SOURCE: CCL Industries Inc.

CCL Industries Inc.

November 05, 2015 07:30 ET

CCL Industries Reports Record Quarterly Results

TORONTO, ON--(Marketwired - November 05, 2015) - CCL Industries Inc. (TSX: CCL.A) (TSX: CCL.B)

Third Quarter Highlights

  • Record quarterly basic and adjusted basic earnings per Class B share(3) of $2.36 and $2.34, up 29.0% and 27.9% respectively; includes $0.21 currency tailwind
  • Sales increased 17.9% supported by 6.9% CCL Label organic sales growth
  • Operating income(1) increased 25.3% driven by strong CCL Label and CCL Container performances with Avery meeting expectations

Nine-Month Highlights

  • Year-to-date basic and adjusted basic earnings per Class B share(3) of $6.45, up 29.5% and 28.5%, respectively
  • Avery delivers 15.6% sales growth and 37.1% operating income(1) improvement
  • Board approves 2015 fourth quarter dividend of $0.375 per Class B share

CCL Industries Inc. ("CCL" or "the Company"), a world leader in specialty label and packaging solutions for global corporations, small businesses and consumers, today reported 2015 third quarter results.

Sales for the third quarter of 2015 increased 17.9% to $812.9 million, compared to $689.7 million for the third quarter of 2014, with 3.4% organic growth, 10.7% positive currency translation impact and 3.8% from the six acquisitions completed since the second quarter of 2014.

Operating income(1) for the third quarter of 2015 was $134.3 million, an increase of 25.3% compared to $107.2 million for the comparable quarter of 2014. Excluding the impact of currency translation operating income improved 14.2%.

Restructuring and other items of $0.9 million was reported for the third quarter of 2015. This consisted of $4.5 million restructuring charge related to the previously announced Avery reorganization and plant closure in Meridian, Mississippi, offset by $3.6 million of contingent consideration foregone related to the acquisition of DekoPak Ambalaj San. Ve Tic. A.S. in Turkey. No expense for restructuring and other items was recorded in the 2014 third quarter.

Net earnings improved 29.6% to $81.8 million for the 2015 third quarter compared to $63.1 million for the 2014 third quarter. Basic and adjusted basic earnings per Class B share(3) were a record $2.36 and $2.34, respectively, compared to basic and adjusted basic earnings per Class B share(3) of $1.83 in the prior year third quarter.

For the nine-month period ended September 30, 2015, sales, operating income and net earnings improved 14.9%, 31.3% and 30.5% to $2,240.3 million, $374.0 million and $223.2 million, respectively, compared to the same nine-month period in 2014. Results for the 2015 nine-month period include results from eight acquisitions completed since January 1, 2014, delivering acquisition related sales growth for the period of 4.7%. Solid organic sales growth averaging 3.7% persisted through the nine months of 2015 driving sound profit improvement while foreign currency translation added $0.35 per share. For the nine-month period ended September 30, 2015, adjusted basic earnings was $6.45 per share compared to $5.02 per share for the 2014 nine-month period.

Geoffrey T. Martin, President and Chief Executive Officer, commented, "Results for the third quarter and 2015-to-date exceeded expectations in spite of the uncertain global economic environment. Per our outlook commentary at the end of the second quarter, Avery sales were impacted by the decision to exit certain product lines in the back-to-school category, especially low margin economy ring binders, while the Printable Media business continued to post solid results. Strong performances from both the Label and Container segments drove record earnings per share for the quarter. We continue to expand CCL Label's capabilities with the recently completed acquisition of Sennett Security Products specializing in high security labels, stamps, identity cards and document components."

Mr. Martin added, "Foreign currency translation added $0.21 per share for the quarter with the stronger U.S. dollar partly offset by weaker Latin American currencies. Current Canadian dollar exchange rates would provide a currency translation tailwind for the balance of the year."

Mr. Martin concluded, "We reduced our drawn debt in the past quarter bringing the Company's leverage ratio(4) firmly below 1.0 times EBITDA(2) and purchased Sennett Security Products early in the fourth quarter with cash-on-hand. Therefore our $300 million revolving credit facility remains principally untapped leaving significant capacity to execute future growth plans including both bolt-on and transformative acquisitions. Given the Company's outlook and strong free cash flow, the Board of Directors declared a continuation of the $0.375 per Class B non-voting share and $0.3625 per Class A voting share dividend, payable to shareholders of record at the close of business on December 11, 2015, to be paid on December 22, 2015."

2015 Third Quarter Highlights

CCL Label

  • Sales increased 19.4% to $522.2 million, with 6.9% organic growth, 3.1% acquisitions, 9.4% positive currency translation.
  • Regional organic sales growth: mid-single digit in North America, high single digit in Europe, low single digit in Asia Pacific and strong double digit in Latin America.
  • Operating income margin(1) up 200 basis points to 15.6%. Gains in all regions and business lines, especially Food & Beverage and Home & Personal Care.
  • Label joint ventures added $0.04 earnings per Class B share.

Avery

  • Sales increased 13.9% to $233.1 million, 6.3% from acquisitions, 14.0% positive currency translation partially offset by 6.4% organic sales decline, largely due to lower back-to-school volumes in North America.
  • Printable Media posted solid profitability globally, broadly in-line with prior year.
  • Operating income(1) increased 3.8%, principally on a foreign exchange tailwind.
  • pc/nametag acquisition continues to perform ahead of expectations.

CCL Container

  • Sales increased 21.0% to $57.6 million driven by 13.4% organic growth and 7.6% positive currency translation.
  • Favourable mix and exchange rates accompanied by lower aluminum costs drove improved results with operating income doubling over prior year.
  • At current U.S. dollar exchange rates the capacity consolidation project remains delayed until at least the end of 2016.
  • Start-up losses at the Rheinfelden Americas aluminum slug joint venture reduced earnings by less than $0.01 per Class B share.

CCL will hold a conference call at 9:00 a.m. EST on November 5, 2015, to discuss these results. The analyst presentation will be posted on the Company's website.

To access this call, please dial:

416-340-2219 -- Local
1-866-225-2055 -- Toll Free

Forward-looking Statements

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

Forward-looking statements are not guarantees of future performance. They involve known and unknown risks and uncertainties relating to future events and conditions including, but not limited to, the after-effects of the global financial crisis and its impact on the world economy and capital markets; the impact of competition; consumer confidence and spending preferences; general economic and geopolitical conditions; currency exchange rates; interest rates and credit availability; technological change; changes in government regulations; risks associated with operating and product hazards; and CCL's ability to attract and retain qualified employees. Do not unduly rely on forward-looking statements as the Company's actual results could differ materially from those anticipated in these forward-looking statements. Forward-looking statements are also based on a number of assumptions, which may prove to be incorrect, including, but not limited to, assumptions about the following: global economic recovery and higher consumer spending; improved customer demand for the Company's products; continued historical growth trends, market growth in specific sectors and entering into new sectors; the Company's ability to provide a wide range of products to multinational customers on a global basis; the benefits of the Company's focused strategies and operational approach; the achievement of the Company's plans for improved efficiency and lower costs, including stable aluminum costs; the availability of cash and credit; fluctuations of currency exchange rates; the Company's continued relations with its customers; 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 2014 Annual Report, Management's Discussion and Analysis, particularly under Section 4: "Risks and Uncertainties." CCL's annual and quarterly reports can be found online at www.cclind.com and www.sedar.com or are available upon request.

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

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

 
Financial Information
 
CCL Industries Inc.
Consolidated statements of financial position
Unaudited
 
In thousands of Canadian dollars     
  As at
September 30
 As at
December 31
  2015  2014
      
Assets         
          
Current assets         
          
 Cash and cash equivalents $ 298,757  $ 221,873
          
 Trade and other receivables   501,789    380,965
          
 Inventories   230,110    192,286
          
 Prepaid expenses   20,201    14,949
          
 Income taxes recoverable   1,085    11,810
          
          
Total current assets   1,051,942    821,883
          
Non-current assets         
          
 Property, plant and equipment   1,013,324    925,512
          
 Goodwill   639,666    563,730
          
 Intangible assets   263,351    226,567
          
 Deferred tax assets   13,693    4,183
          
 Equity accounted investments   57,546    54,652
          
 Other assets   26,192    21,848
          
Total non-current assets   2,013,772    1,796,492
          
Total assets $ 3,065,714  $ 2,618,375
          
Liabilities         
          
Current liabilities         
          
 Trade and other payables $ 590,795  $ 519,440
          
 Current portion of long-term debt   213,674    59,058
          
 Income taxes payable   47,778    21,419
          
 Derivative instruments   1,481    280
          
Total current liabilities   853,728    600,197
          
Non-current liabilities         
          
 Long-term debt   492,878    600,011
          
 Deferred tax liabilities   46,603    43,453
          
 Employee benefits   161,655    138,594
          
 Provisions and other long-term liabilities   14,118    19,413
          
 Derivative instruments   580    488
          
Total non-current liabilities   715,834    801,959
          
Total liabilities   1,569,562    1,402,156
          
Equity         
      
 Share capital   269,992    248,087
       
 Contributed surplus   27,859    26,241
       
 Retained earnings   1,122,748    938,526
       
 Accumulated other comprehensive income   75,553    3,365
       
Total equity attributable to shareholders of the Company   1,496,152    1,216,219
      
Total liabilities and equity $ 3,065,714  $ 2,618,375
 
 
CCL Industries Inc.
Consolidated income statements
Unaudited
 
   Three Months Ended
 September 30
 Nine Months Ended
September 30
              
In thousands of Canadian dollars, except per share information   2015 2014  2015   2014
              
Sales $ 812,907 $ 689,691  $ 2,240,271 $ 1,949,793
                  
Cost of sales   587,664   502,159    1,610,018   1,427,166
                  
Gross profit   225,243   187,532    630,253   522,627
          
Selling, general and administrative expenses  103,319   91,603    295,024   262,526
                  
Restructuring and other items   864   -    1,804   2,041
                  
Earnings in equity accounted investments   (1,100)   (516)    (1,863)   (1,560)
                  
    122,160   96,445    335,288   259,620
                  
Finance cost   7,048   6,864    20,472   20,215
                  
Finance income   (709)   (373)    (1,610)   (703)
                  
Net finance cost   6,339   6,491    18,862   19,512
                  
Earnings before income tax   115,821   89,954    316,426   240,108
                  
Income tax expense   34,027   26,872    93,218   69,136
                  
Net earnings $ 81,794 $ 63,082  $ 223,208 $ 170,972
                  
Attributable to:                 
                  
 Shareholders of the Company $ 81,794 $ 63,082  $ 223,208 $ 170,972
                  
Net earnings $ 81,794 $ 63,082  $ 223,208 $ 170,972
                  
Earnings per share                 
                  
Basic earnings per Class B share $ 2.36 $ 1.83  $ 6.45 $ 4.98
                  
Diluted earnings per Class B share $ 2.33 $ 1.79  $ 6.35 $ 4.88
 
 
CCL Industries Inc.
Consolidated statements of cash flows
Unaudited
    
  Three Months Ended
S
eptember 30
 Nine Months Ended
September 30
      
In thousands of Canadian dollars 2015 2014  2015 2014
       
Cash provided by (used for)      
       
Operating activities      
       
Net earnings $ 81,794 $ 63,082  $ 223,208 $ 170,972
                 
Adjustments for:                
                 
 Depreciation and amortization   41,296   37,229   119,980   109,785
                 
 Earnings in equity accounted investments, net of dividends received   1,548   1,672   996   628
                 
 Net finance costs   6,339   6,491   18,862   19,512
                 
 Current income tax expense   46,982   25,709   103,762   67,670
                 
 Deferred taxes   (12,955)   1,163   (10,544)   1,466
                 
 Equity-settled share-based payment transactions   1,074   4,402   7,348   10,212
                 
 (Gain) loss on sale of property, plant and equipment   1   (369)   (957)   (439)
                 
    166,079   139,379   462,655   379,806
                 
 Change in inventories   4,209   24,915   (32,260)   (3,807)
                 
 Change in trade and other receivables   (22,049)   20,495   (116,063)   (33,468)
                 
 Change in prepaid expenses   7,824   1,127   (4,828)   (4,548)
                 
 Change in trade and other payables   28,795   (17,253)   65,794   3,208
                 
 Change in income taxes receivable and payable   (332)   (101)   (624)   (72)
                 
 Change in employee benefits   11,875   2,072   23,061   9,612
                 
 Change in other assets and liabilities   (7,988)   5,421   (13,915)   (6,949)
                 
    188,413   176,055   383,820   343,782
                 
Net interest paid (10,590)
 (10,119)
  (22,430)
 (23,205)
                 
Income taxes paid   (42,706)   (17,327)   (67,611)   (59,926)
                 
          
Cash provided by operating activities   135,117   148,609   293,779   260,651
       
     
Financing activities      
       
Proceeds on issuance of long-term debt   8,792   17,969    55,815   129,561
                 
Repayment of debt   (45,714)   (118,508)   (98,233)   (166,357)
                 
Proceeds from issuance of shares   6,755   2,432   12,760   7,216
                 
Dividends paid   (13,100)   (10,361)   (39,165)   (27,567)
                 
                 
Cash used for financing activities   (43,267)   (108,468)   (68,823)   (57,147)
                 
                 
Investing activities                
                 
Additions to property, plant and equipment   (38,807)   (26,442)   (130,400)   (110,589)
                 
Proceeds on disposal of property, plant and equipment   10,131   7,716   12,576   13,368
                 
Business acquisitions and other long-term investments   (7,833)   (15,199)   (46,456)   (102,123)
                 
                 
Cash used for investing activities   (36,509)   (33,925)   (164,280)   (199,344)
                 
                 
Net increase in cash and cash equivalents   55,341   6,216   60,676   4,160
                 
Cash and cash equivalents at beginning of period   234,720   208,303   221,873   209,095
                 
Translation adjustments on cash and cash equivalents   8,696   1,507   16,208   2,771
                 
Cash and cash equivalents at end of the period$298,757$216,026
 $298,757$216,026
 
 
CCL Industries Inc.
Segment Information
Unaudited
 
In thousands of Canadian dollars
     
   Three Months Ended September 30  Nine Months Ended September 30
   Sales  Operating income  Sales  Operating income
   2015  2014  2015  2014  2015  2014  2015  2014
Label  $ 522,198  $ 437,431  $ 81,612  $ 59,392  $ 1,477,229  $ 1,284,929  $ 235,405  $ 184,762
Avery    233,082    204,671    46,532    44,782    591,440    511,794    118,369    86,330
Container    57,627    47,589    6,197    2,979    171,602    153,070    20,265    13,807
Total operations  $ 812,907  $ 689,691    134,341    107,153  $ 2,240,271  $ 1,949,793    374,039    284,899
                                 
Corporate expense            (12,417)    (11,224)            (38,810)    (24,798)
Restructuring and other items          (864)    -            (1,804)    (2,041)
Earnings in equity accounted investments          1,100    516            1,863    1,560
Finance cost            (7,048)    (6,864)            (20,472)    (20,215)
Finance income            709    373            1,610    703
Income tax expense           (34,027)    (26,872)            (93,218)    (69,136)
Net earnings          $ 81,794  $ 63,082          $ 223,208  $ 170,972
             
             
  Total assets
 Total liabilities  Depreciation and amortization Capital expenditures
   September 30  December 
31
 September 30  December 
31
 Nine Months Ended September 30  Nine Months Ended September 30
   2015  2014  2015  2014  2015  2014  2015  2014
                         
Label  $ 1,900,167  $ 1,668,565  $ 487,891  $ 436,527  $ 96,711  $ 88,799  $ 111,969  $ 85,369
                                         
Avery    604,885    490,337    213,074    189,567    11,171    9,929    10,728    7,978
                                         
Container    168,490    162,460    61,172    54,701    11,352    10,458    7,703    17,242
                                         
Equity accounted investments    57,546    54,652    -    -    -    -    -    -
                                         
Corporate    334,626    242,361    807,425    721,361    746    599    -    -
                                         
Total  $ 3,065,714  $ 2,618,375  $ 1,569,562  $ 1,402,156  $ 119,980  $ 109,785  $ 130,400  $ 110,589
                         

Non-IFRS Measures

(1) Operating income and operating income margin are key non-IFRS financial measures used to assist in understanding the profitability of the Company's business units. Operating income is defined as earnings before corporate expenses, net finance cost, goodwill impairment loss, earnings in equity accounted investments, restructuring and other items, and taxes. Operating income margin is defined as operating income over sales.

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

 
Reconciliation of operating income to EBITDA
 
Unaudited
(In millions of Canadian dollars)
 Three months ended Nine months ended
 September 30
 September 30
Sales 2015  2014  2015  2014
            
Label $522.2  $437.4  $1,477.2  $1,284.9
            
Avery  233.1   204.7   591.5   511.8
            
Container  57.6   47.6   171.6   153.1
            
Total sales $812.9  $689.7  $2,240.3  $1,949.8
            
Operating income               
                
Label $81.6  $59.4  $235.4  $184.8
                
Avery  46.5   44.8   118.3   86.3
                
Container  6.2   3.0   20.3   13.8
                
Total operating income  134.3   107.2   374.0   284.9
                
Less: Corporate expenses  (12.4)   (11.3)   (38.8)   (24.8)
                
Add: Depreciation & amortization  41.3   37.2   120.0   109.8
                
                
EBITDA $163.2  $133.1  $455.2  $369.9
                
Label operating income margin  15.6%   13.6%        
            

(3) Adjusted basic earnings per Class B Share is an important non-IFRS financial measure used to assist in understanding the ongoing earnings performance of the Company excluding items of a one-time or non-recurring nature. It is not considered a substitute for basic net earnings per Class B share but it does provide additional insight into the ongoing financial results of the Company. This non-IFRS financial measure is defined as basic net earnings per Class B share excluding gains on dispositions, goodwill impairment loss, restructuring and other items, and tax adjustments.

 
Reconciliation of Basic Earnings per Class B Share to
Adjusted Basic Earnings per Class B Share
 
Unaudited
 
  Three months ended
September 30
 Nine months ended
September 30
            
  2015  2014  2015  2014
Basic earnings per Class B Share $ 2.36  $ 1.83  $ 6.45  $ 4.98
Net loss from restructuring and other items   0.02    -    -    0.04
               
Adjusted Basic Earnings per Class B Share $ 2.34  $ 1.83  $ 6.45  $ 5.02
            

(4) Leverage Ratio is a measure that indicates the Company's ability to service its existing debt. Leverage ratio is calculated as net debt divided by EBITDA.

 
Unaudited
(In millions of Canadian dollars)
  
   September 30, 2015
     
Current debt $ 213.7
     
Long-term debt   492.9
     
Total debt   706.6
     
Cash and cash equivalents   298.8
     
Net debt $ 407.8
     
EBITDA for 12 months ending September 30, 2015 (see below) $ 566.9
     
Leverage Ratio   0.7
   
EBITDA for 12 months ended December 31, 2014 $ 481.6
    
 less: EBITDA for nine months ended September 30, 2014   (369.9)
    
 add: EBITDA for nine months ended September 30, 2015   455.2
   
EBITDA for 12 months ended September 30, 2015   566.9
 
 
Supplemental Financial Information
 
Sales Change Analysis
Revenue Growth Rates (%)
                    
  Three Months Ended September 30, 2015   Nine Months Ended September 30, 2015
   Organic Acquisition FX     Organic Acquisition FX  
   Growth Growth Translation Total   Growth Growth Translation Total
                    
Label  6.9% 3.1% 9.4% 19.4%   4.9% 4.8% 5.3% 15.0%
Avery  (6.4%) 6.3% 14.0% 13.9%   (0.3%) 6.1% 9.8% 15.6%
Container  13.4% 0.0% 7.6% 21.0%   6.3% - 5.8% 12.1%
CCL  3.4% 3.8% 10.7% 17.9%   3.7% 4.7% 6.5% 14.9%
                    
                    

Business Description

With headquarters in Toronto, Canada, CCL Industries now employs approximately 11,000 people and operates 105 production facilities in 29 countries on six continents with corporate offices in Toronto, Canada, and Framingham, Massachusetts. CCL Label is the world's largest converter of pressure sensitive and extruded film materials for a wide range of decorative, instructional and functional applications for large global customers in the consumer packaging, healthcare, automotive and consumer durables markets. Extruded & laminated plastic tubes, folded instructional leaflets, precision printed & die cut metal components with LED displays and other complementary products and services are sold in parallel to specific end-use markets. Avery is the world's largest supplier of labels, specialty converted media and software solutions to enable short run digital printing in businesses and homes alongside complementary office products sold through distributors and mass market retailers. CCL Container is a leading producer of impact extruded aluminum aerosol cans and bottles for consumer packaged goods customers in the United States, Canada and Mexico.

Audio replay service will be available from November 5, 2015, at 6:00 p.m. EST until December 4, 2015, at 11:59 p.m. EST.

To access Conference Replay, please dial:

905-694-9451 -- Local
800-408-3053 -- Toll Free
Access Code: 5150372

Contact Information

  • For more information on CCL, visit our website -- www.cclind.com or contact:

    Sean Washchuk
    Senior Vice President and Chief Financial Officer
    416-756-8526