Stock Symbol: TSX - CCL.A and CCL.NV.B
TORONTO, May 5 /CNW/ -
May 5, 2005
Dear Shareholder:
Please find enclosed the First Quarter 2005 financial results for CCL
Industries Inc. and the related public disclosures. This shareholder
package provides detailed information about your Company's latest
business activities and financial performance.
Under the leadership of Donald Lang over the last five years, CCL has
taken a number of steps to focus the Company on businesses that provide
long-term sustainable growth. This strategy has seen us invest in new
equipment, expand internationally through accretive acquisitions and
divest non-core operations. The announcement on April 20th of the sale of
our North American Custom Manufacturing business is the watershed
transaction in the strategic realignment of CCL.
The decision to sell the Custom Manufacturing business in North America
was very difficult. This was the original business founded in 1951 by
Gordon Lang and has had a long and successful history with CCL. But we
believe that there are more opportunities to increase shareholder value
by focusing CCL as a specialty packaging company consisting of aluminum
containers, plastic packaging and the pressure sensitive label business
and our joint venture with ColepCCL in Europe. The proceeds from this
sale will strengthen our balance sheet and allow CCL to expand these
businesses more quickly as opportunities arise. On behalf of the Board of
Directors, we would like to thank the employees of CCL Custom
Manufacturing for their contribution and achievements over the years and
wish them all the best in the future.
The Board of Directors continues to be very pleased with your Company's
financial progress through the first quarter. These record quarterly
results provide further support for the plan to continue to invest in the
specialty packaging sector.
Your Board of Directors is pleased to approve a quarterly dividend
payable on June 30, 2005. This dividend will be payable at the same level
as the prior quarter and continues CCL's record of paying consecutive
quarterly dividends for over 20 years without a reduction. The dividend
is $0.10 per Class B non-voting share and $0.0875 per Class A voting
share.
Conference calls with our stakeholders are always held following the
release of our quarterly results. These calls are made to ensure that all
stakeholders can gain further insight into our business in keeping with
good corporate governance practices. Presentation material used during
the conference calls is posted on our web site and an audio recording of
the calls is also available. Instructions for accessing these services
are set out at the end of this earnings release.
We encourage all shareholders to access our web site www.cclind.com on a
regular basis for investor and company news including scheduled dates for
future earnings releases. If you would like to have future Press Releases
e-mailed to you at the time they are issued, please complete the
Information Request Form under the Investor Relations Section on our Web
Site or write to us at CCL to the attention of Christene Duncan.
Yours truly,
Jon K. Grant
Chairman of the Board
Investor Update
---------------
1. First Quarter 2005 Results and Dividend Release
2. Consolidated Statements of Earnings and Retained Earnings
3. Consolidated Balance Sheets
4. Consolidated Statements of Cash Flows
5. Notes to Consolidated Financial Statements
6. First Quarter 2005 Management's Discussion and Analysis
7. Press Release re: Molson Kick - March 17, 2005
8. Press Release re: North American Custom Manufacturing disposal -
April 20, 2005
<<
CCL Releases Record First Quarter Results and Declares Dividend
Results Summary
---------------
For First Quarters
(in millions of Cdn dollars Ended March 31st
--------------------------- --------------------------------
except per share data) 2005 2004 % Change
----------------------- ------ ------ ----------
Sales $ 429.5 $ 390.1 10.1
---------- ----------
---------- ----------
Net earnings $ 19.7 $ 14.8 33.1
---------- ----------
---------- ----------
Per Class B share
Net earnings $ 0.61 $ 0.46 32.6
---------- ----------
---------- ----------
Diluted earnings $ 0.60 $ 0.45 33.3
---------- ----------
---------- ----------
Number of shares outstanding (in 000s)
Weighted average for the period 32,348 32,238 0.3
---------- ----------
---------- ----------
Actual at period-end 32,569 32,423
---------- ----------
---------- ----------
Toronto, May 5, 2005 - CCL Industries Inc., a world leader in developing
manufacturing, packaging and labelling solutions for the consumer products
industry, announced today its financial results for the first quarter ended
March 31, 2005 and the declaration of its quarterly dividend.
Sales for the first quarter of 2005 of $429.5 million were 10% ahead of
the $390.1 million recorded in 2004. Financial comparisons to the prior year's
results have continued to be affected by the appreciation of the Canadian
dollar relative to the U.S. dollar and, now, to the Euro. In addition,
business acquisitions net of dispositions have impacted the comparison to
prior periods. Excluding the effect of changing foreign rates and
divestitures, sales increased 16% for the quarter due to overall sales growth
and acquisitions.
Net earnings for the first quarter of 2005 of $19.7 million were up 33%
from the $14.8 million recorded in the first quarter of 2004. There were no
unusual items in the first quarter of either year.
Earnings per Class B share were $0.61 in the first quarter of 2005
compared to the $0.46 earned in the same period last year, an increase of 33%.
Diluted earnings per Class B share were $0.01 lower than the basic earnings
for the quarter in both the current and prior year.
The United States dollar, the base currency for over 50% of CCL's total
sales, has depreciated by 7% against the Canadian dollar in the first quarter
of 2005 versus the comparable period last year. In addition, European exchange
rates have also weakened by 2% versus the Canadian dollar. This has had two
effects on earnings: first, the impact of currency translation on reported
results for all currencies reduced comparative earnings by $0.03 per share in
the first quarter; secondly, the Company's Canadian plants hedged the majority
of their sales to U.S. customers by selling U.S. dollars at higher exchange
rates in 2004. Since the U.S. dollar has weakened, the change in exchange
rates has reduced comparative earnings by an additional $0.03 per share due to
these currency transactions.
Donald G. Lang, President and Chief Executive Officer said, "We are very
pleased with the overall performance of all of our businesses. The significant
growth in earnings in the last two quarters has been achieved despite the
continued negative effect of currency changes on our results. Our announcement
last month to sell the North American Custom Manufacturing business for
$265 million will leave a short-term gap in our earnings. However, it is
gratifying to see the progress that has been made in our specialty packaging
businesses, which provides further evidence that our strategy to focus on
these growing areas is sound."
Mr. Lang continued, "Our Container Division is continuing to experience
strong sales and income growth on the aluminum side even as we ramp up new
production capacity to meet our customers' expectations. The Plastic Packaging
unit of the Container Division has doubled its income over the first quarter
of last year as the new management has improved the operating performance of
the business and its credibility with customers. We continue to be impressed
with the management and the financial results of our ColepCCL joint venture in
Europe as it continues to perform ahead of expectations since its formation in
July 2004. Our Label Division's results were robust with sales growth due to
both the Steinbeis acquisition and strong personal care markets in North
America, particularly in Mexico and operating income growth of 18%. The North
American Custom Manufacturing business, as expected, continued to show good
volume growth above last year's weak first quarter and a modest improvement in
profitability."
"The sale of our North American Custom Manufacturing business is the
culminating event in the five-year journey to reposition CCL as a focused
international player in growing specialty packaging markets."
Mr. Lang concluded, "Our outlook for 2005 is positive as customer demand
continues to remain buoyant and we anticipate earnings before unusual items to
exceed the results of 2004. I am pleased to inform you that your Board of
Directors has declared the payment of a dividend of $0.0875 on the Class A
Voting shares and $0.10 on the Class B non-voting shares payable June 30, 2005
to shareholders of record at the close of business on June 16, 2005. CCL
continues to extend its record of quarterly dividends for over 20 years
without a reduction in payout."
The Company's financial position is in good condition. At the end of the
first quarter, cash and cash equivalents were $47.2 million. Net debt amounted
to $445 million at March 31, 2005, $90 million higher than the $355 million at
year-end 2004 and $78 million higher than the $367 million a year ago. The
increase in net debt since December 31, 2004 is primarily due to the Steinbeis
acquisition and the seasonal working capital increase. Net debt to total
capitalization at the end of first quarter 2005 was 48.9%, up from 45.9% a
year ago. Book value per share was $14.31 at the end of the first quarter of
2005, up 7% from the $13.42 recorded a year earlier.
CCL Industries Inc. (TSX CCL.A and CCL.NV.B) provides state-of-the-art
packaging solutions, including specialty aluminum and plastic packaging and
innovative product labelling, to some of the world's largest producers of
consumer brands, helping them to get their products to market quickly and
cost-effectively. CCL develops solutions for producers of leading consumer
brands in personal care, cosmetic, pharmaceutical, household and specialty
food and beverage products. Container is North America's leading manufacturer
of recyclable aluminum packaging for the beverage, food, personal care,
pharmaceutical and household markets. With headquarters in Toronto, Canada,
CCL directly employs 6,100 people and directly operates 42 production
facilities in North America, Europe and Asia.
"Statements contained in this Press Release, other than statements of
historical facts, are forward-looking statements subject to a number of
risks and uncertainties that could cause actual events or results to
differ materially from statements made. These risks and uncertainties are
detailed from time to time in CCL's public disclosure documents or other
filings with securities regulatory bodies. These forward-looking
statements are made as of the date hereof and CCL disclaims any intention
and has no obligation or responsibility, except as required by law, to
update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise."
Note: CCL will hold a conference call at 10:00 a.m. EST on Friday,
----- May 6, 2005 to discuss these results.
To access this call, please dial Toll-Free North America -
1-800-633-8692 or Domestic and International - 416-641-6703.
Post-View service will be available from Friday, May 6, 2005 at
12:00 p.m. EST until Monday, June 6, 2005 at 11:59 p.m. EST.
Dial: Toll-Free North America - 1-800-558-5253 or Domestic and
International - 416-626-4100; Access Code: 21242967.
For more details on CCL, visit our web site - www.cclind.com.
Financial Tables follow ...
CCL INDUSTRIES INC.
2005 First Quarter
Consolidated Statements of Earnings and Retained Earnings
Unaudited First quarters ended March 31st
-------------------------------------------------------------------------
(in millions of Cdn dollars, 2005 2004 % Change
except per share data) ------ ------ ----------
Sales $ 429.5 $ 390.1 10.1
--------------------------------
Income before undernoted items 52.9 43.3 22.2
Depreciation and amortization 18.9 16.9
Interest expense, net 6.0 5.3
--------------------------------
Earnings before income taxes 28.0 21.1 32.7
Income taxes 8.3 6.3
--------------------------------
Net earnings 19.7 14.8 33.1
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-------------------------------------------------------------------------
Retained earnings, beginning of period 272.7 227.1
Net earnings 19.7 14.8
--------------------------------
292.4 241.9
Less dividends:
Class A shares 0.2 0.2
Class B shares 3.0 2.7
--------------------------------
3.2 2.9
--------------------------------
Retained earnings, end of period $ 289.2 $ 239.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per share
Class B $ 0.61 $ 0.46 32.6
Class A $ 0.60 $ 0.45 33.3
-------------------------------------------------------------------------
Diluted earnings per share
Class B $ 0.60 $ 0.45 33.3
Class A $ 0.59 $ 0.44 34.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See notes to interim consolidated financial statements.
CCL INDUSTRIES INC.
2005 First Quarter
Consolidated Balance Sheets
December
Unaudited March 31st March 31st 31st
-------------------------------------------------------------------------
(in millions of Cdn dollars) 2005 2004 2004
---------- ---------- ----------
Assets
Current assets
Cash and cash equivalents $ 47.2 $ 60.2 $ 71.4
Accounts receivable - trade 236.1 197.7 194.3
Other receivables and prepaid
expenses 36.6 27.0 29.5
Inventories 152.1 115.0 125.3
--------------------------------
472.0 399.9 420.5
Capital assets 540.7 454.1 471.8
Other assets 38.7 39.3 38.8
Intangible assets 38.9 18.7 27.5
Goodwill 321.6 299.8 315.5
-------------------------------------------------------------------------
Total assets $1,411.9 $1,211.8 $1,274.1
-------------------------------------------------------------------------
Liabilities
Current liabilities
Bank advances $ 73.2 $ 5.0 $ 39.4
Accounts payable and accrued
liabilities 310.1 241.3 271.4
Income and other taxes payable 10.5 5.7 8.1
Current portion of long-term debt 163.7 14.9 19.3
--------------------------------
557.5 266.9 338.2
Long-term debt 255.3 407.7 367.7
Other long-term items 44.2 34.5 32.3
Future income taxes 90.5 69.3 86.9
-------------------------------------------------------------------------
Total liabilities 947.5 778.4 825.1
-------------------------------------------------------------------------
Shareholders' equity
Share capital (note 2) 191.1 188.8 189.8
Executive share purchase plan loans (1.8) (1.8) (1.8)
Contributed surplus 0.3 0.1 0.2
Retained earnings 289.2 239.0 272.7
Foreign currency translation adjustment (14.4) 7.3 (11.9)
-------------------------------------------------------------------------
Total shareholders' equity 464.4 433.4 449.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total liabilities and shareholders'
equity $1,411.9 $1,211.8 $1,274.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See notes to interim consolidated financial statements.
Certain 2004 figures have been restated for comparative purposes.
CCL INDUSTRIES INC.
2005 First Quarter
Consolidated Statements of Cash Flows
First quarters ended
Unaudited March 31st
-------------------------------------------------------------------------
(in millions of Cdn dollars) 2005 2004
---------- ----------
Cash provided by (used for)
Operating activities
Net earnings $ 19.7 $ 14.8
Items not requiring cash:
Depreciation and amortization 18.9 16.9
Stock-based compensation 0.1 0.1
Future income taxes 3.3 1.8
-----------------------------------------------------------------------
42.0 33.6
Net change in non-cash working capital (24.5) (24.9)
-----------------------------------------------------------------------
Cash provided by operating activities 17.5 8.7
-------------------------------------------------------------------------
Financing activities
Proceeds and issuance of long-term debt 32.3 -
Retirement of long-term debt (1.7) (1.4)
Increase (decrease) in bank advances 35.1 (2.6)
Issue of shares 1.3 0.7
Dividends (3.2) (2.9)
-----------------------------------------------------------------------
Cash provided by (used for) financing activities 63.8 (6.2)
-------------------------------------------------------------------------
Investing activities
Additions to capital assets (44.1) (23.3)
Business acquisitions (note 3) (63.8) -
Other 2.9 (1.3)
-----------------------------------------------------------------------
Cash used for investing activities (105.0) (24.6)
-------------------------------------------------------------------------
Effect of exchange rate changes on cash (0.5) 0.5
-------------------------------------------------------------------------
Decrease in cash (24.2) (21.6)
Cash and cash equivalents at beginning of period 71.4 81.8
-------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 47.2 $ 60.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash and cash equivalents are defined as cash and short-term investments.
See notes to interim consolidated financial statements.
CCL INDUSTRIES INC.
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED MARCH 31, 2005 AND 2004
(Tabular amounts in millions of Cdn dollars except share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The disclosures contained in these unaudited interim consolidated
financial statements do not include all of the requirements of
generally accepted accounting principles for annual financial
statements. The unaudited interim consolidated financial statements
should be read in conjunction with the annual consolidated financial
statements for the year ended December 31, 2004.
The unaudited interim consolidated financial statements are based
upon accounting principles consistent with those used and described
in the annual consolidated statements, except that: starting
January 1, 2005, the Company adopted the Canadian Institute of
Chartered Accountants ("CICA") amendments to Emerging Issues
Committee (EIC) - 144, "Accounting by a Customer (Including a
Reseller) for Certain Consideration Received from a Vendor" related
to recording of vendor rebates by a purchaser. The Committee reached
a consensus that the customer should measure the rebate based on the
estimated amount of the rebate that is expected to be received for
the underlying transactions that have occurred and that result in
progress by the customer toward achieving the specified requirement
to receive the rebate. This change to EIC - 144 did not have a
material impact on the Company.
Accounting Guideline - 15, "Consolidation of Variable Interest
Entities", is effective for periods beginning on or after November 1,
2004. The Guideline did not have any effect on the Company as it is
not party to any variable interest entities.
Comparative figures have been reclassified where necessary to
correspond with the current period's presentation.
2. SHARE CAPITAL
Issued and outstanding
Actual number of shares:
March 31, March 31, December 31,
2005 2004 2004
------------ ------------ ------------
Class A 2,439,187 2,442,424 2,439,187
Class B 30,130,256 29,980,819 30,021,756
Less: Executive Share
Purchase Plan shares (150,000) (150,000) (150,000)
--------------------------------------
Total 32,419,443 32,273,243 32,310,943
--------------------------------------
--------------------------------------
March 31, March 31, December 31,
2005 2004 2004
------------ ------------ ------------
Year-to-date weighted average
number of shares 32,348,460 32,238,010 32,290,097
--------------------------------------
--------------------------------------
Year-to-date weighted average
diluted number of shares 33,177,107 32,854,203 32,848,536
--------------------------------------
--------------------------------------
3. ACQUISITIONS
On January 31, 2005, the Company purchased Steinbeis Packaging based
in Holzkirchen, Germany, for $63.8 million, net of cash acquired. The
purchase price was financed by cash on hand and bridge bank financing
denominated in Euros. In addition, the Company intends to exercise
its option to purchase the Holzkirchen building and land right for
4.0 million Euros in January 2006. Steinbeis Packaging, through its
plants in the U.S., France, Germany and China, supplies battery
labels on a global basis and provides premium decorative label
solutions for the European consumer products market. The Company is
reviewing the valuation of the net assets acquired, including
intangible assets, therefore, certain items disclosed below may
change when the review is completed in the second quarter of 2005.
Details of the transaction are as follows:
Current assets $ 34.8
Current liabilities (25.8)
Non-current assets at assigned values 45.6
Long-term liabilities (9.8)
Goodwill and intangible assets 19.0
----------
Net assets purchased $ 63.8
----------
----------
Total consideration:
Cash, less cash acquired $4.7 million $ 63.8
----------
----------
4. EMPLOYEE FUTURE BENEFITS
The expense for the defined benefit plans in the first quarter is
$0.4 million (2004 - $0.2 million).
5. SEGMENTED INFORMATION
Industry segments
First quarters ended March 31st
---------------------------------------------------------------------
Sales Operating income
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Custom Manufacturing $ 215.1 $ 203.3 $ 11.8 $ 8.5
Container 57.1 50.2 6.2 4.0
Label 157.3 136.6 19.1 16.2
-------------------------------------------
Total operations $ 429.5 $ 390.1 37.1 28.7
---------------------
Corporate expense (3.1) (2.3)
---------------------
34.0 26.4
Interest expense, net 6.0 5.3
---------------------
Earnings before income
taxes 28.0 21.1
Income taxes 8.3 6.3
---------------------
Net earnings $ 19.7 $ 14.8
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Identifiable Assets Goodwill
--------------------- ---------------------
December December
March 31st 31st March 31st 31st
---------- ---------- ---------- ----------
2005 2004 2005 2004
------ ------ ------ ------
Custom Manufacturing $ 422.5 $ 411.9 $ 65.9 $ 65.9
Container 274.1 261.7 51.8 51.5
Label 643.7 512.6 203.9 198.1
Corporate 71.6 87.9 - -
-------------------------------------------
Total $1,411.9 $1,274.1 $ 321.6 $ 315.5
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Depreciation &
Amortization Capital Expenditures
--------------------- ---------------------
First quarters ended First quarters ended
March 31st March 31st
--------------------- ---------------------
2005 2004 2005 2004
------ ------ ------ ------
Custom Manufacturing $ 5.5 $ 4.9 $ 3.2 $ 4.2
Container 4.2 4.3 7.3 12.1
Label 9.0 7.4 33.6 6.8
Corporate 0.2 0.3 - 0.2
-------------------------------------------
Total $ 18.9 $ 16.9 $ 44.1 $ 23.3
---------------------------------------------------------------------
---------------------------------------------------------------------
6. Subsequent event
In April 2005, the Company announced it had agreed to sell its North
American Custom Manufacturing Division, for US$215 million
(approximately $265 million) in cash, to KCP Income Fund, a Toronto
based contract manufacturer of private label household products. The
net book value of the disposed assets are approximately
US$104 million ($126 million). The sale will be completed in the
second quarter of this year pending regulatory approval and other
typical conditions on a transactions of this nature. The disposition
will be reported as discontinued operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS
First Quarters ended March 31, 2005 and 2004
This document has been prepared for the purpose of providing Management's
Discussion and Analysis (MD&A) of the financial condition and results of
operations for the first quarters ended March 31, 2005 and 2004 and an update
to the 2004 Annual MD&A document. The information in this interim MD&A is
current to May 5, 2005 and should be read in conjunction with the Company's
March 31, 2005 unaudited first quarter financial statements released on May 5,
2005 and the 2004 Annual MD&A document, which forms part of the CCL INDUSTRIES
INC. 2004 Annual Report, dated February 10, 2005.
The financial statements have been prepared in accordance with Canadian
generally accepted accounting principles and in accordance with the
requirements of section 1751 of the CICA Handbook. Unless otherwise noted,
both these financial statements and this interim MD&A are expressed in
Canadian dollars as the reporting currency. The measurement currencies of
CCL's operations are primarily the Canadian dollar, the U.S. dollar, the Euro,
the Danish krone, the U.K. pounds sterling, the Mexican peso, the Thailand
baht and the Chinese renminbi. CCL's Audit Committee and its Board of
Directors have reviewed this interim MD&A to ensure consistency with the
approved strategy of the Company.
Management's Discussion and Analysis contains forward-looking statements,
including statements concerning possible or assumed future results of
operations of the Company. Forward-looking statements typically are preceded
by, followed by or include the words "believes", "expects", "anticipates",
"estimates", "intends", "plans" or similar expressions. Forward-looking
statements are not guarantees of future performance. They involve risks,
uncertainties and assumptions, including, but not limited to: the impact of
competition; consumer confidence and spending preferences; general economic
conditions; currency exchange rates; and CCL's ability to attract and retain
qualified employees and, as such, the Company's results could differ
materially from those anticipated in these forward-looking statements.
Overview of Business Conditions
-------------------------------
The markets in which CCL operates have continued to be surprisingly
strong in the first quarter of 2005 despite the impact of much higher energy
and commodity costs. In addition, short-term interest rates in the United
States have been systematically increasing as the Federal Reserve has been
attempting to soften the potential impact of excessive inflation and the
devaluation of the U.S. dollar. Worldwide demand for commodities continues to
be affected by China's fast growing economy and has resulted in shortages and
large cost increases for raw materials in many industries. The growth in
consumer non-durable products sales in the western world is reflective of the
continuation of the consumer to spend even in the face of higher energy costs.
Many of CCL's international marketing customers in the personal care
industry have been continuing to benefit from higher sales volumes than last
year, particularly in a number of specific product categories. Our
pharmaceutical customers are generally experiencing modest growth. Overall,
customer demand for CCL's products appears to be firm into the second quarter
of 2005.
The demand for new and existing products in CCL's aluminum container
business continues to surpass our current ability to supply even after the
addition of meaningful new capacity in the last two years. The Plastic
Packaging segment of the Container Division continues to show a steady
turnaround in sales volumes and profitability. The Custom Manufacturing
Division in North America continues to attract and run new volumes in our
facilities to replace volume lost in 2003 due, primarily, to competitive
activity and has experienced significant volume growth in both aerosol and
liquid filling compared to the same period a year ago. The Label business
continues to enjoy good volume growth as customers are expanding product lines
and realizing the benefits of our international network as they roll out
products on a worldwide basis. Further details on divisional volume trends can
be found later in this report.
CCL announced on April 20, 2005, the sale of the North American Custom
Manufacturing business with closing anticipated on May 17, 2005. This
transaction will significantly change CCL's business profile and financial
position. Further information on this disposition is disclosed later in this
report under the Subsequent Event section.
Review of Consolidated Operations
---------------------------------
Sales for the first quarter of 2005 of $429.5 million were 10% ahead of
the $390.1 million recorded in 2004. Financial comparisons to the 2004 results
have continued to be negatively affected by the appreciation of the Canadian
dollar relative to the U.S. dollar and, now, also to the Euro. In addition,
business acquisitions net of dispositions have impacted the comparison to
prior periods. Excluding the effect of changing foreign currency translation
rates and business dispositions, sales increased by 16% for the quarter due to
overall sales growth and acquisitions. On a comparative volume basis, sales
increased in the quarter in the Custom Manufacturing Division, the Label
Division, the Aluminum Container business and ColepCCL. The volume of Plastic
Packaging unit of the Container Division was slightly below a year ago but
better than any of the last three quarters continuing the improvement trend.
On July 12, 2004, CCL completed the merger of its European Custom
Manufacturing operations with COLEP Europe to create the largest contract
manufacturing company in Europe of personal care, cosmetic and over-the-
counter medication and household care products. COLEP contributed its four
contract manufacturing plants including its metal packaging business to the
joint venture and CCL contributed its two European plants and approximately
Cdn $24 million to acquire a 40% investment in the joint venture named
ColepCCL. CCL is proportionately consolidating its interest in the joint
venture.
Also in July 2004, the Label Division acquired Graphiques Apex Inc.
located in Boucherville, QuDebec and divested its non-core Winnipeg label
business.
On January 31, 2005, CCL acquired Steinbeis Packaging, based in
Holzkirchen, Germany for approximately Cdn $64 million. Steinbeis supplies
battery labels on a global basis and produces premium decorative label
solutions for the European consumer products market.
All of the above affected financial comparisons in this quarter to the
first quarter of 2004.
Net earnings for the first quarter of 2005 of $19.7 million were up 33%
from the $14.8 million recorded in the first quarter of 2004. There were no
unusual items in the first quarter of either year. Operating income improved
from last year's first quarter due to a substantially stronger performance in
the Label Division, the Container Division (in both the aluminum and the
plastic packaging segments), modest growth in the North American Custom
Manufacturing business and higher income from the new ColepCCL joint venture
than our former European Custom Manufacturing business in 2004. These
improvements in operating income were partly offset by the negative effect of
the lower value of the U.S. dollar and the Euro relative to the Canadian
dollar, additional interest expense due to the acquisition debt and higher
corporate costs.
Earnings per Class B share were $0.61 in the first quarter of 2005
compared to the $0.46 earned in the same period last year, an increase of 33%.
Unusual items had no effect on either year. Management will continue to
disclose the impact of unusual items on its results because the timing and
extent of such items do not reflect or relate to the Company's ongoing
operating performance. Management evaluates the operating income of its
divisions before the effect of unusual items. Diluted earnings per Class B
share were $0.01 lower than the basic earnings for the quarter in both the
current and prior year.
The following is selected financial information for the nine most
recently completed quarters:
(in millions of Canadian dollars, except per share amounts)
-----------------------------------------------------------
Qtr 1 Qtr 2 Qtr 3 Qtr 4 Total
--------- --------- --------- --------- ---------
Sales
2005 429.5
2004 390.1 377.4 378.3 372.7 1,518.5
2003 426.8 390.4 354.5 346.7 1,518.4
Net earnings
2005 19.7
2004 14.8 11.9 18.6 13.9 59.2
2003 14.1 14.7 6.8 17.4 53.0
-------------------------------------------------------------------------
Net earnings per
Class B share
Basic
2005 0.61
2004 0.46 0.37 0.58 0.43 1.84
2003 0.43 0.46 0.21 0.54 1.64
Diluted
2005 0.60
2004 0.45 0.36 0.57 0.43 1.81
2003 0.42 0.45 0.21 0.53 1.61
-------------------------------------------------------------------------
Approximately 80% of CCL's sales are generated in foreign currencies and
are then translated into Canadian dollars for reporting purposes. Since
January 2003, the U.S. dollar, in particular, has depreciated over 20% against
the Canadian dollar. The United States dollar is the functional currency for
over 50% of CCL's total sales and it has depreciated on average by 7% compared
to the Canadian dollar in the first quarter 2005 versus last year's first
quarter. In addition, the Euro exchange rate has also weakened by 2% versus
the Canadian dollar. Changes in foreign exchange rates, primarily the
depreciation of the U.S. dollar, have reduced earnings per share due to
currency translation by $0.03 in the first quarter compared to 2004.
Additionally, CCL has a hedging program to lock in a portion of its
expected U.S. dollar revenues earned in Canada. These hedge transactions were
at an average rate of $1.34 for the first quarter of 2004 but, due to the
decline in the U.S. dollar over the last year, the average rate on the 2005
hedges was $1.27. The change in the rates on these currency transactions
reduced comparative income by $1.1 million in the first quarter of 2005 and
reduced comparative earnings per share by $0.03 for the quarter.
Net interest expense was $6.0 million for the first quarter of 2005, up
from $5.3 million from the comparable period last year. Higher net debt due
primarily to acquisitions and higher floating interest rates account for the
increase. The depreciation of the U.S. dollar has had the effect of reducing
reported interest expense as CCL's borrowings are primarily denominated in
U.S. dollars in the form of private placements from U.S. institutional
investors. Net interest expense is net of interest earned on both short-term
investments and interest rate swaps. The Interest Rate Swap Agreements
("IRSA") have had the effect of converting U.S. dollar fixed rate debt into
U.S. dollar floating rate debt. The Company is also amortizing a gain realized
on the sale of an IRSA in 2001.
The unrealized loss on these agreements as at March 31, 2005 amounted to
approximately $1.0 million. The effect of these four IRSAs has been to reduce
interest expense by $1.0 million in the first quarter of 2005 compared to a
reduction of $1.8 million in the first quarter of 2004. Interest coverage
(defined as operating income before unusual items and net interest expense
divided by net interest expense calculated on a 12-month rolling basis)
improved to 4.9 times in 2005 compared to 4.5 times in 2004.
The income tax rate was approximately 30% in the first quarter of this
year compared to 30% in last year's first quarter. This effective tax rate is
lower than the combined Canadian federal and provincial tax rates of 34.2% for
the year 2005 due to the benefit of lower tax rates in foreign subsidiaries
net of income and expense items not subject to tax expense or tax recovery.
The Company's financial position is in good condition. At the end of
March 31, 2005, cash and cash equivalents amounted to $47.2 million compared
to $60.2 million as at March 31, 2004 and $71.4 million at December 31, 2004.
The major cash expenditure in the first quarter was the acquisition of
Steinbeis Packaging for approximately $64 million. As is usual in CCL's
business, working capital increased in its traditional seasonal pattern in the
first quarter of both 2005 and 2004 after the typically lower levels at the
end of each year. Net debt amounted to $445 million at March 31, 2005,
$90 million higher than the net debt of $355 million at the end of 2004 and
$78 million higher than the $367 million on March 31, 2004. The increase in
net debt since December 31, 2004 is primarily due to the Steinbeis acquisition
and the seasonal working capital increase. The increase in net debt from a
year ago is due primarily to the Steinbeis acquisition combined with the
$24 million of cash invested in July 2004 to create the ColepCCL joint
venture.
In May 2004, the Company announced its intention to acquire, via a Normal
Course Issuer Bid ("Bid), up to 10,000 Class A voting shares and 1,975,000 of
its issued and outstanding Class B non-voting shares between May 25, 2004 and
May 24, 2005. This Bid represents 0.4% of the Class A and 9.8% of the Class B
public float of the shares of each Class. No repurchases have been made since
the third quarter of 2004. As of today's date, 2,200 Class A shares and 98,500
Class B shares have been acquired under the Bid for a total cost of
$1.7 million at an average price of $17.01 per share.
During the first quarters of 2005 and 2004, the Company generated cash
from operations of $17.5 million and $8.7 million respectively. Working
capital consumed $24.5 million of cash in the first quarter of 2005 versus
$24.9 million in last year's first quarter. In addition, $44.1 million was
spent on capital additions in the first quarter as CCL continues to reinvest
in its businesses to take advantage of current and future expected organic
growth. This level of capital spending was higher than the $23.3 million spent
in 2004 and higher than the $18.9 million of depreciation and amortization in
the first quarter of 2005. Plans for capital spending in 2005 are expected to
be near $100 million as the Company continues to expand its business base into
new markets and invest in assets to improve efficiencies and competitiveness.
Net debt to total capitalization defined as net debt divided by net debt
plus shareholders' equity, at March 31, 2005 was 48.9%, up from the 44.2% at
the end of 2004 and 45.9% a year ago due primarily to the Steinbeis
acquisition. Book value per share defined as shareholders' equity divided by
total period end shares, was $14.31 at the end of the first quarter of 2005,
7% higher than the year ago level of $13.42 and 3% above the $13.89 at year
end 2004. The increase is primarily the result of earnings retained in the
Company.
Discussion of Divisional Business Segments
------------------------------------------
Custom Manufacturing
--------------------
Sales in Custom Manufacturing were $215.1 million in the first quarter of
2005, up 6% from the $203.3 million registered in the same quarter of 2004.
Excluding the effect of foreign currency translation, sales would have been
10% higher in the first quarter versus last year. During the second half of
2003, the Division experienced reduced demand in its personal care markets and
lost certain business due to competitive pricing, which had not been replaced
in the first half of 2004. However, new contracts have been signed with
customers in 2004 and early 2005 and this new business has now more than
replaced the business lost in 2003. In addition, a major customer exited
aerosol filling in the U.S.A. last year and has outsourced a large part of
this business to CCL commencing in early 2005.
The ColepCCL joint venture was created in July 2004. This joint venture
generated sales for CCL's proportionate share in the first quarter of 2005
approximately 5% lower than the comparative sales last year of CCL's two
former European operations. However, the ColepCCL joint venture has a
substantially higher return on sales than the former CCL operations.
Operating income in the first quarter of 2005 for the Division, including
the contribution from ColepCCL, was $11.8 million, up 39% from $8.5 million in
the comparable period of 2004. Excluding the effect of currency translation
and transaction hedging, operating income would have been up by 46% for the
quarter compared to last year.
Income contribution has been positively affected by stronger demand with
unit volume in North America up 15% in the quarter versus last year. However,
income has been impacted by unfavourable product mix, lower profit margins and
the impact of the lower value of the U.S. dollar. The Rexdale, Ontario
operation sells a large part of its production to the United States market and
has generated higher volume in the first quarter despite being negatively
affected competitively by the rising Canadian dollar. During 2004, this
operation hedged its profit margins by selling forward the U.S. dollar into
Canadian dollars at the rate of $1.34, generating additional income. However,
as the U.S. dollar weakened, the forward contracts for 2005 were transacted at
only $1.30, which reduced the Division's income by $0.4 million in the quarter
compared to 2004.
European income for the quarter was more than double last year's level
due to the strong contribution of the ColepCCL joint venture as compared to
the income from the Division's former German and U.K. plants last year. Sales
for ColepCCL in the first quarter of 2005 were $51.3 million and operating
income was $5.5 million. In the first quarter of 2004, the former CCL European
Custom Manufacturing facilities generated sales of $53.9 million and operating
income of $2.6 million.
In order to take advantage of customer and market opportunities, to
reduce operating costs and to maintain existing business, the Division spent
$3.2 million to purchase capital assets in the first quarter of 2005 compared
to $4.2 million in the comparable 2004 period. This compares to first quarter
depreciation and amortization of $5.5 million in 2005 and $4.9 million in
2004.
Container
---------
Sales in the first quarter this year were $57.1 million, up 14% from
$50.2 million last year. If the effect of foreign currency translation were
excluded, sales in the first quarter of 2005 would have increased by 21%
compared to the first quarter of 2004.
The Container Division continues to benefit from the strong demand for
aluminum aerosol containers, the growth in usage of aluminum bottles and other
new applications for this technology. Personal care volume in the aerosol
format continued to be very strong in the quarter as our customers are ramping
up many new products. The beverage business benefited from the new aluminum
beer bottle promoted by Pittsburgh Brewing and now Molson for its Kick
product. Mexican aerosol sales also strengthened in the first quarter compared
to a weak first quarter in 2004. The backlog for aluminum container products
remains very high even as new capacity has been added to meet this demand and
to improve service levels. In the meantime, certain production requirements
are being outsourced to satisfy customer requirements. In the Plastic
Packaging business, sales were flat in the first quarter of last year despite
unfavourable currency translation. The demand for plastic tubes has continued
to show improvement in the first quarter compared to the volumes of each of
the last three quarters of 2004 as new management has improved credibility
with the customer base. Plastic closure sales were somewhat lower than planned
after a weak January but custom moulding sales have been up significantly due
to new outsourced product opportunities from other plastic moulders.
Operating income for the first quarter of 2005 was $6.2 million, up 55%
from the $4.0 million earned in the first quarter of 2004. Excluding the
effect of currency translation and transaction hedging as described below,
operating income would have been up by 77% for the first quarter compared to
last year due to the higher volumes and improved operational performance in
the Aluminum Container business despite the adverse currency impact. In
addition, the operating income of Plastic Packaging was double the prior
year's first quarter level reflecting overhead reductions and improvements in
manufacturing.
The aluminum container plant in Penetanguishene, Ontario sells a large
part of its production to the United States market. During 2004, this
operation hedged its profit margins by selling forward the U.S. dollar into
Canadian dollars at the rate of $1.34. However, as the U.S. dollar has
weakened, the contracts for 2005 were transacted at only $1.23, which further
reduced the Division's comparable income by $0.7 million for the quarter.
The Container Division has invested $7.3 million in capital in the first
quarter of 2005 compared to $12.1 million last year, to maintain and expand
its manufacturing base and reduce its production costs. Depreciation and
amortization amounted to $4.2 million in the first quarter of 2005 compared to
$4.3 million in the first quarter of 2004. The Division has successfully
installed three new aluminum container lines in the last two years and is now
installing a fourth new line which is expected to be operational in early
third quarter 2005. A fifth new line is on order for installation early in
2006 and is destined for the Hermitage, Pennsylvania plant.
Label
-----
Sales for the Label Division of $157.3 million for the first quarter were
up 15% from $136.6 million in the same quarter last year. If the effects of
unfavourable currency translation and the Winnipeg disposition were excluded,
sales would have been up 24% in the first quarter of 2005 compared to the same
period in 2004. Sales growth in the first quarter was predominantly due to the
Steinbeis acquisition but the business also experienced a continuation of the
positive volume trends seen in the fourth quarter of last year. North American
personal care volume was well ahead of last year for the quarter, with major
improvements in Mexico. Specialty products were also much improved over last
year's first quarter in both agchem and promotional labels. The North American
healthcare business recorded sales that were ahead of last year due primarily
to the Graphiques Apex acquisition. European sales were ahead of last year in
healthcare, specialty and food and beverage, and Thailand enjoyed dramatic
growth from last year's start-up position. Sales from the Steinbeis Packaging
battery and personal care business for the two months of ownership were as
expected.
Operating income for the first quarter of 2005 was $19.1 million, up 18%
from $16.2 million in the first quarter of 2004 and return on sales at 12.1%
exceeded internal targets. Excluding the effect of foreign currency
translation and the Winnipeg disposition, operating income in the first
quarter of 2005 would have been up by 29% over last year. This improvement was
driven primarily by improvements in volumes and margins in most of the
Division's operations and the incremental effect of acquisitions completed in
the last three years.
In July 2004, the Division acquired Graphiques Apex Inc. in Boucherville,
QuDebec to expand its healthcare offerings and at the end of January 2005
acquired the German-based Steinbeis Packaging business. Sales and operating
income from these acquisitions in first quarter 2005 amounted to $22.4 million
and $0.9 million respectively. Also, in July 2004, the non-core Winnipeg
business was sold. Sales and operating income for this disposition in the
first quarter of 2004 were $2.4 million and $0.3 million, respectively.
Sales backlogs for the label business are generally short but indications
are that customers' orders will be reasonably firm for the second quarter of
2005. However, it is important to note that there is now much more seasonality
in the overall label business with the first and fourth quarters being
generally stronger than the second and third quarters. This seasonality is due
to the slowdown because of summer vacations in Europe, strong agchem label
production before the spring planting season, and then increased battery label
production in the late summer and fall for the Christmas season.
CCL acquired the Steinbeis Packaging business on January 31, 2005 for
approximately $64 million in cash. The transaction was paid for with cash on
hand and a bridge bank line of credit. Steinbeis Packaging, based in Germany,
supplies battery labels on a global basis and provides premium product
decorating solutions for the European consumer products market. Steinbeis'
plants are located in Germany, France, the United States and China and
complement CCL's existing plants.
The Label Division invested $33.6 million in capital in 2005 compared to
$6.8 million in the same period last year. The capital was spent throughout
the Division to maintain and expand its manufacturing base with the most
significant items related to the construction of new plants in Poland and
China. The Division expects to continue to spend capital to increase its
capabilities, expand geographically, and replace or upgrade existing plants
and equipment to improve efficiencies over the next few years. Depreciation
and amortization for the Label Division were $9.0 million for the first
quarter of 2005 and $7.4 million in the comparable 2004 period.
Subsequent Event
----------------
On April 20, 2005, CCL announced the sale of the North American Custom
Manufacturing business for gross proceeds of $215 million U.S. (approximately
$265 million Canadian) to KCP Income Fund. The sale is expected to close on
May 17, 2005 and is subject to regulatory approval and typical standard
financing conditions for a transaction of this nature. This disposition will
be reported as a discontinued operation. Sales and Operating Income for this
business in the first quarter of 2005 were $163.8 million and $6.3 million,
respectively, compared to sales of $149.4 million and Operating Income of
$5.9 million in the first quarter of 2004.
The Company divested this business to transform into a specialty
packaging company focusing on the significant growth opportunities available
in the international label converting business, the aluminum container and
plastic tube businesses and the ColepCCL joint venture. CCL intends to use the
proceeds to make accretive acquisitions, reduce debt and potentially
repurchase shares. On a pro-forma basis, after the sale of the business, net
debt to capitalization would be approximately 28% as compared to 49% as at
March 31, 2005.
For the year ended December 31, 2004, the North American Custom
Manufacturing business generated sales of $604.6 million and operating income
of $26.6 million. In the short term, this income will not be replaced since
the proceeds will be invested in secure deposits with yields in the 2% to 4%
range dependent on currency and duration. It is anticipated that the growth in
CCL's existing specialty packaging businesses combined with accretive
acquisitions will more than offset this income reduction over the next two
years.
Liquidity and Capital Structure
-------------------------------
The Company's debt structure is primarily comprised of three private debt
placements completed in 1996, 1997 and 1998 totaling US$304.9 million
(Cdn$368.8 million) at March 31, 2005, with an average interest rate of 5.9%,
factoring in the related Interest Rate Swap Agreements. A scheduled annual
repayment of US$9.4 million (Cdn$11.3 million) on one of these notes is due in
September 2005. In addition, the US$120 million notes issued in 1996 are due
to be repaid in March 2006 and are now presented as a current liability.
Repayment of these notes is expected to come primarily from the proceeds of
the expected sale of the North American Custom Manufacturing business in mid-
May 2005 as described above. Net debt has increased from year-end 2004 and
from the year ago period due primarily to the Steinbeis acquisition. This
acquisition debt is anticipated to be paid upon the disposition of Custom
Manufacturing North America. The net debt analysis is as follows:
March 31, December 31, March 31,
$ Millions 2005 2004 2004
---------- ------------ ------------ ------------
Total debt $492.2 $426.4 $427.6
Cash on hand 47.2 71.4 60.2
------------ ------------ ------------
Net debt $445.0 $355.0 $367.4
------------ ------------ ------------
------------ ------------ ------------
Non-cash working capital traditionally increases during the first part of
each year to accommodate increased customer activity following the slower
year-end period, before reducing to its lowest point at the next year-end.
This increase in working capital in the first quarter of $24.5 million in 2005
compared to an increase of $24.9 million in the comparable 2004 period.
Capital spending was $44.1 million in the first quarter of 2005;
$20.8 million higher than the $23.3 million spent in the same quarter last
year. Overall, the level of capital spending exceeded depreciation and
amortization to provide for increased capacity as previously described, to
implement cost reduction programs, and to maintain the existing business and
asset base. It is expected that capital spending will continue at about this
pace in 2005 and is expected to be just above the $100 million mark after
taking into account the disposition of Custom Manufacturing North America in
May.
Dividends declared in the first quarters of 2005 and 2004, were
$3.2 million and $2.9 million, respectively. There was an increase in the
dividend rate of 11% announced in May 2004 that accounted for the increased
outflow. The total number of shares outstanding at March 31, 2005 of
32.6 million is slightly higher than the 32.4 million outstanding a year ago
due to the exercise of stock options partially offset by the shares
repurchased under the Normal Course Issuer Bid. The current annualized
dividend rate is $0.35 per Class A share and $0.40 per Class B share. The
Company has historically paid out dividends at a rate of 20-25% of normalized
earnings. Since the Company's cash flow is strong, the Board approved a
continuation of the quarterly dividend rate of $0.0875 per Class A share and
$0.10 per Class B share payable at the end of June 2005.
Effective January 1, 2005, the Company has adopted the Canadian Institute
of Chartered Accountants ("CICA") amendments to the Emerging Issues Committee
rules with respect to the recording of vendor rebates by a purchaser. The
adoption of this change did not have a material impact on the Company. A new
CICA guideline on the consolidation of variable interest entities had no
impact on the Company since it is not a party to any variable interest
entities.
The Company has no material "off balance sheet" financing obligations
except for typical long-term operating lease agreements. The nature of these
commitments is described in note 14 of the December 31, 2004 Annual
Consolidated Financial Statements. The Company does not have any material
related party transactions. Additionally, the vast majority of the Company's
post-employment obligations are defined contribution pension plans. There are
no defined benefit plans funded with CCL stock.
Risks and Strategies
--------------------
The 2004 Management's Discussion and Analysis in the Annual Report
detailed the risks to the Company's business and the strategies that were
planned for 2005 and beyond. The disposition of the North American Custom
Manufacturing business has eliminated or reduced certain risks applicable to
that business segment. CCL will have: less dependence on the North American
manufacturing sector and its ability to compete internationally; less reliance
on the long-term currency effects of the U.S. dollar relative to the Canadian
dollar; less refinancing risk on the maturity of its $120 million U.S. senior
notes in March 2006 and less overall dependence on a concentrated number of
consumer products companies. CCL will now be more dependent on the inherent
risks associated with running a more internationally diverse specialty
packaging business without the diversification effect of the divested
business. These risks were described in the 2004 Management's Discussion and
Analysis.
In 2005, the Company will be more focused on the growth prospects of its
specialty packaging business and the prudent management of the cash generated
from the disposition with a view to improving shareholder value.
Molson Picks CCL's Award-Winning Aluminum Bottle
Canada's CCL Industries Bottle Tapped to Launch Molson's Kick
Toronto, Thursday, March 17, 2005 - CCL Industries Inc., a world leader
in developing manufacturing, packaging and labelling solutions for the
consumer products industry, announced today that Molson Canada will launch its
latest entry to the beer market, Molson Kick, in the award-winning aluminum
bottle developed by CCL's Container Division.
"We are just delighted that Molson's has recognized our innovative bottle
to introduce its newest product," said Rami Younes, President, CCL Container.
"Molson selected the 355 ml aluminum bottle because it not only offers a
contemporary, stylish package, but also because it chills faster and is
lighter than a glass bottle. The sleek design of this bottle and its silver-
metallic look is something beer drinkers will enjoy holding in their hands,"
Mr. Younes said.
Late last year, CCL received important industry recognition at The
Package of the Year (POY) Awards for its lustrous new aluminum bottle that was
first introduced by Pittsburgh Brewing for its Iron City Beer. CCL was also
honoured for a number of other exciting new packaging innovations including
"Package of the Year in the Household and Industrial Category" for Febreze Air
Effects, a new aerosol product launched by Procter and Gamble.
Donald Lang, President and CEO of CCL Industries said, "We believe there
is still significant opportunity for this new aluminum beverage packaging. The
role of packaging in marketing strategies is gaining more attention, both in
our core personal care market and the new beverage market, with the rising
awareness that more and more consumers are making their decisions based on
packaging appeal. Marketers are recognizing that unique packaging not only
garners attention for a new product, but it can also actually revitalize and
change perceptions about an existing brand."
Mr. Lang went on to say that, "Over the last few years, CCL Container has
focused on bringing innovative containers and bottles to the marketplace that
offer a variety of product options. Chill-retention, re-sealability,
recyclability and durability - plus a wide range of decorating and shaping
options - are just a few of the reasons why CCL's bottle appeals to beverage
marketers."
CCL started commercial production beginning in the 90s, by offering
exciting new packaging for a variety of personal care and automotive products.
The package made its debut in the beverage industry in 2002 with Snapple's new
age energy drink. Since then, several beverage marketers have evaluated and
adopted CCL's containers and bottles, the latest of which is Molson Kick.
CCL Industries Inc. (TSX CCL.A and CCL.NV.B) provides state-of-the-art
packaging solutions, including specialty aluminum and plastic packaging and
innovative product labelling, to some of the world's largest producers of
consumer brands, helping them to get their products to market quickly and
cost- effectively. CCL develops solutions for producers of leading consumer
brands in personal care, cosmetic, pharmaceutical, household and specialty
food and beverage products. Container is North America's leading manufacturer
of recyclable aluminum packaging for the beverage, food, personal care,
pharmaceutical and household markets. With headquarters in Toronto, Canada,
CCL directly employs 6,100 people and directly operates 42 production
facilities in North America, Europe and Asia.
For more information, contact:
Steve Lancaster Executive Vice President 416-756-8517
and Chief Financial Officer
Barbara Jesson
416 323 7828 x 24
bjesson(at)jessonartmont.com
For more details on CCL, visit our web site - www.cclind.com
CCL Transformed into Pure Specialty Packaging Company with the
Sale of its North American Custom Manufacturing Division
Toronto, April 20, 2005 - CCL Industries Inc., a world leader in
developing manufacturing, packaging and labelling solutions for the consumer
products industry, announced today that it has agreed to sell its North
American CCL Custom Manufacturing Division to KCP Income Fund for
approximately Cdn $265 million in cash. The proceeds from the sale will fund
the continued growth of CCL's higher growth Label and Container businesses
through further acquisitions and technology improvements. The Company may also
repay debt, and repurchase stock.
CCL Custom Manufacturing operates one plant in Canada and three in the
U.S. These facilities, their customer base and product capabilities will
provide a strategic enhancement to KCP's contract manufacturing business,
which is focused on the retail branded household cleaner market. CCL Custom
Manufacturing's 2,200 employees will continue with the business.
The North American Custom Manufacturing Division generated sales of Cdn
$604.6 million in 2004 and accounted for Cdn $26.6 million of CCL's
consolidated operating income. Once the sale is completed, CCL's annualized
revenues will still be in excess of Cdn $1.0 billion.
Mr. Donald Lang, President and CEO stated, "CCL Industries started as a
small custom manufacturer in Toronto 54 years ago and we have enjoyed a long
and successful history with CCL Custom Manufacturing. The quality of the
business and its people has enabled us to derive significant value for the
business, making this transaction possible."
Mr. Lang continued, "This completes the dramatic transformation of CCL
that we started five years ago, with CCL now emerging as a pure specialty
packaging company focusing on our high growth Label and Container businesses.
The divestitures of non-core businesses and the focus on cash flow have
enabled us to invest in new technology, upgrade facilities and pursue
international growth, creating the largest label converting network in North
America, Europe and Asia, and the most innovative aluminum container business.
The sale of our North American Custom Manufacturing business is consistent
with our objective of redeploying our resources to shareholder value-
maximizing initiatives and also reduces our risk profile by diversifying our
exposure to the U.S. currency. This divestiture will significantly improve
CCL's balance sheet to support the continuation of the Company's growth
strategy."
Management believes that this initiative will also help position CCL to
achieve valuations for its common shares that are more comparable with its
publicly traded Canadian and U.S. specialty packaging peers. CCL anticipates
recording an after tax gain on this disposition of approximately
Cdn $100 million or Cdn $3.00 a share.
Donald Lang added, "We anticipate that our first quarter results will
significantly out pace the record results reported for the previous 4th
quarter. First quarter results will be issued on May 5, 2005 prior to our
Annual Meeting, which is being held the same day. Operational improvements in
all divisions, including those created by our newly installed container
capacity, the positive contributions of ColepCCL and the recently completed
Steinbeis Label acquisition, combined with the continued strength of the
personal care market, bode well for continued success in 2005. Based on these
positive factors, it appears that earnings before unusual items will exceed
the Company's 2004 performance."
CCL Custom Manufacturing has also achieved a strong start to the year.
The North American Custom Manufacturing Division's preliminary unaudited
results for the First Quarter of 2005 indicated sales of approximately Cdn
$163.8 million and operating income of approximately Cdn $6.3 million. This
compares favourably to the Cdn $149.5 million of sales and Cdn $5.9 million of
operating income recorded in the First Quarter of 2004 for this business.
The Company is also pleased to announce that in conjunction with the sale
of CCL Custom Manufacturing, Geoffrey Martin, President, CCL Label and Plastic
Packaging is being promoted to President and Chief Operating Officer,
expanding his responsibilities to include all operations of the new CCL
including CCL Container. Donald Lang will retain his responsibilities as Chief
Executive Officer and assume the new role of Vice Chairman of the Board.
Mr. Lang said, "Over the last four years, Geoff Martin has demonstrated
his strong operating expertise through the international expansion of the
Label Division to support our customers around the world while doubling the
Division's income at the same time. Last year, he assumed responsibility for
CCL Plastic Packaging and has positively impacted the business through
significant restructuring and cost reduction and by improving its printing
technology. In his new role, Geoff will also assist CCL Container as it
continues to expand to meet increasing customer demands."
The Company anticipates that the sale of the North American Custom
Manufacturing Division will be completed by the end of May subject to
regulatory approval. KCP has entered into an agreement to sell to a syndicate
of underwriters, KCP Income Fund Units and Exchangeable Unsecured Subordinated
Debentures on a bought deal basis to finance this acquisition. KCP has also
entered into a fully committed credit facility to finance the remainder of the
purchase price.
CCL Industries Inc. (TSX CCL.A and CCL.NV.B) provides state-of-the-art
packaging solutions, including specialty aluminum and plastic packaging and
innovative product labelling, to some of the world's largest producers of
consumer brands, helping them to get their products to market quickly and cost-
effectively. CCL develops solutions for producers of leading consumer brands
in personal care, cosmetic, pharmaceutical, household and specialty food and
beverage products. Container is North America's leading manufacturer of
recyclable aluminum packaging for the beverage, food, personal care,
pharmaceutical and household markets. With headquarters in Toronto, Canada,
CCL directly employs 6,100 people and directly operates 42 production
facilities in North America, Europe and Asia.
Note: CCL will hold a conference call at 10:00 a.m. EST on Wednesday,
----- April 20, 2005 to discuss this transaction.
To access this call, please dial - Toll Free - North America -
1-800-381-7839 or Domestic and International - 416-641-6679
Post-View service will be available from Wednesday, April 20, 2005
at 12:00 p.m. EST until Friday, May 20, 2005 at 11:59 p.m. EST.
Dial: Toll Free - North America - 1-800-558-5253; Access Code:
21245062 or Domestic and International - 416-626-4100;
Access Code: 21245062.
"Statements contained in this Press Release, other than statements of
historical facts, are forward-looking statements subject to a number of
risks and uncertainties that could cause actual events or results to
differ materially from statements made. These risks and uncertainties are
detailed from time to time in CCL's public disclosure documents or other
filings with securities regulatory bodies. These forward-looking
statements are made as of the date hereof and CCL disclaims any intention
and has no obligation or responsibility, except as required by law, to
update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise."
For more information, contact:
Steve Lancaster Executive Vice President 416-756-8517
and Chief Financial Officer
For more details on CCL, visit our web site - www.cclind.com.
>>