CCL Industries Inc. (TSX:CCL.A)(TSX:CCL.B) -
Results Summary
For periods ended March 31 Three months unaudited
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(in millions of Cdn dollars,
except per share data) 2014 2013 % Change % Change
Excl. FX(i)
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Sales $ 609.7 $ 363.6 67.7% 59.5%
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EBITDA(1) $ 117.8 $ 81.0 45.4% 36.8%
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Operating income(2) $ 88.6 $ 61.9 43.1% 34.7%
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Earnings in equity accounted
investments $ 0.1 $ 0.4 (75.0%)
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Restructuring and other items - net
loss $ 0.9 $ 1.3 (30.8%)
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Net earnings $ 52.6 $ 34.1 54.3% 44.6%
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Per Class B share
Basic earnings per share $ 1.54 $ 1.01 52.5%
Diluted earnings per share $ 1.51 $ 0.99 52.5%
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Restructuring and other items - net
loss $ 0.02 $ 0.03 33.3%
Adjusted basic earnings per
Class B share(3) $ 1.56 $ 1.04 50.0%
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Number of outstanding shares (in
000s)
Weighted average for the period -
basic 34,251 33,838
Actual at period end 34,519 34,143
(i) - Change over prior year's comparative period excludes estimated impact
of foreign currency translation.
CCL Industries Inc. ("CCL" or "the Company") is a world leader in specialty
label and packaging solutions for global corporations, small businesses and
consumers.
First Quarter 2014 Results
Sales for the first quarter of 2014 increased 67.7% to $609.7 million, compared
to $363.6 million for the first quarter of 2013, with 4.2% organic growth, 8.2%
positive currency translation and the balance primarily from the Avery Dennison,
INT and Sancoa acquisitions.
Operating income (a non-IFRS measure; see note 2 below) for the first quarter of
2014 was $88.6 million, an increase of 43.1% compared to $61.9 million for the
comparable quarter of 2013. The Label Segment posted a 22.8% increase in
operating income while the Container Segment posted a 13.2% increase in
operating income for the comparable first quarters. The Avery Segment recorded a
strong first quarter with a $13.1 million operating income.
EBITDA (a non-IFRS measure; see note 1 below) was $117.8 million for the first
quarter of 2014, an increase of 45.4% compared to $81.0 million for the first
quarter of 2013, driven principally by above noted acquisitions. EBITDA improved
36.8% excluding the impact of currency translation.
The Company's joint ventures contributed equity earnings of $0.1 million
compared to $0.4 million for the 2013 first quarter, with the current period
including start-up costs in Thailand and Saudi Arabia. Russia was negatively
impacted by the declining ruble to the euro.
Tax expense in the first quarter of 2014 was $22.2 million compared to $14.2
million in the prior year period. The effective tax rates for these two periods
are 29.7% and 29.6%, respectively.
Net earnings for the 2014 first quarter were $52.6 million, compared to $34.1
million for the first quarter of 2013. Basic earnings per Class B share were
$1.54 in the first quarter of 2014 compared to $1.01 per Class B share in the
prior year quarter.
During the first quarter of 2014, the Company recorded restructuring and other
expenses of $0.9 million principally related to severance and transaction costs
associated with the Sancoa acquisition and reorganization. During the first
quarter of 2013, the Company recorded restructuring and other expenses of $1.3
million. Therefore the Company posted adjusted basic earnings (a non-IFRS
measure; see note 3 below) of $1.56 per Class B share for the first quarter of
2014 compared to adjusted basic earnings of $1.04 per Class B share for the same
quarter of 2013.
Geoffrey T. Martin, President and Chief Executive Officer, stated, "We are
excited to report another record quarter with our legacy business outperforming
the very strong 2013 prior year period and acquisitions delivering better than
expected results; particularly our new Avery consumer arm. The comparatively
weaker Canadian dollar against many currencies, notably excluding the Brazilian
real, translated to ten cents earnings per share positive impact; partially
offset by transaction challenges in certain international markets due to the
rising U.S. dollar and euro. Nonetheless, strong operational results, successful
acquisition integrations and a currency tailwind combined to deliver our
fourteenth consecutive quarter of year-over-year improvement in adjusted
earnings per share."
Mr. Martin continued, "CCL Label sales increased 36% driven by acquisitions,
solid 5% organic growth and positive currency translation. North American sales
improved sequentially but were comparatively flat organically on sluggish
consumer staples demand in the United States influenced by the tough winter.
Underlying profits were up moderately but strong automotive demand continued to
drive good results at CCL Design alongside solid performance aided by cost
reduction and renewed focus at the rest of the acquired operations from Avery
Dennison. Excluding acquisitions, European sales and profitability were up
mid-single digits in local currencies as demand improved in our consumer and
automotive businesses with the Food & Beverage sector an area of strength aided
by exports to Africa. Emerging Markets posted double digit sales increases with
particular strength in China and Mexico, although growth rates softened
appreciably from 2013 levels in Brazil compounded by the decline of the real.
Our joint ventures posted solid underlying results held in check by start-up
costs in Thailand, softer mix and foreign exchange challenges in the Middle East
and the devaluation of the ruble to the euro in Russia. Overall profitability
continued to improve for the Segment with margins compressed only due to the
acquisition mix effect."
Mr. Martin then added, "Results at Avery significantly exceeded expectations
with an operating income of $13 million in its seasonally slow quarter often
noted for operating losses in pre-acquisition prior year periods. Cost saving
initiatives globally and market share gains in the United States in the
important label category were the primary drivers. North America and Europe both
delivered robust results ahead of our plans with Latin American and Asia Pacific
performance solid. The supply chain facilities consolidation progressed smoothly
without service disruption and is heading for a successful completion later this
year. After all the changes in the second half of last year, we are pleased to
see the organization settle down with renewed energy and focus on innovation
fueled by a very good start to 2014."
Mr. Martin then added, "Winter weather and a robust prior year period impacted
volume comparisons at CCL Container. January was particularly affected but
demand accelerated as the period progressed culminating in a strong March. Sales
for the quarter in local currencies fell slightly but profits improved with the
benefit of a stronger U.S. dollar and lower operating costs at our Canadian
plant offsetting slower sales in Mexico. Results included $0.2 million of our
budgeted $4 million move expense to redistribute capacity from the
Penetanguishene facility to our U.S. and Mexican operations. We remain committed
to deliver $10 million in annualized cost savings once the transition is
completed in early to mid-2015."
Mr. Martin continued, "The Sancoa acquisition closed late in the quarter
alongside a series of small transactions around the world. Given the stub
reporting period, combined results were not material to our earnings but the
quarter end financial position reflects transaction purchase prices. We began
restructuring initiatives in our North American Home & Personal Care sector in
view of the Sancoa acquisition and remain committed to our $5 million target in
annualized synergies by 2016."
Mr. Martin concluded, "Debt increased by $124 million in the first quarter due
largely to the Sancoa acquisition and currency translation; cash on hand was
$194 million. However, with significantly improved results the consolidated net
debt to annualized EBITDA leverage ratio remained a comfortable 1.6 times. Given
our strong cash flow and prospects for the balance of the year, your Board of
Directors has declared a quarterly dividend of $0.25 per Class B non-voting
share and $0.2375 per Class A voting share payable to shareholders of record at
the close of business on June 16, 2014, to be paid on June 30, 2014. CCL has
delivered dividends to shareholders without omission or reduction for over 30
years."
With headquarters in Toronto, Canada, CCL Industries now employs approximately
10,000 people and operates 96 production facilities in 27 countries on five
continents with corporate offices in Toronto, Canada, and Framingham,
Massachusetts. CCL Label is the world's largest converter of pressure sensitive
and extruded film materials for a wide range of decorative, instructional and
functional applications for large global customers in the consumer packaging,
healthcare, automotive and consumer durables markets. Extruded plastic tubes,
folded instructional leaflets, precision printed and die cut metal components
with LED displays and other complementary products and services are sold in
parallel to specific end-use markets. Avery is the world's largest supplier of
labels, specialty converted media and software solutions to enable short run
digital printing in businesses and homes alongside complementary office products
sold through distributors and mass market retailers. CCL Container is a leading
producer of impact extruded aluminum aerosol cans and bottles for consumer
packaged goods customers in the United States, Canada and Mexico.
(1) EBITDA is a critical non-IFRS financial measure used extensively in the
packaging industry and other industries to assist in understanding and measuring
operating results. It is also considered as a proxy for cash flow and a
facilitator for business valuations. This non-IFRS financial measure is defined
as earnings before net finance cost, taxes, depreciation and amortization,
goodwill impairment loss, earnings in equity accounted investments, non-cash
acquisition accounting adjustment to finished goods inventory and restructuring
and other items. See section entitled "Supplementary Information" below for a
reconciliation of operating income to EBITDA. The Company believes that it is an
important measure as it allows management to assess CCL's ongoing business
without the impact of net finance cost, depreciation and amortization and income
tax expenses, as well as non-operating factors and one-time items. As a proxy
for cash flow, it is intended to indicate CCL's ability to incur or service debt
and to invest in property, plant and equipment, and it allows management to
compare CCL's business to those of CCL's peers and competitors who may have
different capital or organizational structures. EBITDA is a measure tracked by
financial analysts and investors to evaluate financial performance and is a key
metric in business valuations. EBITDA is considered an important measure by
lenders to the Company and is included in the financial covenants of CCL's
senior notes and bank lines of credit.
(2) Operating Income is a key non-IFRS financial measure used to assist in
understanding the profitability of the Company's business units. This non-IFRS
financial measure is defined as income before corporate expenses, net finance
cost, goodwill impairment loss, earnings in equity accounted investments,
restructuring and other items, and taxes.
(3) Adjusted Basic Earnings per Class B Share is an important non-IFRS financial
measure used to assist in understanding the ongoing earnings performance of the
Company excluding items of a one-time or non-recurring nature. It is not
considered a substitute for basic net earnings per Class B share but it does
provide additional insight into the ongoing financial results of the Company.
This non-IFRS financial measure is defined as basic net earnings per Class B
share excluding gains on dispositions, goodwill impairment loss, restructuring
and other items Avery and DES finance costs, non-cash acquisition accounting
adjustment to finished goods inventory and tax adjustments.
Supplementary Information
For periods ended March 31st
Reconciliation of Operating Income to EBITDA
Unaudited
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(In millions of Canadian dollars)
Three months ended
March 31st
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Operating Income
2014 2013
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Label $ 69.5 $ 56.6
Avery 13.1 -
Container 6.0 5.3
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Total operating income 88.6 61.9
Less: Corporate expenses (6.3) (7.5)
Add: Depreciation & amortization 35.5 26.6
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EBITDA $ 117.8 $ 81.0
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Reconciliation of Basic Earnings per Class B Share to
Adjusted Basic Earnings per Class B Share
Unaudited
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Three months ended
March 31st
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2014 2013
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Basic earnings per Class B Share $ 1.54 $ 1.01
Net loss from restructuring and other items 0.02 0.03
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Adjusted Basic Earnings per Class B Share $ 1.56 $ 1.04
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The financial information presented herein has been prepared on the basis of
IFRS for financial statements and is expressed in Canadian dollars unless
otherwise stated.
This press release contains forward-looking information and forward-looking
statements (hereinafter collectively referred to as "forward-looking
statements"), as defined under applicable securities laws, that involve a number
of risks and uncertainties. Forward-looking statements include all statements
that are predictive in nature or depend on future events or conditions.
Forward-looking statements are typically identified by the words "believes,"
"expects," "anticipates," "estimates," "intends," "plans" or similar
expressions. Statements regarding the operations, business, financial condition,
priorities, ongoing objectives, strategies and outlook of the Company, other
than statements of historical fact, are forward-looking statements.
Specifically, this press release contains forward-looking statements regarding
the anticipated growth in sales, income and profitability of the Company's
segments; and the Company's expectations regarding general business and economic
conditions.
Forward-looking statements are not guarantees of future performance. They
involve known and unknown risks and uncertainties relating to future events and
conditions including, but not limited to, the after-effects of the global
financial crisis and its impact on the world economy and capital markets; the
impact of competition; consumer confidence and spending preferences; general
economic and geopolitical conditions; currency exchange rates; interest rates
and credit availability; technological change; changes in government
regulations; risks associated with operating and product hazards; and CCL's
ability to attract and retain qualified employees. Do not unduly rely on
forward-looking statements as the Company's actual results could differ
materially from those anticipated in these forward-looking statements.
Forward-looking statements are also based on a number of assumptions, which may
prove to be incorrect, including, but not limited to, assumptions about the
following: global economic recovery and higher consumer spending; improved
customer demand for the Company's products; continued historical growth trends,
market growth in specific sectors and entering into new sectors; the Company's
ability to provide a wide range of products to multinational customers on a
global basis; the benefits of the Company's focused strategies and operational
approach; the achievement of the Company's plans for improved efficiency and
lower costs, including stable aluminum costs; the availability of cash and
credit; fluctuations of currency exchange rates; the Company's continued
relations with its customers; general business and economic conditions, and the
Company's ability to realize targeted operational synergies and cost savings
from the restructuring of Avery, Sancoa and the Canadian Container operation.
Should one or more risks materialize or should any assumptions prove incorrect,
then actual results could vary materially from those expressed or implied in the
forward-looking statements. Further details on key risks can be found in the
2013 Management's Discussion and Analysis, particularly under Section 4: "Risks
and Uncertainties." CCL's annual and quarterly reports can be found online at
www.cclind.com and www.sedar.com or are available upon request.
Except as otherwise indicated, forward-looking statements do not take into
account the effect that transactions or non-recurring or other special items
announced or occurring after the statements are made may have on CCL's business.
Such statements do not, unless otherwise specified by the Company, reflect the
impact of dispositions, sales of assets, monetizations, mergers, acquisitions,
other business combinations or transactions, asset write-downs or other charges
announced or occurring after forward-looking statements are made. The financial
impact of these transactions and non-recurring and other special items can be
complex and depends on the facts particular to each of them and therefore cannot
be described in a meaningful way in advance of knowing specific facts.
The forward-looking statements are provided as of the date of this press release
and the Company does not assume any obligation to update or revise the
forward-looking statements to reflect new events or circumstances, except as
required by law.
Note: CCL will hold a conference call at 2:00 p.m. EDT on May 1, 2014, to
discuss these results. The analyst presentation will be posted on the
Company's website.
To access this call, please dial:
416-340-8527 - Local
800-952-4972 - Toll Free
Audio replay service will be available from May 1, 2014, at 6:00 p.m.
EDT until May 15, 2014, at 11:59 p.m. EDT.
To access Conference Replay, please dial:
905-694-9451 - Local
800-408-3053 - Toll Free
Access Code: 1252787
For more details on CCL, visit our website - www.cclind.com
CCL Industries Inc.
Consolidated condensed interim statements of financial position
Unaudited
In thousands of Canadian dollars
As at March 31 As at December 31
2014 2013
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Assets
Current assets
Cash and cash equivalents $ 193,843 $ 209,095
Trade and other receivables 418,417 363,493
Inventories 205,306 181,644
Prepaid expenses 13,672 13,458
Income tax recoverable 1,002 2,503
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Total current assets 832,240 770,193
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Property, plant and equipment 944,662 856,001
Goodwill 563,678 494,231
Intangible assets 216,028 207,569
Deferred tax assets 4,005 4,115
Equity accounted investments 53,258 47,363
Other assets 21,934 22,176
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Total non-current assets 1,803,565 1,631,455
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Total assets $ 2,635,805 $ 2,401,648
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Liabilities
Current liabilities
Trade and other payables $ 485,167 $ 475,777
Current portion of long-term debt 47,585 47,070
Income taxes payable 23,768 21,060
Derivative instruments 550 642
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Total current liabilities 557,070 544,549
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Long-term debt 788,454 664,976
Deferred tax liabilities 42,716 42,661
Employee benefits 116,036 109,068
Provisions and other long-term
liabilities 15,124 21,511
Derivative instruments 678 748
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Total non-current liabilities 963,008 838,964
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Total liabilities 1,520,078 1,383,513
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Equity
Share capital 241,700 237,189
Contributed surplus 14,547 11,919
Retained earnings 812,750 768,738
Accumulated other comprehensive income 46,730 289
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Total equity attributable to shareholders
of the Company 1,115,727 1,018,135
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Total liabilities and equity $ 2,635,805 $ 2,401,648
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CCL Industries Inc.
Consolidated condensed interim income statements
Unaudited
In thousands of Canadian dollars, except per share data
Three Months Ended March 31
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%
2014 2013 Change
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Sales $ 609,700 $ 363,643 67.7
Cost of sales 448,743 267,913
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Gross profit 160,957 95,730
Selling, general and administrative 78,625 41,307
Restructuring and other items 946 1,322
Earnings in equity accounted investments (69) (377)
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81,455 53,478
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Finance cost 6,874 5,367
Finance income (151) (160)
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Net finance cost 6,723 5,207
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Earnings before income taxes 74,732 48,271 54.8
Income tax expense 22,170 14,189
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Net earnings $ 52,562 $ 34,082 54.2
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Attributable to:
Shareholders of the Company $ 52,562 $ 34,082
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Net earnings for the period $ 52,562 $ 34,082
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Basic earnings per Class B share $ 1.54 $ 1.01 52.5
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Diluted earnings per Class B share $ 1.51 $ 0.99 52.5
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CCL Industries Inc.
Segment Information
Unaudited
In thousands of Canadian dollars
Three Months Ended March 31
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Sales Operating income
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2014 2013 2014 2013
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Label $ 423,740 $ 312,264 $ 69,387 $ 56,579
Avery 132,923 - 13,143 -
Container 53,037 51,379 6,024 5,317
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Total operations $ 609,700 $ 363,643 88,554 61,896
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Corporate expense (6,222) (7,473)
Restructuring and
other items (946) (1,322)
Earnings in equity
accounted investments 69 377
Finance cost (6,874) (5,367)
Finance income 151 160
Income tax expense (22,170) (14,189)
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Net earnings $ 52,562 $ 34,082
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Total Assets Total Liabilities
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March 31 December 31 March 31 December 31
-------------- -------------- -------------- --------------
2014 2013 2014 2013
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Label $ 1,761,730 $ 1,558,832 $ 397,032 $ 357,386
Avery 399,554 391,658 168,513 205,154
Container 155,417 140,678 53,905 49,607
Equity accounted
investments 53,258 47,363 - -
Corporate 265,846 263,117 900,628 771,366
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Total $ 2,635,805 $ 2,401,648 $ 1,520,078 $ 1,383,513
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Depreciation and Amortization Capital Expenditures
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Three Months Ended Three Months Ended
March 31 March 31
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2014 2013 2014 2013
-------------- -------------- --------------- -------------
Label $ 28,381 $ 22,883 $ 46,516 $ 38,420
Avery 3,446 - 3,750 -
Container 3,474 3,560 9,612 830
Equity accounted
investments - - - -
Corporate 206 190 - -
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Total $ 35,507 $ 26,633 $ 59,878 $ 39,250
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Due to the seasonality of CCL's business, the Company's operating results for
the three months ended March 31, 2014, are not necessarily indicative of the
results that may be expected for the full year ending December 31, 2014. The
first and second quarters are traditionally higher sales periods for the Label
and Container Segments as a result of the greater number of work days and
various customer activities undertaken during this period versus the third and
fourth quarters of the year. For Avery, the third quarter has historically been
its strongest, as it benefits from the increased demand related to
back-to-school activities in North America.
Certain comparative segment information has been recast to conform with current
period presentation.
FOR FURTHER INFORMATION PLEASE CONTACT:
CCL Industries Inc.
Sean Washchuk
Senior Vice President and Chief Financial Officer
416-756-8526
www.cclind.com
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