<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 2000
-----------------------
Commission File Number 000-19914
-----------------------
COTT CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
CANADA None
------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
207 Queen's Quay W, Toronto, Ontario M5J 1A7
----------------------------------------------------------
(Address of principal executive offices) (Postal Code)
(416) 203-3898
---------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
There were 59,847,992 shares of common stock outstanding as of July 27, 2000.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<S> <C>
Consolidated Statements of Income for the three and six months ended July 1, 2000 and July 3, 1999 ........... Page 2
Consolidated Balance Sheets as of July 1, 2000 and January 1, 2000 ........................................ Page 3
Consolidated Statements of Shareowners' Equity as of July 1, 2000 and July 3, 1999............................ Page 4
Consolidated Statements of Cash Flows for the six months ended July 1, 2000 and July 3, 1999 .............. Page 5
Notes to the Consolidated Financial Statements ............................................................ Page 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations ................................................................................. Page 11
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders ........................................ Page 14
Signatures.................................................................................................... Page 15
</TABLE>
1
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COTT CORPORATION
Consolidated Statements of Income
---------------------------------
(in millions of U.S. dollars, except per share amounts)
Unaudited
<TABLE>
<CAPTION>
For the For the
three months ended six months ended
----------------------- ------------------------
JULY 1, JULY 3, JULY 1, JULY 3,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SALES $ 287.6 $ 288.3 $ 501.4 $ 520.5
Cost of sales 240.7 246.4 419.6 446.3
--------- --------- --------- ---------
GROSS PROFIT 46.9 41.9 81.8 74.2
Selling, general and administrative expenses 24.2 24.9 47.6 46.2
--------- --------- --------- ---------
OPERATING INCOME 22.7 17.0 34.2 28.0
Other expenses (income), net 0.1 (0.1) -- 0.2
Interest expense, net 7.7 8.9 15.8 18.1
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES AND EQUITY
INCOME 14.9 8.2 18.4 9.7
Income taxes - note 2 (6.0) (1.1) (7.5) (2.1)
Equity income -- 0.2 -- 0.5
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 8.9 7.3 10.9 8.1
Cumulative effect of change in accounting
principle, net of tax -- -- -- (2.1)
--------- --------- --------- ---------
NET INCOME - note 3 $ 8.9 $ 7.3 $ 10.9 $ 6.0
========= ========= ========= =========
PER SHARE DATA - note 4
INCOME PER COMMON SHARE - BASIC
Income from continuing operations $ 0.15 $ 0.12 $ 0.18 $ 0.14
Cumulative effect of change in
accounting principle $ -- $ -- $ -- $ (0.03)
Net income $ 0.15 $ 0.12 $ 0.18 $ 0.11
INCOME PER COMMON SHARE - DILUTED
Income from continuing operations $ 0.13 $ 0.11 $ 0.16 $ 0.12
Cumulative effect of change in
accounting principle $ -- $ -- $ -- $ (0.03)
Net income $ 0.13 $ 0.11 $ 0.16 $ 0.09
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE> 3
COTT CORPORATION
Consolidated Balance Sheets
---------------------------
(in millions of U.S. dollars)
<TABLE>
<CAPTION>
JULY 1, JANUARY 1,
2000 2000
-------- --------
Unaudited Audited
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 18.1 $ 2.6
Accounts receivable 122.9 97.6
Inventories - note 5 69.9 67.3
Prepaid expenses 2.0 4.4
-------- --------
212.9 171.9
PROPERTY, PLANT AND EQUIPMENT - note 6 244.1 266.4
GOODWILL 102.5 108.1
INVESTMENT AND OTHER ASSETS 37.1 43.2
-------- --------
$ 596.6 $ 589.6
======== ========
LIABILITIES
CURRENT LIABILITIES
Short-term borrowings $ 4.1 $ 1.8
Current maturities of long-term debt 5.8 1.6
Accounts payable and accrued liabilities 112.4 104.8
Discontinued operations 0.9 1.0
-------- --------
123.2 109.2
LONG-TERM DEBT 310.3 322.0
OTHER LIABILITIES 17.3 16.1
-------- --------
450.8 447.3
-------- --------
SHAREOWNERS' EQUITY
CAPITAL STOCK
Common shares - 59,847,992 (1999 - 59,837,392) shares issued 189.0 189.0
Second preferred shares, Series 1 - 4,000,000 shares issued 40.0 40.0
DEFICIT (52.4) (63.3)
ACCUMULATED OTHER COMPREHENSIVE INCOME (30.8) (23.4)
-------- --------
145.8 142.3
-------- --------
$ 596.6 $ 589.6
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE> 4
COTT CORPORATION
Consolidated Statements of Shareowners' Equity
----------------------------------------------
(in millions of U.S. dollars)
Unaudited
<TABLE>
<CAPTION>
NUMBER OF COMMON PREFERRED DEFICIT ACCUMULATED OTHER TOTAL
COMMON SHARES SHARES COMPREHENSIVE EQUITY
SHARES INCOME
(in thousands)
-------------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 2, 1999 59,837 $ 189.0 $ 40.0 $ (81.8) $ (25.2) $ 122.0
Comprehensive income - note 3
Currency translation adjustment -- -- -- -- 1.6 1.6
Net income -- -- -- 6.0 -- 6.0
------ -------- ------- ------- ------- --------
Balance at July 3, 1999 59,837 $ 189.0 $ 40.0 $ (75.8) $ (23.6) $ 129.6
====== ======== ======= ======= ======= ========
Balance at January 1, 2000 59,837 $ 189.0 $ 40.0 $ (63.3) $ (23.4) $ 142.3
Options exercised 11 -- -- -- -- --
Comprehensive income - note 3
Currency translation adjustment -- -- -- -- (7.4) (7.4)
Net income -- -- -- 10.9 -- 10.9
------ -------- ------- ------- ------- --------
Balance at July 1, 2000 59,848 $ 189.0 $ 40.0 $ (52.4) $ (30.8) $ 145.8
====== ======== ======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE> 5
COTT CORPORATION
Consolidated Statements of Cash Flows
-------------------------------------
(in millions of U.S. dollars)
Unaudited
<TABLE>
<CAPTION>
For the
six months ended
-------------------
JULY 1, JULY 3,
2000 1999
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Income from continuing operations $ 10.9 $ 8.1
Depreciation and amortization 19.3 20.3
Deferred income taxes 7.3 --
Equity income -- (0.5)
Gain on sale of property, plant and equipment (0.1) --
Other non-cash items 0.7 --
Net change in non-cash working capital from continuing operations -
note 7 (20.1) (35.6)
------- -------
Cash provided by (used in) operating activities 18.0 (7.7)
------- -------
INVESTING ACTIVITIES
Additions to property, plant and equipment (11.9) (7.1)
Proceeds from disposal of businesses 15.9 20.4
Proceeds from disposal of property, plant and equipment 0.3 0.5
Other (2.1) (0.7)
------- -------
Cash provided by investing activities 2.2 13.1
------- -------
FINANCING ACTIVITIES
Payments of long-term debt (5.1) (29.0)
Short-term borrowings 2.6 2.1
Other (2.0) --
------- -------
Cash used in financing activities (4.5) (26.9)
------- -------
Net cash used in discontinued operations -- (0.5)
Effect of exchange rate changes on cash and cash equivalents (0.2) 0.2
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 15.5 (21.8)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2.6 28.1
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 18.1 $ 6.3
======= =======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE> 6
COTT CORPORATION
Notes to the Consolidated Financial Statements
----------------------------------------------
Unaudited
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements have been prepared in accordance
with United States ("U.S.") generally accepted accounting principles ("GAAP")
for interim financial information. Accordingly, they do not include all
information and notes presented in the annual consolidated financial statements
in conformity with U.S. GAAP. In the opinion of management, the statements
reflect all adjustments that are necessary for a fair statement of the results
for the interim periods presented. All such adjustments are of a normal
recurring nature.
Certain comparative amounts have been restated to conform to the financial
statement presentation adopted in the current year.
The results for the interim periods presented are not necessarily indicative of
the results that may be expected for the full fiscal year.
Consolidated financial statements in accordance with Canadian GAAP, in U.S.
dollars, are made available to all shareowners and filed with various regulatory
authorities.
NOTE 2 - INCOME TAXES
The following table reconciles income taxes calculated at the basic Canadian
corporate rates with the income tax provision:
<TABLE>
<CAPTION>
For the For the
three months ended six months ended
--------------------- ---------------------
JULY 1, JULY 3, JULY 1, JULY 3,
(in millions of U.S. dollars) 2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Income tax provision based on
Canadian statutory rates $ (6.3) $ (3.6) $ (7.9) $ (4.2)
Foreign tax rate differential 0.5 3.9 1.1 7.8
Manufacturing and processing
deduction 0.2 -- 0.2 (0.3)
Tax benefit on losses recognized
(not recognized) 0.1 (1.0) -- (4.6)
Non-deductible items (0.5) (0.4) (0.9) (0.8)
------ ------ ------ ------
$ (6.0) $ (1.1) $ (7.5) $ (2.1)
------ ------ ------ ------
</TABLE>
6
<PAGE> 7
COTT CORPORATION
Notes to the Consolidated Financial Statements
----------------------------------------------
Unaudited
NOTE 3 - COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
For the For the
three months ended six months ended
------------------- -------------------
JULY 1, JULY 3, JULY 1, JULY 3,
(in millions of U.S. dollars) 2000 1999 2000 1999
------ ------ ------- ------
<S> <C> <C> <C> <C>
Net income $ 8.9 $ 7.3 $ 10.9 $ 6.0
Foreign currency translation (5.5) 1.2 (7.4) 1.6
------ ------ ------- ------
$ 3.4 $ 8.5 $ 3.5 $ 7.6
====== ====== ======= ======
</TABLE>
NOTE 4 - INCOME PER SHARE
Basic net income per common share is computed by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
net income 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:
<TABLE>
<CAPTION>
For the three months ended For the six months ended
---------------------------- ----------------------------
JULY 1, JULY 3, JULY 1, JULY 3,
(in thousands) 2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Weighted average number of shares
outstanding - basic 59,848 59,837 59,847 59,837
Dilutive effect of stock options 321 17 364 10
Dilutive effect of second preferred
Shares 6,286 6,286 6,286 6,286
------ ------ ------ ------
Adjusted weighted average number
of shares outstanding - diluted 66,455 66,140 66,497 66,133
------ ------ ------ ------
</TABLE>
As of July 1, 2000, the Company has the following equity instruments
outstanding: 59,847,992 common shares, 4,900,160 common share stock options and
4,000,000 second preferred shares convertible into 5,558,709 common shares and
entitled to 5,558,709 votes.
7
<PAGE> 8
COTT CORPORATION
Notes to the Consolidated Financial Statements
----------------------------------------------
Unaudited
NOTE 5 - INVENTORIES
<TABLE>
<CAPTION>
JULY 1, JANUARY 1,
(in millions of U.S. dollars) 2000 2000
------- ---------
<S> <C> <C>
Raw materials $ 25.3 $ 29.4
Finished goods 36.1 29.4
Other 8.5 8.5
------- -------
$ 69.9 $ 67.3
======= =======
</TABLE>
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
JULY 1, JANUARY 1,
(in millions of U.S. dollars) 2000 2000
------- -------
<S> <C> <C>
Cost $ 439.6 $ 464.3
Accumulated depreciation (195.5) (197.9)
------- -------
$ 244.1 $ 266.4
======= =======
</TABLE>
NOTE 7 - NET CHANGE IN NON-CASH WORKING CAPITAL
The changes in non-cash working capital components, net of effects of unrealized
foreign exchange gains and losses, are as follows:
<TABLE>
<CAPTION>
JULY 1, JULY 3,
(in millions of U.S. dollars) 2000 1999
------- -------
<S> <C> <C>
Decrease (increase) in accounts receivable $ (25.5) $ (31.8)
Decrease (increase) in inventories (5.7) (4.3)
Decrease (increase) in prepaid expenses 0.2 (0.1)
Decrease (increase) in income taxes recoverable (1.4) 0.9
Increase (decrease) in accounts payable and accrued liabilities 12.3 (0.3)
------- -------
$ (20.1) $ (35.6)
======= =======
</TABLE>
NOTE 8 - COMMITMENTS AND CONTINGENCIES
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.
8
<PAGE> 9
COTT CORPORATION
Notes to the Consolidated Financial Statements
----------------------------------------------
Unaudited
NOTE 9 - SEGMENT REPORTING (continued)
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 Canada, the United Kingdom and the
United States. The Company manages its beverage business by geographic segments
as described below:
FOR THE THREE MONTHS ENDED:
<TABLE>
<CAPTION>
UNITED CORPORATE &
JULY 1, 2000 CANADA UNITED KINGDOM STATES OTHER TOTAL
--------- -------------- -------- ----------- --------
(in millions of U.S. dollars)
<S> <C> <C> <C> <C> <C>
External sales $ 49.0 $ 41.6 $ 190.6 $ 6.4 $ 287.6
Intersegment sales 4.2 - 1.4 (5.6) -
Depreciation and amortization 2.0 2.2 4.8 0.4 9.4
Operating income (loss) 5.4 1.9 18.0 (2.6) 22.7
Additions to property, plant and
equipment 0.5 1.2 3.3 0.1 5.1
--------- -------------- -------- ----------- --------
</TABLE>
<TABLE>
<CAPTION>
UNITED CORPORATE &
JULY 3, 1999 CANADA UNITED KINGDOM STATES OTHER TOTAL
--------- -------------- -------- ----------- --------
(in millions of U.S. dollars)
<S> <C> <C> <C> <C> <C>
External sales $ 49.4 $ 53.3 $ 175.2 $ 10.4 $ 288.3
Intersegment sales 6.1 - 1.6 (7.7) -
Depreciation and amortization 2.2 2.8 4.8 0.6 10.4
Operating income (loss) 4.9 1.6 12.6 (2.1) 17.0
Additions to property, plant and
equipment 0.6 0.8 0.9 0.2 2.5
--------- -------------- -------- ----------- --------
</TABLE>
9
<PAGE> 10
COTT CORPORATION
Notes to the Consolidated Financial Statements
----------------------------------------------
Unaudited
FOR THE SIX MONTHS ENDED:
<TABLE>
<CAPTION>
UNITED CORPORATE &
JULY 1, 2000 CANADA UNITED KINGDOM STATES OTHER TOTAL
--------- -------------- -------- ----------- --------
(in millions of U.S. dollars)
<S> <C> <C> <C> <C> <C>
External sales $ 85.1 $ 71.7 $ 334.3 $ 10.3 $ 501.4
Intersegment sales 7.1 - 2.3 (9.4) -
Depreciation and amortization 4.1 4.6 9.7 0.9 19.3
Operating income (loss) 7.7 1.3 30.1 (4.9) 34.2
Total assets 138.1 170.6 307.7 (19.8) 596.6
Additions to property, plant and
equipment 0.7 1.6 8.3 1.3 11.9
--------- -------------- -------- ----------- --------
</TABLE>
<TABLE>
<CAPTION>
UNITED CORPORATE &
JULY 3, 1999 CANADA UNITED KINGDOM STATES OTHER TOTAL
--------- -------------- -------- ----------- --------
(in millions of U.S. dollars)
<S> <C> <C> <C> <C> <C>
External sales $ 85.7 $ 94.8 $ 313.4 $ 26.6 $ 520.5
Intersegment sales 11.0 - 3.0 (14.0) -
Depreciation and amortization 4.4 5.4 9.3 1.2 20.3
Operating income (loss) 6.7 2.2 21.0 (1.9) 28.0
Total assets (January 1, 2000) 137.0 173.4 332.1 (52.9) 589.6
Additions to property, plant and
equipment 1.2 1.4 4.1 0.4 7.1
--------- -------------- -------- ----------- --------
</TABLE>
The comparative figures have been restated to include a corporate cost
allocation to the business segments.
Intersegment sales and total assets under the Corporate & Other caption include
the elimination of intersegment sales, receivables and investments.
For the six months ended July 1, 2000, sales to two major customers accounted
for 33% and 13% respectively, of the Company's total sales (23% and 12% - July
3, 1999).
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Cott Corporation is the world's largest supplier of premium retailer brand
beverages, with manufacturing, marketing, product development and customer
service facilities in Canada, the United Kingdom and the United States.
OVERVIEW
In its sixth consecutive profitable quarter, Cott Corporation reported net
income growth of 22%, up 35% as compared with 1999 first six months results,
before the change in accounting principle. Net sales of $287.6 million were flat
with last year and up 1% after removing sales by divested businesses, reflecting
customer and product rationalization undertaken over the past twelve months. In
line with key strategies, the Company has increased volume with key customers,
improved margins and strengthened cash flow, while leading innovation in the
category.
For the quarter, sales volumes to the core top 15 customers worldwide, who
account for approximately 80% of the business, grew 8.0% versus last year,
significantly outpacing category growth in the markets served by the Company.
New product launches with key customers helped offset volume decreases from
customer rationalization.
Gross margin for the quarter increased to 16.3% from 14.5% last year, driven by
an improved customer and product mix, and by operating efficiencies arising from
the Company's continuing focus on improving cost and productivity.
Operating cash flow, after capital expenditures, of $10.6 million was $17.3
million ahead of the second quarter last year resulting in reduced net interest
expense due to lower net debt levels. Net debt at $302.1 million as of July 1,
2000 was down $20.7 million from the beginning of the year, $64.9 million lower
than one year ago.
RESULTS OF OPERATIONS
Net income for the quarter was $8.9 million or $0.13 per share diluted, a 22%
increase compared with the $7.3 million or $0.11 per share diluted reported in
1999. For the first six months the Company reported a net income of $10.9
million, up 35% from $8.1 million last year, before the cumulative effect of a
change in accounting principle of $2.1 million, or $0.03 per share diluted.
SALES - Net sales were $287.6 million for the second quarter, down from $288.3
million in 1999. After removing sales by divested units in the second quarter of
1999, net sales increased 1%. For the first six months of 2000 net sales were
$501.4 million, flat with last year after removing the effect of divestitures.
The Company's "Focus on Core" strategy resulted in improved customer service in
core markets and contributed to the second quarter's 8.0% increase in sales
volume to the top 15 customers. Year-to-date sales volume to the top 15
customers was up 7.5%. Second quarter and six month 8 oz equivalent case volumes
of 163.8 million and 285.6 million were down from 166.2 million and 299.8
million last year.
Net sales in Canada of $49.0 million for the quarter were flat compared to 1999.
Volume gains due to new product launches at two key customers and strong summer
promotional activities were offset by lower export and water sales and by the
effect of this year's inclement spring weather. Year-to-date net sales were down
1% and equivalent case volume declined 5%.
<PAGE> 12
Net sales in the U.K. declined to $41.6 million from $53.3 million in 1999.
Excluding the impact of divested businesses net sales dropped 18%. Equivalent
case volume was down 11%, excluding the Featherstone divestiture, primarily as a
result of customer rationalization and reduced promotional activities. Continued
pricing pressures and the weakness of the pound sterling compared to the U.S.
dollar further decreased sales. For the first six months net sales dropped to
$71.7 million from $94.8 million, a 20% reduction excluding the impact of the
divested business, and equivalent case volume declined 18%.
Net sales in the U.S. rose to $190.6 million from $175.2 million last year, an
increase of 9% for the quarter. Equivalent case volume increased 4%. Sales
volume to the division's top five customers was up by 23%, more that offsetting
the impact of rationalization. Net sales for the first half were $334.3 million,
up 7% from last year, and equivalent case volume rose 3%.
GROSS PROFIT - Gross profit for the quarter and the first six months was 16.3%,
a 1.8 percentage point improvement from the second quarter last year and a 2.0
percentage point improvement for the six-month period. This growth was driven by
rationalization efforts which strengthened customer and product mix, improved
operating efficiencies at the Company's manufacturing facilities, and reduced
fixed expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") - SG&A for the quarter was
$24.2 million compared with $24.9 million last year. The reorganization in the
U.K. led to savings through lower general and administrative expenses. SG&A in
the U.K. was 32% lower than last year, excluding the impact of divestitures.
Partially offsetting these savings was the accrual of management incentives in
2000, not recorded until the third quarter last year. For the first six months,
SG&A was up $1.4 million principally as a result of costs incurred in
undertaking the U.K. reorganization.
INTEREST EXPENSE - Net interest expense was $7.7 million in the quarter as
compared with $8.9 million for the second quarter of 1999. Year-to-date net
interest expense totaled $15.8 million, down $2.3 million from last year.
Interest on long-term debt decreased $0.6 million for the quarter and $1.3
million for the six-month period as a result of lower average long-term debt
balances compared with last year. Significant debt repayments were made
throughout 1999. Cash flow improvements led to lower average borrowings on
short-term facilities over the six-month period, resulting in the remaining
decrease in interest expense.
INCOME TAXES - The Company recorded an income tax provision of $6.0 million for
the quarter and $7.5 million for the six-month period as compared with $1.1
million and $2.1 million for the respective periods last year. For the first six
months the overall effective tax rate was 41% compared with 22% in 1999. This
was primarily as a result of a change in mix of earnings by tax jurisdiction.
FINANCIAL CONDITION - In the second quarter of 2000, the Company received $15.9
million in cash proceeds for the sale of the polyethylene terephthalate ("PET")
preform blow molding assets. No gain or loss was realized on the disposal.
Operating cash flow after capital expenditures for the six-month period was $6.1
million as compared with an outflow of $14.8 million in 1999. The operating cash
flow, after capital expenditures, together with proceeds from the sale, were
used to repay debt and also resulted in a $15.5 million increase in cash in the
first half of 2000. Cash and cash equivalents as of July 1, 2000 totaled $18.1
million.
Under current credit facilities the Company is provided maximum credit of $59.7
million depending on available collateral. At July 1, 2000, approximately $54.0
million of credit was available.
<PAGE> 13
CAPITAL EXPENDITURES - Capital expenditures for the first half of 2000 were
$11.9 million compared with $7.1 million in 1999. Significant capital
expenditures included $2.9 million to install a new filling line and $1.2
million to upgrade an existing line in U.S. manufacturing facilities. In
addition $1.2 million was spent towards a project to update and standardize
information and accounting systems throughout the company. Capital expenditures
have been limited to those projects with an internal rate of return above 30%,
in addition to those required for essential maintenance, safety and regulatory
compliance.
LONG-TERM DEBT - As of July 1, 2000, the Company's long-term debt totaled $316.1
million as compared with $323.6 million at the end of 1999 and $345.0 million
one year ago. At quarter end, debt consisted of $276.4 million in senior
unsecured notes and $39.7 million of other term debt. The Company is exposed to
minimal interest rate risk as substantially all debt is at fixed rates.
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.
OUTLOOK - The carbonated soft drink industry continues to experience positive
growth. Expectations for market growth in Cott's three core geographic markets,
Canada, the United Kingdom and the United States, extend through the next
several years. With the U.K. reorganization in the first quarter, this unit is
regaining momentum and has positioned itself to handle the competitive business
environment. Facing intense price competition from heavily promoted global and
regional brands, the Company's major opportunity for growth depends on
management's execution of critical strategies and on retailers' continued
commitment to their retailer brand soft drink programs. Risks and uncertainties
include stability of procurement costs for such items as sweetener, packaging
materials and other ingredients, national brand pricing and promotional
strategies and fluctuations in currency versus the U.S. dollar. The Company's
exposure to raw material price fluctuations is minimized by the existence of
long-term contracts for certain key raw materials.
RISKS AND UNCERTAINTIES - Sales to the top two customers in the first six months
of 2000 accounted for 46% of the Company's total sales volumes. The loss of any
significant customer or any significant portion of the Company's sales could
have a material adverse effect on the Company's operating results and cash
flows.
FORWARD LOOKING STATEMENTS - This report may contain forward-looking statements
reflecting management's current expectations regarding future results of
operations, economic performance, financial condition and achievements of the
Company. Forward-looking statements, specifically those concerning future
performance, are subject to certain risks and uncertainties, and actual results
may differ materially. These risks and uncertainties are detailed from time to
time in the Company's filings with the appropriate securities commissions.
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of the Company's shareholders was held on May 3, 2000.
(b) The meeting was held to consider and vote on the following matters:
<TABLE>
<CAPTION>
MATTERS SUBMITTED TO A VOTE VOTES
--------------------------- -----------------------------------------------------------------------
FOR AGAINST ABSTAIN TOTAL
---------- ------- ------------- ----------
<S> <C> <C> <C> <C>
To elect directors for a period of one year 48,319,730* 48,639 942 (spoiled) 48,369,311
---------- ------ ------------- ----------
To appoint PricewaterhouseCoopers LLP as auditors 48,304,022* 64,347 942 (spoiled) 48,369,311
and authorize the directors to fix their
remuneration
---------- ------ ------------- ----------
</TABLE>
*Includes 4,000,000 outstanding Second Preferred Shares, Series 1, which voted
on an as converted basis entitling the holders thereof (in the aggregate) to
5,558,709 votes at such meeting.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COTT CORPORATION
(Registrant)
Date: July 27, 2000 /S/ Raymond P. Silcock
---------------------------
Raymond P. Silcock
Executive Vice President &
Chief Financial Officer
(On behalf of the Company)
Date: July 27, 2000 /S/ Tina Dell'Aquila
---------------------------
Tina Dell'Aquila
Vice President, Controller
(Principal accounting officer)
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