CCL Industries Inc.
TSX : CCL.A
TSX : CCL.B

CCL Industries Inc.

February 25, 2010 17:23 ET

CCL Industries Reports a 12% Increase in Fourth Quarter Operating Income and Raises Dividend by 7%

TORONTO, ONTARIO--(Marketwire - Feb. 25, 2010) - CCL Industries Inc. (TSX:CCL.A)(TSX:CCL.B) -

Results Summary                                
       
For periods ended December 31   Three months (Unaudited)     Twelve months (Unaudited)  
   
(In millions of Cdn dollars, except per share data)   2009     2008   % Change     2009     2008   % Change  
   
Sales $ 289.3   $ 291.3   (0.7% ) $ 1,199.0   $ 1,189.0   0.8%  
     
EBITDA (Note 1) $ 49.0   $ 44.9   9.1%   $ 207.9   $ 216.4   (3.9% )
     
Operating income (Note 2) $ 27.2   $ 24.2   12.4%   $ 124.4   $ 142.8   (12.9% )
     
Goodwill impairment loss $ -   $ (31.4 )     $ -   $ (31.4 )    
     
Restructuring and other items – net loss $ (5.2 ) $ (6.6 )     $ (7.3 ) $ (3.1 )    
   
Net earnings (loss) $ (0.1 ) $ (25.7 ) n.m.   $ 42.2   $ 48.0   (12.1% )
       
Per Class B share                                
   
  Basic earnings per share $ -   $ (0.80 ) n.m.   $ 1.31   $ 1.50   (12.7% )
   
  Diluted earnings per share $ -   $ (0.80 ) n.m.   $ 1.29   $ 1.46   (11.6% )
   
  Goodwill impairment loss $ -   $ (0.97 )     $ -   $ (0.97 )    
   
  Restructuring and other items and                                
  tax adjustments – net loss $ (0.41 ) $ (0.18 )     $ (0.46 ) $ (0.07 )    
   
  Adjusted basic earnings per Class B share                                
  (Note 3) $ 0.41   $ 0.35   17.1%   $ 1.77   $ 2.54   (30.3% )
     
  Number of outstanding shares (in 000's)                                
  Weighted average for the period                 32,340   32,090      
  Actual at period end                 33,048   32,556      
   
n.m. – not meaningful                                

CCL Industries Inc., a world leader in the development of labelling solutions and specialty packaging for the consumer products and healthcare industries, announced today its financial results for the fourth quarter and fiscal year ended December 31, 2009, and declaration of its quarterly dividend.

Full Year 2009 Results

Sales were $1,199.0 million in 2009 compared to $1,189.0 million in 2008, up 1%. Favourable currency translation of 2% and the positive impact of small acquisitions and divestitures of 1% drove the sales growth, partially offset by an organic decline of 2% compared to the prior year due primarily to performance in the Container Division. The Label Division experienced a small organic decline, while the Tube Division delivered positive growth.

EBITDA (a non-GAAP measure; see note 1 below) was $207.9 million in 2009, down by 4% from the $216.4 million reported in 2008. This decline reflects lower operating income (a non-GAAP measure; see note 2 below), higher corporate expense partially offset by a positive impact from the improvement in currency translation and transaction rates.

Net earnings for 2009 were $42.2 million, down 12% from $48.0 million in 2008 due to lower operating income plus higher corporate expense, interest cost and income taxes. Foreign currency had a slight positive impact in 2009 including translation and transactions. Operating income was down by $18.4 million or 13% primarily due to the poor performance in the Container Division. The Label Division also experienced a small decline, while the Tube Division delivered improved results. Restructuring and other items of $7.3 million ($5.5 million after tax) and an unfavorable U.S. tax adjustment of $9.3 million negatively impacted earnings. In 2008, net earnings were negatively impacted by the goodwill impairment loss of $31.4 million recorded in the Tube Division and restructuring and other items of $3.1 million ($2.0 million after tax).

Basic earnings per Class B share were $1.31 in 2009 compared to $1.50 in 2008, a decrease of 13%. In 2009, restructuring and other items and an unfavourable tax adjustment decreased earnings per Class B share by $0.46. In 2008, earnings per Class B share were negatively affected by the goodwill impairment loss of $0.97 and restructuring and other items of $0.07. In 2009, unfavourable foreign currency translation reduced basic earnings per Class B share by $0.01, while foreign currency transactions had a favourable impact of $0.04.

Adjusted basic earnings per Class B share (a non-GAAP measure; see note 3 below) were $1.77 in 2009, down 30% from the $2.54 in 2008.

Fourth Quarter 2009

Sales for the fourth quarter of 2009 were $289.3 million, down 1%, from $291.3 million for the same period in 2008. Unfavourable currency translation negatively impacted sales by 8% largely offset by organic growth of 6% and 1% from acquisitions. The increase in sales, excluding currency translation, came from the Label, Tube and Container Divisions, up $14.6 million, $2.4 million and $3.5 million, respectively.

Divisional operating income in the fourth quarter of 2009 was $27.2 million, up $3.0 million or 12%, from $24.2 million in the fourth quarter of 2008. The increase in operating income at Label ($2.9 million) and Tube ($2.2 million) was offset by a decrease of $2.1 million at Container. Excluding the significant unfavourable currency translation effect, operating income increased by 28%.

EBITDA for the fourth quarter of 2009 was $49.0 million, up 9% from the $44.9 million in the comparable 2008 period. Excluding the unfavourable impact from currency translation, EBITDA increased by 21% compared to the prior year period.

Corporate expenses of $4.1 million were up by $1.0 million due primarily to higher insurance costs in 2009 versus 2008. Net interest expense of $6.5 million in this year's fourth quarter was down by $1.2 million reflecting lower debt levels, lower interest rates and favourable currency translation on U.S. dollar-denominated interest.

Restructuring and other items in the fourth quarter of 2009 totalled a net loss of $5.2 million ($3.8 million after tax). These consisted of pension settlements in the U.K of $3.5 million ($2.5 million after tax), final closure costs for the Avelin, France, Label plant of $0.3 million (with no tax effect), severance costs for the European Label operations of $1.3 million ($1.1 million after tax), closure costs for the Mexican Tube plant of $0.1 million ($0.1 million after tax) and closure costs for the Burgess Hill, U.K., Label plant of $0.5 million ($0.3 million after tax). This was marginally offset by a gain on a repatriation of capital from foreign subsidiaries of $0.5 million (with no tax effect).

In the fourth quarter of 2008, a non-cash goodwill impairment loss of $31.4 million was recorded for the Tube Division with no tax benefit. Restructuring and other items in the fourth quarter of 2008 totalled $6.6 million ($5.5 million after tax). These consisted of the loss provision for the residual lease payments and exit costs for the Tube Division's building in Los Angeles, CA, as a result of its move to a new location, of $3.1 million ($2.0 million after tax) and the loss on the shutdown of the Avelin, France, operation in the Label Division of $3.5 million with no tax effect.

Tax expense in the fourth quarter of 2009 was $11.5 million compared to $1.1 million in the prior year period. The fourth quarter's tax expense reflects a $9.3 million charge for U.S. withholding taxes on an internal debt transaction partially offset by a $1.9 million benefit on Canadian tax losses related to unrealized foreign exchange gains on the Company's U.S. dollar-denominated debt. Excluding the U.S. withholding taxes, the benefit from Canadian tax losses and restructuring and other items, the overall effective tax rate was 32.8%. The increased tax rate in the current year reflects the unfavourable mix of income earned in higher taxed jurisdictions versus lower taxed jurisdictions.

The net loss in the fourth quarter of 2009 was $0.1 million compared to a net loss of $25.7 million in last year's fourth quarter, reflecting the items discussed above.

Earnings per Class B share were nil in the fourth quarter of 2009 compared with the $0.80 loss per Class B share in the fourth quarter of 2008. Unfavourable currency translation increased the loss per share compared to last year by $0.05 per share, and unfavourable currency transactions increased the loss per share by $0.01.

Restructuring and other items and an unfavourable tax adjustment negatively affected Class B earnings per share by $0.41 in the fourth quarter of 2009. In 2008, the goodwill impairment loss negatively affected Class B earnings per share by $0.97 and restructuring and other items negatively affected Class B earnings per share by $0.18.

Adjusted basic earnings per Class B share were $0.41 in the fourth quarter of 2009, up 17% from $0.35 in the corresponding quarter of 2008.

Geoffrey T. Martin, President and Chief Executive Officer commented, "The improved business conditions that we saw in North America in the summer months accelerated in the fourth quarter and we began to see early signs of improvement in Europe. Sales in Emerging Markets also continued at robust levels resulting in stronger than anticipated global organic growth of 6%."

Mr. Martin continued, "Adjusted basic earnings per share were up 17% for the quarter and operating income increased by 28%, excluding unfavourable currency translation. Higher profitability in the Label and Tube Divisions were held back by another weak quarter at Container. Reported earnings were negatively impacted by tax expense on a dividend driven by our internal debt releveraging of our US business and by a number of one-time restructuring items to reduce cost, principally in Europe."

Mr. Martin also noted, "Sales in the fourth quarter for the Label Division were up 5% organically and global operating income excluding currency translation improved a significant 20%. The North American business delivered exceptionally strong results in the quarter primarily driven by our Healthcare & Specialty segment. Sales in Europe fell slightly but we began to see signs of comparative improvement as the quarter progressed which is continuing so far in 2010. Asia and Latin America both continue to deliver strong results, particularly in the Home and Personal Care market."

Mr. Martin added, "Results in the Container Division remained at unacceptable levels although volumes improved significantly as the quarter unfolded. Volatility in aluminum cost and a challenging pricing environment affected direct margins. Significant productivity progress is already underway at our U.S. and Mexican operations but the weak U.S. dollar remains a significant hurdle for our Canadian plant. Pricing initiatives to improve profitability will also be necessary in 2010."

Mr. Martin continued, "The Tube Division continues to progress and delivered another solid performance in the quarter with a double digit sales increase, improved operational performance and better product mix. Comparisons eased considerably driven by the Los Angeles plant relocation in the fourth quarter of 2008."

Mr. Martin stated, "Our outlook for the first quarter of the new year is positive as the improved demand levels that we saw in the second half of 2009 have continued through the first two months of 2010."

Mr. Martin concluded, "The Company's financial position remains very solid. Cash balances improved to over $150 million at year end and net debt to total capital fell from 38% at the end of 2008 to 32% in 2009. Based on our cash flow, cautious optimism on the improving outlook for 2010, and available credit lines to finance our business, your Board of Directors has declared a 7% increase in the dividend, following a similar increase last year. The dividend of $0.16 on the Class B non-voting shares and $0.1475 on the Class A voting shares will be payable to shareholders of record at the close of business on March 17, 2010, to be paid on March 31, 2010. CCL continues its record of paying quarterly dividends without reduction or omission for over 25 years."

With headquarters in Toronto, Canada, CCL Industries now employs approximately 5,500 people and operates 58 production facilities globally located to meet the sourcing needs of large international customers. CCL Label is the world's largest converter of pressure sensitive and film materials for label applications and sells to leading global customers in the consumer packaging, healthcare, automotive and consumer durable markets. CCL Container and CCL Tube are leading producers of aluminum aerosol cans, bottles and extruded plastic tubes for consumer packaged goods customers in the United States, Canada and Mexico.

Note 1 - EBITDA - A critical financial measure used extensively in the packaging industry and other industries to assist in understanding and measuring operating results and is also considered as a proxy for cash flow and a facilitator for business valuations. This non-GAAP measure is defined as earnings before interest, taxes, depreciation and amortization, goodwill impairment loss and restructuring and other items. See section entitled "Supplementary Information" below for a reconciliation of operating income to EBITDA. We believe that it is an important measure as it allows us to assess our ongoing business without the impact of interest, depreciation and amortization and income tax expenses, as well as non- operating factors and one-time items. As a proxy for cash flow, it is intended to indicate our ability to incur or service debt and to invest in property, plant and equipment, and it allows us to compare our business to those of our peers and competitors who may have different capital or organizational structures. EBITDA is a measure tracked by financial analysts and investors to evaluate financial performance and is a key metric in business valuations. EBITDA is considered an important measure by lenders to the Company and is included in the financial covenants of our senior notes and bank lines of credit.

Note 2 – Operating Income is a key non-GAAP measure to assist in understanding the profitability of the Company's business units. This non-GAAP measure is defined as income before corporate expenses, interest, restructuring and other items and taxes.

Note 3 – Adjusted Basic Earnings Per Class B Share is an important non-GAAP measure to assist in understanding the ongoing earnings performance of the Company excluding items of a one-time or non- recurring nature. It is not considered a substitute for Basic Net Earnings per Class B share but it does provide additional insight into the ongoing financial results of the Company. This non-GAAP measure is defined as basic net earnings per Class B share excluding restructuring and other items and tax adjustments.

Supplementary Information
 
Twelve months ended December 31st
Reconciliation of Operating Income to EBITDA
 
Unaudited
 
(In million of Cdn dollars)
 
  Three months ended Dec 31st   Twelve months ended Dec 31st  
Operating Income                  
  2009   2008   2009     2008  
     
Label $ 30.2   $ 27.3   $ 128.4   $ 134.3  
   
Container (3.8 ) (1.7 ) (7.0 )   9.3  
   
Tube 0.8   (1.4 ) 3.0     (0.8 )
   
Total operations 27.2   24.2   124.4     142.8  
   
Less: Corporate expenses (4.1 ) (3.1 ) (16.5 )   (11.5 )
     
Add: Depreciation & Amortization 25.9   23.8   100.0     85.1  
     
EBITDA $ 49.0   $ 44.9   $ 207.9     $ 216.4  

Unless noted otherwise, all amounts are expressed in Canadian dollars.

This press release contains forward-looking information and forward-looking statements, as defined under applicable securities laws, (hereinafter collectively referred to as "forward-looking statements") that involve a number of risks and uncertainties. Forward-looking statements include all statements that are predictive in nature or depend on future events or conditions. Forward-looking statements are typically identified by the words "believes," "expects," "ant icipates," "estimates," "intends," "plans" or simil ar expressions. Statements regarding the operations, business, financial condition, priorities, ongoing objectives, strategies and outlook of the Company, other than statements of historical fact, are forward- looking statements. Specifically, this press release contains forward-looking statements regarding the anticipated growth in sales, income and profitability of the Company's divisions; the future profitability of the Container Division; and the Company's expectations regarding general business and economic conditions.

Forward-looking statements are not guarantees of future performance. They involve known and unknown risks and uncertainties relating to future events and conditions including, but not limited to, the evolving global financial crisis and its impact on the world economy and capital markets; the impact of competition; consumer confidence and spending preferences; general economic and geopolitical conditions; currency exchange rates; interest rates and credit availability; technological change; changes in government regulations; risks associated with operating and product hazards; and CCL's ability to attract and retain qualified employees. Do not unduly rely on forward-looking statements as the Company's actual results could differ materially from those anticipated in these forward-looking statements. Forward-looking statements are also based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions about the following: global economic recovery and higher consumer spending; improved customer demand for the Company's products; continued historical growth trends, market growth in specific segments and entering into new segments; the Company's ability to provide a wide range of products to multinational customers on a global basis; the benefits of the Company's focused strategies and operational approach; the achievement of the Company's plans for improved efficiency and lower costs, including stable aluminum costs; the availability of cash and credit; fluctuations of currency exchange rates; the Company's continued relations with its customers; and general business and economic conditions. Should one or more risks materialize or should any assumptions prove incorrect, then actual results could vary materially from those expressed or implied in the forward-looking statements. Further details on key risks can be found in the MD&A section of our 2008 Annual Report, particularly under Section 4: "Risks and Uncertainties". Our annual and quarterly reports can be found online at www.cclind.com and www.sedar.com or 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 our business. Such statements do not, unless otherwise specified by us, reflect the impact of dispositions, sales of assets, monetizations, mergers, acquisitions, other business combinations or transactions, asset write-downs or other charges announced or occurring after forward-looking statements are made. The financial impact of these transactions and non-recurring and other special items can be complex and depends on the facts particular to each of them and therefore cannot be described in a meaningful way in advance of knowing specific facts.

The forward-looking statements are provided as of the date of this press release and the Company does not assume any obligation to update or revise the forward-looking statements to reflect new events or circumstances, except as required by law.

Note:
 
CCL will hold a conference call at 11:00 a.m. EST on Friday, February 26, 2010, to discuss these results. Analyst presentation will be posted on the Company's website.
 
To access this call, please dial:
416-695-6622 - Local
800-769-8320 - Toll Free
 
Post-View service will be available from Friday, February 26, 2010, at 6:00 p.m. EST until Friday, March 12, 2010, at 11:59 p.m. EST
 
To access Conference Replay, please dial:
416-695-5800 - Local
800-408-3053 - Toll Free
Access Code: 7830114
 
In mid March 2010, CCL intends to file with securities regulators in Canada our Audited Annual Consolidated Statements and Notes thereto for the year ended December 31, 2009 and related MD&A.  Notification of such filings will be made by a press release and be available on www.cclind.com and www.sedar.com or upon request.

For more details on CCL, visit our website - www.cclind.com

              APPENDIX              
 
CCL INDUSTRIES INC.                    
Consolidated Statements of Earnings                      
(In millions of Canadian dollars)                          
Unaudited                                  
 
    Three months ended December 31st       Twelve months ended December 31st    
      Sales     Operating income     Sales     Operating income  
    2009   2008   2009   2008   2009   2008   2009   2008  
Label $ 238.2 $ 237.9 $ 30.2   $ 27.3   $ 989.4 $ 971.3 $ 128.4   $ 134.3    
Container   34.9   37.3   (3.8 )   (1.7 )   139.9   154.9   (7.0 )   9.3    
Tube   16.2   16.1   0.8     (1.4 )   69.7   62.8   3.0     (0.8 )  
  $ 289.3 $ 291.3   27.2     24.2   $ 1,199.0 $ 1,189.0   124.4     142.8    
   
Corporate expense       (4.1 )   (3.1 )           (16.5 )   (11.5 )  
Interest expense, net       (6.5 )   (7.7 )           (29.3 )   (23.9 )  
Goodwill impairment loss         (31.4 )               (31.4 )  
Restructuring and other                                      
items, net loss         (5.2 )   (6.6 )           (7.3 )   (3.1 )  
Income taxes         (11.5 )   (1.1 )           (29.1 )   (24.9 )  
 
Net earnings         $ (0.1 ) $ (25.7 )         $ 42.2   $ 48.0    
     

CCL INDUSTRIES INC.

Consolidated Balance Sheets
(In thousands of Canadian dollars)
Unaudited
December 31, 2009 and 2008
      2009   2008
Assets            
Current assets:            
  Cash and cash equivalents $ 150,594   $ 136,269  
  Accounts receivable, trade   148,688     155,977  
  Other receivables and prepaid expenses   24,342     26,443  
  Income and other taxes receivable       2,153  
  Inventories   75,530     87,105  
      399,154     407,947  
Property, plant and equipment   751,592     830,833  
Other assets   46,182     57,630  
Future income tax assets   47,440     43,474  
Intangible assets   42,335     47,537  
Goodwill   358,794     379,253  
    $ 1,645,497   $ 1,766,674  
Liabilities and Shareholders' Equity            
Current liabilities:            
  Accounts payable and accrued liabilities $ 206,510   $ 250,764  
  Income and other taxes payable   10,943      
  Current portion of long-term debt   49,290     25,947  
      266,743     276,711  
Long-term debt   448,849     566,575  
Other long-term items   58,384     66,492  
Future income tax liabilities   118,764     106,378  
      892,740     1,016,156  
Shareholders' equity:            
  Share capital   201,339     191,273  
  Accumulated other comprehensive loss   (95,690 )   (67,497 )
  Contributed surplus   3,805     4,826  
  Retained earnings   643,303     621,916  
      752,757     750,518  
   
    $ 1,645,497   $ 1,766,674  
   
CCL INDUSTRIES INC.
Consolidated Statements of Earnings
(In thousands of Canadian dollars, except per share data)
Unaudited
Years ended December 31, 2009 and 2008
    2009   2008
 
Sales $ 1,198,984 $ 1,189,025
 
Cost of goods sold   943,507   923,323
Selling, general and administrative expenses   140,966   127,491
Depreciation and amortization   6,678   6,919
    107,833   131,292
 
Interest, net   29,323   23,949
    78,510   107,343
 
Goodwill impairment loss     31,386
Restructuring and other items, net loss   7,275   3,094
 
Earnings before income taxes   71,235   72,863
 
Income taxes   29,061   24,877
   
Net earnings $ 42,174 $ 47,986
 
Earnings and diluted earnings per Class B share        
 
  Net earnings $ 1.31 $ 1.50
 
  Diluted earnings $ 1.29 $ 1.46

   
CCL INDUSTRIES INC.
Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
Unaudited
Years ended December 31, 2009 and 2008

      2009     2008  
   
Cash provided by (used for):            
   
Operating activities:            
  Net earnings $ 42,174   $ 47,986  
  Items not involving cash:            
    Depreciation and amortization   100,004     85,144  
    Goodwill impairment loss       31,386  
    Stock-based compensation   2,081     2,028  
    Future income taxes   2,933     6,495  
    Restructuring and other items, net of tax   5,512     1,965  
    Gain on sale of property, plant and equipment   (1,128 )   (1,464 )
      151,576     173,540  
  Net change in non-cash working capital   (1,296 )   42,808  
  Cash provided by operating activities   150,280     216,348  
   
Financing activities:            
  Proceeds on issuance of long-term debt   13,904     184,847  
  Retirement of long-term debt   (22,745 )   (109,233 )
   
  Issue of shares   6,817     4,413  
  Purchase of shares held in trust   (195 )   (4,437 )
  Repurchase of shares       (18,097 )
  Repayment of executive share purchase plan loans   342      
  Dividends   (18,964 )   (17,512 )
  Cash provided by financing activities   (20,841 )   39,981  
   
Investing activities:            
  Additions to property, plant and equipment   (99,310 )   (192,801 )
  Proceeds on disposal of property, plant and equipment   4,908     4,395  
  Proceeds on product line disposal       9,411  
  Business acquisitions   (5,327 )   (40,677 )
  Long-term investments       (10,747 )
   
  Cash used for investing activities   (99,729 )   (230,419 )
   
Effect of exchange rates on cash   (15,385 )   13,757  
   
Increase in cash and cash equivalents   14,325     39,667  
   
Cash and cash equivalents, beginning of year   136,269     96,602  
   
Cash and cash equivalents, end of year $ 150,594   $ 136,269  

Contact Information

  • CCL Industries Inc.
    Gaston Tano
    Senior Vice President and Chief Financial Officer
    416-756-8526
    www.cclind.com