TORONTO, ON–(Marketwired – February 23, 2017) –
Fourth Quarter Highlights
- Record fourth quarter adjusted basic earnings per Class B share(3) of $2.98, up 38.0%; basic earnings per Class B share of $2.80, up 36.6%; includes $0.06 currency headwind
- Sales increased 32.5%, supported by 6.9% CCL Label organic sales growth
- Checkpoint delivered $27.3 million operating income(1)
- Announced $1.13 billion acquisition of Innovia Group, necessary approvals in place to close the transaction in the first quarter 2017
- Board approves 15.0% increase to annual dividend
2016 Highlights
- Record full-year 2016 adjusted basic earnings per Class B share(3) of $11.41, up 32.5%; record basic earnings per Class B share of $9.90 up 16.5%
- Sales increased 30.8% supported by 7.2% CCL Label organic sales growth
- Closed eight acquisitions for an aggregate $669 million purchase price
- Closed US$500 million public bond offering at 3.25% for ten years
CCL Industries Inc. (TSX: CCL.A) (TSX: CCL.B) (“CCL” or “the Company”), a world leader in specialty label and packaging solutions for global corporations, government institutions, small businesses and consumers, today reported record fourth quarter and annual financial results for 2016.
Sales for the fourth quarter of 2016 increased 32.5% to $1,058.4 million, compared to $798.8 million for the fourth quarter of 2015, with 4.0% organic growth, 2.1% negative currency translation impact and 30.6% acquisition-related growth, primarily driven by the May 13, 2016 acquisition of Checkpoint Systems, Inc. (“Checkpoint”).
Operating income(1) for the fourth quarter of 2016 was $160.6 million, an increase of 31.0% compared to $122.6 million for the comparable quarter of 2015. Excluding the impact of currency translation operating income improved 33.8%.
Restructuring and other items of $6.7 million ($6.4 million after tax) was reported for the fourth quarter of 2016. This consisted of severance costs of $4.7 million and $2.5 million for the Checkpoint and Worldmark acquisitions, respectively, as well as other acquisition related transaction costs of $1.5 million partially offset by a reversal of the Avery Segment acquisition accrual of $2.0 million due to the repurposing of the Meridian, Mississippi facility as a distribution centre. There was a net expense for restructuring and other items of $4.2 million ($3.7 million after tax) in the 2015 fourth quarter.
Tax expense in the fourth quarter of 2016 was $33.6 million compared to $27.8 million in the prior year period. The effective tax rates for these two periods were 25.7% and 28.4%, respectively. The decrease in the effective tax rate can be attributed to the recognition of previously unrecognized deferred tax assets and other discrete tax deductions partially offset by an increase in taxable income in higher taxed jurisdictions. The net impact of these fourth quarter adjustments was an approximate $3.5 million reduction in tax expense or $0.10 per class B share.
Net earnings were $98.3 million for the 2016 fourth quarter compared to $71.9 million for the 2015 fourth quarter. Basic and adjusted basic earnings per Class B share(3) were $2.80 and a record $2.98, respectively, compared to basic and adjusted basic earnings per Class B share(3) of $2.05 and $2.16, respectively, in the prior year fourth quarter.
For 2016, sales, operating income and net earnings improved 30.8%, 21.5% and 17.4% to $3,974.7 million, $603.3 million and $346.3 million, respectively, compared to 2015. Included in the 2016 annual results was a $33.9 million non-cash acquisition accounting adjustment to the acquired finished goods inventory from the Checkpoint and Worldmark businesses that was expensed in the Company’s cost of goods sold for the period. Excluding this non-cash adjustment, operating income was $637.2 million and improved 28.3% compared to 2015. 2016 included results from fourteen acquisitions completed since January 1, 2015, delivering acquisition-related sales growth for the period of 25.5%. Organic sales growth of 4.0% provided the foundation for solid profit improvement and foreign currency translation added $0.07 per share. For 2016, basic and adjusted basic earnings per Class B share(3) were $9.90 and $11.41, respectively, compared to basic and adjusted basic earnings per Class B share(3) of $8.50 and $8.61, respectively for 2015.
Geoffrey T. Martin, President and Chief Executive Officer, commented, “Record fourth quarter results were underpinned by strong performance in our core businesses and a second consecutive quarter of solid performance at Checkpoint. CCL Label posted robust 6.9% organic growth with profit gains broad based by business and geography augmented by recent acquisitions. Avery continued to expand operating margins despite tough conditions in North America driven by office superstore closures while CCL Container had a strong finish to a record year.”
Mr. Martin added, “Although Checkpoint’s last two quarters are the seasonally strongest of the year, results were still better than expected as cost savings kicked in faster than anticipated. The coming first quarter has traditionally been loss making for Checkpoint in the low ‘sale season’ for retailers. So far, $20.7 million of reorganization costs have been recorded of an expected $30.0 million total, recently reduced from $40.0 million. We expect this to yield at least $40.0 million in annualized savings, likely delivering earlier than the previously indicated 2018.”
Mr. Martin continued, “Foreign currency translation reduced earnings $0.06 per share for the quarter, largely driven by the slightly lower U.S. dollar and euro and the significant devaluations of the Mexican peso and U.K. pound compared to the exchange rates in effect at the end of 2015. At today’s Canadian dollar exchange rates, currency translation would remain a modest headwind for the first quarter of 2017, if sustained.”
Mr. Martin concluded, “Late last year we announced the acquisition of Innovia for $1.13 billion. Closing prerequisites are in place so we expect the transaction to complete in the first quarter. Our balance sheet and liquidity positions are strong with a net leverage ratio(4) declining in the quarter to a conservative 1.3 times EBITDA at the end of the year, cash-on-hand of $585 million, undrawn capacity of US$631.1 million on our syndicated revolving credit facility and a US$450 million term loan committed, contingent on the closing of the Innovia transaction. Given the Company’s strong financial performance in 2016, outlook and expected strong free cash flow for 2017, the Board of Directors declared a 15% increase in the dividend to $0.575 per Class B non-voting share and $0.5625 per Class A voting share dividend, payable to shareholders of record at the close of business on March 17, 2017, to be paid on March 31, 2017.”
Fourth Quarter 2016 Segment Highlights
CCL Label
- Sales increased 14.2% to $632 million, with 6.9% organic growth, 9.4% acquisitions and 2.1% negative currency translation
- Regional organic sales growth: mid-single digit in North America and Europe, high single digit in Asia Pacific and strong double digit in Latin America
- Solid 14.4% operating margin(1) diluted 30 bps by the impact of acquisitions
- Label joint ventures added $0.05 earnings per Class B share
Avery
- Sales were $181 million, 4.8% organic sales decline, 1.5% negative currency translation partially offset by a 0.7% increase from acquisitions
- Office superstore closures impacted demand in North America, International up modestly
- Operating margin(1) expanded 170 bps to 19.7%. Results improved 6.2% excluding the impact of currency translation and acquisitions.
Checkpoint
- $191 million sales met expectations for the retail high season
- Operating income(1) of $27.3 million, better than expected 14.3% operating margin
- Additional $4.7 million of restructuring recorded for the quarter
CCL Container
- Sales increased 1.3% to $55 million with 5.5% organic sales growth partially offset by 4.2% negative currency translation
- Operating income(1) of $7.1 million, operating margin expanded 130 bps to 12.9%
- Start-up losses at the Rheinfelden Americas aluminum slug joint venture reduced earnings by $0.01 per Class B share
CCL will hold a conference call at 8:00 a.m. EST on February 23, 2017, 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
1-866-225-0198 – Toll Free
Audio replay service will be available from February 23, 2017, at 10:00 a.m. EST until March 26, 2017, at 11:59 p.m. EDT.
To access Conference Replay, please dial:
905-694-9451 – Local
1-800-408-3053 – Toll Free
Access Code: 2928302
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 estimated annual cost reductions from the restructuring of the Checkpoint Systems, Inc. acquisition; the expected closing of the Innovia acquisition and financial impact; 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 December 31, 2016 | As at December 31, 2015 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 585,077 | $ | 405,692 | ||||
| Trade and other receivables | 672,253 | 524,621 | ||||||
| Inventories | 351,480 | 260,600 | ||||||
| Prepaid expenses | 25,760 | 20,562 | ||||||
| Income taxes recoverable | 26,231 | 18,389 | ||||||
| Derivative instruments | 68 | – | ||||||
| Total current assets | 1,660,869 | 1,229,864 | ||||||
| Non-current assets | ||||||||
| Property, plant and equipment | 1,216,946 | 1,085,506 | ||||||
| Goodwill | 1,131,784 | 876,838 | ||||||
| Intangible assets | 549,604 | 285,340 | ||||||
| Deferred tax assets | 21,177 | 12,293 | ||||||
| Equity accounted investments | 64,057 | 61,502 | ||||||
| Other assets | 34,404 | 30,962 | ||||||
| Total non-current assets | 3,017,972 | 2,352,441 | ||||||
| Total assets | $ | 4,678,841 | $ | 3,582,305 | ||||
| Liabilities | ||||||||
| Current liabilities | ||||||||
| Trade and other payables | $ | 844,510 | $ | 710,999 | ||||
| Current portion of long-term debt | 4,213 | 167,103 | ||||||
| Income taxes payable | 58,301 | 33,652 | ||||||
| Derivative instruments | – | 1,095 | ||||||
| Total current liabilities | 907,024 | 912,849 | ||||||
| Non-current liabilities | ||||||||
| Long-term debt | 1,597,080 | 838,416 | ||||||
| Deferred tax liabilities | 67,825 | 59,860 | ||||||
| Employee benefits | 279,228 | 135,216 | ||||||
| Provisions and other long-term liabilities | 52,484 | 13,833 | ||||||
| Derivative instruments | – | 253 | ||||||
| Total non-current liabilities | 1,996,617 | 1,047,578 | ||||||
| Total liabilities | 2,903,641 | 1,960,427 | ||||||
| Equity | ||||||||
| Share capital | 261,352 | 276,882 | ||||||
| Contributed surplus | 64,234 | 50,584 | ||||||
| Retained earnings | 1,450,495 | 1,182,686 | ||||||
| Accumulated other comprehensive income | (881 | ) | 111,726 | |||||
| Total equity | 1,775,200 | 1,621,878 | ||||||
| Total liabilities and equity | $ | 4,678,841 | $ | 3,582,305 | ||||
| CCL Industries Inc. | |||||||||||||||||
| Consolidated income statements | |||||||||||||||||
| Unaudited | |||||||||||||||||
| Three Months Ended December 31 | Twelve Months Ended December 31 | ||||||||||||||||
| In thousands of Canadian dollars, except per share information | 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Sales | $ | 1,058,449 | $ | 798,841 | $ | 3,974,749 | $ | 3,039,112 | |||||||||
| Cost of sales | 735,866 | 569,676 | 2,806,853 | 2,179,694 | |||||||||||||
| Gross profit | 322,583 | 229,165 | 1,167,896 | 859,418 | |||||||||||||
| Selling, general and administrative expenses | 173,042 | 120,062 | 612,825 | 415,086 | |||||||||||||
| Restructuring and other items | 6,757 | 4,219 | 34,637 | 6,023 | |||||||||||||
| Earnings in equity accounted investments | (1,279 | ) | (1,614 | ) | (4,528 | ) | (3,477 | ) | |||||||||
| 144,063 | 106,498 | 524,962 | 441,786 | ||||||||||||||
| Finance cost | 13,719 | 7,700 | 41,772 | 28,172 | |||||||||||||
| Finance income | (1,494 | ) | (925 | ) | (3,853 | ) | (2,535 | ) | |||||||||
| Net finance cost | 12,225 | 6,775 | 37,919 | 25,637 | |||||||||||||
| Earnings before income tax | 131,838 | 99,723 | 487,043 | 416,149 | |||||||||||||
| Income tax expense | 33,507 | 27,853 | 140,734 | 121,071 | |||||||||||||
| Net earnings | $ | 98,331 | $ | 71,870 | $ | 346,309 | $ | 295,078 | |||||||||
| Attributable to: | |||||||||||||||||
| Shareholders of the Company | $ | 98,331 | $ | 71,870 | $ | 346,753 | $ | 295,078 | |||||||||
| Non-controlling interest | – | – | (444 | ) | – | ||||||||||||
| Net earnings | $ | 98,331 | $ | 71,870 | $ | 346,309 | $ | 295,078 | |||||||||
| Earnings per share | |||||||||||||||||
| Basic earnings per Class B share | $ | 2.80 | $ | 2.05 | $ | 9.90 | $ | 8.50 | |||||||||
| Diluted earnings per Class B share | $ | 2.76 | $ | 2.03 | $ | 9.77 | $ | 8.38 | |||||||||
| CCL Industries Inc. | |||||||||||||||||
| Consolidated statements of cash flows | |||||||||||||||||
| Unaudited | |||||||||||||||||
| Three Months Ended December 31 | Twelve Months Ended December 31 | ||||||||||||||||
| In thousands of Canadian dollars | 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Cash provided by (used for) | |||||||||||||||||
| Operating activities | |||||||||||||||||
| Net earnings | $ | 98,331 | $ | 71,870 | $ | 346,309 | $ | 295,078 | |||||||||
| Adjustments for: | |||||||||||||||||
| Depreciation and amortization | 54,801 | 44,101 | 203,692 | 164,081 | |||||||||||||
| Earnings in equity accounted investments, net of dividends received | (1,279 | ) | (1,614 | ) | (1,722 | ) | (618 | ) | |||||||||
| Net finance costs | 12,225 | 6,775 | 37,919 | 25,637 | |||||||||||||
| Current income tax expense | 20,536 | 17,915 | 125,928 | 121,677 | |||||||||||||
| Deferred taxes | 12,971 | 9,938 | 14,806 | (606 | ) | ||||||||||||
| Equity-settled share-based payment transactions | 3,861 | 1,077 | 15,381 | 8,425 | |||||||||||||
| Gain on sale of property, plant and equipment | (238 | ) | (1,906 | ) | (1,444 | ) | (2,863 | ) | |||||||||
| 201,208 | 148,156 | 740,869 | 610,811 | ||||||||||||||
| Change in inventories | 35,944 | (6,008 | ) | 61,380 | (38,268 | ) | |||||||||||
| Change in trade and other receivables | 62,042 | 32,960 | 22,834 | (83,103 | ) | ||||||||||||
| Change in prepaid expenses | 3,966 | 4,603 | (4,346 | ) | (225 | ) | |||||||||||
| Change in trade and other payables | (221 | ) | 63,651 | (100,148 | ) | 129,445 | |||||||||||
| Change in income taxes receivable and payable | (5,375 | ) | (5,984 | ) | (2,471 | ) | (6,608 | ) | |||||||||
| Change in employee benefits | 3,799 | (26,439 | ) | 16,633 | (3,378 | ) | |||||||||||
| Change in other assets and liabilities | (3,519 | ) | 16,742 | (9,895 | ) | 2,827 | |||||||||||
| 297,844 | 227,681 | 724,856 | 611,501 | ||||||||||||||
| Net interest paid | (2,970 | ) | (1,479 | ) | (35,991 | ) | (23,909 | ) | |||||||||
| Income taxes paid | (40,751 | ) | (44,721 | ) | (124,829 | ) | (112,332 | ) | |||||||||
| Cash provided by operating activities | 254,123 | 181,481 | 564,036 | 475,260 | |||||||||||||
| Financing activities | |||||||||||||||||
| Proceeds on issuance of long-term debt | (2,880 | ) | 268,795 | 835,194 | 324,610 | ||||||||||||
| Repayment of debt | (69,913 | ) | (1,612 | ) | (302,219 | ) | (99,845 | ) | |||||||||
| Proceeds from issuance of shares | – | 5,556 | 5,614 | 18,316 | |||||||||||||
| Purchase of shares held in trust | – | – | (28,836 | ) | – | ||||||||||||
| Dividends paid | (17,565 | ) | (13,131 | ) | (70,174 | ) | (52,296 | ) | |||||||||
| Cash provided by (used for) financing activities | (90,358 | ) | 259,608 | 439,579 | 190,785 | ||||||||||||
| Investing activities | |||||||||||||||||
| Additions to property, plant and equipment | (33,911 | ) | (41,814 | ) | (234,663 | ) | (172,214 | ) | |||||||||
| Proceeds on disposal of property, plant and equipment | 2,662 | 5,019 | 9,331 | 17,595 | |||||||||||||
| Business acquisitions and other long-term investments | (2,762 | ) | (310,247 | ) | (571,482 | ) | (356,703 | ) | |||||||||
| Cash used for investing activities | (34,011 | ) | (347,042 | ) | (796,814 | ) | (511,322 | ) | |||||||||
| Net increase in cash and cash equivalents | 129,754 | 94,047 | 206,801 | 154,723 | |||||||||||||
| Cash and cash equivalents at beginning of period | 458,297 | 298,757 | 405,692 | 221,873 | |||||||||||||
| Translation adjustments on cash and cash equivalents | (2,974 | ) | 12,888 | (27,416 | ) | 29,096 | |||||||||||
| Cash and cash equivalents at end of the period | $ | 585,077 | $ | 405,692 | $ | 585,077 | $ | 405,692 | |||||||||
CCL Industries Inc.
Segment Information
Unaudited
In thousands of Canadian dollars
| Three Months Ended December 31 | Twelve Months Ended December 31 | |||||||||||||||||||||||||||
| Sales | Operating income | Sales | Operating income | |||||||||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||
| Label | $ | 631,794 | $ | 553,093 | $ | 90,686 | $ | 81,847 | $ | 2,497,592 | $ | 2,030,322 | $ | 378,028 | $ | 317,252 | ||||||||||||
| Avery | 180,578 | 191,246 | 35,457 | 34,384 | 787,727 | 782,686 | 166,732 | 152,753 | ||||||||||||||||||||
| Checkpoint | 190,869 | – | 27,369 | – | 458,999 | – | 28,204 | – | ||||||||||||||||||||
| Container | 55,208 | 54,502 | 7,056 | 6,328 | 230,431 | 226,104 | 30,290 | 26,593 | ||||||||||||||||||||
| Total operations | $ | 1,058,449 | $ | 798,841 | 160,568 | $ | 122,559 | $ | 3,974,749 | $ | 3,039,112 | 603,254 | 496,598 | |||||||||||||||
| Corporate expense | (11,027 | ) | (13,456 | ) | (48,183 | ) | (52,266 | ) | ||||||||||||||||||||
| Restructuring and other items | (6,757 | ) | (4,219 | ) | (34,637 | ) | (6,023 | ) | ||||||||||||||||||||
| Earnings in equity accounted investments | 1,279 | 1,614 | 4,528 | 3,477 | ||||||||||||||||||||||||
| Finance cost | (13,719 | ) | (7,700 | ) | (41,772 | ) | (28,172 | ) | ||||||||||||||||||||
| Finance income | 1,494 | 925 | 3,853 | 2,535 | ||||||||||||||||||||||||
| Income tax expense | (33,507 | ) | (27,853 | ) | (140,734 | ) | (121,071 | ) | ||||||||||||||||||||
| Net earnings | $ | 98,331 | $ | 71,870 | $ | 346,309 | $ | 295,078 | ||||||||||||||||||||
| Total assets | Total liabilities | Depreciation and amortization | Capital expenditures | |||||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||
| Label | $ | 2,451,904 | $ | 2,285,169 | $ | 639,546 | $ | 596,902 | $ | 152,603 | $ | 132,796 | $ | 194,754 | $ | 145,974 | ||||||||
| Avery | 566,569 | 615,893 | 201,274 | 230,293 | 16,105 | 15,123 | 16,229 | 13,765 | ||||||||||||||||
| Checkpoint | 935,802 | – | 441,817 | – | 18,702 | – | 5,892 | – | ||||||||||||||||
| Container | 156,114 | 173,688 | 42,266 | 50,929 | 15,305 | 15,191 | 17,788 | 12,475 | ||||||||||||||||
| Equity accounted investments | 64,057 | 61,502 | – | – | – | – | – | – | ||||||||||||||||
| Corporate | 504,395 | 446,053 | 1,578,738 | 1,082,303 | 977 | 971 | – | – | ||||||||||||||||
| Total | $ | 4,678,841 | $ | 3,582,305 | $ | 2,903,641 | $ | 1,960,427 | $ | 203,692 | $ | 164,081 | $ | 234,663 | $ | 172,214 | ||||||||
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, non-cash acquisition accounting adjustments to finished goods inventory, 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 December 31 | Twelve months ended December 31 | |||||||||||||||
| Sales | 2016 | 2015 | 2016 | 2015 | ||||||||||||
| Label | $ | 631.8 | $ | 553.1 | $ | 2,497.6 | $ | 2,030.3 | ||||||||
| Avery | 180.5 | 191.2 | 787.7 | 782.7 | ||||||||||||
| Checkpoint | 190.9 | – | 459.0 | – | ||||||||||||
| Container | 55.2 | 54.5 | 230.4 | 226.1 | ||||||||||||
| Total sales | $ | 1,058.4 | $ | 798.8 | $ | 3,974.7 | $ | 3,039.1 | ||||||||
| Operating income | ||||||||||||||||
| Label | $ | 90.7 | $ | 81.9 | $ | 378.0 | $ | 317.2 | ||||||||
| Avery | 35.5 | 34.4 | 166.8 | 152.8 | ||||||||||||
| Checkpoint | 27.3 | – | 28.2 | – | ||||||||||||
| Container | 7.1 | 6.3 | 30.3 | 26.6 | ||||||||||||
| Total operating income | 160.6 | 122.6 | 603.3 | 496.6 | ||||||||||||
| Less: Corporate expenses | (11.0 | ) | (13.5 | ) | (48.2 | ) | (52.3 | ) | ||||||||
| Add: Depreciation & amortization | 54.7 | 44.1 | 203.7 | 164.1 | ||||||||||||
| Add: Non-cash acquisition accounting adjustment to finished goods inventory | – | – | 33.9 | – | ||||||||||||
| EBITDA | $ | 204.3 | $ | 153.2 | $ | 792.7 | $ | 608.4 | ||||||||
(3) Adjusted basic earnings per Class B share is an important non-IFRS 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-IFRS financial measure is defined as basic net earnings per Class B share excluding gains on business dispositions, goodwill impairment loss, non-cash acquisition accounting adjustments to finished goods inventory, 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 December 31 | Twelve months ended December 31 | |||||||
| 2016 | 2015 | 2016 | 2015 | |||||
| Basic earnings per Class B Share | $2.80 | $2.05 | $9.90 | $8.50 | ||||
| Net loss from restructuring and other items | 0.18 | 0.11 | 0.79 | 0.11 | ||||
| Non-cash acquisition accounting adjustment related to finished goods inventory | – | – | 0.72 | – | ||||
| Adjusted Basic Earnings per Class B Share | $2.98 | $2.16 | $11.41 | $8.61 | ||||
(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.
| For the years ended December 31 | 2016 | 2015 | ||||||
| Unaudited | ||||||||
| (In millions of Canadian dollars) | ||||||||
| Current debt | $ | 4.2 | $ | 167.1 | ||||
| Long-term debt | 1,597.1 | 838.4 | ||||||
| Total debt | $ | 1,601.3 | $ | 1,005.5 | ||||
| Cash and cash equivalents | (585.1 | ) | (405.7 | ) | ||||
| Net debt | $ | 1,016.2 | $ | 599.8 | ||||
| EBITDA for 12 months ending December 31, | $ | 792.7 | $ | 608.4 | ||||
| Leverage Ratio | 1.28 | 0.99 | ||||||
Supplemental Financial Information
Sales Change Analysis
| Revenue Growth Rates (%) | ||||||||
| Three Months Ended December 31, 2016 | Twelve Months Ended December 31, 2016 | |||||||
| Organic | Acquisition | FX | Organic | Acquisition | FX | |||
| Growth | Growth | Translation | Total | Growth | Growth | Translation | Total | |
| Label | 6.9% | 9.4% | (2.1%) | 14.2% | 7.2% | 14.7% | 1.1% | 23.0% |
| Avery | (4.8%) | 0.7% | (1.5%) | (5.6%) | (4.1%) | 2.2% | 2.5% | 0.6% |
| Checkpoint | 0.0% | 100% | 0.0% | 100% | 0.0% | 100% | 0.0% | 100% |
| Container | 5.5% | 0.0% | (4.2%) | 1.3% | 3.4% | 0.0% | (1.5%) | 1.9% |
| CCL | 4.0% | 30.6% | (2.1%) | 32.5% | 4.0% | 25.5% | 1.3% | 30.8% |
Business Description
CCL Industries employs almost 19,000 people operating 146 production facilities in 35 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 and chemicals, consumer durable, electronic device and automotive markets. Extruded and laminated plastic tubes, folded instructional leaflets, precision decorated and 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. Checkpoint is a leading manufacturer of technology-driven, loss prevention, inventory management and labeling solutions, including RF and RFID-based, to the retail and apparel industry. 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 four business segments.
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