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TORONTO, ON --(Marketwired - May 05, 2016) - CCL Industries Inc. CCL CCL
First Quarter Highlights
-- Record quarterly basic and adjusted basic earnings per Class B share (3)
of $2.57 and $2.65, up 30.5% and 33.2% respectively; includes $0.13
currency tailwind
-- Sales increased 22.8% supported by 7.3% CCL Label organic sales growth
-- Operating income (1) increased 28.0% driven by strong performances
across CCL Label, Avery and CCL Container
-- Closed five bolt-on acquisitions during the quarter in addition to the
planned transaction to acquire Checkpoint Systems, Inc.
CCL Industries Inc. ("CCL" or "the Company"), a world leader in specialty label and packaging solutions for global corporations, small businesses and consumers, today reported 2016 first quarter results.
Sales for the first quarter of 2016 increased 22.8% to $866.8 million, compared to $705.9 million for the first quarter of 2015, with 4.5% organic growth, 6.5% positive currency translation impact and 11.8% from the eleven acquisitions completed since December 31, 2014.
Operating income(1) for the first quarter of 2016 was $149.9 million, an increase of 28.0% compared to $117.1 million for the comparable quarter of 2015. Excluding the impact of currency translation operating income improved 21.8%.
Restructuring and other items of $3.0 million ($2.8 million after tax) was reported for the first quarter of 2016. This consisted of a $1.5 million restructuring charge for severance costs associated with the November 2015 Worldmark Ltd. transaction plus $1.5 million of first quarter acquisition related costs. The 2015 first quarter included restructuring and other items of $0.9 million ($0.8 million after tax) primarily related to the September 2014 Bandfix acquisition.
Net earnings attributable to shareholders of the Company improved 32.0% to $89.9 million for the 2016 first quarter compared to $68.1 million for the 2015 first quarter. Basic and adjusted basic earnings per Class B share(3) were a record $2.57 and $2.65, respectively, compared to basic and adjusted basic earnings per Class B share(3) of $1.97 and $1.99, respectively, in the prior year first quarter.
Geoffrey T. Martin, President and Chief Executive Officer, commented, "Record quarterly results were driven by strong organic growth in our legacy CCL Label businesses, especially in North America and Emerging Markets, and CCL Container. Cost savings, new product initiatives and pricing added strong profit improvement at Avery despite lower sales compared to a robust prior year period. All our businesses benefitted from one extra work day this quarter but European and Latin American units were negatively impacted by the timing of Easter falling in March 2016. Our first quarter acquisitions enhance capabilities and broaden geographic reach for CCL Label and bring new products to Avery. Recent acquisitions diluted operating margins but performed to expectations. So far into the second quarter order intake levels continue solid across all business lines and geographies."
Mr. Martin continued, "Foreign currency translation added $0.13 per share for the quarter with the comparatively stronger U.S. dollar and euro partly offset by weaker Latin American currencies. The transaction impact improved to slightly favourable on the sequential decline of the U.S. dollar, firming of the euro and commodity influenced currencies moving up in line with the price of oil. Today's Canadian dollar exchange rates would significantly reduce recent currency translation tailwind benefits in the second quarter and move to a headwind for the second half of the year, if sustained."
Mr. Martin concluded, "Despite closing five acquisitions during the first quarter, CCL's leverage ratio(4) remains a modest 1.1 times EBITDA(2). Our December 2015 enhanced credit facility has current undrawn capacity of US$563 million, giving CCL ample capacity to execute future growth plans including both bolt-on and transformative acquisitions. Given the Company's outlook and strong free cash flow, the Board of Directors declared a continuation of the $0.50 per Class B non-voting share and $0.4875 per Class A voting share dividend, payable to shareholders of record at the close of business on June 16, 2016, to be paid on June 30, 2016."
2016 First Quarter Highlights
CCL Label
-- Sales increased 28.0% to $622.3 million, with 7.3% organic growth, 14.4%
acquisitions and 6.3% positive currency translation
-- Regional organic sales growth: high single digit in North America and
Asia Pacific, low single digit in Europe and strong double digit in
Latin America
-- 16.7% operating income margin(1) with improvements in legacy operations
offset by the dilutive impact of recently acquired businesses
-- Label joint ventures added $0.03 earnings per Class B share
Avery
-- Sales increased 12.1% to $179.6 million, 8.3% from acquisitions and 8.4%
positive currency translation partially offset by 4.6% organic sales
decline
-- Operating income(1) increased 33.1% on positive currency translation,
cost savings, new products and pricing
-- Mabel's Labels performed as expected in its seasonally low quarter,
pc/nametag continues to outperform
CCL Container
-- Sales increased 8.9% to $64.9 million driven by 5.7% organic growth and
3.2% positive currency translation
-- Solid volume overall and strong performance in Mexico drove record
profitability despite modest negative currency transaction headwinds:
sequentially weaker U.S. dollar
-- Start-up losses at the Rheinfelden Americas aluminum slug joint venture
reduced earnings by $0.01 per Class B share
Checkpoint Systems, Inc. Acquisition Update
On March 2, 2016, CCL announced it had entered into a definitive merger agreement to acquire Checkpoint Systems, Inc. CKP ("Checkpoint") for US$10.15 per share in an all-cash transaction valued at approximately $556 million, including net cash. The boards of directors of both companies unanimously recommended the transaction. Subsequently the proposed merger cleared filing reviews with the Securities and Exchange Commission and received all anti-trust regulatory approvals. Checkpoint filed their definitive proxy statement setting the shareholder vote for May 11, 2016; subject to shareholder approval, closing has been scheduled for May 13, 2016.
CCL will hold a conference call at 8:00 a.m. EDT on May 5, 2016, to discuss these results. The analyst presentation will be posted on the Company's website.
To access this call, please dial:
416-340-2219 - Local
1-866-225-2055 - Toll Free
Forward-looking Statements
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; the Company's planned closing of the Checkpoint Systems, Inc. acquisition, general business and economic conditions. 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 2015 Annual Report, 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.
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.
Financial Information
CCL Industries Inc.
Consolidated statements of financial position
Unaudited
In thousands of Canadian dollars
As at March 31, As at December
2016 31, 2015
---------------------------------
Assets
Current assets
Cash and cash equivalents $ 320,140 $ 405,692
Trade and other receivables 551,399 524,621
Inventories 279,951 260,600
Prepaid expenses 17,288 20,562
Income taxes recoverable 5,679 18,389
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Total current assets 1,174,457 1,229,864
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Non-current assets
Property, plant and equipment 1,090,258 1,085,506
Goodwill 831,476 876,838
Intangible assets 345,403 285,340
Deferred tax assets 7,605 12,293
Equity accounted investments 61,213 61,502
Other assets 28,614 30,962
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Total non-current assets 2,364,569 2,352,441
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Total assets $ 3,539,026 $ 3,582,305
============================================================================
Liabilities
Current liabilities
Bank indebtedness $ 1,006 $ -
Trade and other payables 601,425 710,999
Current portion of long-term debt 17,715 167,103
Income taxes payable 33,173 33,652
Derivative instruments 873 1,095
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Total current liabilities 654,192 912,849
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Non-current liabilities
Long-term debt 1,011,876 838,416
Deferred tax liabilities 80,495 59,860
Employee benefits 138,217 135,216
Provisions and other long-term
liabilities 12,324 13,833
Derivative instruments - 253
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Total non-current liabilities 1,242,912 1,047,578
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Total liabilities 1,897,104 1,960,427
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Equity
Share capital 283,498 276,882
Contributed surplus 48,290 50,584
Retained earnings 1,255,088 1,182,686
Accumulated other comprehensive income 52,766 111,726
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Total equity attributable to shareholders
of the Company 1,639,642 1,621,878
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Non-controlling interest 2,280 -
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Total equity 1,641,922 1,621,878
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Total liabilities and equity $ 3,539,026 $ 3,582,305
============================================================================
CCL Industries Inc.
Consolidated income statements
Unaudited
Three Months Ended
March 31
---------------------
In thousands of Canadian dollars, 2016 2015
except per share information
Sales $ 866,818 $ 705,870
Cost of sales 615,506 507,648
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Gross profit 251,312 198,222
Selling, general and administrative expenses 112,230 94,489
Restructuring and other items 2,980 940
Earnings in equity accounted investments (808) (518)
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136,910 103,311
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Finance cost 8,782 6,706
Finance income (879) (396)
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Net finance cost 7,903 6,310
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Earnings before income tax 129,007 97,001
Income tax expense 39,283 28,855
----------------------------------------------------------------------------
Net earnings $ 89,724 $ 68,146
============================================================================
Attributable to:
Shareholders of the Company $ 89,919 $ 68,146
Non-controlling interest (195) -
----------------------------------------------------------------------------
Net earnings $ 89,724 $ 68,146
============================================================================
Earnings per share
Basic earnings per Class B share $ 2.57 $ 1.97
============================================================================
Diluted earnings per Class B share $ 2.54 $ 1.93
============================================================================
CCL Industries Inc.
Consolidated statements of cash flows
Unaudited
Three Months Ended
March 31
-----------------------
In thousands of Canadian dollars 2016 2015
Cash provided by (used for)
Operating activities
Net earnings $ 89,724 $ 68,146
Adjustments for:
Depreciation and amortization 46,820 39,405
Earnings in equity accounted investments, net of
dividends received (808) (518)
Net finance costs 7,903 6,310
Current income tax expense 27,153 22,440
Deferred taxes 12,130 6,415
Equity-settled share-based payment transactions 1,472 2,423
Gain on sale of property, plant and equipment (728) (316)
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183,666 144,305
Change in inventories (6,943) (20,087)
Change in trade and other receivables (10,373) (78,972)
Change in prepaid expenses 4,019 770
Change in trade and other payables (128,103) 12,780
Change in income taxes receivable and payable 860 (737)
Change in employee benefits 3,001 7,877
Change in other assets and liabilities (5,265) 1,500
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40,862 67,436
Net interest paid (12,932) (10,446)
Income taxes paid (13,077) (9,677)
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Cash provided by operating activities 14,853 47,313
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Financing activities
Proceeds on issuance of long-term debt 233,394 46,682
Repayment of debt (148,242) (13,833)
Proceeds from issuance of shares - 3,602
Dividends paid (17,519) (13,021)
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Cash provided by financing activities 67,633 23,430
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Investing activities
Additions to property, plant and equipment (70,508) (56,665)
Proceeds on disposal of property, plant and
equipment 5,586 611
Business acquisitions and other long-term
investments (86,084) (38,812)
----------------------------------------------------------------------------
Cash used for investing activities (151,006) (94,866)
----------------------------------------------------------------------------
Net decrease in cash and cash equivalents (68,520) (24,123)
Cash and cash equivalents at beginning of period 405,692 221,873
Translation adjustments on cash and cash equivalents (17,032) 8,243
----------------------------------------------------------------------------
Cash and cash equivalents at end of the period $ 320,140 $ 205,993
============================================================================
CCL Industries Inc.
Segment Information
Unaudited
In thousands of Canadian dollars
Three Months Ended March 31
------------------------------------------------
Sales Operating income
------------------------------------------------
2016 2015 2016 2015
------------------------------------------------
Label $ 622,311 $ 486,131 $ 103,861 $ 81,792
Avery 179,625 160,190 35,395 26,560
Container 64,882 59,549 10,615 8,714
------------------------------------------------
Total operations $ 866,818 $ 705,870 149,871 117,066
========================
Corporate expense (10,789) (13,333)
Restructuring and other
items (2,980) (940)
Earnings in equity accounted
investments 808 518
Finance cost (8,782) (6,706)
Finance income 879 396
Income tax expense (39,283) (28,855)
------------------------
Net earnings $ 89,724 $ 68,146
========================
Total
Total assets liabilities
-----------------------------------------------
March 31 December 31 March 31 December 31
-----------------------------------------------
2016 2015 2016 2015
-----------------------------------------------
Label $ 2,356,694 $ 2,285,169 $ 573,270 $ 596,902
Avery 593,110 615,893 194,171 230,293
Container 175,062 173,688 44,132 50,929
Equity accounted investments 61,213 61,502 - -
Corporate 352,947 446,053 1,085,531 1,082,303
-----------------------------------------------
Total $ 3,539,026 $ 3,582,305 $ 1,897,104 $ 1,960,427
-----------------------------------------------
Depreciation and
amortization Capital expenditures
-----------------------------------------------
Three Months Ended Three Months Ended
March 31 March 31
-----------------------------------------------
2016 2015 2016 2015
-----------------------------------------------
Label $ 38,823 $ 32,084 $ 53,857 $ 48,110
Avery 3,973 3,327 8,054 6,362
Container 3,759 3,749 8,597 2,193
Equity accounted investments - - - -
Corporate 265 245 - -
-----------------------------------------------
Total $ 46,820 $ 39,405 $ 70,508 $ 56,665
-----------------------------------------------
Non-IFRS Measures
(1) Operating income and operating income margin are key non-IFRS financial measures used to assist in understanding the profitability of the Company's business units. Operating income is defined as earnings before corporate expenses, net finance cost, goodwill impairment loss, earnings in equity accounted investments, restructuring and other items, and taxes. Operating income margin is defined as operating income over sales.
(2) 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. EBITDA 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 and restructuring and other items. Calculations are provided below to reconcile operating income to EBITDA. The Company believes that this 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 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.
Reconciliation of operating income to EBITDA
Unaudited
----------------------------------------------------------------------------
(In millions of Canadian dollars)
Three months ended March 31
---------------------------
Sales 2016 2015
---------------------------
Label $ 622.3 $ 486.1
Avery 179.6 160.2
Container 64.9 59.6
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Total sales $ 866.8 $ 705.9
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Operating income
Label $ 103.9 $ 81.8
Avery 35.4 26.6
Container 10.6 8.7
----------------------------------------------------------------------------
Total operating income 149.9 117.1
Less: Corporate expenses (10.8) (13.4)
Add: Depreciation & amortization 46.8 39.4
----------------------------------------------------------------------------
EBITDA $ 185.9 $ 143.1
----------------------------------------------------------------------------
Label operating income margin 16.7% 16.8%
(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 business dispositions, goodwill impairment loss, restructuring and other items, and tax adjustments.
Reconciliation of Basic Earnings per Class B Share to
Adjusted Basic Earnings per Class B Share
Unaudited
----------------------------------------------------------------------------
Three months ended March 31
---------------------------
2016 2015
---------------------------
Basic earnings per Class B Share $ 2.57 $ 1.97
Net loss from restructuring and other items 0.08 0.02
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Adjusted Basic Earnings per Class B Share $ 2.65 $ 1.99
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(4) Leverage ratio is a measure that indicates the Company's ability to service its existing debt. Leverage ratio is calculated as net debt divided by EBITDA.
Unaudited
----------------------------------------------------------------------------
(In millions of Canadian dollars)
March 31, 2016
----------------------------------------------------------------------------
Current debt $ 18.7
Long-term debt 1,011.9
----------------------------------------------------------------------------
Total debt 1,030.6
Cash and cash equivalents (320.1)
----------------------------------------------------------------------------
Net debt $ 710.5
EBITDA for 12 months ending March 31, 2016 (see below) $ 651.2
============================================================================
Leverage Ratio 1.09
============================================================================
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EBITDA for 12 months ended December 31, 2015 $ 608.4
less: EBITDA for three months ended March 31, 2015 (143.1)
add: EBITDA for three months ended March 31, 2016 185.9
============================================================================
EBITDA for 12 months ended March 31, 2016 $ 651.2
============================================================================
Supplemental Financial Information
Sales Change Analysis
Revenue Growth Rates (%)
Three Months Ended March 31, 2016
----------------------------------------------------------------------------
Organic Acquisition FX
Growth Growth Translation Total
Label 7.3% 14.4% 6.3% 28.0%
Avery (4.6%) 8.3% 8.4% 12.1%
Container 5.7% - 3.2% 8.9%
CCL 4.5% 11.8% 6.5% 22.8%
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Business Description
CCL Industries employs more than 13,800 people operating 125 production facilities in 33 countries on 6 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 & chemicals, consumer durable, electronic device & automotive markets. Extruded & laminated plastic tubes, folded instructional leaflets, precision decorated & die cut components, electronic 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 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 and Mexico. CCL partly backward integrates into materials science with capabilities in polymer extrusion, adhesive development and coating, surface engineering and metallurgy that are deployed across all three business segments.
Audio replay service will be available from May 5, 2016, at 10:00 a.m. EDT until June 5, 2016, at 11:59 p.m. EDT.
To access Conference Replay, please dial:
905-694-9451 - Local
1-800-408-3053 - Toll Free
Access Code: 3544461
FOR FURTHER INFORMATION PLEASE CONTACT:
For more information on CCL, visit our website - www.cclind.com or contact:
Sean Washchuk
Senior Vice President and Chief Financial Officer
416-756-8526
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