Cott Corp. Reports Strong Fourth Quarter And Fiscal 2010

Cott Corp. announced its results for the fourth quarter and fiscal year ended Jan. 1, 2011. Fourth quarter 2010 revenue was $529 million, compared to $386 million. Operating income was $15 million, compared to $14 million. Adjusted operating income was $26 million. Net income and earnings per diluted share were $15 million and $0.16, respectively, compared with $14 million and $0.17. Adjusted net income and adjusted net income per diluted share were $8 million and $0.08, respectively. Fourth quarter and fiscal year 2009 included an additional week of sales relative to 2010 that is estimated to have contributed $20 million of additional revenue.

"I'm pleased with the top-line volume growth and strong cash generation achieved during the fourth quarter," commented Cott's chief executive officer, Jerry Fowden, in a prepared statement. "While we did feel the impact of increased national brand promotions in the juice category during the quarter, we feel comfortable with the underlying 2010 performance in our juice business and continue to progress towards a smooth integration. We remain confident in our ability to deliver our previously announced synergy targets for 2011," added Fowden.

Filled beverage case volume increased 20 percent (4 percent excluding Cliffstar and the additional week in 2009), as volumes excluding the additional week in 2009 were higher in North America, the United Kingdom/Europe, and Royal Crown International.

Revenue increased 37 percent (3 percent excluding Cliffstar, the impact of foreign exchange, and the $20 million contributed by the additional week in 2009), as higher volumes in North America, the U.K. and RCI excluding the additional week in 2009 more than offset the impact of lower average net selling prices in North America, Mexico and the U.K.

Gross profit as a percentage of sales was 13.0 percent compared to 14.1 percent. Excluding Cliffstar transaction related purchase accounting adjustments, gross profit as a percentage of sales was 13.8 percent.

Selling, general and administrative expenses were $53 million compared to $40 million. The increase in SG&A expense was due to higher SG&A from Cliffstar and integration related expenses. Core Cott SG&A was $37 million.

Operating income was $15 million, compared to $14 million. Adjusted operating income was $26 million, compared to $14 million.

Income before income taxes includes $20 million related to a reduction in the fair value of the Cliffstar contingent consideration earn-out accrual, which is payable in July of 2011. The reduction is due to lower than projected income. The amount of the contingent consideration is not directly correlated to the decline in actual income.

For the fourth quarter, North America filled beverage case volume increased 29 percent (5 percent excluding Cliffstar and the additional week in 2009) and revenue increased 54 percent (3 percent excluding Cliffstar, the impact of foreign exchange and the $16 million contributed by the additional week in 2009), driven by volume growth in soft drinks.

RCI concentrate volumes increased 5 percent and revenue increased 16 percent (27 percent excluding the $1 million contributed by the additional week in 2009), primarily as a result of increased sales to existing customers during the quarter.

For fiscal 2010, filled beverage case volume increased 7 percent (1 percent excluding Cliffstar and the additional week in 2009), as a 36 percent increase in RCI concentrate sales volume drove total beverage volume in 8-ounce equivalents (including concentrate sales) up 13 percent. The growth in filled beverage case volume was driven by higher volumes in Mexico and the U.K., offset by lower volumes in North America excluding Cliffstar.

Fiscal 2010 revenue increased 13 percent (declined 1 percent excluding Cliffstar, the impact of foreign exchange and the $20 million contributed by the additional week in 2009), due to the inclusion of Cliffstar revenue. Lower revenue excluding Cliffstar was due to lower volumes in North America and lower average selling prices in North America and Mexico.

Gross profit in fiscal 2010 was $266 million or 14.8 percent of sales, compared to $250 million or 15.6 percent of sales. Gross profit included $11 million of Cliffstar related purchase accounting adjustments. Excluding these adjustments, gross profit was $277 million or 15.4 percent of sales.

In Fiscal 2010, North America filled beverage case volume increased 8 percent (declined 2 percent excluding Cliffstar and the additional week in 2009) and revenue increased 16 percent (declined 4 percent excluding Cliffstar and the $16 million contributed by the additional week in 2009). Revenue and volume declines in the first half of 2010 were due to national brand promotional activity. Revenue and volume increased in the second half of 2010 due to improved existing operations and Cliffstar.

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