouseCoopers LLP
-------------------------------
Toronto, Ontario
February 7, 2001
COTT CORPORATION 2000 ANNUAL REPORT
22
27
CONSOLIDATED STATEMENTS OF INCOME
DECEMBER 30, January 1, January 2,
2000 2000 1999
(in millions of U.S. dollars, except per share amounts) (52 WEEKS) (52 weeks) (48 weeks)
---------- ---------- -----------
SALES $ 990.6 $ 993.7 $ 961.9
Cost of sales 825.5 847.9 862.4
---------- ---------- -----------
GROSS PROFIT 165.1 145.8 99.5
Selling, general and administrative expenses 91.3 100.8 91.3
Unusual items - note 2 (2.1) (1.2) 77.2
---------- ---------- -----------
OPERATING INCOME (LOSS) 75.9 46.2 (69.0)
Other income, net - note 3 (1.4) (5.1) (1.0)
Interest expense, net - note 4 30.1 34.6 33.2
---------- ---------- -----------
INCOME (LOSS) BEFORE INCOME TAXES, EQUITY INCOME
AND MINORITY INTEREST 47.2 16.7 (101.2)
Income taxes - note 5 (20.6) 3.8 4.0
Equity income -- 0.9 1.5
Minority interest -- -- (0.1)
---------- ---------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS 26.6 21.4 (95.8)
Cumulative effect of changes in accounting principles,
net of tax - note 6 -- (2.1) (9.9)
Loss from discontinued operations - note 7 -- (0.8) (3.8)
Extraordinary item - note 8 (1.2) -- --
---------- ---------- -----------
NET INCOME (LOSS) - note 9 $ 25.4 $ 18.5 $ (109.5)
========== ========== ===========
PER SHARE DATA - note 10
INCOME (LOSS) PER COMMON SHARE - BASIC
Income (loss) from continuing operations $ 0.44 $ 0.35 $ (1.53)
Cumulative effect of changes in accounting principles $ -- $ (0.03) $ (0.16)
Discontinued operations $ -- $ (0.01) $ (0.05)
Extraordinary item $ (0.02) $ -- $ --
Net income (loss) $ 0.42 $ 0.31 $ (1.74)
INCOME (LOSS) PER COMMON SHARE - DILUTED
Income (loss) from continuing operations $ 0.40 $ 0.32 $ (1.53)
Cumulative effect of changes in accounting principles $ -- $ (0.03) $ (0.16)
Discontinued operations $ -- $ (0.01) $ (0.05)
Extraordinary item $ (0.02) $ -- $ --
Net income (loss) $ 0.38 $ 0.28 $ (1.74)
The accompanying notes are an integral part of these consolidated financial
statements.
COTT CORPORATION 2000 ANNUAL REPORT
23
28
CONSOLIDATED BALANCE SHEETS
DECEMBER 30, January 1,
(in millions of U.S. dollars) 2000 2000
---------- ----------
ASSETS
Current assets
Cash and cash equivalents $ 7.2 $ 2.6
Accounts receivable - note 11 109.0 97.6
Inventories - note 12 64.0 67.3
Prepaid expenses 2.2 4.4
---------- ----------
182.4 171.9
Property, plant and equipment - note 13 245.0 266.4
Goodwill - note 14 115.2 108.1
Intangibles and other assets - note 15 79.0 43.2
---------- ----------
$ 621.6 $ 589.6
========== ==========
LIABILITIES
Current liabilities
Short-term borrowings - note 16 $ 36.6 $ 1.8
Current maturities of long-term debt - note 17 1.6 1.6
Accounts payable and accrued liabilities - note 18 114.5 104.8
Discontinued operations - note 7 0.6 1.0
---------- ----------
153.3 109.2
Long-term debt - note 17 279.6 322.0
Other liabilities - note 19 30.2 16.1
---------- ----------
463.1 447.3
---------- ----------
SHAREOWNERS' EQUITY
Capital stock - note 20
Common shares - 59,868,342 shares issued 189.1 189.0
Second preferred shares, Series 1 - 4,000,000 shares issued 40.0 40.0
Deficit (37.9) (63.3)
Accumulated other comprehensive income (32.7) (23.4)
---------- ----------
158.5 142.3
---------- ----------
$ 621.6 $ 589.6
========== ==========
APPROVED BY THE BOARD OF DIRECTORS
/s/ Serge Gouin /s/ C. Hunter Boll
--------------- -------------------
Serge Gouin C. Hunter Boll
Director Director
The accompanying notes are an integral part of these consolidated financial
statements.
COTT CORPORATION 2000 ANNUAL REPORT
24
29
CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
Number of Accumulated
Common Retained Other
Shares Common Preferred Earnings/ Comprehensive Total
(in millions of U.S. dollars) (in thousands) Shares Shares (Deficit) Income Equity
-------------- -------- --------- --------- ------------- --------
BALANCE AT JANUARY 31, 1998 64,203 $ 202.4 $ -- $ 47.6 $ (19.1) $ 230.9
Options exercised - note 21 3 -- -- -- -- --
Second preferred shares issued -- -- 40.0 (1.8) -- 38.2
Issued to executive officer 100 0.7 -- -- -- 0.7
Shares purchased and cancelled (4,469) (14.1) -- (15.9) -- (30.0)
Comprehensive income - note 9
Currency translation adjustment -- -- -- -- (6.1) (6.1)
Net loss -- -- -- (109.5) -- (109.5)
Dividends -- -- -- (2.2) -- (2.2)
------ -------- -------- -------- ------- --------
BALANCE AT JANUARY 2, 1999 59,837 189.0 40.0 (81.8) (25.2) 122.0
Comprehensive income - note 9
Currency translation adjustment -- -- -- -- 1.8 1.8
Net income -- -- -- 18.5 -- 18.5
------ -------- -------- -------- ------- --------
BALANCE AT JANUARY 1, 2000 59,837 189.0 40.0 (63.3) (23.4) 142.3
Options exercised - note 21 31 0.1 -- -- -- 0.1
Comprehensive income - note 9
Currency translation adjustment -- -- -- -- (9.3) (9.3)
Net income -- -- -- 25.4 -- 25.4
------ -------- -------- -------- ------- --------
BALANCE AT DECEMBER 30, 2000 59,868 $ 189.1 $ 40.0 $ (37.9) $ (32.7) $ 158.5
====== ======== ======== ======== ======= ========
The accompanying notes are an integral part of these consolidated financial
statements.
COTT CORPORATION 2000 ANNUAL REPORT
25
30
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECEMBER 30, January 1, January 2,
2000 2000 1999
(in millions of U.S. dollars) (52 WEEKS) (52 weeks) (48 weeks)
------------ ---------- -----------
OPERATING ACTIVITIES
Income (loss) from continuing operations $ 26.6 $ 21.4 $ (95.8)
Depreciation and amortization 39.0 39.1 43.7
Deferred income taxes 20.1 (6.1) (6.9)
Non-cash unusual items (1.9) 0.3 51.4
Gain on disposal of equity investment -- (5.9) --
Other non-cash items 2.2 (0.3) 5.1
Net change in non-cash working capital from
continuing operations - note 22 5.5 8.4 (7.2)
--------- --------- -----------
Cash provided by (used in) operating activities 91.5 56.9 (9.7)
--------- --------- -----------
INVESTING ACTIVITIES
Additions to property, plant and equipment (23.9) (18.5) (36.7)
Acquisitions - note 23 (55.5) (25.0) (2.9)
Proceeds from disposal of businesses 18.9 39.1 --
Proceeds from disposal of property, plant and equipment 1.9 1.4 3.9
Other (3.8) (2.6) (6.4)
--------- --------- -----------
Cash used in investing activities (62.4) (5.6) (42.1)
--------- --------- -----------
FINANCING ACTIVITIES
Payments of long-term debt (38.7) (52.0) (31.2)
Short-term borrowings 17.5 (24.4) 5.2
Common shares purchased and cancelled -- -- (30.0)
Issue of common shares 0.1 -- 0.7
Issue of preferred shares -- -- 40.0
Share issue costs -- -- (1.8)
Dividends paid -- -- (2.2)
Other (2.1) -- --
--------- --------- -----------
Cash used in financing activities (23.2) (76.4) (19.3)
--------- --------- -----------
Net cash used in discontinued operations (0.4) (1.0) (1.5)
Effect of exchange rate changes on cash and
cash equivalents (0.9) 0.6 (2.9)
--------- --------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4.6 (25.5) (75.5)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2.6 28.1 103.6
--------- --------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 7.2 $ 2.6 $ 28.1
========= ========= ===========
The accompanying notes are an integral part of these consolidated financial
statements.
COTT CORPORATION 2000 ANNUAL REPORT
26
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION These consolidated financial statements have been prepared
in accordance with United States ("U.S.") generally accepted accounting
principles ("GAAP") and using the U.S. dollar as the reporting currency, as the
majority of the Company's business and the majority of its shareowners are in
the U.S. Consolidated financial statements in accordance with Canadian GAAP, in
U.S. dollars, are made available to all shareowners and filed with various
Canadian regulatory authorities.
In 1998, the Company changed its fiscal year-end to the Saturday closest to
December 31. Previously, the year-end was the last Saturday in January.
Comparative amounts in prior years have been reclassified to conform to the
financial statement presentation adopted in the current year.
BASIS OF CONSOLIDATION The financial statements consolidate the accounts of the
Company and its subsidiaries. All significant inter-company accounts and
transactions are eliminated upon consolidation.
ESTIMATES The preparation of these 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. Actual results could differ from those estimates.
CASH EQUIVALENTS Cash equivalents include highly liquid investments with
original maturities of three months or less.
INVENTORIES Inventories are stated at the lower of cost, determined on the
first-in, first-out method, or net realizable value. Returnable bottles and
plastic shells are valued at the lower of cost, deposit value or net realizable
value. Finished goods and work-in-process include the cost of raw materials,
direct labor and manufacturing overhead costs.
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated at the
lower of cost less accumulated depreciation or net recoverable amount.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets as follows:
Buildings 20 to 40 years
Manufacturing equipment 7 to 15 years
Furniture and fixtures 3 to 10 years
Computer hardware and software 3 to 5 years
Plates and films 3 years
The Company periodically compares the carrying value of property, plant and
equipment to the estimated undiscounted future cash flows that may be generated
by the related assets and recognizes in net income any impairment to net
realizable value.
COTT CORPORATION 2000 ANNUAL REPORT
27
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
GOODWILL Goodwill represents the excess purchase price of acquired businesses
over the fair value of the net assets acquired. Goodwill is amortized using the
straight-line method over its estimated period of benefit, not exceeding 40
years. The Company periodically compares the carrying value of goodwill to the
estimated undiscounted future cash flows that may be generated by the related
businesses and recognizes in net income any impairment to net realizable value.
INTANGIBLES AND OTHER ASSETS Issuance costs for credit facilities and long-term
debt are deferred and amortized over the term of the credit agreement or related
debt, respectively.
Customer lists represent the cost of acquisition for the right to sell to
specific customers and are amortized over 15 years. Trademarks are recorded at
the cost of acquisition and are amortized over 15 years. The Company
periodically compares the carrying value of the customer lists and trademarks to
the estimated undiscounted future cash flows that may be generated by the
related businesses and recognizes in net income any impairment to net realizable
value.
REVENUE RECOGNITION The Company recognizes sales upon shipment of goods to
customers.
SHIPPING AND HANDLING COSTS The Company records shipping and handling costs as
incurred and includes these costs as a component of cost of sales.
FOREIGN CURRENCY TRANSLATION The assets and liabilities of foreign operations,
all of which are self-sustaining, are translated at the exchange rates in effect
at the balance sheet dates. Revenues and expenses are translated using average
exchange rates prevailing during the period. The resulting gains or losses are
accumulated in the other comprehensive income account in shareowners' equity.
TAXATION The Company accounts for income taxes under the asset and liability
method. Deferred tax assets and liabilities are recognized based on the
differences between the accounting values of assets and liabilities and their
related tax bases using current income tax rates.
FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts reflected in the
consolidated balance sheets for cash, cash equivalents, receivables, payables,
short-term borrowings, long-term debt and deferred consideration on acquisitions
approximate their respective fair values, except as otherwise indicated. Fair
values of long-term debt are based primarily on quoted prices for those or
similar instruments.
COMPREHENSIVE INCOME Comprehensive income is comprised of net income (loss)
adjusted for changes in the cumulative foreign currency translation adjustment
account.
COTT CORPORATION 2000 ANNUAL REPORT
28
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. UNUSUAL ITEMS
The utilization of the prior period's unusual items charge provided in the
consolidated statement of income during the two years ended December 30, 2000 is
as follows:
Property, Plant
& Equipment Writedowns (Gain) Loss on
Restructuring and Inventory of Businesses Disposal of
(in millions of U.S. dollars) Costs (a) Impairment (b) Held for Sale (c) Business (d) Total
------------- --------------- ----------------- -------------- -----------
ORIGINAL CHARGE $ 25.8 $ 28.3 $ 17.8 $ 5.3 $ 77.2
Spending and realization (2.9) (23.8) (11.7) (5.3) (43.7)
--------- --------- --------- ---------- -----------
BALANCE AT JANUARY 2, 1999 22.9 4.5 6.1 -- 33.5
Spending and realization (16.8) (1.4) (7.6) -- (25.8)
1999 unusual item
Modification and changes
in estimate (2.0) (3.1) 1.5 -- (3.6)
1999 provision 0.6 -- 1.8 -- 2.4
--------- --------- --------- ---------- -----------
Subtotal (1.4) (3.1) 3.3 -- (1.2)
--------- --------- --------- ---------- -----------
BALANCE AT JANUARY 1, 2000 4.7 -- 1.8 -- 6.5
Spending and realization (2.9) -- (1.0) 1.7 (2.2)
2000 unusual item
Modification and changes
in estimate (0.2) -- (0.2) -- (0.4)
2000 provision -- -- -- (1.7) (1.7)
--------- --------- --------- ---------- -----------
Subtotal (0.2) -- (0.2) (1.7) (2.1)
--------- --------- --------- ---------- -----------
BALANCE AT DECEMBER 30, 2000 $ 1.6 $ -- $ 0.6 $ -- $ 2.2
========= ========= ========= ========== ===========
All restructuring activities have been completed. The remaining restructuring
provision of $1.6 million primarily represents contractual obligations expiring
in subsequent years.
(a) Changes in estimates resulted in reductions of $0.2 million and $2.0
million in the years ended December 30, 2000 and January 1, 2000,
respectively, relating to prior period restructuring charges. During
the year ended January 1, 2000, the Company recorded an additional $0.6
million charge ($0.4 million after tax or $0.01 per share) related to
severances for 14 employees.
During the period ended January 2, 1999, the Company recorded a charge of
$25.8 million ($22.3 million after tax or $0.36 per share) for a
restructuring program undertaken by the Company to focus on businesses in
core markets (North America and the United Kingdom ("U.K.")), fix its cost
structure and strengthen the management team. The restructuring charge
represented expected cash payments before proceeds from sales of assets and
businesses. These costs included $5.4 million of severance covering
approximately 110 employees, termination costs relating to leases, and
other contractual obligations.
(b) For the year ended January 1, 2000, the reversal of prior period unusual
items of $3.1 million reflects the impact of changes in estimates primarily
due to inventory impairments being less than originally anticipated.
COTT CORPORATION 2000 ANNUAL REPORT
29
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
During the period ended January 2, 1999, a charge of $28.3 million was
recorded to writedown assets to net realizable value in connection with
manufacturing rationalization, discontinued products or customers, and
expected divestitures of certain investments and manufacturing facilities.
(c) For the year ended December 30, 2000, the unusual item reflects a change in
estimate of prior period writedowns of non-core businesses. During the year
ended January 1, 2000, the Company recorded $1.8 million related primarily
to the writedown of one of the Company's trademarks to net realizable
value. The balance reflects a change in estimate of prior period
writedowns.
(d) During the year ended December 30, 2000, the Company disposed of its
preform blow molding operation in the U.K. and recorded a $1.7 million gain
on disposal. Proceeds of disposal included deferred consideration of $4.4
million ((pound)3.0 million) payable by the acquirer over the next two
years. During the period ended January 2, 1999, the Company sold its
bottling operations in Norway and recorded a $5.3 million loss on disposal.
3. OTHER INCOME, NET
DECEMBER 30, January 1, January 2,
(in millions of U.S. dollars) 2000 2000 1999
------------ ---------- ----------
Foreign exchange (gain) loss $ (1.3) $ 0.4 $ (0.8)
Gain on disposal of equity investment
in Menu Foods Limited -- (5.9) --
Other (0.1) 0.4 (0.2)
------------ ---------- ----------
$ (1.4) $ (5.1) $ (1.0)
============ ========== ==========
4. INTEREST EXPENSE, NET
DECEMBER 30, January 1, January 2,
(in millions of U.S. dollars) 2000 2000 1999
------------ ----------- ----------
Interest on long-term debt $ 31.2 $ 33.2 $ 33.0
Other interest 0.9 2.6 2.1
Interest income (2.0) (1.2) (1.9)
------------ ----------- ----------
$ 30.1 $ 34.6 $ 33.2
============ =========== ==========
Interest paid during the year was approximately $22.8 million ($36.0 million --
January 1, 2000; $36.1 million -- January 2, 1999).
COTT CORPORATION 2000 ANNUAL REPORT
30
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES
Income (loss) before income taxes, equity income and minority interest consisted
of the following:
DECEMBER 30, January 1, January 2,
(in millions of U.S. dollars) 2000 2000 1999
------------ ---------- -----------
Canada $ 4.7 $ 2.7 $ (61.4)
Outside Canada 42.5 14.0 (39.8)
--------- --------- -----------
$ 47.2 $ 16.7 $ (101.2)
========= ========= ===========
Recovery of (provision for) income taxes consisted of the following:
DECEMBER 30, January 1, January 2,
(in millions of U.S. dollars) 2000 2000 1999
------------ ----------- -----------
CURRENT
Canada $ (0.2) $ (0.6) $ (0.3)
Outside Canada (0.3) (1.7) (2.6)
---------- ---------- ----------
$ (0.5) $ (2.3) $ (2.9)
---------- ---------- ----------
DEFERRED
Canada $ (1.8) $ 12.1 $ 1.0
Outside Canada (18.3) (6.0) 5.9
---------- ---------- ----------
$ (20.1) $ 6.1 $ 6.9
---------- ---------- ----------
RECOVERY OF (PROVISION FOR) INCOME TAXES $ (20.6) $ 3.8 $ 4.0
========== ========== ==========
Income taxes paid during the year were $2.4 million ($2.9 million -- January
1, 2000; $4.2 million -- January 2, 1999).
The following table reconciles income taxes calculated at the basic Canadian
corporate rates with the income tax recovery (provision):
DECEMBER 30, January 1, January 2,
(in millions of U.S. dollars) 2000 2000 1999
------------ ---------- -----------
Income tax (provision) recovery based on
Canadian statutory rates $ (20.4) $ (7.3) $ 44.1
Foreign tax rate differential 2.3 7.3 (14.4)
Manufacturing and processing deduction 0.3 0.7 (2.1)
Decrease (increase) in valuation allowance (0.8) 9.5 (19.0)
Non-deductible items (2.0) (6.4) (4.6)
---------- --------- ----------
Recovery of (provision for) income taxes $ (20.6) $ 3.8 $ 4.0
========== ========= ==========
COTT CORPORATION 2000 ANNUAL REPORT
31
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
During the year ended January 1, 2000, the Company substantially completed the
implementation of a corporate reorganization that improved the probability of
realizing certain loss carryforwards. As a result, the valuation allowance was
reduced to recognize the benefit of these loss carryforwards.
Deferred income tax assets and liabilities were recognized on temporary
differences between the financial and tax bases of existing assets and
liabilities as follows:
DECEMBER 30, January 1,
(in millions of U.S. dollars) 2000 2000
------------ ----------
DEFERRED TAX ASSETS
Loss carryforwards $ 36.5 $ 56.4
Liabilities and reserves 4.3 7.3
Intangible assets 2.1 1.5
Other 1.0 1.0
--------- ---------
43.9 66.2
Valuation allowance (10.1) (9.3)
--------- ---------
33.8 56.9
--------- ---------
DEFERRED TAX LIABILITIES
Property, plant and equipment 19.4 21.2
Other 28.5 30.0
--------- ---------
47.9 51.2
--------- ---------
NET DEFERRED TAX ASSET (LIABILITY) $ (14.1) $ 5.7
========= =========
As of December 30, 2000, operating loss carryforwards of $98.9 million ($144.5
million -- January 1, 2000) are available to reduce future taxable income. These
losses expire as follows:
(in millions of U.S. dollars)
2004 $ 1.0
2005 15.9
2006 19.6
After 2007 40.6
No expiry 21.8
----------
$ 98.9
==========
6. CHANGES IN ACCOUNTING PRINCIPLES
The Accounting Standards Executive Committee issued SOP 98-5, Reporting on the
Costs of Start-Up Activities, which became effective in the year ended January
1, 2000. SOP 98-5 requires that costs of start-up activities and organization
costs be expensed as incurred. The impact of the initial adoption was recorded
as a cumulative effect of a change in accounting principle and resulted in a
charge of $2.1 million, net of a deferred income tax recovery of $1.2 million.
COTT CORPORATION 2000 ANNUAL REPORT
32
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Commencing in the period ended January 2, 1999, development costs for new
packaging and prepaid contract costs for retailers are expensed as incurred.
Previously, development costs for packaging were amortized over three years and
prepaid contract costs were amortized over the term of the related contract. For
the period ended January 2, 1999, net income included a charge for the
cumulative effect of the change in accounting policy of $9.9 million, net of a
deferred income tax recovery of $1.1 million.
7. DISCONTINUED OPERATIONS
During the year ended January 31, 1998, the Company decided to dispose of its
food business, Destination Products International, LLC ("DPI"). During the
period ended January 2, 1999, the Company recorded a $3.8 million provision (net
of a deferred income tax recovery of $0.4 million) reflecting a revision in the
estimated loss on disposal. The assets of DPI were sold in May 1999 for cash
proceeds of $6.9 million (C$10.1 million) and the Company recorded a loss on
disposal of $0.8 million (net of a deferred income tax recovery of $0.5
million).
For the year ended January 1, 2000, the loss from discontinued operations
included an allocation of interest expense of $0.3 million ($0.9 million --
January 2, 1999) relating to debt attributable to the discontinued operations.
The results of discontinued operations were as follows:
January 1, January 2,
(in millions of U.S. dollars) 2000 1999
---------- ----------
Sales $ 14.4 $ 28.5
--------- ----------
Loss on disposal of discontinued operations $ (0.8) $ (3.8)
========= ==========
8. EXTRAORDINARY ITEM
On November 30, 2000, the Company repaid the $30.6 million ((pound)21.0 million)
remaining balance of its term bank loan in the U.K. from cash-on-hand. A loss of
$1.2 million, net of a deferred income tax recovery of $0.5 million, was
recorded as an extraordinary item on the early extinguishment of this debt. The
loss represented primarily the write-off of the unamortized portion of financing
costs for the term loan.
9. OTHER COMPREHENSIVE INCOME
DECEMBER 30, January 1, January 2,
(in millions of U.S. dollars) 2000 2000 1999
------------ ---------- -----------
Net income (loss) $ 25.4 $ 18.5 $ (109.5)
Foreign currency translation
(January 1, 2000 - net of $2.4 impact of divestitures) (9.3) 1.8 (6.1)
-------- -------- ----------
$ 16.1 $ 20.3 $ (115.6)
======== ======== ==========
COTT CORPORATION 2000 ANNUAL REPORT
33
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding during the
period. Diluted net income (loss) per share includes the effect of exercising
stock options and converting the preferred shares, only if dilutive.
The following table reconciles the basic weighted average number of shares
outstanding to the diluted weighted average number of shares outstanding:
DECEMBER 30, January 1, January 2,
(in thousands) 2000 2000 1999
------------ ----------- ----------
Weighted average number of shares outstanding-basic 59,856 59,837 62,797
Dilutive effect of stock options 454 82 --
Dilutive effect of second preferred shares 6,286 6,286 --
------ ------ ------
Adjusted weighted average number of shares
outstanding-diluted 66,596 66,205 62,797
====== ====== ======
For the period ended January 2, 1999, the dilutive effect of stock options and
preferred shares of 131,000 and 6,286,000, respectively, was not included in the
computation of diluted loss per share as it was anti-dilutive.
11. ACCOUNTS RECEIVABLE
DECEMBER 30, January 1,
(in millions of U.S. dollars) 2000 2000
------------ ----------
Trade receivables $ 93.6 $ 90.7
Allowance for doubtful accounts (3.3) (8.7)
Other 18.7 15.6
--------- ---------
$ 109.0 $ 97.6
========= =========
12. INVENTORIES
DECEMBER 30, January 1,
(in millions of U.S. dollars) 2000 2000
------------ ----------
Raw materials $ 21.3 $ 29.4
Finished goods 34.3 29.4
Other 8.4 8.5
--------- ---------
$ 64.0 $ 67.3
========= =========
COTT CORPORATION 2000 ANNUAL REPORT
34
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. PROPERTY, PLANT AND EQUIPMENT
DECEMBER 30, 2000 January 1, 2000
------------------------------------------------------------------------------------
ACCUMULATED Accumulated
(in millions of U.S. dollars) COST DEPRECIATION NET Cost Depreciation Net
--------- ------------- -------- ---------- ------------ ---------
Land $ 17.1 $ -- $ 17.1 $ 15.8 $ -- $ 15.8
Buildings 75.9 13.5 62.4 73.6 11.6 62.0
Machinery and equipment 248.5 96.4 152.1 258.2 85.8 172.4
Computer hardware and
software 31.1 22.9 8.2 31.9 22.1 9.8
Furniture and fixtures 9.3 5.1 4.2 9.0 4.5 4.5
Plates and film 8.2 7.2 1.0 10.9 9.0 1.9
--------- --------- -------- ---------- ---------- ---------
$ 390.1 $ 145.1 $ 245.0 $ 399.4 $ 133.0 $ 266.4
========= ========= ======== ========== ========== =========
Depreciation expense, excluding the property, plant and equipment impairment
provision described in note 2, was $30.9 million ($33.7 million -- January
1, 2000; $30.7 million -- January 2, 1999).
14. GOODWILL
DECEMBER 30, January 1,
(in millions of U.S. dollars) 2000 2000
------------ ----------
Cost $ 131.0 $ 120.8
Accumulated amortization (15.8) (12.7)
--------- ----------
$ 115.2 $ 108.1
========= ==========
15. INTANGIBLES AND OTHER ASSETS
DECEMBER 30, 2000 January 1, 2000
------------------------------------------------------------------------------------
ACCUMULATED Accumulated
(in millions of U.S. dollars) COST AMORTIZATION NET Cost Amortization Net
--------- ------------- -------- ---------- ------------- ---------
Customer lists $ 49.6 $ 2.3 $ 47.3 $ 25.0 $ 0.3 $ 24.7
Trademarks 19.0 1.1 17.9 1.0 0.7 0.3
Financing costs 9.6 4.4 5.2 13.2 4.3 8.9
Deferred income taxes -
note 5 -- -- -- 5.7 -- 5.7
Other 9.2 0.6 8.6 3.6 -- 3.6
--------- --------- --------- ---------- --------- ---------
$ 87.4 $ 8.4 $ 79.0 $ 48.5 $ 5.3 $ 43.2
========= ========= ========= ========== ========= =========
COTT CORPORATION 2000 ANNUAL REPORT
35
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. SHORT-TERM BORROWINGS
DECEMBER 30, January 1,
(in millions of U.S. dollars) 2000 2000
------------ ----------
Bank overdrafts and borrowings under bank credit facilities $ 18.7 $ 1.8
Promissory notes - note 23 17.9 --
-------- --------
$ 36.6 $ 1.8
======== ========
The Company has a committed revolving bank credit facility providing a maximum
credit of $40.0 million depending on available collateral, consisting of
accounts receivable and inventory. This facility expires in 2002. As of December
30, 2000, $27.3 million was available. Borrowings under the bank credit facility
bear interest at prime plus 0.5% or LIBOR plus 1.75%. Commitment fees of 0.375%
are payable on the unused line of credit. The weighted average interest rate at
December 30, 2000 was 9.3% (7.5% - January 1, 2000).
The Company also has a $15.0 million demand bank credit facility in the U.K.
expiring in 2001 with $15.0 million available as of December 30, 2000.
Borrowings under this facility bear interest at prime plus 1.0% or LIBOR plus
0.75%.
17. LONG-TERM DEBT
DECEMBER 30, January 1,
(in millions of U.S. dollars) 2000 2000
------------ ----------
Senior unsecured notes at 9.375% due 2005 (a) $ 152.4 $ 155.7
Senior unsecured notes at 8.5% due 2007 (a) 124.0 125.0
Term bank loan at LIBOR plus 2% (b) - note 8 -- 36.3
Capital leases due 2001 to 2004 2.2 3.7
Mortgages at 5.75% to 7.125% due 2001 to 2002 2.5 2.7
Other 0.1 0.2
---------- ----------
281.2 323.6
Less current maturities (1.6) (1.6)
---------- ----------
$ 279.6 $ 322.0
========== ==========
(a) The fair value of the senior unsecured notes as of December 30, 2000 was
$274.2 million ($266.0 million -- January 1, 2000). These debt instruments
contain a number of financial covenants including limitations on dividend
payments and indebtedness. An increase of approximately $3.4 million in
shareowners' equity is required before dividend payments can be resumed.
Penalties exist if the Company redeems the 9.375% and the 8.5% senior
unsecured notes before July 1, 2002 and July 1, 2004, respectively.
(b) The term loan was (pound) 22.5 million as of January 1, 2000 and was
extinguished during 2000.
On January 1, 2000, the Company had a fixed interest rate swap with a 7.33%
interest rate maturing on January 31, 2001. As at January 1, 2000, the fair
value of the interest rate swap contract was a liability of $0.3 million,
COTT CORPORATION 2000 ANNUAL REPORT
36
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
reflecting the estimated amount that would have been paid if the contract
was terminated on this date. The swap was settled as of November 30, 2000
upon repayment of the underlying term bank loan and resulted in a payment
of $0.1 million on termination.
(c) Long-term debt payments required in each of the next five years and
thereafter are as follows:
(in millions of U.S. dollars)
2001 $ 1.6
2002 2.7
2003 0.3
2004 0.2
2005 152.4
Thereafter 124.0
---------
$ 281.2
=========
18. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
DECEMBER 30, January 1,
(in millions of U.S. dollars) 2000 2000
------------ ----------
Trade payables $ 60.3 $ 50.9
Accrued compensation 17.4 16.7
Accrued promotion and rebates 13.0 15.9
Accrued interest 9.0 2.3
Sales, payroll and other taxes 5.5 5.7
Restructuring - note 2 1.6 4.7
Other accrued liabilities 7.7 8.6
--------- ----------
$ 114.5 $ 104.8
========= ==========
19. OTHER LIABILITIES
DECEMBER 30, January 1,
(in millions of U.S. dollars) 2000 2000
----------- ----------
Deferred consideration on acquisition $ 16.1 $ 16.1
Deferred income taxes - note 5 14.1 --
--------- ----------
$ 30.2 $ 16.1
========= ==========
COTT CORPORATION 2000 ANNUAL REPORT
37
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The deferred consideration on the acquisition of the Hero Drinks Group (U.K.)
Limited of $16.1 million ((pound) 10.7 million; (pound) 10.0 million -- January
1, 2000) equals the present value of the minimum guaranteed payments under the
agreement and is due at the latest in May 2003. The deferred consideration is
non-interest bearing and has been discounted using an effective interest rate of
8.5%. The maximum deferred consideration on the acquisition is $30.7 million
((pound) 20.5 million), however, it is unlikely that any payments in excess of
the minimum amounts will be required. Amounts required in excess of the minimum
payments will be recorded as goodwill if paid.
20. CAPITAL STOCK
The authorized capital stock of the Company consists of an unlimited number of
common shares and an unlimited number of first and second preferred shares,
issuable in series.
PREFERRED SHARES
The Convertible Participating Voting Second Preferred Shares, Series 1 ("second
preferred shares") carry a cash dividend equal to one-half of the common share
cash dividend, if any, on an as converted basis. The Company issued 4,000,000
second preferred shares in the period ended January 2, 1999 and paid a
transaction fee of $0.9 million to the owners of the second preferred shares
("preferred shareowners"). From and after July 7, 2002, the preferred
shareowners are entitled to receive a cumulative preferential non-cash
paid-in-kind dividend, payable in additional second preferred shares, at the
rate of 2.5% for each six months, compounded semi-annually, with daily accrual.
The second preferred shares are also entitled to voting rights together with the
common shares on an as converted basis.
The Company may redeem all, but not less than all, of the second preferred
shares for payment of an amount per share equal to, at the option of the
preferred shareowners, either the adjusted redemption price or the common share
equivalent redemption price, as calculated in accordance with the Company's
Articles. The common share equivalent redemption price is, at the option of the
Company, payable in cash or in common shares. The Company may not redeem any of
the preferred shares prior to July 7, 2002 unless the common shares have traded
at an average closing price of not less than $13.00 during a consecutive 120 day
trading period.
The second preferred shares are convertible into that amount of common shares
which is determined by dividing a conversion factor in effect at the time of
conversion by a conversion value. The initial conversion factor of $10.00 shall
be adjusted semi-annually at the rate of 2.5% for each six-month period,
compounded semi-annually, with daily accrual, until July 7, 2002. From and after
July 7, 2002 the conversion factor is $12.18. The conversion value is $7.75 and
is subject to reduction in certain circumstances. The right of conversion may be
exercised by the preferred shareowners at any time, and may be exercised by the
Company at any time after July 7, 2002 or if the common shares have traded at an
average closing price of not less than $13.00 during a consecutive 120 day
trading period, prior to July 7, 2002.
COTT CORPORATION 2000 ANNUAL REPORT
38
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
21. STOCK OPTION PLANS
Under the 1986 Common Share Option Plan as amended on July 21, 1998, the Company
has reserved 12.0 million common shares for future issuance. Options are granted
at a price not less than fair value of the shares on the date of grant.
Options granted prior to April 12, 1996 and all options granted to employees
with six months of service expire after five years and vest at 20% per annum
over 4.5 years. Options granted on or after April 12, 1996 but prior to
September 1, 1998 expire after ten years and vest at 25% per annum commencing on
the second anniversary date of the grant. Options granted on or after September
1, 1998 expire after 7 years and vest at 30% per annum on the anniversary date
of the grant for the first two years and the balance on the third anniversary
date of the grant. Certain options granted under the plan vest monthly over a
period of 36 months. All options are non-transferrable.
Pursuant to the SFAS No. 123, Accounting for Stock-Based Compensation, the
Company has elected to account for its employee stock option plan under APB
opinion No. 25, Accounting for Stock Issued to Employees. Accordingly, no
compensation expense has been recognized for stock options issued under these
plans. Had compensation expense for the plans been determined based on the fair
value at the grant date consistent with SFAS No. 123, the Company's net income
(loss) and income (loss) per common share would have been as follows:
DECEMBER 30, January 1, January 2,
(in millions of U.S. dollars, except per share amounts) 2000 2000 1999
------------ ---------- -----------
NET INCOME (LOSS)
As reported $ 25.4 $ 18.5 $ (109.5)
Pro forma 21.9 15.9 (112.0)
NET INCOME (LOSS) PER SHARE - BASIC
As reported 0.42 0.31 (1.74)
Pro forma 0.37 0.27 (1.78)
NET INCOME (LOSS) PER SHARE - DILUTED
As reported 0.38 0.28 (1.74)
Pro forma 0.33 0.24 (1.78)
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:
DECEMBER 30, January 1, January 2,
2000 2000 1999
------------ ---------- ----------
Risk-free interest rate 5.7% - 6.5% 4.8% - 6.2% 4.6% - 5.6%
Average expected life (years) 4 4 3-7
Expected volatility 50.0% 45.0% 47.5%
Expected dividend yield -- -- 0.50%
COTT CORPORATION 2000 ANNUAL REPORT
39
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Option activity was as follows:
DECEMBER 30, 2000 January 1, 2000 January 2, 1999
----------------------------------------------------------------------------------------
WEIGHTED- Weighted- Weighted-
AVERAGE Average Average
EXERCISE Exercise Exercise
SHARES PRICE (C$) Shares Price (C$) Shares Price (C$)
--------- --------- --------- ---------- --------- ----------
Balance - at beginning 5,203,060 $ 9.55 6,444,008 $ 11.24 6,202,850 $ 15.59
Granted 878,000 $ 8.24 1,162,500 $ 5.80 2,462,400 $ 9.42
Exercised (30,950) $ 7.37 -- -- (3,080) $ 9.08
Cancelled (804,450) $ 11.01 (2,403,448) $ 12.32 (2,218,162) $ 21.36
--------- -------- --------- --------- --------- ---------
Balance - at end 5,245,660 $ 9.12 5,203,060 $ 9.55 6,444,008 $ 11.24
========= ======== ========= ========= ========= =========
Outstanding options at December 30, 2000 are as follows:
Options Outstanding Options Exercisable
------------------------------------------------------------------------------------
Weighted- Weighted-
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices (C$) Outstanding Life Price (C$) Exercisable Price (C$)
- -------------------- ----------- ----------- ---------- ----------- ----------
$ 3.30 - $ 4.80 105,000 5.3 4.45 31,500 4.45
$ 5.25 - $ 9.90 4,235,000 5.3 8.38 2,208,191 8.83
$10.80 - $16.10 905,660 6.4 13.17 601,260 13.03
22. NET CHANGE IN NON-CASH WORKING CAPITAL
The changes in non-cash working capital components from continuing operations,
net of effects of acquisitions and divestitures of businesses and unrealized
foreign exchange gains and losses, are as follows:
DECEMBER 30, January 1, January 2,
(in millions of U.S. dollars) 2000 2000 1999
-------- --------- ----------
Decrease (increase) in accounts receivable $ (4.4) $ 25.8 $ 11.8
Decrease (increase) in inventories 2.1 8.3 14.1
Decrease (increase) in prepaid expenses 0.1 (1.9) 2.1
Increase (decrease) in accounts payable and
accrued liabilities 7.7 (23.8) (35.2)
-------- --------- ----------
$ 5.5 $ 8.4 $ (7.2)
======== ========= ==========
COTT CORPORATION 2000 ANNUAL REPORT
40
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
23. ACQUISITIONS
All acquisitions have been accounted for using the purchase method, and
accordingly, the results of operations are included in the Company's
consolidated statements of income from the effective dates of purchase.
YEAR ENDED DECEMBER 30, 2000
Effective October 2000, the Company acquired substantially all the assets and
assumed certain obligations of the private label beverage and Vintage (TM) brand
seltzer water businesses of the Concord Beverage Company, a retailer brand soft
drink manufacturing operation in the northeast U.S. The acquisition price was
$72.8 million, excluding acquisition costs of $0.6 million, $34.4 million of
which was paid from cash-on-hand. The balance was financed through the Company's
existing bank credit facilities and two promissory notes payable to the seller
totalling $17.9 million, bearing interest at 7% per annum and due one year from
the acquisition date.
The total purchase price was allocated as follows based on the fair value of net
assets acquired:
(in millions of U.S. dollars)
Current assets $ 12.0
Property, plant and equipment 10.1
Customer list 25.0
Trademark 18.0
Goodwill 15.4
----------
80.5
----------
Current liabilities 7.1
----------
Purchase price $ 73.4
==========
COTT CORPORATION 2000 ANNUAL REPORT
41
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following unaudited pro forma information for the years ended December
30, 2000 and January 1, 2000 presents the consolidated results of operations of
the Company as if the acquisition of Concord had occurred as of January 3, 1999.
Pro forma information does not include benefits from the anticipated synergies
resulting from the acquisition.
DECEMBER 30, January 1,
(in millions of U.S. dollars, except per share amounts) 2000 2000
------------ ----------
SALES
As reported $ 990.6 $ 993.7
Pro forma 1,055.2 1,076.5
INCOME FROM CONTINUING OPERATIONS
As reported 26.6 21.4
Pro forma 24.8 21.2
NET INCOME
As reported 25.4 18.5
Pro forma 23.6 18.3
NET INCOME PER SHARE - BASIC
As reported 0.42 0.31
Pro forma 0.39 0.31
NET INCOME PER SHARE - DILUTED
As reported 0.38 0.28
Pro forma 0.35 0.28
YEAR ENDED JANUARY 1, 2000
In November 1999, the Company's U.S. subsidiary modified its arrangements with
Premium Beverage Packers, Inc. This business was originally purchased effective
January 1997. The Company paid $25.0 million to settle its obligation to make
annual payments relating to the January 1997 acquisition of the customer list.
This amount has been capitalized to customer list in intangibles and other
assets.
PERIOD ENDED JANUARY 2, 1999
In August 1998, the Company acquired the remaining 1% minority interest of a
U.S. subsidiary from a former executive officer of the Company for $2.9 million
(C$4.5 million) in cash that was allocated primarily to goodwill.
24. BENEFIT PLANS
The Company maintains primarily contributory pension plans covering qualifying
employees in the U.S., Canada and the U.K. The total expense with respect to
these plans was $2.5 million for the year ended December 30, 2000 ($2.1 million
- -- January 1, 2000; $2.1 million -- January 2, 1999).
COTT CORPORATION 2000 ANNUAL REPORT
42
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
25. COMMITMENTS AND CONTINGENCIES
(a) The Company leases buildings, machinery &equipment, computer hardware &
software and furniture & fixtures. The minimum annual payments under
operating leases are as follows:
(in millions of U.S. dollars)
2001 $ 9.4
2002 8.0
2003 5.3
2004 3.0
2005 1.9
Thereafter 5.6
---------
$ 33.2
=========
Operating lease expenses were:
(in millions of U.S. dollars)
YEAR ENDED DECEMBER 30, 2000 $ 9.9
Year ended January 1, 2000 8.4
Period ended January 2, 1999 9.0
(b) The Company has sales commitments with various retailers and distributors
and purchase commitments with various suppliers. These contracts generally
provide for fixed or variable prices and minimum volumes. It is not
anticipated that losses will be incurred on these contracts.
(c) The Company is subject to environmental legislation in jurisdictions in
which it carries on business. The Company anticipates that environmental
legislation may become more restrictive but at this time is not in a
position to assess the impact of future potential legislation. The Company,
along with other industry participants, is not in compliance with the
Environmental Protection Act (Ontario). The requirements under the act are
not presently being enforced, and the Company has made no provision for any
possible assessments thereon. The Company continues to work with industry
groups and the Ministry of Environment to seek alternative means to meet
the requirement for a minimum percentage of sales in refillable containers.
(d) The Company is subject to various claims and legal proceedings with respect
to matters such as governmental regulations, income taxes, 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 the Company's financial position or results from operations.
COTT CORPORATION 2000 ANNUAL REPORT
43
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
26. SEGMENT REPORTING
The Company produces, packages and distributes retailer brand and branded
bottled and canned soft drinks to regional and national grocery,
mass-merchandise and wholesale chains in the U.S., Canada and the U.K. & Europe.
For comparative purposes, the segmented information for prior periods has been
restated to conform to the way the Company currently manages its beverage
business by geographic segments as described below:
BUSINESS SEGMENTS
FOR THE YEAR ENDED DECEMBER 30, 2000
-----------------------------------------------------------------------
UNITED
UNITED KINGDOM CORPORATE
(in millions of U.S. dollars) STATES CANADA & EUROPE & OTHER TOTAL
-------- --------- --------- --------- ---------
External sales $ 657.3 $ 169.7 $ 156.7 $ 6.9 $ 990.6
Intersegment sales 4.0 12.8 -- (16.8) --
Depreciation and amortization 20.7 7.8 8.9 1.6 39.0
Operating income (loss) before
unusual items 63.6 17.1 4.0 (10.9) 73.8
Unusual items (0.2) -- (1.7) (0.2) (2.1)
Property, plant and equipment 126.3 48.7 64.8 5.2 245.0
Goodwill, intangibles and other assets 112.6 18.9 50.4 12.3 194.2
Total assets 427.5 143.7 156.5 (106.1) 621.6
Additions to property, plant and equipment 16.5 3.0 3.9 0.5 23.9
Property, plant and equipment, goodwill,
intangibles and other assets acquired 68.5 -- -- -- 68.5
FOR THE YEAR ENDED JANUARY 1, 2000
---------------------------------------------------------------------------
United
United Kingdom Corporate
(in millions of U.S. dollars) States Canada & Europe & Other Total
---------- ---------- ---------- --------- ---------
External sales $ 596.8 $ 172.1 $ 201.9 $ 22.9 $ 993.7
Intersegment sales 5.6 19.5 -- (25.1) --
Depreciation and amortization 18.6 8.5 10.2 1.8 39.1
Operating income (loss) before
unusual items 36.1 13.6 3.2 (7.9) 45.0
Unusual items (2.2) (0.4) 3.3 (1.9) (1.2)
Property, plant and equipment 127.7 55.1 78.4 5.2 266.4
Goodwill, intangibles and other assets 77.1 20.2 52.5 1.5 151.3
Total assets 331.1 135.1 175.9 (52.5) 589.6
Additions to property, plant and equipment 9.5 3.0 5.9 0.1 18.5
Property, plant and equipment, goodwill,
intangibles and other assets acquired 25.0 -- -- -- 25.0
COTT CORPORATION 2000 ANNUAL REPORT
44
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED JANUARY 2, 1999
-------------------------------------------------------------------------
United
United Kingdom Corporate
(in millions of U.S. dollars) States Canada & Europe & Other Total
--------- --------- --------- --------- ---------
External sales $ 513.1 $ 164.5 $ 239.4 $ 44.9 $ 961.9
Intersegment sales 6.9 21.8 -- (28.7) --
Depreciation and amortization 18.9 10.8 10.7 3.3 43.7
Operating income (loss) before
unusual items 6.8 2.2 9.8 (10.6) 8.2
Unusual items 25.5 5.9 16.6 29.2 77.2
Property, plant and equipment 138.8 56.3 90.2 10.5 295.8
Goodwill, intangibles and other assets 37.2 20.6 77.3 18.9 154.0
Total assets 295.5 220.0 232.7 (49.0) 699.2
Additions to property, plant and equipment 23.1 8.5 4.0 1.1 36.7
Property, plant and equipment, goodwill,
intangibles and other assets acquired 2.9 -- -- -- 2.9
Intersegment sales and total assets under the Corporate & Other caption include
the elimination of intersegment sales, receivables and investments.
For the year ended December 30, 2000, sales to two major customers accounted for
37% and 13%, respectively of the Company's total sales (30% and 11% -- January
1, 2000; 19% and 11% -- January 2, 1999).
Credit risk arises from the potential default of a customer in meeting its
financial obligations with the Company. Concentrations of credit exposure may
arise with a group of customers which 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.
COTT CORPORATION 2000 ANNUAL REPORT
45
50
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
First Second Third Fourth
(in millions of U.S. dollars, except per share amounts) Quarter Quarter Quarter Quarter Total
---------- ---------- ---------- --------- ---------
YEAR ENDED DECEMBER 30, 2000
Sales $ 215.0 $ 288.9 $ 263.5 $ 223.2 $ 990.6
Cost of sales 179.9 241.8 221.3 182.5 825.5
Selling, general and administrative 23.6 24.4 21.9 21.4 91.3
Unusual items -- -- -- (2.1) (2.1)
---------- ---------- ---------- --------- ---------
Operating income 11.5 22.7 20.3 21.4 75.9
---------- ---------- ---------- --------- ---------
Income from continuing operations 2.0 8.9 7.9 7.8 26.6
Extraordinary item -- -- -- (1.2) (1.2)
---------- ---------- ---------- --------- ---------
Net income 2.0 8.9 7.9 6.6 25.4
========== ========== ========== ========= =========
Per share data:
Income per common share - basic
Income from continuing operations $ 0.03 $ 0.15 $ 0.13 $ 0.13 $ 0.44
Net income $ 0.03 $ 0.15 $ 0.13 $ 0.11 $ 0.42
Income per common share - diluted
Income from continuing operations $ 0.03 $ 0.13 $ 0.12 $ 0.12 $ 0.40
Net income $ 0.03 $ 0.13 $ 0.12 $ 0.10 $ 0.38
========== ========== ========== ========= =========
YEAR ENDED JANUARY 1, 2000
Sales $ 232.7 $ 289.2 $ 261.8 $ 210.0 $ 993.7
Cost of sales 200.4 247.3 222.5 177.7 847.9
Selling, general and administrative 21.3 24.9 26.9 27.7 100.8
Unusual items -- -- -- (1.2) (1.2)
---------- ---------- ---------- --------- ---------
Operating income 11.0 17.0 12.4 5.8 46.2
---------- ---------- ---------- --------- ---------
Income from continuing operations 0.8 7.3 8.7 4.6 21.4
Cumulative effect of change in accounting
principle (2.1) -- -- -- (2.1)
Discontinued operations -- -- -- (0.8) (0.8)
---------- ---------- ---------- --------- ---------
Net income (loss) (1.3) 7.3 8.7 3.8 18.5
========== ========== ========== ========= =========
Per share data:
Income (loss) per common share - basic
Income from continuing operations $ 0.01 $ 0.12 $ 0.15 $ 0.07 $ 0.35
Net income (loss) $ (0.02) $ 0.12 $ 0.15 $ 0.06 $ 0.31
Income (loss) per common
share - diluted
Income from continuing operations $ 0.01 $ 0.11 $ 0.13 $ 0.07 $ 0.32
Net income (loss) $ (0.02) $ 0.11 $ 0.13 $ 0.06 $ 0.28
========== ========== ========== ========= =========
COTT CORPORATION 2000 ANNUAL REPORT
46
51
SELECTED FINANCIAL DATA
DECEMBER 30, January 1, January 2, January 31, January 25,
2000(1) 2000(2) 1999(3) 1998(4) 1997
(in millions of U.S. dollars, except per share amounts) (52 WEEKS) (52 weeks) (48 weeks) (53 weeks) (52 weeks)
----------- ----------- ----------- ---------- ----------
SALES $ 990.6 $ 993.7 $ 961.9 $ 1,051.4 $ 950.3
Cost of sales 825.5 847.9 862.4 905.9 808.5
Selling, general and administrative 91.3 100.8 91.3 96.5 83.5
Unusual items (2.1) (1.2) 77.2 21.7 8.4
---------- ----------- ---------- ---------- ----------
OPERATING INCOME (LOSS) 75.9 46.2 (69.0) 27.3 49.9
---------- ----------- ---------- ---------- ----------
Income (loss) from continuing operations 26.6 21.4 (95.8) 0.4 23.0
Cumulative effect of changes in
accounting principles -- (2.1) (9.9) -- --
Discontinued operations -- (0.8) (3.8) (5.1) 2.0
Extraordinary item (1.2) -- -- -- --
---------- ----------- ---------- ---------- ----------
NET INCOME (LOSS) $ 25.4 $ 18.5 $ (109.5) $ (4.7) $ 25.0
========== =========== ========== ========== ==========
INCOME (LOSS) PER SHARE - BASIC
Income (loss) from continuing operations $ 0.44 $ 0.35 $ (1.53) $ 0.01 $ 0.38
Cumulative effect of changes in
accounting principles $ -- $ (0.03) $ (0.16) $ -- $ --
Discontinued operations $ -- $ (0.01) $ (0.05) $ (0.08) $ 0.03
Extraordinary item $ (0.02) $ -- $ -- $ -- $ --
Net income (loss) $ 0.42 $ 0.31 $ (1.74) $ (0.07) $ 0.41
========== =========== ========== ========== ==========
INCOME (LOSS) PER SHARE - DILUTED
Income (loss) from continuing operations $ 0.40 $ 0.32 $ (1.53) $ 0.01 $ 0.37
Cumulative effect of changes in
accounting principles $ -- $ (0.03) $ (0.16) $ -- $ --
Discontinued operations $ -- $ (0.01) $ (0.05) $ (0.08) $ 0.03
Extraordinary item $ (0.02) $ -- $ -- $ -- $ --
Net income (loss) $ 0.38 $ 0.28 $ (1.74) $ (0.07) $ 0.40
========== =========== ========== ========== ==========
Cash dividend per share $ -- $ -- $ 0.03 $ 0.05 $ 0.02
========== =========== ========== ========== ==========
Total assets $ 621.6 $ 589.6 $ 699.2 $ 861.5 $ 599.6
Current maturities of long-term debt 1.6 1.6 12.5 19.5 10.2
Long-term debt 279.6 322.0 365.2 388.3 204.6
Shareowners' equity 158.5 142.3 122.0 230.9 239.0
1 During the year, the Company acquired the assets of the private label
beverage and Vintage (TM) brand seltzer water businesses of the Concord
Beverage Company and completed the divestiture of its polyethylene
terephthalate preform blow-molding operations.
2 During the year, the Company completed a series of planned divestitures of
non-core businesses.
3 During the period ended January 2, 1999, the Company divested of its
bottling operations in Norway.
4 During the year the Company invested in several acquisitions, the most
significant of which was Hero Drinks Group (U.K.) Limited.
COTT CORPORATION 2000 ANNUAL REPORT
47
52
CORPORATE OFFICERS AND BOARD OF DIRECTORS
BOARD OF DIRECTORS CORPORATE OFFICERS
- ------------------ ------------------
COLIN J. ADAIR(3)* FRANK E. WEISE III EDMUND P. O'KEEFFE
Director President & Chief Executive Officer Vice President,
Merrill Lynch Canada, Inc. Investor Relations &
MARK BENADIBA Corporate Development
W. JOHN BENNETT(1) Executive Vice President
Chief Executive Officer President, Cott Beverages Canada PREM VIRMANI
Benvest Capital Inc. Vice President,
DAVID G. BLUESTEIN Technical Services
C. HUNTER BOLL(1)* Executive Vice President
Principal Managing Director President, Cott Beverages U.S.A.
Thomas H. Lee Partners L.P.
PAUL R. RICHARDSON
SERGE GOUIN(1),(2)* Executive Vice President, (1) Member, Audit Committee
Chairman, Cott Corporation Global Procurement & Innovation (2) Member, Corporate
Vice Chairman, Salomon Smith Governance Committee
Barney Canada, Inc. RAYMOND P. SILCOCK (3) Member, Human Resources
Executive Vice President & & Compensation Committee
THOMAS M. HAGERTY(2) Chief Financial Officer * Committee Chairman
Principal Managing Director
Thomas H. Lee Partners L.P. NEIL A. THOMPSON
Executive Vice President
STEPHEN H. HALPERIN(2),(3) Managing Director,
Partner Cott U.K. & Europe
Goodmans LLP
MARK R. HALPERIN
DAVID V. HARKINS(3) Senior Vice President,
President General Counsel & Secretary
Thomas H. Lee Partners L.P.
COLIN D. WALKER
TRUE H. KNOWLES Senior Vice President,
Director Human Resources
Cott Corporation
CATHERINE M. BRENNAN
FRASER D. LATTA Vice President,
Vice Chairman Treasurer
Cott Corporation
TINA DELL'AQUILA
DONALD G. WATT Vice President,
Chairman Controller
Watt International Inc.
IVANO R. GRIMALDI
FRANK E. WEISE III Vice President,
President & Chief Executive Officer Purchasing
Cott Corporation
COTT CORPORATION 2000 ANNUAL REPORT
48
53
INVESTOR INFORMATION
CORPORATE HEADQUARTERS RESEARCH AND DEVELOPMENT CENTRE
207 Queen's Quay West Columbus, Georgia, U.S.
Suite 340
Toronto, Ontario INVESTOR INFORMATION
M5J 1A7 Tel: (416) 203-5662
Tel:(416) 203-3898 (800) 793-5662
Fax:(416) 203-8171 Email:investor_relations@cott.com
Website:www.cott.com
REGISTERED OFFICE
333 Avro Avenue PUBLICATIONS
Pointe-Claire, Quebec For copies of the Annual Report or the SEC
H9R 5W3 Form 10-K, visit our website, or contact
us at (800) 793-5662.
CANADIAN OFFICE
6525 Viscount Road QUARTERLY BUSINESS RESULTS/COTT NEWS
Mississauga, Ontario Current investor information is available
L4V 1H6 on our website at www.cott.com
U.K. & EUROPE OFFICE TRANSFER AGENT & REGISTRAR
Citrus Grove, Side Ley Computershare Trust Company of Canada
Kegworth, Derbyshire
DE74 2FJ AUDITORS
U.K. PricewaterhouseCoopers LLP
U.S. OFFICE STOCK EXCHANGE LISTING
5405 Cypress Center Drive Toronto Stock Exchange: BCB
Suite 100 NASDAQ: COTT
Tampa, Florida 33609
PRINCIPAL OPERATIONS ANNUAL GENERAL MEETING
Calgary, Alberta, Canada Cott's 2001 Annual Meeting takes place on
Concordville, Pennsylvania, U.S. Wednesday, April 18, 2001 at 9:30 a.m. at
Kegworth, Derbyshire, U.K. News Theatre, Toronto, Ontario.
Lachine, Quebec, Canada
Mississauga, Ontario, Canada La version francaise est disponible
Pointe-Claire, Quebec, Canada sur demande.
Pontefract, West Yorkshire, U.K.
San Antonio, Texas, U.S. All trademarks are owned by Cott or its
San Bernardino, California, U.S. customers.
Scoudouc, New Brunswick, Canada
Sikeston, Missouri, U.S.
St.Louis, Missouri, U.S.
Surrey, British Columbia, Canada
Tampa, Florida, U.S.
Wilson, North Carolina, U.S.
DESIGN: MEDIACONCEPTS CORPORATION, ASSONET, MA WWW.MEDIACONCEPTSCORP.COM
54
[COTT LOGO]
THE LEADER IN PREMIUM RETAILER BRAND BEVERAGE INNOVATION
COTT CORPORATION
207 QUEEN'S QUAY WEST SUITE 340
TORONTO, ONTARIO M5J 1A7
CANADA
WWW.COTT.COM
[ILLUSTRATION OF CARBONATED SOFT DRINKS]