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

CCL Industries Inc.

August 04, 2011 08:15 ET

CCL Industries Reports a 25% Increase in Second Quarter Net Earnings and Declares Dividend

TORONTO, ONTARIO--(Marketwire - Aug. 4, 2011) - CCL Industries Inc. (TSX:CCL.A)(TSX:CCL.B)

Results Summary

For periods ended June 30 Three months unaudited Six months unaudited
(in millions of Cdn dollars, except per share data) 2011 2010 %
Change
%
Change
Excl.
FX
(Note)
2011 2010 %
Change
%
Change
Excl.
FX
(Note)
Sales $ 318.9 $ 302.2 5.5 % 5.2 % $ 634.5 $ 609.3 4.1 % 6.1 %
EBITDA (Note 1) $ 60.9 $ 57.7 5.5 % 5.3 % $ 127.2 $ 120.4 5.6 % 7.7 %
Operating income (Note 2) $ 43.1 $ 39.7 8.6 % 8.2 % $ 91.7 $ 83.0 10.5 % 12.8 %
Restructuring and other items – net loss $ - $ - - $ 0.5 $ - n.m.
Net earnings (loss) $ 21.8 $ 17.5 24.6 % 22.8 % $ 48.7 $ 42.0 16.0 % 17.6 %
Per Class B share
Basic earnings per share $ 0.66 $ 0.53 24.5 % $ 1.47 $ 1.28 14.8 %
Diluted earnings per share $ 0.64 $ 0.52 23.1 % $ 1.44 $ 1.26 14.3 %
Restructuring and other items – net loss $ - $ - $ 0.01 $ -
Adjusted basic earnings per Class B share (Note 3) $ 0.66 $ 0.53 24.5 % $ 1.48 $ 1.28 15.6 %
Number of outstanding shares (in 000's)
Weighted average for the period 33,040 32,774
Actual at period end 33,339 33,099
Note – Change over prior year excludes estimated impact of foreign currency translation.

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 consolidated financial results for the second quarter ended June 30, 2011, in accordance with International Financial Reporting Standards ("IFRS"), and the declaration of its quarterly dividend.

Sales for the second quarter of 2011 were $318.9 million, up 5% excluding a nominal positive impact from currency translation, due to solid organic growth across all divisions for the quarter and a small positive impact from acquisitions. Year-to-date, sales increased by 6% on the same basis.

Operating income in the second quarter of 2011 was $43.1 million, up 9%, from $39.7 million in the second quarter of 2010 and up by 8%, excluding currency translation. The majority of the growth was driven by the Container Division, which delivered solid profitability over a significant loss in the prior year quarter. The Tube Division had another quarter of record profitability, while the Label Division declined 5% compared to a strong prior year period. Year-to-date operating income increased by 13% excluding the impact of currency translation.

EBITDA for the second quarter of 2011 was $60.9 million, up 6% from the $57.7 million in the comparable 2010 period and up by 5% excluding currency translation. Year-to-date, EBITDA increased by 8%, excluding the impact of currency translation.

Net earnings in the second quarter of 2011 were $21.8 million, up 25% compared to $17.5 million in last year's second quarter. In addition to the items described above, this increase reflects lower net finance costs and income taxes, and a small favourable impact from currency translation partially offset by higher corporate expenses. Restructuring and other items had no impact on net earnings in the second quarter of 2011 or 2010.

Year-to-date, net earnings were $48.7 million, up 16% from the $42.0 million in the prior year. Restructuring and other items had $0.5 million negative impact on earnings in the first six months of 2011 compared to no impact in 2010.

Basic earnings per Class B share were $0.66 in the second quarter of 2011 compared to $0.53 in the 2010 comparable period. Year-to-date, basic earnings per Class B share were $1.47 in 2011, up 15% over the prior year.

Adjusted basic earnings per Class B share were $0.66 in the second quarter of 2011 compared with $0.53 in the prior year period. Year-to-date, adjusted basic earnings per Class B share were $1.48 in 2011, up 16% over the prior year.

Geoffrey T. Martin, President and Chief Executive Officer commented, "We are pleased to report on a good quarter driven again by significant improvement in our historically underperforming Container and Tube Divisions. Slower market conditions, particularly in developed regions of the world, impacted profit margins slightly in the Label Division compared to a strong prior year quarter. Reduced interest costs on lower debt levels and a favourable tax rate leveraged our overall 9% increase, excluding currency translation, in operating income into a 25% increase in EPS for the quarter."

Mr. Martin also noted, "Sales in our Label Division, excluding currency translation, were up 5% for the second quarter. The consumer product sectors in North America and Europe declined as customers limited marketing initiatives in response to slower demand levels and certain business lines were impacted by inflation and pricing challenges. As expected, our North American Healthcare business improved over the soft first quarter as the U.S. FDA quarantine at a large customer was lifted and overall market conditions improved. We continued to see strong double digit growth rates from emerging market regions although there are some early signs of growth rates moderating over inflation concerns, particularly in China. We expect to see profit growth in the Division over the second half of the year as comparatives ease and our recent acquisitions, Sertech and Pacman, deliver immediate accretion to our results."

Mr. Martin added, "Volume in the Container Division also softened over first quarter levels but price increases and better mix drove a 10% increase in sales excluding currency translation. The Division reported another quarter of solid profitability compared to a sizable loss in the prior year second quarter despite a significant rise in aluminum cost. Our U.S. and Mexican operations were the main drivers of improved performance but the Canadian operation also reported a significantly reduced loss on the back of productivity gains and cost reduction programs. The Container Division will benefit from relatively easy comparatives for the remainder of the year and is expected to continue to contribute significantly to our profit growth for 2011."

Mr. Martin continued, "The Tube Division had another record quarter of profitability, with sales growth of 7% excluding currency translation. We continue to gain share in a flat to down U.S. personal care and cosmetic market and our plant in Pennsylvania improved its operating performance significantly. The outlook for the remainder of the year remains encouraging but comparatives will normalize in the second half as the Division started its recent positive trend at this time last year."

Mr. Martin stated, "Order levels remain stable so far in the third quarter so despite growing concerns about the global economy, we remain cautiously optimistic for the balance of the year. We expect currency translation to remain a challenge at current levels as the Canadian dollar continues to strengthen against the U.S. dollar. At today's exchange rates, European currencies will not sustain the offset we benefitted from in the second quarter as they are now trading approximately in line with prior year levels."

Mr. Martin concluded, "The Company continues to have a strong financial position. Cash balances are solid with over $100 million at the end of the second quarter and net debt to total capital dropped below 24%. Based on our strong cash flow and continued positive outlook for 2011, your Board of Directors has declared a dividend at the same level as the dividend declared last quarter. The dividend rate of $0.175 for the Class B non-voting shares and $0.1625 on the Class A voting shares will be payable to shareholders of record at the close of business on September 16, 2011, to be paid on September 30, 2011. CCL continues its record of paying quarterly dividends without reduction or omission for over 25 years."

With headquarters in Toronto, Canada, CCL Industries now employs approximately 6,000 people and operates 62 production facilities globally located to meet the sourcing needs of large international customers. CCL Label is the world's largest converter of pressure sensitive and film materials for label applications and sells to leading global customers in the consumer packaging, healthcare, automotive and consumer durable markets. CCL Container and CCL Tube are leading producers of aluminum aerosol cans, bottles and extruded plastic tubes for consumer packaged goods customers in the United States, Canada and Mexico.

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

Note 2 - Operating Income is a key non-IFRS financial measure to assist in understanding the profitability of the Company's business units. This non-IFRS financial 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-IFRS financial measure to assist in understanding the ongoing earnings performance of the Company excluding items of a one- time or non-recurring nature. It is not considered a substitute for basic net earnings per Class B share but it does provide additional insight into the ongoing financial results of the Company. This non-IFRS financial measure is defined as basic net earnings per Class B share excluding restructuring and other items and tax adjustments.

Supplementary Information
Six months ended June 30th
Reconciliation of Operating Income to EBITDA
Unaudited
(In millions of Canadian dollars)
Three months ended
June 30
th
Six months ended
June 30
th
Operating Income
2011 2010 2011 2010
Label $ 37.3 $ 39.0 $ 79.1 $ 82.0
Container 2.1 (2.2 ) 5.8 (3.9 )
Tube 3.7 2.9 6.8 4.9
Total operating income 43.1 39.7 91.7 83.0
Less: Corporate expenses (7.2 ) (5.2 ) (13.4 ) (9.9 )
Add: Depreciation & amortization 25.0 23.2 48.9 47.3
EBITDA $ 60.9 $ 57.7 $ 127.2 $ 120.4

This earnings release, which is current as of August 4, 2011, is a summary of our second quarter 2011 results and should be read in conjunction with our second quarter 2011 Management's Discussion and Analysis ("MD&A"), second quarter 2011 Unaudited Consolidated Condensed Interim Financial Statements and Notes thereto, 2010 Annual MD&A, 2010 Annual Audited Consolidated Financial Statements and Notes thereto and other recent securities filings available on www.cclind.com and www.sedar.com.

The financial information presented herein has been prepared on the basis of IFRS for interim financial statements and is expressed in Canadian dollars unless otherwise stated.

The amounts in this earnings release, MD&A and interim financial statements for the six months ended June 30, 2010, have been restated to reflect CCL's adoption of IFRS, with effect from January 1, 2010. Further disclosure on the transition to IFRS can found in section 8 of the June 30, 2011, MD&A and note 11 of the Company's consolidated condensed interim financial statements for the six months ended June 30, 2011. This disclosure contains a description of the IFRS adjustments and reclassifications on transition and a reconciliation of the Company's financial statements previously prepared under Canadian GAAP to those prepared under IFRS for the six months ended June 30, 2010, and for the year ended December 31, 2010.

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

Forward-looking statements are not guarantees of future performance. They involve known and unknown risks and uncertainties relating to future events and conditions including, but not limited to, the after-effects of the global financial crisis and its impact on the world economy and capital markets; the impact of competition; consumer confidence and spending preferences; general economic and geopolitical conditions; currency exchange rates; interest rates and credit availability; technological change; changes in government regulations; risks associated with operating and product hazards; and CCL's ability to attract and retain qualified employees. Do not unduly rely on forward-looking statements as the Company's actual results could differ materially from those anticipated in these forward-looking statements. Forward-looking statements are also based on a number of assumptions, which may prove to be incorrect, including, but not limited to, assumptions about the following: global economic recovery and higher consumer spending; improved customer demand for the Company's products; continued historical growth trends, market growth in specific 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 Management's Discussion and Analysis section of CCL's 2010 Annual Report, particularly under Section 4: "Risks and Uncertainties." CCL's annual and quarterly reports can be found online at www.cclind.com and www.sedar.com or are available upon request.

Except as otherwise indicated, forward-looking statements do not take into account the effect that transactions or non-recurring or other special items announced or occurring after the statements are made may have on CCL's business. Such statements do not, unless otherwise specified by the Company, reflect the impact of dispositions, sales of assets, monetizations, mergers, acquisitions, other business combinations or transactions, asset write-downs or other charges announced or occurring after forward-looking statements are made. The financial impact of these transactions and non-recurring and other special items can be complex and depends on the facts particular to each of them and therefore cannot be described in a meaningful way in advance of knowing specific facts.

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

Note: CCL will hold a conference call at 2:00 p.m. EDT on Thursday, August 4, 2011, to discuss these results. The analyst presentation will be posted on the Company's website.
To access this call, please dial:
416-340-2218 – Local
866-226-1793 – Toll Free
Post-View service will be available from Thursday, August 4, 2011, at 6:00 p.m. EDT until Thursday, August 18, 2011, at 11:59 p.m. EDT.
To access Conference Replay, please dial:
905-694-9451 – Local
800-408-3053 – Toll Free
Access Code: 3186843
For more details on CCL, visit our website - www.cclind.com.
CCL Industries Inc.
Consolidated condensed interim income statements
Unaudited
Three months ended Six months ended
June 30th June 30th
In thousands of Canadian dollars, except per share information 2011 2010 2011 2010
Revenue $ 318,894 $ 302,157 $ 634,519 $ 609,288
Cost of sales 243,670 230,110 481,707 464,348
Gross profit 75,224 72,047 152,812 144,940
Selling, general and administrative expenses 39,362 37,582 74,504 71,828
Restructuring and other items - - 542 -
Results from operating activities 35,862 34,465 77,766 73,112
Finance cost 5,588 6,742 11,577 13,514
Finance income 265 253 589 483
Net finance cost 5,323 6,489 10,988 13,031
Earnings before income tax 30,539 27,976 66,778 60,081
Income tax expense 8,707 10,501 18,126 18,049
Net earnings for the period $ 21,832 $ 17,475 $ 48,652 $ 42,032
Attributable to:
Shareholders of the Company $ 21,832 $ 17,475 $ 48,652 $ 42,032
Net earnings for the period $ 21,832 $ 17,475 $ 48,652 $ 42,032
Earnings per share
Basic earnings per Class B share $ 0.66 $ 0.53 $ 1.47 $ 1.28
Diluted earnings per Class B share $ 0.64 $ 0.52 $ 1.44 $ 1.26
CCL Industries Inc.
Consolidated condensed interim statements of financial position
Unaudited
As at As at As at
June 30 December 31 June 30
In thousands of Canadian dollars 2011 2010 2010
Assets
Current assets
Cash and cash equivalents $ 102,945 $ 173,197 $ 165,757
Trade and other receivables 204,267 173,066 209,194
Prepaid expenses 9,866 5,983 8,171
Income and other taxes recoverable - 2,457 -
Inventories 85,679 77,863 75,974
Total current assets 402,757 432,566 459,096
Property, plant and equipment 717,364 704,403 717,780
Other investments 36,331 39,199 43,179
Deferred tax assets 55,105 54,956 53,123
Intangible assets 37,903 38,053 40,776
Goodwill 352,107 350,527 356,702
Total non-current assets 1,198,810 1,187,138 1,211,560
Total assets $ 1,601,567 $ 1,619,704 $ 1,670,656
Liabilities
Current liabilities
Bank advances $ - $ 497 $ 384
Trade and other payables 222,122 222,072 218,510
Income and other taxes payable 13,268 - 7,662
Current portion of long-term debt 16,826 87,147 121,199
Total current liabilities 252,216 309,716 347,755
Long-term debt 337,461 346,750 382,054
Employee benefits 71,757 66,219 67,206
Provisions and other long-term liabilities 8,165 8,616 10,750
Deferred tax liabilities 113,593 119,076 118,065
Total non-current liabilities 530,976 540,661 578,075
Total liabilities $ 783,192 $ 850,377 $ 925,830
CCL Industries Inc.
Consolidated condensed interim statements of financial position (continued)
Unaudited
As at As at As at
June 30 December 31 June 30
In thousands of Canadian dollars 2011 2010 2010
Equity
Share capital 210,812 208,666 203,181
Contributed surplus 9,003 7,688 6,554
Retained earnings 610,561 573,425 556,127
Accumulated other comprehensive loss (12,001 ) (20,452 ) (21,036 )
Total equity attributable to shareholders of the Company $ 818,375 $
769,327
$ 744,826
Total liabilities and equity $ 1,601,567 $ 1,619,704 $ 1,670,656
CCL Industries Inc.
Consolidated condensed interim statements of cash flows
Unaudited
Three months ended
June 30th
Six months ended
June 30th
In thousands of Canadian dollars 2011 2010 2011 2010
Cash provided by (used for)
Operating activities
Net earnings $ 21,832 $ 17,475 $ 48,652 $ 42,032
Adjustments for:
Depreciation and amortization 24,992 23,183 48,942 47,337
Restructuring and other items, net of tax - - 350 -
Equity-settled share-based payment transactions 1,000 1,154 2,090 2,053
Deferred taxes 707 1,728 718 (541 )
Gain on sale of property, plant and equipment (257 ) (224 ) (710 ) (262 )
48,274 43,316 100,042 90,619
Change in inventories (2,803 ) (3,392 ) (7,251 ) (13 )
Change in trade and other receivables (4,360 ) (10,028 ) (29,663 ) (40,398 )
Change in prepaid expenses (3,093 ) (3,314 ) (1,919 ) (2,479 )
Change in trade and other payables 11,911 21,906 (1,425 ) 11,590
Change in income and other taxes payable 1,274 2,808 15,725 (3,327 )
Change in employee benefits 2,722 (1,027 ) 5,538 (2,088 )
Change in other assets and liabilities (943 ) 4,790 (10,200 ) 8,451
Cash provided by operating activities 52,982 55,059 70,847 62,355
Financing activities
Proceeds on issuance of long-term debt - 2,857 1,040 4,449
Repayment of long-term debt (1,107 ) (676 ) (69,579 ) (1,291 )
Increase in bank advances (669 ) (149 ) (497 ) 384
Issue of shares - 83 1,073 1,067
Repayment of executive share purchase plan loans - - - 683
Dividends paid (5,802 ) (5,264 ) (11,604 ) (10,524 )
Cash used for financing activities (7,578 ) (3,149 ) (79,567 ) (5,232 )
CCL Industries Inc.
Consolidated condensed interim statements of cash flows (continued)
Unaudited
Three months ended
June 30th
Six months ended
June 30th
In thousands of Canadian dollars 2011 2010 2011 2010
Investing activities
Additions to property, plant and equipment (28,082 ) (17,395 ) (53,923 ) (38,617 )
Proceeds on disposal of property, plant and equipment 455 2,591 1,119 2,659
Business acquisitions (6,837 ) (7 ) (8,792 ) (1,246 )
Cash used for investing activities (34,464 ) (14,811 ) (61,596 ) (37,204 )
Translation adjustments on cash and cash equivalents (129 ) 2,042 64 (4,756 )
Net increase (decrease) in cash and cash equivalents 10,811 39,141 (70,252 ) 15,163
Cash and cash equivalents at beginning of period 92,134 126,616 173,197 150,594
Cash and cash equivalents at end of period $ 102,945 $ 165,757 $ 102,945 $ 165,757
CCL Industries Inc.
Segmented Information
Unaudited
In thousands of Canadian dollars
Three months ended June 30th Six months ended June 30th
Sales Operating Income Sales Operating Income
2011 2010 2011 2010 2011 2010 2011 2010
Label $ 255,883 $ 242,102 $ 37,308 $ 38,978 $ 503,639 $ 491,006 $ 79,154 $ 81,984
Container 42,567 39,695 2,079 (2,166 ) 90,218 80,010 5,819 (3,898 )
Tube 20,444 20,360 3,671 2,898 40,662 38,272 6,769 4,951
$ 318,894 $ 302,157 43,058 39,710 $ 634,519 $ 609,288 91,742 83,037
Corporate expenses (7,196 ) (5,245 ) (13,434 ) (9,925 )
Restructuring and other items - - (542 ) -
Finance cost, net (5,323 ) (6,489 ) (10,988 ) (13,031 )
Income tax (8,707 ) (10,501 ) (18,126 ) (18,049 )
Net earnings $ 21,832 $ 17,475 $ 48,652 $ 42,032
Identifiable Assets Goodwill Depreciation & Amortization Capital Expenditures
Six months ended
June 30
Six months ended
June 30
June 30
2011
December 31
2010
June 30
2011
December 31
2010
2011 2010 2011 2010
Label $ 1,183,761 $ 1,118,220 $ 339,376 $ 337,792 $ 37,975 $ 36,280 $ 49,784 $ 34,742
Container 165,774 165,097 12,731 12,735 7,012 7,136 2,145 3,435
Tube 49,250 51,940 - - 3,541 3,769 1,847 411
Corporate 202,782 284,447 - - 414 152 147 29
Total $ 1,601,567 $ 1,619,704 $ 352,107 $ 350,527 $ 48,942 $ 47,337 $ 53,923 $ 38,617

Contact Information

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

    CCL Industries Inc.
    Janis M. Wade
    Senior Vice President, Human Resources
    and Corporate Communications
    416-756-8509
    www.cclind.com