<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 APRIL 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 April 30, 2000.
PART I - FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Financial Statements
Consolidated Statements of Income for the three months ended April 1, 2000 and April 3, 1999 .......... Page 2
Consolidated Balance Sheets as of April 1, 2000 and January 1, 2000 .................................. Page 3
Consolidated Statements of Shareowners' Equity as of April 1, 2000 and April 3, 1999 ................... Page 4
Consolidated Statements of Cash Flows for the three months ended April 1, 2000 and April 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 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings........................................................................... Page 12
Item 6. Exhibits and Reports on Form 10-Q........................................................... Page 12
Signatures ............................................................................................ Page 13
</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 three months ended
------------------------------------------
APRIL 1, APRIL 3,
2000 1999
------------------ -------------------
<S> <C> <C>
SALES $ 213.8 $ 232.2
Cost of sales 178.9 199.9
------------------ -------------------
GROSS PROFIT 34.9 32.3
Selling, general and administrative expenses 23.4 21.3
------------------ -------------------
OPERATING INCOME 11.5 11.0
Other expenses (income), net (0.1) 0.3
Interest expense, net 8.1 9.2
------------------ -------------------
INCOME BEFORE INCOME TAXES AND EQUITY INCOME 3.5 1.5
Income taxes - note 2 (1.5) (1.0)
Equity income - 0.3
------------------ -------------------
INCOME FROM CONTINUING OPERATIONS 2.0 0.8
Cumulative effect of change in accounting principle, net of tax - (2.1)
------------------ -------------------
NET INCOME (LOSS) - note 3 $ 2.0 $ (1.3)
================== ===================
PER SHARE DATA - note 4
INCOME (LOSS) PER COMMON SHARE - BASIC
Income from continuing operations $ 0.03 $ 0.01
Cumulative effect of change in accounting principle $ - $ (0.03)
Net income (loss) $ 0.03 $ (0.02)
INCOME (LOSS) PER COMMON SHARE - DILUTED
Income from continuing operations $ 0.03 $ 0.01
Cumulative effect of change in accounting principle $ - $ (0.03)
Net income (loss) $ 0.03 $ (0.02)
</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>
APRIL 1, JANUARY 1,
2000 2000
------------------- -------------------
Unaudited Audited
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1.3 $ 2.6
Accounts receivable 104.4 97.6
Inventories - note 5 71.2 67.3
Prepaid expenses 1.7 4.4
------------------- -------------------
178.6 171.9
PROPERTY, PLANT AND EQUIPMENT - note 6 266.0 266.4
GOODWILL 106.3 108.1
INVESTMENT AND OTHER ASSETS 42.0 43.2
------------------- -------------------
$ 592.9 $ 589.6
------------------- -------------------
LIABILITIES
CURRENT LIABILITIES
Short-term borrowings $ 12.9 $ 1.8
Current maturities of long-term debt 5.9 1.6
Accounts payable and accrued liabilities 101.9 104.8
Discontinued operations 1.0 1.0
------------------- -------------------
121.7 109.2
LONG-TERM DEBT 312.6 322.0
OTHER LIABILITIES 16.2 16.1
------------------- -------------------
450.5 447.3
------------------- -------------------
SHAREOWNERS' EQUITY
CAPITAL STOCK
Common shares - 59,847,992 shares issued 189.0 189.0
Second preferred shares, Series 1 - 4,000,000 shares issued 40.0 40.0
DEFICIT (61.3) (63.3)
ACCUMULATED OTHER COMPREHENSIVE INCOME (25.3) (23.4)
------------------- -------------------
142.4 142.3
------------------- -------------------
$ 592.9 $ 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 RETAINED ACCUMULATED TOTAL
COMMON SHARES SHARES EARNINGS/ OTHER EQUITY
SHARES (DEFICIT) COMPREHENSIVE
(in INCOME
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 - - - - 0.4 0.4
Net loss - - - (1.3) - (1.3)
----------------------------------------------------------------------------------------
Balance at April 3, 1999 59,837 $ 189.0 $ 40.0 $ (83.1) $ (24.8) $ 121.1
========================================================================================
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 - - - - (1.9) (1.9)
Net income - - - 2.0 - 2.0
----------------------------------------------------------------------------------------
Balance at April 1, 2000 59,848 $ 189.0 $ 40.0 $ (61.3) $ (25.3) $ 142.4
========================================================================================
</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 three months ended
--------------------------------------------
APRIL 1, APRIL 3,
2000 1999
------------------- --------------------
<S> <C> <C>
OPERATING ACTIVITIES
Income from continuing operations $ 2.0 $ 0.8
Depreciation and amortization 9.9 9.9
Deferred income taxes 1.3 -
Equity income - (0.3)
Gain on sale of property, plant and equipment (0.1) -
Other non-cash items 0.4 -
Net change in non-cash working capital from continuing operations -
note 7 (11.2) (13.9)
------------------- --------------------
Cash provided by (used in) operating activities 2.3 (3.5)
------------------- --------------------
INVESTING ACTIVITIES
Additions to property, plant and equipment (6.8) (4.6)
Proceeds from disposal of property, plant and equipment 0.1 -
Other (1.3) -
------------------- --------------------
Cash used in investing activities (8.0) (4.6)
------------------- --------------------
FINANCING ACTIVITIES
Payments of long-term debt (4.6) (7.3)
Short-term borrowings 11.1 9.7
Other (2.1) -
------------------- --------------------
Cash provided by financing activities 4.4 2.4
------------------- --------------------
Net cash used in discontinued operations - (0.3)
Effect of exchange rate changes on cash and cash equivalents - 0.1
------------------- --------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1.3) (5.9)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2.6 28.1
------------------- --------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1.3 $ 22.2
------------------- --------------------
</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>
APRIL 1, APRIL 3,
2000 1999
------------------ -------------------
(in millions of U.S. dollars)
<S> <C> <C>
Income tax provision based on Canadian statutory rates $ (1.6) $ (0.6)
Foreign tax rate differential 0.6 3.9
Manufacturing and processing deduction - (0.3)
Tax benefit on losses not recognized (0.1) (3.6)
Non-deductible items (0.4) (0.4)
-------------------- -------------------
$ (1.5) $ (1.0)
-------------------- -------------------
</TABLE>
6
<PAGE> 7
COTT CORPORATION
Notes to the Consolidated Financial Statements
- ----------------------------------------------------------------------------
Unaudited
NOTE 3 - COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
APRIL 1, APRIL 3,
2000 1999
----------------- -------------------
(in millions of U.S. dollars)
<S> <C> <C>
Net income (loss) $ 2.0 $ (1.3)
Foreign currency translation (1.9) 0.4
----------------- -------------------
$ 0.1 $ (0.9)
----------------- -------------------
</TABLE>
NOTE 4 - INCOME (LOSS) PER 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:
<TABLE>
<CAPTION>
APRIL 1, APRIL 3,
2000 1999
-------------- --------------
(in thousands)
<S> <C> <C>
Weighted average number of shares outstanding - basic 59,845 59,837
Dilutive effect of stock options 408 4
Dilutive effect of second preferred shares 6,286 6,286
-------------- --------------
Adjusted weighted average number of shares outstanding - diluted 66,539 66,127
-------------- --------------
</TABLE>
NOTE 5 - INVENTORIES
<TABLE>
<CAPTION>
APRIL 1, JANUARY 1,
2000 2000
---------------- ------------------
(in millions of U.S. dollars)
<S> <C> <C>
Raw materials $ 23.3 $ 29.4
Finished goods 39.7 29.4
Other 8.2 8.5
----------------- -------------------
$ 71.2 $ 67.3
----------------- -------------------
</TABLE>
7
<PAGE> 8
COTT CORPORATION
Notes to the Consolidated Financial Statements
- -----------------------------------------------------------------------------
Unaudited
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
APRIL 1, JANUARY 1,
2000 2000
------------------ -------------------
(in millions of U.S. dollars)
<S> <C> <C>
Cost $ 469.7 $ 464.3
Accumulated depreciation (203.7) (197.9)
------------------ -------------------
$ 266.0 $ 266.4
------------------ -------------------
</TABLE>
Machinery and equipment includes $14.2 million of assets held for sale relating
to the polyethylene terephthalate ("PET") preform blow molding operation which
were sold subsequent to the period end.
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>
APRIL 1, APRIL 3,
2000 1999
-------------------- -------------------
(in millions of U.S. dollars)
<S> <C> <C>
Decrease (increase) in accounts receivable $ (7.3) $ (5.0)
Decrease (increase) in inventories (4.1) (4.9)
Decrease (increase) in prepaid expenses 0.5 (0.7)
Decrease (increase) in income taxes recoverable 0.1 0.8
Increase (decrease) in accounts payable and accrued liabilities (0.4) (4.1)
-------------------- -------------------
$ (11.2) $ (13.9)
-------------------- -------------------
</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
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:
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED CANADA UNITED UNITED CORPORATE TOTAL
APRIL 1, 2000 KINGDOM STATES & OTHER
- ------------------------------------------------------------------------------------------------------------------
(in millions of U.S. dollars)
<S> <C> <C> <C> <C> <C>
External sales $ 36.1 $ 30.1 $ 143.7 $ 3.9 $ 213.8
Intersegment sales 2.9 - 0.9 (3.8) -
Depreciation and amortization 2.1 2.4 4.9 0.5 9.9
Operating income (loss) 3.1 (0.2) 13.4 (4.8) 11.5
Total assets 133.9 170.1 340.1 (51.2) 592.9
Additions to property, plant and
equipment 0.2 0.4 5.0 1.2 6.8
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED CANADA UNITED UNITED CORPORATE TOTAL
APRIL 3, 1999 KINGDOM STATES & OTHER
- -------------------------------------------------------------------------------------------------------------------
(in millions of U.S. dollars)
<S> <C> <C> <C> <C> <C>
External sales $ 36.3 $ 41.5 $ 138.2 $ 16.2 $ 232.2
Intersegment sales 4.9 - 1.4 (6.3) -
Depreciation and amortization 2.2 2.6 4.5 0.6 9.9
Operating income (loss) 2.6 1.0 9.7 (2.3) 11.0
Total assets (January 1, 2000) 137.0 173.4 332.1 (52.9) 589.6
Additions to property, plant and
equipment 0.6 0.6 3.2 0.2 4.6
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Intersegment sales and total assets under the Corporate & Other caption include
the elimination of intersegment sales, receivables and investments.
For the quarter ended April 1, 2000, sales to two major customers accounted for
34% and 12%, respectively, of the Company's total sales (30% and 11% - January
1, 2000).
9
<PAGE> 10
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. The
Company is the world's fourth largest manufacturer of soft drinks. Its vision is
to be the leader in premium retailer brand beverage innovation.
OVERVIEW
In 2000, the Company continues with the three key strategies that lead to
success in 1999: "focus on core," "fix the cost structure" and "strengthen and
grow."
The improvement in earnings in the first quarter of 2000 was directly
attributable to the benefits gained in quality, cost savings and productivity
through the implementation of the Six Sigma and Continuous Process Improvement
initiatives.
The Company's PET blow-molding assets, including inventories, were sold to
Schmalbach-Lubeca Plastic Containers USA, Inc. effective April 13, 2000 for
proceeds of $15.5 million. No gain or loss was realized on the disposal. These
proceeds will be used to reduce indebtedness.
RESULTS OF OPERATIONS
Net income for the quarter was $2.0 million or $0.03 per share, versus a net
loss of $1.3 million or $0.02 per share in the first quarter of 1999. The loss
in the prior year included the cumulative effect of a change in accounting
principle of $2.1 million or $0.03 per share.
SALES - Sales were $213.8 million for the first quarter, down from $232.2
million in 1999. After removing sales by divested units in the first quarter of
1999, sales decreased 2.4%. Customer service was significantly improved in the
core markets and the "focus on core" strategy resulted in an 8% increase in
sales volume to the top 15 accounts. This improvement helped offset lost sales
resulting from the product rationalization undertaken throughout last year and
weakness in the U.K. market.
Sales in Canada were $36.1 million for the quarter as compared to $36.3 million
in 1999. Volume gains with the division's top customers were offset by lower
water and export sales.
Sales in the U.K. declined to $30.1 million from $41.5 million in 1999.
Divestiture of the Featherstone plant in May 1999, lower co-packing volume and
continued pricing pressure in the U.K. all contributed to lower sales.
Sales in the U.S. increased to $143.7 million from $138.2 million in 1999. Sales
volume to the division's top five customers was up by 17%. These increases were
driven by solid business plans with core customers as a result of focused
customer service activities.
GROSS PROFIT - Gross profit margin improved 2.4 percentage points to 16.3% of
sales in 2000 as compared to 13.9% in the first three months of 1999. This
improvement was the result of continued efficiency gains at manufacturing
facilities and the elimination of unprofitable product offerings.
10
<PAGE> 11
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") - SG&A was $23.4 million
in the first quarter of 2000, up from $21.3 million in 1999. The $2.1 million
increase in SG&A resulted from costs incurred to reorganize sales and operations
in Canada and the United Kingdom and from a change in the timing of recording
management incentives.
INTEREST EXPENSE - Net interest expense of $8.1 million for the quarter compared
to $9.2 million in 1999. Interest expense on long-term debt decreased by $1.0
million as the average long-term debt balance was down $49.4 million compared
with the same period last year. Significant debt repayments were made throughout
1999.
INCOME TAXES - In the quarter, the Company recorded an income tax provision of
$1.5 million, compared to a $1.0 million provision last year. In the first
quarter of last year, estimated tax recoveries in certain jurisdictions were not
recorded due to the uncertainty of using tax loss carryforwards in future
periods.
FINANCIAL CONDITION - Cash flow from operations in the quarter was $2.3 million
compared with a cash outflow of $3.5 million in the first quarter of 1999.
Operating cash flow and short-term borrowings were used to fund capital
expenditures and working capital requirements.
Cash and cash equivalents decreased $1.3 million in the first quarter of 2000
from $2.6 million as of January 1, 2000. Under current credit facilities the
Company is provided maximum credit of $60.7 million depending on available
collateral. At April 1, 2000, approximately $52.0 million of credit was
available.
CAPITAL EXPENDITURES - Capital expenditures were $6.8 million compared with $4.6
million in 1999. The continued low level of capital spending reflects
management's commitment to make assets "sweat". Only those projects with an
internal rate of return above 30% are considered, in addition to those required
for essential maintenance, safety and regulatory compliance. Spending in the
first quarter of 2000 included $1.1 million representing the initial costs of a
project to upgrade and standardize company wide information and accounting
systems to enhance business operations, decision making and customer service.
Costs of this project over the next 2 years are expected to be $5.3 million.
Capital expenditures also included $2.2 million to install a PET filling line in
a U.S. manufacturing facility. This line was operational in March 2000.
LONG-TERM DEBT - As of April 1, 2000, the Company's long-term debt totaled
$318.5 million as compared with $323.6 million at the end of 1999 and $368.0
million one year ago. At quarter end, debt consisted of $276.5 million in senior
unsecured notes and $42.0 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. 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
11
<PAGE> 12
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 quarter 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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 14, 2000, the Lemelson Medical, Education & Research Foundation,
Limited Partnership (the "Foundation") filed a patent infringement civil action
in the United States District Court for the District of Arizona against the
Company and 106 other defendants which are alleged to manufacture and sell
products for human consumption or use. The suit alleges that these defendants
have infringed on "machine vision" and "automatic identification" patents in
their manufacturing processes and automated management of inventory,
warehousing, distribution and point of sale transactions. The Foundation seeks
an injunction against further alleged infringement and an award of damages
"adequate to compensate" the Foundation for past infringements, treble damages
based on allegation of willful and deliberate infringement and reasonable
attorney's fees. As of this date, the Complaint has not been served on the
Company. Since the lawsuit is in its very early stages, the Company is not in a
position to state the outcome of this case at this time, as the Company is still
investigating the allegations and potential defenses.
In the action previously commenced by Channelmark Corporation, the trial has
been scheduled to begin on June 12, 2000. In the action styled North American
Container, Inc. v. Plastipak Packaging Inc., et al., the Company has reached an
agreement with its major supplier of PET bottles in the United States to
indemnify the Company for a significant portion of its costs and damages, if
any. This portion is based upon such supplier's pro rata share of those PET
bottles supplied to the Company which were sold by the Company in the United
States during the period in issue in the litigation (which share is currently
estimated to be 85%). Reference is made to the Company's prior public filings,
which include a description of these claims.
ITEM 6. EXHIBITS AND REPORTS ON FORM 10-Q
<TABLE>
<CAPTION>
- ---------------- ---------------------------------------------------------------------------------------------
NUMBER DESCRIPTION
- ---------------- ---------------------------------------------------------------------------------------------
<C> <S>
10.1 * Asset Acquisition and Facility Use Agreement, dated April 13, 2000, between BCB USA Corp.
and Schmalbach-Lubeca Plastic Containers USA, Inc. relating to the sale of the PET preform
blow molding operation.
- ---------------- ---------------------------------------------------------------------------------------------
</TABLE>
* Document is subject to request for confidential treatment.
12
<PAGE> 13
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: May 3, 2000 /s/ Raymond P. Silcock
----------------------------------
Raymond P. Silcock
Executive Vice President &
Chief Financial Officer
(On behalf of the Company)
Date: May 3, 2000 /s/ Tina Dell'Aquila
----------------------------------
Tina Dell'Aquila
Vice President, Controller
(Principal accounting officer)
13
<PAGE> 1
[EXHIBIT 10.1]
ASSET ACQUISITION AND
FACILITY USE AGREEMENT
THIS ASSET ACQUISITION AND FACILITY USE AGREEMENT (the "Agreement") is made
the 13th day of April, 2000.
B E T W E E N:
SCHMALBACH-LUBECA PLASTIC CONTAINERS USA, INC., a Delaware
corporation, having its principal place of business at 10521 Highway
M-52, Manchester, Michigan 48158 ("S-L")
- and -
BCB USA CORP., a Georgia corporation, having its principal place of
business at 5405 Cypress Center Drive, Suite 100, Tampa, Florida,
33609 ("BCB").
WHEREAS, S-L, BCB and BCB's ultimate parent company, Cott Corporation
("CC", with BCB and CC hereinafter collectively referred to as "Cott") are
parties to a certain Memorandum of Agreement dated February 17, 2000
("Memorandum") and Supply Agreement of even date herewith ("Supply Agreement")
relating to the sale by BCB to S-L of certain equipment, inventory and other
assets relating to the production of polyethylene terephthalate ("P.E.T.")
preforms and containers, and the supply by S-L to BCB and CC of such preforms
and containers from and after the date on which such sale is completed; and
WHEREAS, in order to give effect to the Memorandum, S-L desires to purchase
such assets from BCB, utilize certain of BCB's existing facilities and hire
certain of BCB's employees; and
WHEREAS, attached to the Memorandum is Schedule "A" ("Memorandum Schedule
A") which outlines the terms of such purchase and sale, facility use and
employee hiring as more fully set forth herein; and
WHEREAS, the parties desire to enter into this Agreement in order to more
completely set forth the purchase and sale of the Purchased Assets (as
hereinafter defined) and facility use arrangement outlined in Memorandum
Schedule A.
NOW THEREFORE THE PARTIES AGREE AS FOLLOWS:
1. MEMORANDUM SCHEDULE A.
(a) Memorandum Schedule A is attached hereto and, for purposes of this
Agreement, is referred to as "Schedule A". Schedule A is incorporated
herein and made part hereof by the references to it hereinbelow. It is
understood that Schedule A contains provisions related to the Supply
Agreement as well as the asset acquisition, facility use and employee
hiring relating to this Agreement. The provisions relating to the
Supply Agreement are the subject of a separate agreement between the
parties and are not incorporated into this Agreement by any of the
references hereinbelow.
<PAGE> 2
- 2 -
(b) Provisions in Schedule A which relate to the subject matter of this
Agreement but which are not otherwise referenced in the body of this
Agreement are hereby incorporated by reference and are part of this
Agreement.
(c) In the event of a conflict between the terms and conditions of the
body of this Agreement and Schedule A, the terms and conditions in the
body of this Agreement shall govern.
2. PURCHASE AND OPERATION OF INJECTION AND BLOW MOLDING ASSETS.
(a) S-L hereby purchases:
(i) the injection molding assets at BCB's Leland, North Carolina
facility and the blow molding assets at BCB's San Antonio, Texas,
Tampa, Florida and Wilson, North Carolina facilities (all of such
facilities being hereinafter collectively described as the
"Facilities"), upon the terms and conditions set forth in Section
2.0 of Schedule A;
(ii) all additional assets set forth in Section 2.1.3.1 of Schedule A,
it being acknowledged that BCB's inventories of raw and packaging
materials described therein (collectively, the "Inventories")
include, without limitation, raw and packaging materials located
at outside warehouses or stored in trailers, as well as
inventories in transit; and
(iii) all preforms which have been produced by Cott as of the date
hereof but which are to be blow molded into containers by S-L
pursuant to the terms of the Supply Agreement,
and all of such assets are herein collectively described as the
"Purchased Assets").
Exhibit C hereto ("New Exhibit C") supersedes and replaces Exhibit C
to Schedule A.
(b) In addition to the warranties of Cott set forth in Schedule A relating
to the Purchased Assets, and except as otherwise confirmed to S-L in
writing, Cott hereby warrants and represents that the assets appearing
on New Exhibit C have not been moved or relocated from the facilities
where they were located as of the date of the Memorandum.
(c) With respect to Section 2.1.4 of Schedule A, in the event any of the
equipment is not in good working condition as of the date hereof, and
S-L discovers that fact, and notifies Cott in writing, within thirty
(30) days following the date hereof of the condition of such
equipment, then, at Cott's option, Cott shall either repair or replace
such equipment in a timely manner, failing which such equipment shall
be removed from New Exhibit C, in which case the net book value of the
Purchased Assets shall be adjusted downward accordingly.
<PAGE> 3
- 3 -
(d) It is understood and agreed that the Purchased Assets include such
trade secrets and other intangible intellectual property as are
necessary to enable S-L to supply preforms and bottles pursuant to the
Supply Agreement which are similar to those currently produced by BCB
with the Purchased Assets at the weights at which they are currently
being produced (but not any other intellectual property, including,
without limitation, any patents or applications for lightweighting).
3. TOTAL PURCHASE PRICE.
(a) The total purchase price for all of the Purchased Assets, excluding
the Inventories, is Fourteen Million Two Hundred and Ninety Thousand
Seven Hundred and Twenty-Eight Dollars and Seventy-Six Cents
($14,290,728.76). Upon the closing of the transactions contemplated
herein, S-L shall pay the purchase price for such Purchased Assets in
full, by wire transfer of funds, in accordance with BCB's wiring
instructions which have been previously provided to S-L.
(b) The purchase price for the Inventories shall be established based on a
count taken by the parties, using the valuations attached hereto as
Schedule 3(b). Within seven days following the date hereof, S-L shall
pay the purchase price for the Inventories in full, by wire transfer
of funds, in accordance with BCB's wiring instructions which have been
previously provided to S-L.
4. HART-SCOTT-RODINO FILINGS.
The parties acknowledge they have filed and supplied, or caused to be filed
and supplied, all notifications and information required to be filed or supplied
by any of them in connection with the transactions contemplated under the
Memorandum, Schedule A and this Agreement pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, and early termination of the thirty (30) day
waiting period was granted by the Federal Trade Commission on March 3, 2000.
5. ASSUMED LIABILITIES.
With the exception of any liabilities expressly assumed by S-L in Schedule
A or in any agreements or instruments delivered in connection with the
Memorandum, Schedule A or this Agreement, S-L assumes no liabilities or other
obligations of Cott. S-L acknowledges and confirms that it hereby assumes, and
agrees to indemnify, defend and save harmless BCB from and against, all of the
outstanding liabilities of BCB set out on Exhibits B (excluding any items
already in the purchase price for the Inventories) and D (other than those
expressed on Exhibit D to be retained by Cott) to the Memorandum which relate to
the injection molding and blow molding operations conducted by BCB, including,
without limitation, orders for raw and/or packaging materials in transit and not
yet received at any of the Facilities.
6. DOCUMENTS TO BE DELIVERED CONTEMPORANEOUSLY WITH THE ENTERING INTO OF THIS
AGREEMENT.
(a) BCB shall execute and deliver to S-L a Bill of Sale in form and
substance acceptable to S-L, acting reasonably, fully executed,
conveying, selling, transferring and delivering to S-L all of the
assets set forth on Exhibits B and C to Schedule A, free and clear of
any liens or encumbrances.
<PAGE> 4
- 4 -
(b) BCB shall obtain releases of all liens on the assets and present those
to S-L at or prior to the date hereof.
(c) BCB shall provide S-L will all files, documents, records and drawings
relating to the Purchased Assets which are in the possession of BCB,
including the maintenance history of the assets and any operating
manuals and instructions.
(d) BCB and S-L shall execute the requisite documentation to effect the
assignment of the Leland lease to S-L in accordance with the terms and
conditions of Section 9.2 of Schedule A.
(e) BCB and S-L shall execute the requisite documentation to effect the
assignment of the Ball License Agreement in accordance with the terms
and conditions of Section 2.1.6 of Schedule A.
(f) Each of Cott and S-L shall deliver such other consents and approvals
as are contemplated by Schedule A or as are otherwise necessary in
order to enable S-L to carry out the intent of this Agreement and the
Supply Agreement.
(g) Cott shall deliver a certificate stating that BCB is not a "foreign
person" within the meaning of Section 1445 of the Internal Revenue
Code, such certificate being in the form set forth in the Treasury
Regulations thereunder.
(h) Cott shall deliver an acknowledgement in favour of S-L from BCB's
direct and indirect parent corporations (i.e. Cott USA Corp. and Cott
Holdings Inc.) that none of them shall permit the business of BCB to
be sold unless the obligations of BCB under the Memorandum, this
Agreement, the Supply Agreement and any other agreements contemplated
hereby or by any of such other agreements are assigned to and assumed
by the buyer.
(i) S-L shall deliver an acknowledgement in favor of BCB and Cott from
S-L's direct and indirect parent corporations that none of them shall
permit the business of S-L to be sold unless the obligations of S-L
under the Memorandum, this Agreement, the Supply Agreement and any
other agreements contemplated hereby or by any of such other
agreements are assigned to and assumed by the buyer.
(j) S-L shall deliver a written commitment to Cott to share S-L initiated
non-proprietary product improvements, such as improved barrier, design
innovations, etc., as contemplated by Section 11.0 of Schedule A.
(k) S-L shall deliver resale (tax exemption) certificates relating to the
sale of inventories for Texas, North Carolina and Florida.
7. FACILITY USE.
(a) LELAND, NORTH CAROLINA - Use of the Leland facility will be in
accordance with Section 9.0 of Schedule A, and the terms and
conditions of the lease of the Leland facility.
<PAGE> 5
- 5 -
(b) SAN ANTONIO, TAMPA AND WILSON - Use of these facilities will be in
accordance with Section 16.0 of Schedule A. In particular, BCB agrees
to provide S-L with such reasonable access to these facilities as is
required in order to carry out S-L's obligations under the Supply
Agreement and S-L shall not do anything or refrain from taking any
action that would cause BCB to be in breach of the terms of the leases
of either the Wilson or Tampa facility, or the
acknowledgements/consents delivered by the landlords of such
facilities in connection with the use by S-L thereof. In addition, S-L
shall:
(i) obtain Cott's written approval prior to making any changes to the
configuration of any of the equipment or the portion of any of
the facilities that is occupied by S-L that would affect the
filling operations conducted in such facilities by Cott; and
(ii) provide reasonable advance written notice to Cott's plant manager
that representatives of any customers of S-L will be attending at
any of such facilities at the request or invitation of S-L and
S-L agrees not to disclose any information to any of its
customers that would reasonably be considered confidential or
proprietary to Cott.
8. OPTION TO PURCHASE.
In the event of the early termination or expiration of the Supply
Agreement, BCB has the option to purchase the assets in accordance with Section
2.1.8 of Schedule A. Such option shall be exercisable by BCB by delivery of a
written notice to S-L:
(a) not later than seven (7) days following the end of the Term; or
(b) if this Agreement is terminated prior to the end of the Term, not
later than sixty (60) days following the date of termination.
If BCB elects not to purchase some or all of the assets, BCB agrees to provide
S-L a reasonable period of time to remove and relocate the assets.
9. HIRING OF EMPLOYEES.
(a) S-L agrees to use its best efforts to hire certain of BCB's employees
as set forth in Section 2.1.9 of Schedule A, all subject to the other
relevant terms and conditions of Schedule A.
(b) BCB agrees to provide S-L will all relevant files and data regarding
such employees and agrees to fully cooperate with S-L to the extent
S-L must indemnify, defend and save harmless BCB pursuant to the last
paragraph of Section 2.1.9 of Schedule A.
10. BULK SALES LAW.
In connection with the transactions contemplated hereby, S-L waives
compliance with the provisions of any applicable bulk sales law provided that
BCB and CC agree to
<PAGE> 6
- 6 -
indemnify , defend and save harmless S-L from any liability incurred as a result
of the failure to so comply.
11. SALES AND USE TAX.
All sales (including, without limitation, bulk sales) use, value added,
documentary, stamp, gross receipts, registrations, transfer, conveyance, excise,
recording, and other similar taxes and fees arising out of or in connection with
or attributable to the transactions effected pursuant to this Agreement shall be
borne by S-L.
12. MISCELLANEOUS.
(a) This Agreement made between S-L and Cott shall be binding upon and
shall inure to the benefit of the successors and assigns of the
parties hereto, but, other than in connection with a sale of the
business of any of such parties to any person other than a competitor
of the other party, neither Cott nor S-L shall assign any right or
interest in this Agreement or delegate any obligation under this
Agreement without prior written consent of the other party, which
consent may be arbitrarily or unreasonably withheld by such party in
its sole and unfettered discretion. Any attempted assignment or
delegation, other than in connection with a sale of the business of
any of any of such parties to any person other than a competitor of
the other party, without permission shall be wholly void and
ineffective for all purposes.
(b) This Agreement, including the Memorandum, Schedule A, and the Supply
Agreement of even date herewith represent the entire Agreement among
S-L, BCB and CC. The terms and conditions of this Agreement, including
the Memorandum, Schedule A, and the Supply Agreement of even date
herewith, supersede and are in lieu of any and all other prior
agreements and understandings or representations between the parties.
If there is any express conflict between the terms of this Agreement
and the terms of the Memorandum or Schedule A, the terms of this
Agreement shall govern. Notwithstanding the foregoing, any
confidentiality agreements previously entered into between the parties
shall survive in accordance with their respective terms.
(c) No changes in or additions to this Agreement shall be made or be
binding on any party unless made in writing and signed by each party
to this Agreement.
(d) The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions of this Agreement, and
this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
(e) Captions are utilized herein only as a matter of convenience and
reference, and in no way define, limit or describe the scope of this
Agreement or the intent of any provision thereof.
(f) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to its conflicts of
laws provisions. Each
<PAGE> 7
- 7 -
of the parties hereby attorns to the non-exclusive jurisdiction of the
courts of the State of Michigan.
(g) Each of the parties hereto will pay and discharge its own expenses and
fees in connection with the negotiations of and entry into this
Agreement and the consummation of the transactions contemplated
hereby.
(h) All notices, request, demands, consents and communications necessary
or required under this Agreement shall be made in the manner specified
in Section 18.1 of the Supply Agreement.
(i) This Agreement may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all of which
together shall constitute one and the same instrument, and it shall
not be necessary in making proof of this Agreement to produce or
account for more than one such counterpart.
(j) Unless otherwise expressly indicated, all dollar amounts in this
Agreement refer to lawful currency of the United States.
<PAGE> 8
- 8 -
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SCHMALBACH-LUBECA PLASTIC CONTAINERS USA, INC.
By: /S/ James M. McElyea
----------------------------------------
Name: James M. McElyea
Title: VP, General Counsel and Secretary
BCB USA CORP.
By: /S/ Mark Halperin
----------------------------------------
Name: Mark Halperin
Title: SVP and Secretary
COTT CORPORATION
By: /S/ Mark Halperin
----------------------------------------
Name: Mark Halperin
Title: SVP, General Counsel and Secretary
<PAGE> 9
- 9 -
SCHEDULE 3(b)
PREFORM PRICE
Made with Cott Resin @ $ O [CONFIDENTIAL TREATMENT REQUESTED]
3L O [CONFIDENTIAL TREATMENT REQUESTED]
2L O [CONFIDENTIAL TREATMENT REQUESTED]
2L O [CONFIDENTIAL TREATMENT REQUESTED]
1L O [CONFIDENTIAL TREATMENT REQUESTED]
Made with S-L Resin
All sizes $ O [CONFIDENTIAL TREATMENT REQUESTED]
Any S-L Resin = O [CONFIDENTIAL TREATMENT REQUESTED]
Any Cott Resin = $ O [CONFIDENTIAL TREATMENT REQUESTED]
Regrind/Reclaim = $ O [CONFIDENTIAL TREATMENT REQUESTED]
Encon Preforms = O [CONFIDENTIAL TREATMENT REQUESTED]
Reusable Packaging $ O [CONFIDENTIAL TREATMENT REQUESTED]
GAYLORDS AND LIDS subject to adjustment for quantity and condition
TIER SHEETS evaluated jointly
WOOD PALLETS
TOP FRAMES
<PAGE> 10
- 10 -
EXHIBIT "C"
Asset Sale from Cott Beverages USA to Schmalbach-Lubeca
<TABLE>
<CAPTION>
ACCUM. NET
ORIGINAL DEPREC. BOOK
LOCATION DESCRIPTION COST MAR-00 VALUE
<S> <C> <C> <C> <C>
Leland, NC Injection Molding Assets 7,503,095.05 1,256,417.21 6,246,677.84
Leland, NC Leasehold improvements 187,910.54 75,823.55 112,086.99
Leland, NC Furniture 47,508.36 25,653.59 19,854.77
San Antonio TX Blow Molding Assets 2,855,544.70 237,987.77 2,617,556.93
Tampa, FL Blow Molding Assets 3,518,529.56 482,244.27 3,036,285.29
Wilson, NC Blow Molding Assets 2,688,664.79 430,397.85 2,258,266.94
------------- ------------ -------------
TOTAL 16,799,253.00 2,508,524.24 14,290,728.76
============= ============ =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-START> JAN-02-2000<F1>
<PERIOD-END> APR-01-2000<F1>
<CASH> 1,300
<SECURITIES> 0
<RECEIVABLES> 98,400
<ALLOWANCES> 8,800
<INVENTORY> 71,200
<CURRENT-ASSETS> 178,600
<PP&E> 469,700
<DEPRECIATION> 203,700
<TOTAL-ASSETS> 592,900
<CURRENT-LIABILITIES> 121,700
<BONDS> 318,500
0
40,000
<COMMON> 189,000
<OTHER-SE> (86,600)
<TOTAL-LIABILITY-AND-EQUITY> 592,900
<SALES> 213,800
<TOTAL-REVENUES> 213,800
<CGS> 178,900
<TOTAL-COSTS> 178,900
<OTHER-EXPENSES> (100)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,100
<INCOME-PRETAX> 3,500
<INCOME-TAX> 1,500
<INCOME-CONTINUING> 2,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,000
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
<FN>
<F1>Prior years are different.
</FN>
</TABLE>
