SOURCE: CCL Industries Inc.

CCL Industries Inc.

July 31, 2015 08:00 ET

CCL Industries Reports Record Quarterly Results

TORONTO, ON--(Marketwired - July 31, 2015) - CCL Industries Inc. (TSX: CCL.A) (TSX: CCL.B)

Second Quarter Highlights

  • Record quarterly adjusted basic earnings per Class B share(3) of $2.12, up 30.1%; basic earnings per Class B share of $2.12, up 31.7%
  • Operating income(1) increased 37.4%; strong Avery and CCL Label performances
  • Sales increased 10.9% supported by 4.0% CCL Label organic sales growth
  • Board approves 2015 third quarter dividend of $0.375 per Class B share

Six-Months Highlights

  • Year-to-date adjusted basic earnings per Class B share(3) of $4.11, up 28.8%; basic earnings per Class B share of $4.09, up 29.8%
  • Avery delivers 3.8% organic sales growth and $72 million operating income(1)
  • CCL Label delivers 3.9% organic sales growth and operating income(1) up 22.6%

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 second quarter results.

Sales for the second quarter of 2015 increased 10.9% to $721.5 million, compared to $650.4 million for the second quarter of 2014, with 2.2% organic growth, 4.1% positive currency translation impact and 4.6% from the five acquisitions completed since the second quarter of 2014.

Operating income(1) for the second quarter of 2015 was $122.6 million, an increase of 37.4% compared to $89.2 million for the comparable quarter of 2014. Excluding the impact of currency translation operating income improved 32.9%.

No expense for restructuring and other items was recorded for the second quarter of 2015. The 2014 second quarter included restructuring and other items of $1.1 million primarily related to the Sancoa acquisition and severance costs associated with the DES acquisition.

Net earnings improved 32.5% to $73.3 million for the 2015 second quarter compared to $55.3 million for the 2014 second quarter. Basic and adjusted basic earnings per Class B share(3) were a record $2.12, compared to basic and adjusted basic earnings per Class B share(3) of $1.61 and $1.63 in the prior year second quarter.

For the six-month period ended June 30, 2015, sales, operating income and net earnings improved 13.3%, 34.9% and 31.0% to $1,427.4 million, $239.7 million and $141.4 million, respectively, compared to the same six-month period in 2014. 2015 included results from seven acquisitions completed since January 1, 2014, delivering acquisition related growth for the period of 5.2%. Organic sales growth of 3.8% provided the foundation for solid profit improvement and foreign currency translation added $0.14 per share. For the six-month period ended June 30, 2015, adjusted basic earnings was $4.11 per share compared to $3.19 per share for the 2014 six-month period.

Geoffrey T. Martin, President and Chief Executive Officer, commented, "Results for the second quarter and first six months of this year surpassed high expectations with all Segments contributing meaningfully culminating in record earnings per share for both periods. Comparative earnings momentum will be challenging for the coming quarter given the reduced dependence on 'back-to-school' products at Avery but 2015 should be another year of strong progress for the Company in all business lines and regions of the world. Acquisitions remain front and centre: we recently expanded CCL Design in Germany, completed a small transaction to develop our Wine business in Australia and announced an important new venture for in-mould labels in the United States."

Mr. Martin added, "Foreign currency translation added $0.06 per share for the quarter with the stronger U.S. dollar partly offset by the weaker euro and Latin American currencies. Transaction challenges further diluted the gain in certain foreign countries due to the impact of the higher U.S. dollar on imported materials and the export price effect of the lower euro. Current Canadian dollar exchange rates would provide a currency translation tailwind for the second half of 2015."

Mr. Martin concluded, "Our balance sheet remains in excellent condition with the Company's leverage ratio(4) coming in just below 1.0 times EBITDA(2) resulting in capacity to execute our future growth plans significantly in excess of the Company's current undrawn credit facilities of $275 million. Given the Company's expectation of sustained 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 September 16, 2015, to be paid on September 30, 2015."

2015 Second Quarter Highlights

CCL Label

  • Sales increased 10.6% to $468.9 million, with 4.0% organic growth, 4.0% acquisitions, 2.6% currency translation.
  • Regional organic sales growth: mid-single digit in Europe, strong double digit in Latin America, flat in North America partly offset by mid-single digit decline in Asia Pacific.
  • Operating income margin(1) up 210 basis points to 15.3%. Gains in all regions and business lines with Food & Beverage and CCL Design especially strong.
  • Label joint ventures added $0.02 earnings per Class B share.

Avery

  • Sales increased 13.8% to $198.2 million, 7.2% from acquisitions, 7.6% related to currency translation partially offset by 1.0% product line eliminations.
  • Solid organic sales growth in the Printable Media category globally offset declines in lower margin 'back-to-school' sales in the United States.
  • Operating income(1) increased 60% on price and mix, marketing and new product initiatives, cost savings and productivity gains plus a foreign exchange tailwind.
  • pc/nametag acquisition contributed above expectations.

CCL Container

  • Sales increased 3.8% to $54.4 million driven by currency translation.
  • Price and mix partly offset volume decline in the United States and drove strong sales growth in Mexico. Operating income increased 12.5%.
  • Capacity consolidation project remains on schedule for end of 2016.
  • Start-up losses at the Rheinfelden Americas aluminum slug joint venture reduced earnings by $0.01 per Class B share.

CCL will hold a conference call at 11:30 a.m. EDT on July 31, 2015, to discuss these results. The analyst presentation will be posted on the Company's website.

To access this call, please dial:

416-340-2216 - 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
June 30
 As at
December 31
   2015  2014
         
         
Assets        
         
Current assets        
         
 Cash and cash equivalents  $234,720  $221,873
         
 Trade and other receivables   479,500   380,965
         
 Inventories   233,564   192,286
         
 Prepaid expenses   27,950   14,949
         
 Income taxes recoverable   1,875   11,810
         
         
Total current assets   977,609   821,883
         
Non-current assets        
         
 Property, plant and equipment   982,518   925,512
         
 Goodwill   611,513   563,730
         
 Intangible assets   246,213   226,567
         
 Deferred tax assets   4,835   4,183
         
 Equity accounted investments   58,735   54,652
         
 Other assets   26,154   21,848
         
Total non-current assets   1,929,968   1,796,492
         
Total assets  $2,907,577  $2,618,375
       
Liabilities        
         
Current liabilities        
         
 Trade and other payables  $ 566,285  $519,440
         
 Current portion of long-term debt   200,458   59,058
         
 Income taxes payable   43,067   21,419
         
 Derivative instruments   953   280
         
Total current liabilities   810,763   600,197
         
Non-current liabilities        
         
 Long-term debt   495,334   600,011
         
 Deferred tax liabilities   50,783   43,453
         
 Employee benefits   149,797   138,594
         
 Provisions and other long-term liabilities   19,565   19,413
         
 Derivative instruments   577   488
         
Total non-current liabilities   716,056   801,959
         
Total liabilities   1,526,819   1,402,156
         
Equity        
        
 Share capital   255,287   248,087
        
 Contributed surplus   32,401   26,241
        
 Retained earnings   1,054,019   938,526
        
 Accumulated other comprehensive income   39,051   3,365
        
Total equity attributable to shareholders of the Company   1,380,758   1,216,219
       
Total liabilities and equity  $2,907,577  $2,618,375
       
       
       

CCL Industries Inc.
Consolidated income statements
Unaudited

    
   Three Months Ended
 June 30
 Six Months Ended
June 30
             
In thousands of Canadian dollars, except per share information  2015  2014  2015  2014
                 
Sales  $721,494  $650,402  $1,427,364  $1,260,102
                 
Cost of sales   514,706   476,264   1,022,354   925,007
                 
Gross profit   206,788   174,138   405,010   335,095
             
Selling, general and administrative expenses   97,216   92,298   191,705   170,923
                 
Restructuring and other items   -   1,095   940   2,041
                 
Earnings in equity accounted investments   (245)   (975)   (763)   (1,044)
                 
    109,817   81,720   213,128   163,175
                 
Finance cost   6,718   6,477   13,424   13,351
                 
Finance income   (505)   (179)   (901)   (330)
                 
Net finance cost   6,213   6,298   12,523   13,021
                 
Earnings before income tax   103,604   75,422   200,605   150,154
                 
Income tax expense   30,336   20,094   59,191   42,264
                 
Net earnings  $73,268  $55,328  $141,414  $107,890
                 
Attributable to:                
                 
 Shareholders of the Company  $73,268  $55,328  $141,414  $107,890
                 
Net earnings  $73,268  $55,328  $141,414  $107,890
                 
Earnings per share                
                 
Basic earnings per Class B share  $2.12  $1.61  $4.09  $3.15
                 
Diluted earnings per Class B share  $2.09  $1.58  $4.02  $3.09
                 
             
             

CCL Industries Inc.
Consolidated statements of cash flows
Unaudited

     
   Three Months Ended
June 30
 Six Months Ended
June 30
       
In thousands of Canadian dollars  2015  2014  2015  2014
               
Cash provided by (used for)              
               
Operating activities              
               
Net earnings  $73,268  $55,328  $141,414  $107,890
                 
Adjustments for:                
                 
 Depreciation and amortization   39,279   37,049   78,684   72,556
                 
 Earnings in equity accounted investments, net of dividends received   (34)   (975)   (552)   (1,044)
                 
 Net finance costs   6,213   6,298   12,523   13,021
                 
 Current income tax expense   34,340   21,696   56,780   41,961
                 
 Deferred taxes   (4,004)   (1,602)   2,411   303
                  
 Equity-settled share-based payment transactions   3,851   2,359   6,274   5,810
                 
 Gain on sale of property, plant and equipment   (642)   (220)   (958)   (70)
                 
    152,271   119,933   296,576   240,427
                 
 Change in inventories   (16,382)   (12,833)   (36,469)   (28,722)
                 
 Change in trade and other receivables   (15,042)   (12,497)   (94,014)   (53,963)
                 
 Change in prepaid expenses   (13,422)   (5,678)   (12,652)   (5,675)
                 
 Change in trade and other payables   24,219   31,498   36,999   20,461
                 
 Change in income taxes receivable and payable   445   (2,045)   (292)   29
                 
 Change in employee benefits   3,309   572   11,186   7,540
                 
 Change in other assets and liabilities   (7,427)   (5,370)   (5,927)   (12,370)
                 
    127,971   113,580   195,407   167,727
                 
Net interest paid   (1,394)   (2,603)   (11,840)   (13,086)
                 
Income taxes paid   (15,228)   (25,999)   (24,905)   (42,599)
                 
Cash provided by operating activities   111,349   84,978   158,662   112,042
                 
               
Financing activities              
               
Proceeds on issuance of long-term debt  $341  $13,331  $47,023  $111,592
                 
Repayment of debt   (38,686)   (45,741)   (52,519)   (47,849)
                 
Proceeds from issuance of shares   2,403   1,046   6,005   4,784
                 
Dividends paid   (13,044)   (8,606)   (26,065)   (17,206)
                 
                 
Cash (used for) provided by financing activities   (48,986)   (39,970)   (25,556)   51,321
                 
                 
                 
Investing activities                
                 
Additions to property, plant and equipment  $(34,928)  $(24,269)  $(91,593)  $(84,147)
                 
Proceeds on disposal of property, plant and equipment   1,834   238   2,445   5,652
                 
Business acquisitions and other long-term investments   189   -   (38,623)   (86,924)
                 
                 
Cash used for investing activities   (32,905)   (24,031)   (127,771)   (165,419)
                 
                 
                 
Net increase (decrease) in cash and cash equivalents   29,458   20,977   5,335   (2,056)
                ,
Cash and cash equivalents at beginning of period   205,993   193,843   221,873   209,095
                 
Translation adjustments on cash and cash equivalents   (731)   (6,517)   7,512   1,264
                 
Cash and cash equivalents at end of the period  $234,720  $208,303  $234,720  $208,303
                 
             
             

CCL Industries Inc.
Segment Information
Unaudited

In thousands of Canadian dollars

   Three Months Ended June 30  Six Months Ended June 30
   Sales  Operating income  Sales  Operating income
   2015  2014  2015  2014  2015  2014  2015  2014
                         
Label  $468,900  $423,758  $72,001  $55,983  $955,031  $847,498  $153,793  $125,370
                         
Avery   198,168   174,200   45,277   28,405   358,358   307,123   71,837   41,548
                         
Container   54,426   52,444   5,354   4,804   113,975   105,481   14,068   10,828
                         
Total operations  $721,494  $650,402   122,632   89,192  $1,427,364  $1,260,102   239,698   177,746
                                 
Corporate expense           (13,060)   (7,352)           (26,393)   (13,574)
                         
Restructuring and other items   -   (1,095)           (940)   (2,041)
                         
Earnings in equity accounted investments   245   975           763   1,044
                   
Finance cost           (6,718)   (6,477)           (13,424)   (13,351)
                         
Finance income           505   179           901   330
                         
Income tax expense       (30,336)   (20,094)           (59,191)   (42,264)
                      
Net earnings          $73,268  $55,328          $141,414  $107,890
                                 
                         
                         
   Total assets  Total liabilities  Depreciation and amortization  Capital expenditures
                   
   June 30  December 31  June 30  December 31  Six Months Ended June 30  Six Months Ended June 30
   2015  2014  2015  2014  2015  2014  2015  2014
                                 
Label  $1,800,679  $1,668,565  $452,237  $436,527  $63,588  $58,498  $79,729  $65,625
                                 
Avery   615,404   490,337   214,233   189,567   7,098   6,689   8,676   5,700
                         
Container   162,784   162,460   60,137   54,701   7,520   6,965   3,188   12,822
                                 
Equity accounted investments   58,735   54,652   -   -   -   -   -   -
                         
Corporate   269,975   242,361   800,212   721,361   478   404   -   -
                         
Total  $2,907,577  $2,618,375  $1,526,819  $1,402,156  $78,684  $72,556  $91,593  $84,147
                                 

Subsequent Events

In July 2015, the Company acquired Fritz Brunnhoefer GmbH in Nurnberg, Germany, for a net cash purchase price of $7.8 million, inclusive of the cost of a manufacturing facility. The Company also acquired the assets of Phoenix Label House in the Riverina wine region of Australia for AUD 1.2 million.

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
June 30
 Six months ended
 June 30
Sales  2015  2014  2015  2014
         
Label  $468.9  $423.8  $955.0  $847.5
             
Avery   198.2   174.2   358.4   307.1
             
Container   54.4   52.4   114.0   105.5
             
Total sales  $721.5  $650.4  $1,427.4  $1,260.1
             
Operating income                
                 
Label  $71.9  $56.0  $153.8  $125.4
                 
Avery   45.3   28.4   71.8   41.5
                 
Container   5.4   4.8   14.1   10.8
                 
Total operating income   122.6   89.2   239.7   177.7
                 
Less: Corporate expenses   (13.0)   (7.4)   (26.4)   (13.5)
                 
Add: Depreciation & amortization   39.3   37.0   78.7   72.6
                 
                 
EBITDA  $148.9  $118.8  $292.0  $236.8
                 
Label operating margin           16.1%   14.8%
                 

(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    
(In millions of Canadian dollars)      
   Three months ended 
June 30
 Six months ended 
June 30

             
   2015  2014  2015  2014
Basic earnings per Class B Share  $2.12  $1.61  $4.09  $3.15
Net loss from restructuring and other items   -   0.02   0.02   0.04
                 
Adjusted Basic Earnings per Class B Share  $2.12  $1.63  $4.11  $3.19
                 

(4) Leverage Ratio is a measure that indicates the financial leverage of the Company. It 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)
  June 30, 2015
    
Current debt $200.5
   
Long-term debt  495.3
   
Total debt  695.8
   
Cash and cash equivalents  (234.7)
   
Net debt $461.1
   
EBITDA for 12 months ending June 30, 2015 (see below) $536.8
    
Leverage Ratio  0.9
    
EBITDA for 12 months ended December 31, 2014 $481.6
   
 less: EBITDA for six months ended June 30, 2014  (236.8)
    
 add: EBITDA for six months ended June 30, 2015  292.0
    
EBITDA for 12 months ended June 30, 2015 $536.8
   
   
   

Supplemental Financial Information

Sales Change Analysis
Revenue Growth Rates (%)

               
Three Months Ended June 30, 2015 Six Months Ended June 30, 2015
  Organic Acquisition FX   Organic Acquisition FX  
  Growth Growth Translation Total Growth Growth Translation Total
                 
Label 4.0 4.0 2.6 10.6 3.9 5.6 3.2 12.7
Avery (1.0) 7.2 7.6 13.8 3.8 6.0 6.9 16.7
Container (1.0) - 4.8 3.8 2.9 - 5.2 8.1
CCL 2.2 4.6 4.1 10.9 3.8 5.2 4.3 13.3
                 
                 

Voting Results from 2015 Annual General and Special Shareholders' Meeting

A total of 2,245,574 Class A Voting Shares representing 94.85% of the Company's issued and outstanding Class A Voting Shares, were voted in connection with the Annual and Special Shareholders' Meeting (the "Meeting) held on May 7, 2015. All matters put forth at the Meeting, including the election of nine (9) directors, the appointment of auditors and authorization of the directors to fix the remuneration of such auditors and the amendment to the CCL Industries Inc. Employee Stock Option Plan were approved as detailed in the Company's filing on www.sedar.com.

Each of the director nominees proposed by the Company in its Management Information Circular dated March 16, 2015 was elected as a director of CCL Industries Inc. as follows:

   
Nominee % of Votes For % Withheld
Paul J. Block 100 0
Edward E. Guillet 100 0
Alan D. Horn 100 0
Kathleen L. Keller-Hobson 100 0
Donald G. Lang 100 0
Stuart W. Lang 100 0
Geoffrey T. Martin 100 0
Thomas C. Peddie 100 0
Mandy Shapansky 100 0
   

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 July 31, 2015, at 6:00 p.m. EDT until August 14, 2015, at 11:59 p.m. EDT.

To access Conference Replay, please dial:

905-694-9451 - Local
1-800-408-3053 - Toll Free
Access Code: 9562476

Contact Information

  • For more information on CCL, visit our website - Email contact or contact:

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