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Press release from Marketwire

CCL Industries Reports an 18% Increase in Third Quarter Operating Income and Raises Dividend By 9%

Thursday, November 04, 2010

CCL Industries Reports an 18% Increase in Third Quarter Operating Income and Raises Dividend By 9%13:08 EDT Thursday, November 04, 2010TORONTO, ONTARIO--(Marketwire - Nov. 4, 2010) - CCL Industries Inc. (TSX:CCL.A)(TSX:CCL.B) - Results Summary For periods ended September 30Three months unauditedNine months unaudited(in millions of Cdn dollars, except per share data)20102009% Change20102009% ChangeSales$301.7$294.42.5%$911.0$909.80.1%EBITDA (Note 1)$51.3$50.71.2%$170.8$158.97.5%Operating Income (Note 2)$34.0$28.917.6%$117.6$97.221.0%Restructuring and other items – net loss/(gain)$-$--$(0.1)$2.1n.mNet earnings$14.9$16.6(10.2%)$56.6$42.333.8%Per Class B shareBasic earnings per share$0.46$0.51(9.8%)$1.73$1.3132.1%Diluted earnings per share$0.45$0.51(11.8%)$1.70$1.2931.8%Restructuring and other items – net loss$-$-$-$(0.05)Adjusted basic earnings per Class B Share (Note 3)$0.46$0.51(9.8%)$1.73$1.3627.2%Number of outstanding shares (in 000's)Weighted average for the period32,79732,283Actual at period end33,17632,840CCL Industries Inc., a world leader in the development of labelling solutions and specialty packaging for the consumer products and healthcare industries, announced today its financial results for the third quarter ended September 30, 2010, and the declaration of its quarterly dividend.Sales for the third quarter of 2010 were $301.7 million, up 3%, compared with $294.4 million reported in the same period in 2009. Foreign currency translation had a significant unfavourable impact of 8% due to the strengthening of the Canadian dollar compared to the prior year period. Excluding foreign currency translation, sales increased by 11% as a result of strong organic growth across all divisions. Year-to-date, sales were slightly higher reflecting strong organic growth of 11% and a nominal positive impact from acquisitions, offset by a negative foreign exchange effect of 11%.Operating income (a non-GAAP measure; see note 2 below) in the third quarter of 2010 was $34.0 million, up 18% from $28.9 million in the third quarter of 2009. Excluding the unfavourable currency translation effect, operating income increased by 27%. The increase in operating income, excluding currency translation, reflects solid growth in Label ($3.9 million), Tube ($1.3 million) and Container ($2.0 million). Year-to-date, operating income increased by 21% compared to the prior year period but, excluding foreign currency translation, operating income increased by 35% in the first nine months of 2010.EBITDA (a non-GAAP measure; see note 1 below) for the third quarter of 2010 was $51.3 million, up 1% from the $50.7 million in the comparable 2009 period. Excluding the unfavourable impact from currency translation, EBITDA increased by 9% compared to the prior year period. Year-to-date, EBITDA was $170.8 million in 2010, up 8% from $158.9 million in the comparable 2009 period. Excluding currency translation, EBITDA was up 20% for the first nine months of 2010.Net earnings in the third quarter of 2010 were $14.9 million, down 10%, compared to $16.6 million in last year's third quarter, reflecting higher corporate expenses, a significantly higher tax rate and unfavourable currency translation, partially offset by higher operating income and lower interest expense. In the third quarter of 2010 and 2009, no restructuring and other costs were incurred.Year-to-date net earnings were $56.6 million, up 34% from $42.3 million in the comparable 2009 period. Net earnings for the first nine months of 2010 were positively affected by a net gain of $0.1 million due to restructuring and other items. Net earnings for the comparable period in 2009 were affected by a net loss of $1.7 million due to restructuring and other items.Basic earnings per Class B share were $0.46 in the third quarter of 2010 compared with $0.51 per Class B share in the third quarter of 2009. Year-to-date, earnings per Class B share were $1.73 compared to $1.31 in the 2009 comparable period.Adjusted basic earnings per Class B share (a non-GAAP measure; see note 3 below) were $0.46 in the third quarter of 2010 compared with $0.51 in the corresponding quarter of 2009. Year-to-date, adjusted basic earnings per Class B share were $1.73 compared to $1.36 in 2009.Geoffrey T. Martin, President and Chief Executive Officer commented, "I am pleased to report another solid quarter despite the continuing unfavourable impact of currency translation on our results and an unusually low tax rate in the prior year quarter which negatively affected net earnings comparisons. All divisions experienced strong underlying sales growth in local currencies in the third quarter. The Label and Tube Divisions continued their positive trend and while the Container Division reported a small loss, results were a significant sequential improvement over the first half of 2010 and the prior year quarter."Mr. Martin also noted, "Sales in our Label Division, excluding currency translation, were up 6% for the third quarter of 2010. Results in our consumer related businesses were fueled by higher activity as customers restaged brands and used promotional packages to gain market share at the retail level. We also saw continuing strong growth in emerging markets. The global rate of sales growth, however, slowed during the third quarter as the prior year period already reflected some recovery from the economic crisis and a one-time demand windfall for higher margin H1N1 related products in our Healthcare & Specialty business. The Label Division's return on sales at 13.6% remains at the top end of our internal targets and was a record for the third quarter."Mr. Martin added, "Sales for the quarter increased 43% in the Container business excluding currency translation; all driven by a recovery in volume but compared to a particularly depressed period in 2009. Industry capacity has tightened significantly, so a number of pricing and productivity programs have returned our U.S. operation to solid profitability and we have continued to gain momentum in our successful Mexican business. Our Canadian operation remains loss making but we expect to see new pricing and cost saving initiatives drive improvement there as we move into 2011."Mr. Martin continued, "The Tube Division continues to make progress and had a record third quarter with sales up 14%, excluding currency translation, reflecting improved operating performance and new business wins."Mr. Martin stated, "Order intake remains solid so far in the fourth quarter but the negative impact on earnings from currency rates for the upcoming quarter would be challenging at today's levels compared to the same period in 2009. The rate of growth over the prior year will also moderate significantly as the recovery in 2009 was well underway and was aided by the positive impact from last year's H1N1 phenomenon."Mr. Martin concluded, "The Company continues to have a solid financial position with cash balances of $144 million at quarter-end and a net debt to capitalization ratio down to 28% from 35% last year. Based on our strong cash flow, capital structure and stable outlook for 2011, the Board of Directors decided to accelerate the timing of the annual dividend review to the third quarter and approved a 9% increase. The new quarterly dividend rate will be $0.175 for the Class B non-voting shares and $0.1625 for the Class A voting shares, and be payable to shareholders of record at the close of business on December 14, 2010, to be paid on January 4, 2011. CCL continues its record of paying quarterly dividends without reduction or omission for over 25 years."With headquarters in Toronto, Canada, CCL Industries now employs approximately 5,800 people and operates 60 production facilities globally located to meet the sourcing needs of large international customers. CCL Label is the world's largest converter of pressure sensitive and film materials for label applications and sells to leading global customers in the consumer packaging, healthcare, automotive and consumer durable markets. CCL Container and CCL Tube are leading producers of aluminum aerosol cans, bottles and extruded plastic tubes for consumer packaged goods customers in the United States, Canada and Mexico.Note 1 – EBITDA is a critical 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-GAAP measure is defined as earnings before interest, taxes, depreciation and amortization, goodwill impairment loss 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 interest, 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.Note 2 - Operating Income is a key non-GAAP measure to assist in understanding the profitability of the Company's business units. This non-GAAP measure is defined as income before corporate expenses, interest, restructuring and other items and taxes.Note 3 – Adjusted Basic Earnings Per Class B Share is an important non-GAAP measure 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-GAAP measure is defined as basic net earnings per Class B share excluding restructuring and other items and tax adjustments.Supplementary InformationPeriods ended September 30Reconciliation of Operating Income to EBITDAUnaudited(In millions of Canadian dollars)Three months ended September 30thNine months ended September 30thOperating Income 2010 2009 2010 2009 Label$32.5$30.7$114.9$98.2Container(0.7)(2.8)(4.5)(3.2)Tube2. operations34.028.9117.697.2Less: Corporate expenses(5.9)(2.6)(16.8)(12.4)Add: Depreciation & Amortization23.224.470.074.1EBITDA$51.3$50.7$170.8$158.9Unless noted otherwise, all amounts are expressed in Canadian dollars.This press release contains forward-looking information and forward-looking statements, as defined under applicable securities laws, (hereinafter collectively referred to as "forward-looking statements") 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 divisions; the future profitability of the Container Division; 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 evolving 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 segments and entering into new segments; 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; and 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 MD&A section of CCL's 2009 Annual Report, particularly under Section 4: "Risks and Uncertainties". CCL's annual and quarterly reports can be found online at and 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 10:00 a.m. EST on Monday, November 8, 2010, to discuss these results. The analyst presentation will be posted on the Company's website.To access this call, please dial:416-340-8527- Local877-240-9772- Toll FreePost-View service will be available from Monday, November 8 2010, at 6:00 p.m. EST until Monday, November 22, 2010, at 11:59 p.m. ESTTo access Conference Replay, please dial:416-695-5800- Local800-408-3053- Toll FreeAccess Code:7721077For more details on CCL, visit our website - INDUSTRIES INC.2010 Third QuarterConsolidated Statements of EarningsUnauditedThree months ended September 30Nine months ended September 30(in thousands of Canadian dollars, except per share data) 2010 2009 % Change 2010 2009 % Change Sales$301,695$294,4022.5$910,983$909,7850.1Costs and expensesCost of goods sold234,121231,433697,959714,115Selling, general and administrative37,89734,960107,651105,813Depreciation and amortization1,5481,7354,5905,00928,12926,274100,78384,848Interest expense, net6,2076,92819,13122,77321,92219,34613.381,65262,07531.5Restructuring and other items - net gain (loss)--104(2,120)Earnings before income taxes21,92219,34613.381,75659,95536.4Income taxesCurrent5,5643,84524,15416,049Future1,415(1,113)9761,564Net earnings$14,943$16,614(10.1)$56,626$42,34233.7Basic earnings per Class B share$0.46$0.51(9.8)$1.73$1.3132.1Diluted earnings per Class B share$0.45$0.51(11.8)$1.70$1.2931.8CCL INDUSTRIES INC.2010 Third QuarterConsolidated Balance SheetsUnauditedSeptember 30thDecember 31stSeptember 30th(in thousands of Canadian dollars) 2010 2009 2009 AssetsCurrent assetsCash and cash equivalents$144,229$150,594$108,423Accounts receivable - trade187,816148,688168,794Other receivables and prepaid expenses21,21424,34226,786Inventories76,59675,53082,144429,855399,154386,147Property, plant and equipment729,421751,592783,036Other assets42,06946,18246,575Future income tax assets48,91847,44045,525Intangible assets37,66142,33543,362Goodwill355,077358,794362,480Total assets$1,643,001$1,645,497$1,667,125LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities$221,603$206,510$215,556Income and other taxes payable5,29910,9436,189Current portion of long-term debt85,41549,29059,514312,317266,743281,259Long-term debt361,236448,849452,903Other long-term items58,82258,38456,948Future income tax liabilities119,605118,764113,824Total liabilities851,980892,740904,934Shareholders' equityShare capital205,320201,339195,878Contributed surplus6,2773,8056,105Retained earnings684,252643,303648,357Accumulated other comprehensive loss(104,828)(95,690)(88,149)Total shareholders' equity791,021752,757762,191Total liabilities and shareholders' equity$1,643,001$1,645,497$1,667,125CCL INDUSTRIES INC.2010 Third QuarterConsolidated Statements of Cash FlowsUnauditedThree months ended September 30Nine months ended September 30(in thousands of Canadian dollars) 2010 2009 2010 2009 Cash provided by (used for)Operating activitiesNet earnings$14,943$16,614$56,626$42,342Items not involving cash:Depreciation and amortization23,20824,42770,02874,092Executive compensation9885933,0031,586Future income taxes1,415(1,509)9761,564Restructuring and other items--(104)1,724Gain (loss) on sale of property, plant and equipment(250)186(512)(951)40,30440,311130,017120,357Net change in non-cash working capital3,730(12,122)(23,628)(31,007)Cash provided by operating activities44,03428,189106,38989,350Financing activitiesProceeds on issuance of long-term debt4422,0824,8916,226Retirement of long-term debt(42,718)(10,696)(44,009)(12,788)Decrease in bank advances(384)---Issue of shares1,8258222,8924,108Repayment of executive share purchase plan loans--683342Dividends(5,279)(4,896)(15,803)(14,642)Cash used for financing activities(46,114)(12,688)(51,346)(16,754)Investing activitiesAdditions to property, plant and equipment(20,056)(19,922)(58,673)(88,431)Proceeds on disposal of property, plant and equipment2851872,9444,011Business acquisitions-157(1,246)(5,288)Cash used for investing activities(19,771)(19,578)(56,975)(89,708)Effect of exchange rate changes on cash323(7,947)(4,433)(10,734)Decrease in cash and cash equivalents(21,528)(12,024)(6,365)(27,846)Cash and cash equivalents at beginning of period165,757120,447150,594136,269Cash and cash equivalents at end of period$144,229$108,423$144,229$108,423Consists of:Cash$74,549$51,465Short-term investments69,68056,958Cash and cash equivalents at end of period$144,229$108,423CCL INDUSTRIES INC.2010 Third QuarterSegmented InformationUnaudited(in thousands of Canadian dollars)Industry segmentsThree months ended September 30Nine months ended September 30SalesOperating incomeSalesOperating income 2010 2009 2010 2009 2010 2009 2010 2009 Label$238,385$244,761$32,565$30,688$729,391$751,204$114,941$98,276Container43,96431,567(739)(2,817)123,974105,044(4,512)(3,213)Tube19,34618,0742,2051,00057,61853,5377,1562,179Total operations$301,695$294,40234,03128,871$910,983$909,785117,58597,242Corporate expense(5,902)(2,597)(16,802)(12,394)28,12926,274100,78384,848Interest expense, net6,2076,92819,13122,77321,92219,34681,65262,075Restructuring and other items - net gain (loss)--104(2,120)Earnings before income taxes21,92219,34681,75659,955Income taxes6,9792,73225,13017,613Net earnings$14,943$16,614$56,626$42,342Identifiable AssetsGoodwillDepreciation & AmortizationCapital Expenditures September 30th December 31st September 30th December 31st Nine months ended September 30 Nine months ended September 30 2010 2009 2010 2009 2010 2009 2010 2009 Label$1,173,079$1,095,832$342,337$346,051$53,790$55,722$51,939$81,503Container177,905171,50012,74012,74310,34411,1825,8472,419Tube55,84859,472--5,6526,8558364,501Corporate236,169318,693--242333518Total$1,643,001$1,645,497$355,077$358,794$70,028$74,092$58,673$88,431FOR FURTHER INFORMATION PLEASE CONTACT: Gaston TanoCCL Industries Inc.Senior Vice President and Chief Financial