Stock Symbol: TSX - CCL.A and CCL.NV.B
TORONTO, Oct. 27 /CNW/ -
Dear Shareholder:
Please find enclosed the Third Quarter 2005 financial results and related
public disclosures for CCL Industries Inc. This shareholder package provides
detailed information about your Company's financial performance and business
activities.
Since the sale of CCL's North American Custom Manufacturing business in
May 2005, your Company has been very active in investing the proceeds from
this disposition in its core operations. The acquisition of Inprint Systems,
announced in September and the August announcements of the purchases of the
remaining 49% of the CCL-Pachem joint venture and the assets of Merroc Ltd.
have further enhanced CCL's Label operations in Europe and the U.S.
The Board of Directors is pleased with your Company's progress in its
specialty packaging businesses and the strategic acquisitions and capital
spending initiatives that are in support of our long-term vision.
Your Board of Directors is also pleased to approve a quarterly dividend
payable on January 3, 2006. This dividend will be payable at the same level as
the prior quarter and is a continuation of CCL's record of paying consecutive
quarterly dividends for 25 years without a reduction. The dividend is $0.10
per Class B non-voting share and $0.0875 per Class A voting share.
Conference calls with our stakeholders are always held following the
release of our quarterly results. These calls are made to ensure that all
stakeholders can gain further insight into our business in keeping with good
corporate governance practices. On September 14th, CCL held an Investors' Day
with analysts and investors by web cast to provide further information about
CCL's businesses and strategies. Presentation materials used during the
conference calls and the Investors' Day are posted on our web site and audio
recordings of the meetings are also available there. Instructions for
accessing these services are set out at the end of this earnings release.
We encourage all shareholders to access our web site www.cclind.com on a
regular basis for investor and company news including scheduled dates for
future earnings releases. If you would like to have future Press Releases
e-mailed to you at the time they are issued, please complete the Information
Request Form under the Investor Relations Section on our Web Site or write to
us at CCL to the attention of Christene Duncan.
Yours truly,
Jon K. Grant
Chairman of the Board
Investor Update
---------------
1. Third Quarter 2005 Results and Dividend Release
2. Consolidated Statements of Earnings and Retained Earnings
3. Consolidated Balance Sheets
4. Consolidated Statements of Cash Flows
5. Notes to Consolidated Financial Statements
6. Third Quarter 2005 Management's Discussion and Analysis
7. Press Release re: CCL's purchase of CCL-Pachem joint venture and the
assets of Merroc Ltd.- August 2, 2005
8. Press Release re: Acquisition of Inprint Systems- September 13, 2005
<<
Results Summary For Periods Ended September 30th
----------------------------------------------------
Three Months Nine Months
----------------------------------------------------
(Restated) (Restated)
(in millions of Cdn ---------- ----------
dollars, except per % %
share data) 2005 2004 Change 2005 2004 Change
---- ---- ------ ---- ---- ------
Sales $ 281.9 $ 220.0 28.1 $ 827.7 $ 692.7 19.5
Unusual items - net
(loss) gain - 1.4 (15.5) 1.4
Net earnings from
continuing
operations 15.3 13.6 12.5 36.5 34.2 6.7
Net earnings from
discontinued
operations, net of
tax - 5.0 5.3 11.1
Gain on sale of
discontinued
operations, net of
tax - - 107.0 -
Net earnings 15.3 18.6 148.8 45.3
Per Class B shares
Continuing
operations $ 0.48 $ 0.42 14.3 $ 1.14 $ 1.06 7.5
Discontinued
operations $ - $ 0.16 $ 0.17 $ 0.35
Gain on sale of
discontinued
operations $ - $ - $ 3.31 $ -
Class B - net
earnings $ 0.48 $ 0.58 $ 4.62 $ 1.41
Diluted earnings
per Class B $ 0.46 $ 0.57 $ 4.51 $ 1.38
Unusual items and
tax benefit on
previously
unrecognized tax
losses included in
continuing
operations net
(loss) gain $ - $ 0.13 $ (0.35) $ 0.13
Number of
outstanding shares
(in 000s)
Weighted average
for the period 32,200 32,287
Actual at period
end 32,427 32,440
Toronto, October 27, 2005 - CCL Industries Inc., a world leader in
developing manufacturing, packaging and labelling solutions for the consumer
products industry, announced today its financial results for the third quarter
ended September 30, 2005 and the declaration of its quarterly dividend.
Sales from continuing operations for the third quarter of 2005 of
$281.9 million were 28% ahead of the $220.0 million recorded in the third
quarter of 2004, while sales for the first nine months of 2005 of
$827.7 million were 20% ahead of last year's $692.7 million. Financial
comparisons to the prior year's results have continued to be negatively
affected by the appreciation of the Canadian dollar relative to the U.S.
dollar and the European currencies. Business acquisitions have positively
impacted the comparison to prior periods. Sales volume has also grown
organically in the Label and Aluminum Container Divisions and has exceeded
prior year levels as CCL continues to benefit from strong demand, particularly
in the personal care market with its multinational customers and with new
product offerings. The performance of the recent acquisitions and CCL's
expansion into new markets has also been positive. Sales volumes in the
ColepCCL joint venture and the Plastic Packaging business of the Container
Division were similar to last year's level.
Net earnings from continuing operations for the third quarter of 2005 of
$15.3 million were up by 13% from the $13.6 million recorded in the third
quarter of 2004. There were no unusual items in the third quarter of 2005. In
the third quarter of 2004, included in net earnings was a net gain from
unusual items of $1.4 million ($3.9 million after tax). For the first nine
months of 2005, net earnings from continuing operations were $36.5 million, up
7% from the $34.2 million in the comparable 2004 period. Net earnings from
continuing operations for the first nine months of 2005 were negatively
affected by unusual losses earlier this year of $15.5 million ($15.4 million
after tax) but were partially offset by a tax benefit from previously
unrecognized tax losses of $4.3 million. For the first nine months of 2004,
net earnings were positively affected by a net unusual item of $1.4 million
($3.9 million after tax).
Net earnings in the second quarter of 2005 included the gain in disposal
and the operating results of the discontinued North American Custom
Manufacturing Division ("Custom") totaling $112.3 million. In 2004, Custom's
net earnings were $5.0 million and $11.1 million for the third quarter and
year-to-date, respectively.
Earnings per Class B share from continuing operations were $0.48 in the
third quarter of 2005 compared to $0.42 earned in the same period last year.
Included in the third quarter 2004 results was a net gain from unusual items
of $0.13 per share. Earnings per share from discontinued operations were $0.16
in the third quarter of 2004. Diluted earnings per Class B share were $0.46 in
the third quarter of 2005 and $0.57 in last year's third quarter.
Earnings per Class B share for the first nine months of 2005 were $4.62
compared to $1.41 earned in the same period last year. Earnings per Class B
share from continuing operations in the first nine months of 2005 were $1.14
per share and earnings from discontinued operations were $3.48 per share,
which included the gain on sale of $3.31. Included in earnings per share from
continuing operations for the first three quarters of 2005 were unusual items
and a tax benefit for a net loss of $0.35 per share. In the first nine months
of 2004, earnings per Class B share from continuing operations were $1.06 and
it included $0.13 in earnings from unusual items. Earnings per share from
discontinued operations in the first nine months of 2005 were $0.17 compared
to $0.35 in the same period of 2004. Diluted earnings per Class B share were
$4.51 for the first nine months of 2005 and $1.38 in the comparable 2004
period.
On May 17, 2005, CCL completed the sale of Custom to KCP Income Fund for
gross proceeds of Cdn $273 million. This Division is recorded as a
Discontinued Operation and consequently, its sales and income contribution are
excluded from Continuing Operations. Historical financial information on
Continuing Operations has been restated to reflect this change.
Donald G. Lang, Vice Chairman and Chief Executive Officer said, "We are
gratified by the performance of our specialty packaging business across all
divisions. Our earnings per share from continuing operations, excluding
unusual items, in the third quarter were 66% higher than last year's
comparable period despite unfavourable currency effects. In fact, in this
quarter, we have more than replaced the earnings from our recently disposed
North American Custom Manufacturing Division with organic and acquisition
growth in our specialty packaging core. Many of our multinational customers,
particularly in the personal care markets, are enjoying higher sales levels
than last year and we are seeing growth in their new markets and geographies,
as we expand our services to meet their needs.
"In the Label Division, results continue to be very strong as our
strategy to invest in high-end equipment, new plants and accretive
acquisitions such as Steinbeis and Inprint Systems, are generating significant
earnings momentum. The acquisition of Inprint Systems in September fills out
our pan-European healthcare business and the August purchases of the remaining
49% of the CCL-Pachem joint venture and the Merroc Ltd. label business further
enhance our status in the food, beverage and specialty label segments in
Europe. The aluminum business unit of the Container Division also continues to
run at capacity including its four new lines as it strives to meet the high
growth requirements of its personal care and beverage marketers. The Plastic
Packaging unit of the Container Division has been running much more
effectively and is experiencing a more acceptable level of profitability. Our
ColepCCL joint venture, which was created just over a year ago, continues to
perform reasonably well as the benefits of this merger are being realized."
Mr. Lang added, "I am pleased to report that Geoffrey Martin, who was
recently promoted to the position of President and Chief Operating Officer of
CCL, has been appointed to the Board of Directors of CCL, effective
immediately. This appointment recognizes Geoff's significant contribution to
the Company over the last four years in expanding our business and creating
meaningful shareholder value. We look forward to his participation on the
Board as we continue to roll out our long-term strategy.
"During the quarter, Jean-RenDe Halde was appointed to the position of
President and Chief Executive Officer of the Business Development Bank of
Canada and consequently has been precluded from holding directorships with all
public and private boards in order to avoid a perception of a potential
conflict of interest. As a consequence, Mr. Halde has resigned as a Director
of CCL, a position he has held for four years. The Board and I are very
pleased that Jean-RenDe has accepted this terrific opportunity but, at the same
time, he will be greatly missed for his wisdom and diligence on CCL Board
matters."
Mr. Lang concluded, "We are feeling quite positive about our specialty
packaging business. Our outlook for the balance of the year is good as we are
hoping that our surprisingly strong third quarter performance will follow with
a reasonable fourth quarter in line with our customers' business. We are in a
good cash position and with a significant cash flow, consequently, your Board
of Directors has declared the payment of a dividend of $0.10 on the Class B
non-voting shares and $0.0875 on the Class A voting shares to shareholders of
record at the close of business on December 13th, 2005 payable on January 3rd,
2006. CCL continues its record of paying quarterly dividends without reduction
or omission for 25 years."
The Company's financial position is solid. At the end of September 2005,
cash and cash equivalents amounted to $119 million while net debt was
$293 million, which is $103 million lower than the $396 million level from a
year ago. Net debt to total capitalization at September 30, 2005 was 34.8%,
down substantially from 47.1% a year ago and 44.2% at the end of 2004. Book
value per share is now up to $17.18 at September 30, 2005, up 25% from $13.77
a year earlier.
CCL Industries Inc. provides state-of-the-art packaging solutions,
including specialty aluminum containers, plastic tubes and closures and
innovative product labelling, to some of the world's largest producers of
consumer brands, helping them to get their products to market quickly and
cost-effectively. CCL develops and provides specialty-packaging solutions for
producers of leading consumer brands in personal care, cosmetic,
pharmaceutical, household and specialty food and beverage products. With
headquarters in Toronto, Canada, CCL employs 4,300 people directly and
operates 45 production facilities in North America, Europe and Asia.
"Statements contained in this Press Release, other than statements of
historical facts, are forward-looking statements subject to a number of
risks and uncertainties that could cause actual events or results to
differ materially from statements made. These risks and uncertainties are
detailed from time to time in CCL's public disclosure documents or other
filings with securities regulatory bodies. These forward-looking
statements are made as of the date hereof and CCL disclaims any intention
and has no obligation or responsibility, except as required by law, to
update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise."
Note: CCL will hold a conference call at 4:00 p.m. DST on Thursday,
---- October 27, 2005 to discuss these results.
To access this call, please dial Toll-Free North America -
1-800-840-6238 or Domestic and International - 416-641-6698.
Post-View service will be available from Friday, October 28, 2005
at 8:00 a.m. DST until Monday, November 28, 2005 at 11:59 p.m. DST
Dial: Toll-Free - 1-800-558-5253 - Access Code: 21264413.
For more details on CCL, visit our web site - www.cclind.com
Financial Tables follow ...
CCL INDUSTRIES INC.
2005 Third Quarter
Consolidated Statements of Earnings and Retained Earnings
Three months ended Nine months ended
Unaudited September 30th September 30th
-------------------------------------------------------------------------
(in millions of Cdn
dollars, except per % %
share data) 2005 2004 Change 2005 2004 Change
--------- --------- ------ --------- --------- ------
Sales $ 281.9 $ 220.0 28.1 $ 827.7 $ 692.7 19.5
-----------------------------------------------------
Income before
undernoted items 43.8 33.5 30.7 130.9 98.2 33.3
Depreciation and
amortization 17.4 16.7 49.1 43.8
Interest expense,
net 4.4 4.7 15.0 13.8
-----------------------------------------------------
22.0 12.1 81.8 66.8 40.6 64.5
Unusual items - net
gain (loss) (note 5) - 1.4 (15.5) 1.4
-----------------------------------------------------
Earnings before
income taxes 22.0 13.5 63.0 51.3 42.0 22.1
Income taxes
(recovery) 6.7 (0.1) 14.8 7.8
-----------------------------------------------------
Net earnings from
continuing
operations 15.3 13.6 12.5 36.5 34.2 6.7
Net earnings from
discontinued
operations, net of
tax (note 4) - 5.0 5.3 11.1
Gain on sale of
discontinued
operations, net of
tax (note 4) - - 107.0 -
-----------------------------------------------------
Net earnings 15.3 18.6 148.8 45.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Retained earnings,
beginning of period 389.1 247.7 272.7 227.1
Net earnings 15.3 18.6 148.8 45.3
Repurchase of shares - (1.1) (10.7) (1.1)
-----------------------------------------------------
404.4 265.2 410.8 271.3
Less dividends:
Class A shares 0.2 0.2 0.6 0.6
Class B shares 3.0 3.0 9.0 8.7
-----------------------------------------------------
3.2 3.2 9.6 9.3
-----------------------------------------------------
Retained earnings,
end of period $ 401.2 $ 262.0 $ 401.2 $ 262.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per share
Class B -
Continuing
operations $ 0.48 $ 0.42 14.3 $ 1.14 $ 1.06 7.5
Discontinued
operations $ - $ 0.16 $ 0.17 $ 0.35
Gain on sale of
discontinued
operations $ - $ - $ 3.31 $ -
-----------------------------------------------------
Class B -
Net earnings $ 0.48 $ 0.58 $ 4.62 $ 1.41
Class A(x) $ 0.47 $ 0.57 $ 4.58 $ 1.37
-------------------------------------------------------------------------
Diluted earnings
per share
Class B -
Continuing
operations $ 0.46 $ 0.42 9.5 $ 1.11 $ 1.04 6.7
Discontinued
operations $ - $ 0.15 $ 0.16 $ 0.34
Gain on sale of
discontinued
operations $ - $ - $ 3.24 $ -
-----------------------------------------------------
Class B -
Net earnings $ 0.46 $ 0.57 $ 4.51 $ 1.38
Class A(x) $ 0.45 $ 0.56 $ 4.47 $ 1.34
-------------------------------------------------------------------------
(x) Earnings per class A shares are $0.01 lower than Class B shares for
the third quarters ( $0.04 year-to-date) for 2004 and 2005.
See notes to interim consolidated financial statements.
Certain 2004 and 2005 figures have been restated (note 4) for
discontinued operations.
CCL INDUSTRIES INC.
2005 Third Quarter
Consolidated Balance Sheets
September September December
Unaudited 30th 30th 31st
-------------------------------------------------------------------------
(in millions of Cdn dollars) 2005 2004 2004
---------- ---------- ----------
Assets
Current assets
Cash and cash equivalents $ 119.3 $ 45.3 $ 71.4
Accounts receivable - trade 172.3 212.9 194.3
Other receivables and prepaid
expenses 23.1 24.5 29.5
Inventories 100.4 122.1 125.3
----------------------------------
415.1 404.8 420.5
Capital assets 512.7 461.2 471.8
Other assets 29.8 41.9 38.8
Intangible assets 28.7 17.7 27.5
Goodwill 369.4 335.7 315.5
-------------------------------------------------------------------------
Total assets $ 1,355.7 $ 1,261.3 $ 1,274.1
-------------------------------------------------------------------------
Liabilities
Current liabilities
Bank advances $ 9.8 $ 40.1 $ 39.4
Accounts payable and accrued
liabilities 236.2 265.8 271.4
Income and other taxes payable 27.8 3.8 8.1
Current portion of long-term debt 158.5 14.2 19.3
----------------------------------
432.3 323.9 338.2
Long-term debt 244.1 387.3 367.7
Other long-term items 43.0 32.3 32.3
Future income taxes 86.6 72.9 86.9
-------------------------------------------------------------------------
Total liabilities 806.0 816.4 825.1
-------------------------------------------------------------------------
Shareholders' equity
Share capital (note 2) 188.0 187.7 188.0
Contributed surplus 1.5 0.2 0.2
Retained earnings 401.2 262.0 272.7
Foreign currency translation
adjustment (41.0) (5.0) (11.9)
-------------------------------------------------------------------------
Total shareholders' equity 549.7 444.9 449.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total liabilities and shareholders'
equity $ 1,355.7 $ 1,261.3 $ 1,274.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See notes to interim consolidated financial statements.
Certain 2004 figures have been restated for comparative purposes.
CCL INDUSTRIES INC.
2005 Third Quarter
Consolidated Statements of Cash Flows
Three months Nine months
Unaudited ended September 30th ended September 30th
-------------------------------------------------------------------------
(in millions of Cdn dollars) 2005 2004 2005 2004
Cash provided by (used for) -------- -------- -------- --------
Operating activities
Net earnings $ 15.3 $ 18.6 $ 148.8 $ 45.3
Earnings from discontinued
operations - (5.0) (5.3) (11.1)
Gain on sale of discontinued
operations - - (107.0) -
Items not requiring cash:
Depreciation and
amortization 17.4 16.7 49.1 43.8
Stock-based compensation 1.2 0.1 1.3 0.2
Future income taxes (1.0) 0.7 1.7 3.6
Unusual items (note 5) - (3.9) 15.4 (3.9)
-----------------------------------------------------------------------
32.9 27.2 104.0 77.9
Net change in non-cash
working capital (9.7) (12.0) (37.9) (26.7)
-----------------------------------------------------------------------
Cash provided by continuing
operations 23.2 15.2 66.1 51.2
Cash provided by (used for)
discontinued operations (0.5) 8.6 3.2 21.8
-----------------------------------------------------------------------
Cash provided by operating
activities 22.7 23.8 69.3 73.0
-------------------------------------------------------------------------
Financing activities
Proceeds and issuance of
long-term debt 5.5 - 41.0 -
Retirement of long-term debt (14.0) (12.6) (16.7) (14.4)
Increase (decrease) in bank
advances (0.4) 3.7 (26.2) 6.3
Issue of shares 0.3 0.9 3.9 2.1
Repurchase of shares - (1.7) (14.1) (1.7)
Purchase of shares held in
trust (note 2) (5.5) - (5.5) -
Dividends (3.2) (3.2) (9.6) (9.3)
-----------------------------------------------------------------------
Cash used for financing
activities (17.3) (12.9) (27.2) (17.0)
-------------------------------------------------------------------------
Investing activities
Additions to capital assets (33.2) (33.4) (117.9) (82.4)
Proceeds on disposals - 17.7 272.8 17.7
Business acquisitions (note 3) (75.3) (24.3) (139.4) (24.3)
Other (2.5) (2.6) (2.2) (2.2)
-----------------------------------------------------------------------
Cash provided by (used for)
investing activities (111.0) (42.6) 13.3 (91.2)
-------------------------------------------------------------------------
Effect of exchange rate changes
on cash (5.4) (2.3) (7.5) (1.3)
-------------------------------------------------------------------------
Increase (decrease) in cash (111.0) (34.0) 47.9 (36.5)
Cash and cash equivalents at
beginning of period 230.3 79.3 71.4 81.8
-------------------------------------------------------------------------
Cash and cash equivalents at
end of period $ 119.3 $ 45.3 $ 119.3 $ 45.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash and cash equivalents are defined as cash and short-term investments.
See notes to interim consolidated financial statements.
Certain 2004 figures have been restated (note 4) for discontinued
operations.
CCL INDUSTRIES INC.
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED September 30, 2005 AND 2004
(Tabular amounts in millions of Cdn dollars except share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The disclosures contained in these unaudited interim consolidated
financial statements do not include all of the requirements of
generally accepted accounting principles for annual financial
statements. The unaudited interim consolidated financial statements
should be read in conjunction with the annual consolidated financial
statements for the year ended December 31, 2004.
The unaudited interim consolidated financial statements are based
upon accounting principles consistent with those used and described
in the annual consolidated statements, except that: starting
January 1, 2005, the Company adopted the Canadian Institute of
Chartered Accountants ("CICA") amendments to Emerging Issues
Committee (EIC) - 144, "Accounting by a Customer (Including a
Reseller) for Certain Consideration Received from a Vendor" related
to recording of vendor rebates by a purchaser. The Committee reached
a consensus that the customer should measure the rebate based on the
estimated amount of the rebate that is expected to be received for
the underlying transactions that have occurred and that result in
progress by the customer toward achieving the specified requirement
to receive the rebate. This change to EIC - 144 did not have a
material impact on the Company.
Accounting Guideline - 15, "Consolidation of Variable Interest
Entities", is effective for periods beginning on or after November 1,
2004. The Guideline did not have any effect on the Company as it is
not party to any variable interest entities.
Comparative figures have been restated to reflect discontinued
operations (note 4) and reclassified where necessary to correspond
with the current period's presentation.
2. SHARE CAPITAL
Issued and outstanding
September September December
30th 30th 31st
---------- ---------- ----------
2005 2004 2004
---------- ---------- ----------
Issued share capital $ 195.4 $ 189.5 $ 189.8
Less: Executive share purchase
plan loans (1.8) (1.8) (1.8)
Shares held in trust (5.6) - -
----------------------------------
Total $ 188.0 $ 187.7 $ 188.0
----------------------------------
----------------------------------
During 2005, the Company granted a restricted stock award of 200,000
shares of the Company. 80,000 shares will vest in 2009 dependent on
continuing employment, and 120,000 shares will vest in 2007 dependent
on performance conditions. The Company purchased 200,000 shares in
the open market and has placed them in trust until the restricted
stock is fully vested. The fair value of the restricted share award
is being amortized over the vesting period.
Actual number of shares:
September September December
30th 30th 31st
---------- ---------- ----------
2005 2004 2004
---------- ---------- ----------
Class A 2,428,396 2,439,592 2,439,187
Class B 29,998,597 30,000,151 30,021,756
Less: Executive Share Purchase
Plan shares (150,000) (150,000) (150,000)
Shares held in trust (200,000) - -
-----------------------------------
Total 32,076,993 32,289,743 32,310,943
-----------------------------------
-----------------------------------
September September December
30th 30th 31st
---------- ---------- ----------
2005 2004 2004
---------- ---------- ----------
Year-to-date weighted average
number of shares 32,199,702 32,287,305 32,290,097
-----------------------------------
-----------------------------------
Year-to-date weighted average
diluted number of shares 33,032,306 32,860,069 32,848,536
-----------------------------------
-----------------------------------
During the year, 0.6 million shares (2004 - 0.1 million) were
repurchased for $14.1 million (2004 - $1.7 million). The excess of
the purchase price over the paid-up capital of $10.7 million
(2004 - $1.1 million) was charged to retained earnings.
3. ACQUISITIONS
In September 2005, the Company purchased Inprint Systems based in
Ashford, England, for $63.4 million, net of cash acquired. Inprint
Systems, through its plants in the Netherlands, United Kingdom, Italy
and the USA, manufactures specialty label products.
The Company is reviewing the valuation of the net assets acquired,
including intangible assets, therefore, certain items disclosed below
may change when the review is completed in the fourth quarter of
2005.
Details of the transaction are as follows :
Current assets $ 10.1
Current liabilities (7.5)
Non-current assets at assigned values 20.8
Long-term liabilities (1.1)
Goodwill and intangibles 41.1
----------
Net assets purchased $ 63.4
----------
----------
Total consideration:
Cash, less cash acquired of $3.5 million $ 63.4
----------
----------
In August 2005, the Company purchased the remaining 49% of its
European joint venture, CCL-Pachem. CCL entered the joint venture
with Pachem AG, based in Austria, in 2003, by purchasing a 51%
interest. CCL-Pachem, through its plants in Austria, France and the
United Kingdom, produces pressure sensitive, shrink sleeve and in
mould labels for the global market.The Company paid cash of
$6.3 million, issued 200,000 shares of restricted shares worth
$5.0 million and assumed debt of $12.1 million as consideration. The
restricted shares are price protected and cannot be sold until
December 31, 2008. The Company is reviewing the valuation of the net
assets acquired, therefore, certain items disclosed below may change
when the review is completed in the fourth quarter of 2005.
Details of the transaction are as follows :
Current assets $ 9.3
Current liabilities (11.8)
Non-current assets at assigned values 15.2
Goodwill 11.0
Long-term liabilities (0.3)
----------
Net assets purchased $ 23.4
----------
----------
Total consideration:
Cash $ 6.3
Restricted shares 5.0
Assumed debt 12.1
----------
$ 23.4
----------
----------
In August 2005, the Company purchased the assets of Merroc Ltd. a
privately owned label converter based in Cumbernauld, Scotland.
Details of the transaction are as follows :
Current assets $ 0.2
Non-current assets at assigned values 2.0
----------
Net assets purchased $ 2.2
----------
----------
Total consideration:
Cash $ 2.2
----------
----------
In July 2005, the Company purchased the remaining 30% of its U.S.
plastic closure joint venture, CCL Dispensing Systems, LLC for
$3.4 million cash.
Details of the transaction are as follows :
Current assets $ 1.7
Current liabilities (4.2)
Non-current assets at assigned values 3.1
Goodwill 2.8
----------
Net assets purchased $ 3.4
----------
----------
Total consideration:
Cash $ 3.4
----------
----------
In January 2005, the Company purchased Steinbeis Packaging based in
Holzkirchen, Germany, for $64.1 million, net of cash acquired. The
purchase price was financed by cash on hand and bridge bank financing
denominated in Euros. In addition, the Company intends to exercise
its option to purchase the Holzkirchen building and land right for
$4.0 million Euros in January 2006. Steinbeis Packaging, through its
plants in the U.S., France, Germany and China, supplies battery
labels on a global basis and provides premium decorative label
solutions for the European consumer products market.
Details of the transaction are as follows :
Current assets $ 33.0
Current liabilities (32.0)
Non-current assets at assigned values 45.1
Long-term liabilities (9.8)
Future taxes (4.2)
Intangible assets 3.7
Goodwill 28.3
----------
Net assets purchased $ 64.1
----------
----------
Total consideration:
Cash, less cash acquired of $4.8 million $ 64.1
----------
----------
4. DISCONTINUED OPERATIONS
In May 2005, the Company sold its North American Custom Manufacturing
Division, for $272.8 million in cash, to KCP Income Fund, a Toronto
based contract manufacturer of private label household products. The
sale resulted in a gain of $129.8 million ($107.0 million after tax).
The gain on sale may be adjusted based on purchase price adjustments
and finalization of costs. The disposition is reported as
discontinued operations and the results are as follows:
Three months Nine months
ended September 30th ended September 30th
---------------------------------------------------------------------
2005 2004 2005 2004
-------- -------- -------- --------
Sales from discontinued
operations $ - $ 158.3 $ 246.8 $ 453.1
-----------------------------------------
Income before undernoted
items - 11.9 14.0 29.6
Depreciation and
amortization - 3.6 5.1 10.7
Interest expense, net - 0.7 1.0 2.5
-----------------------------------------
Earnings before income
taxes $ - $ 7.6 $ 7.9 $ 16.4
Income taxes - 2.6 2.6 5.3
-----------------------------------------
Net earnings from
discontinued operations $ - $ 5.0 $ 5.3 $ 11.1
-----------------------------------------
Gain on sale of discontinued
operations, net of tax of
$22.8 million $ - $ - $ 107.0 $ -
---------------------------------------------------------------------
Interest expense is reported in discontinued operations by the
allocation of total interest expense based on the ratio of net assets
sold to total net assets. Income tax expense has been based on the
effective income tax rate in the local country.
The Company has indemnified the purchasers against defined claims
from the past conduct of the business. It is not possible to quantify
the maximum potential liability in relation to the indemnities,
however, the Company has made a provision for estimated
indemnification claims.
5. UNUSUAL ITEMS
Three months Nine months
ended September 30th ended September 30th
Division 2005 2004 2005 2004
-------- -------- -------- -------- --------
Mexico
Container
business
restructuring
and asset
write-down Container $ - $ - $ (3.8) $ -
Impairment of
IntraPac L.P.
investment Corporate - - (11.7) -
Sale of Leeds
property Label - 8.7 - 8.7
Plastic
Packaging
business
restructuring
and asset
write-down Container - (9.6) - (9.6)
Label Division
asset
write-down Label - (2.1) - (2.1)
Sale of Winnipeg
business Label - 4.4 - 4.4
-----------------------------------------
Gain (Loss) $ - $ 1.4 $ (15.5) $ 1.4
-----------------------------------------
-----------------------------------------
Tax recovery on
unusual items $ - $ (2.5) $ (0.1) $ (2.5)
-----------------------------------------
-----------------------------------------
In June 2005, the Company completed an evaluation of its plastic
packaging business within the Container Division in Mexico and
recorded a provision for impairment of related capital assets and
inventory write-downs that amounted to $3.8 million, with no tax
benefit.
In June 2005, the Company provided for an impairment of its equity
investment in IntraPac L.P. in the amount of $11.7 million
($11.6 million after tax). The investment was sold in October 2005.
In September 2004, the Company sold its Leeds, U.K. property for
$11.1 million cash and realized a gain of $8.7 million ($6.8 million
after tax).
In September 2004 the Company recorded provisions for restructuring
and capital assets and inventory write-downs within its Plastic
Packaging business which is under new management that amounted to
$9.6 million ($6.0 million after tax). Capital asset write-downs
related to assets no longer in use and assets to be sold within six
months at their fair value of $1.2 million.
In September 2004 the Company recorded capital asset write-downs
within its Label Division for $2.1 million ($1.3 million after tax)
relating to assets no longer in use.
In July 2004, the Company sold its label manufacturing business in
Winnipeg, Manitoba to a privately held company for $7.2 million. The
gain on this disposition was $4.4 million and did not give rise to
any tax effect due to the utilization of capital losses carried
forward.
6. EMPLOYEE FUTURE BENEFITS
The expense for the defined benefit plans in the third quarter is
$0.3 million (2004 - $0.4 million) and year-to-date $1.2 million
(2004 - $1.0 million). In addition, the second quarter gain on
disposal of discontinued operations included $1.3 million of
settlement losses.
7. INCOME TAXES
As a result of the gain realized on the sale of the North American
Custom Manufacturing division, the Company reduced its valuation
allowance against tax losses carried forward by $4.3 million in the
second quarter.
8. SEGMENTED INFORMATION
Industry segments
As a result of the disposal of the North American Custom
Manufacturing division, the Custom segment consists of the European
Custom Manufacturing business now conducted through the ColepCCL
joint venture.
Three months ended September 30th
---------------------------------------------------------------------
Sales Operating income
----------------------------------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Restated Restated
-------- --------
Note 4 Note 4
------ ------
ColepCCL / Custom
Manufacturing Europe $ 46.5 $ 46.8 $ 3.6 $ 3.5
Container 66.2 54.0 6.9 4.0
Label 169.2 119.2 19.1 10.5
----------------------------------------------
Total operations $ 281.9 $ 220.0 29.6 18.0
----------------------
Corporate expense (3.2) (1.2)
----------------------
26.4 16.8
Interest expense, net 4.4 4.7
----------------------
22.0 12.1
Unusual items -
net gain (loss) - 1.4
----------------------
Earnings before
income taxes 22.0 13.5
Income taxes 6.7 (0.1)
----------------------
Net earnings from
continuing operations 15.3 13.6
Net earnings from
discontinued
operations, net of tax - 5.0
Gain on sale of
discontinued
operations, net of tax - -
----------------------
Net earnings $ 15.3 $ 18.6
---------------------------------------------------------------------
---------------------------------------------------------------------
Nine months ended September 30th
---------------------------------------------------------------------
Sales Operating income
----------------------------------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Restated Restated
-------- --------
Note 4 Note 4
------ ------
ColepCCL / Custom
Manufacturing Europe $ 145.7 $ 147.6 $ 13.1 $ 8.0
Container 188.3 159.4 20.2 13.0
Label 493.7 385.7 57.5 39.1
----------------------------------------------
Total operations $ 827.7 $ 692.7 90.8 60.1
----------------------
Corporate expense (9.0) (5.7)
----------------------
81.8 54.4
Interest expense, net 15.0 13.8
----------------------
66.8 40.6
Unusual items -
net gain (loss) (15.5) 1.4
----------------------
Earnings before
income taxes 51.3 42.0
Income taxes 14.8 7.8
----------------------
Net earnings from
continuing operations 36.5 34.2
Net earnings from
discontinued
operations, net of tax 5.3 11.1
Gain on sale of
discontinued
operations, net of tax 107.0 -
----------------------
Net earnings $ 148.8 $ 45.3
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Identifiable Assets Goodwill
------------------- --------
September December September December
30th 31st 30th 31st
2005 2004 2005 2004
---------- ---------- ---------- ----------
Custom Manufacturing $ 174.4 $ 411.9 $ 42.1 $ 65.9
Container 286.7 261.7 53.1 51.5
Label 743.5 512.6 274.2 198.1
Corporate 151.1 87.9 - -
----------------------------------------------
Total $ 1,355.7 $ 1,274.1 $ 369.4 $ 315.5
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Depreciation & Amortization Capital Expenditures
--------------------------- ----------------------
Nine months ended Nine months ended
September 30th September 30th
2005 2004 2005 2004
---------- ---------- ---------- ----------
Continuing operations
---------------------
Custom Manufacturing $ 5.8 $ 6.2 $ 8.6 $ 14.0
Container 13.7 13.6 34.4 31.2
Label 29.1 23.2 74.8 36.9
Corporate 0.5 0.8 0.1 0.3
----------------------------------------------
Total $ 49.1 $ 43.8 $ 117.9 $ 82.4
---------------------------------------------------------------------
---------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
Third Quarters ended September 30, 2005 and 2004
This document has been prepared for the purpose of providing Management's
Discussion and Analysis (MD&A) of the financial condition and results of
operations for the three and nine month periods ended September 30, 2005 and
2004 and an update to the 2004 Annual MD&A document. The information in this
interim MD&A is current to October 27, 2005 and should be read in conjunction
with the Company's September 30, 2005 unaudited third quarter financial
statements released on October 27, 2005 and the 2004 Annual MD&A document,
which forms part of the CCL INDUSTRIES INC. 2004 Annual Report, dated
February 10, 2005.
The financial statements have been prepared in accordance with Canadian
generally accepted accounting principles and in accordance with the
requirements of section 1751 of the CICA Handbook. Unless otherwise noted,
both these financial statements and this interim MD&A are expressed in
Canadian dollars as the reporting currency. The measurement currencies of
CCL's operations are primarily the Canadian dollar, the U.S. dollar, the Euro,
the Danish krone, the U.K. pound sterling, the Mexican peso, the Thailand baht
and the Chinese renminbi. CCL's Audit Committee and its Board of Directors
have reviewed this interim MD&A to ensure consistency with the current
approved strategy and actual results of the Company.
Management's Discussion and Analysis contains forward-looking statements,
including statements concerning possible or assumed future results of
operations of the Company. Forward-looking statements typically are preceded
by, followed by or include the words "believes", "expects", "anticipates",
"estimates", "intends", "plans" or similar expressions. Forward-looking
statements are not guarantees of future performance. They involve risks,
uncertainties and assumptions, including, but not limited to: the impact of
competition; consumer confidence and spending preferences; general economic
conditions; currency exchange rates; and CCL's ability to attract and retain
qualified employees and, as such, the Company's results could differ
materially from those anticipated in these forward-looking statements.
Overview of Business Conditions
-------------------------------
The markets in which CCL's customers operate have continued to be
generally buoyant through the third quarter of 2005. CCL has experienced good
growth in most of its product categories in line with its customers'
performance. This has occurred despite the continued economic drag and
uncertain impact of higher energy and commodity costs on consumers and the
supply chain. The Federal Reserve continues to ramp up short-term interest
rates in the United States in its attempt to soften the impact of potential
inflation, the weakening of the U.S. dollar and the U.S. trade and fiscal
deficits. Europe is experiencing a weaker economy overall despite
substantially lower and more stable interest rates while the Asian markets
continue to grow rapidly.
Most of CCL's international marketing customers in the personal care
industry have been benefiting from higher sales volumes than last year,
particularly in a number of specific product categories and regions, whereas
our pharmaceutical customers are continuing to experience more modest growth.
Overall, customer demand for CCL's products appears to be firm into the last
quarter of 2005 on the back of very strong demand in our more seasonally weak
third quarter. The fourth quarter now tends to be a relatively stronger
quarter for CCL, primarily in the Label Division, in advance of the holiday
season for battery label products and the spring agricultural chemical season.
This strength is partly tempered by plant shutdowns during the holiday season
in certain countries for CCL and its customers.
The impact of higher material prices on our customers' products and the
supply chain's ability to access raw materials is a growing concern. All CCL
business units are direct or indirect users of hydrocarbon-based commodities
and energy. The current supply interruptions caused by hurricanes in the Gulf
of Mexico have added to the already volatile pricing and supply challenges.
Management has been able to control these highly unusual issues effectively
but they continue to be a cause for concern and diligence.
The current demand for new and existing products in CCL's aluminum
container business persists and despite additional new manufacturing capacity,
is still surpassing our ability to supply our customers in a satisfactory
manner. Personal care orders are still reasonably strong with a high backlog
while orders for beverage containers are more mixed. The Plastic Packaging
business unit of the Container Division is experiencing a steady turnaround in
sales volumes with expectations for good production levels in the last quarter
of 2005. The Label business continues to enjoy good volume growth as customers
are expanding product lines and realizing the benefits of our international
network as they roll out products on a worldwide basis. CCL's 40% owned joint
venture, ColepCCL, which was formed in July 2004, is maintaining good volume
levels with both existing and new customers as it continues to benefit from
the combined capabilities of the merged businesses. Further details on
divisional sales trends can be found later in this report.
Review of Consolidated Continuing Operations
--------------------------------------------
Sales for the third quarter of 2005 of $281.9 million were 28% ahead of
the $220.0 million recorded in the third quarter of 2004 for continuing
operations, while sales for the first nine months of 2005 of $827.7 million
were 20% ahead of last year's $692.7 million. Financial comparisons to the
prior year's results have continued to be negatively affected by the
appreciation of the Canadian dollar relative to the U.S. dollar and the Euro.
In addition, business acquisitions have impacted the comparison to prior
periods. Sales increased for the quarter by 36% (year-to-date 26%) due to
acquisitions and organic growth partially offset by a decrease of 8%
(year-to-date 6%) due to foreign exchange. On a comparative basis with last
year's third quarter, sales volumes increased in the Label Division and the
Aluminum Container business while sales volumes in the Plastic Packaging
business and ColepCCL were essentially flat with last year.
The following acquisitions, divestitures and merger affected financial
comparisons in the third quarter and in the first nine months of 2005:
On July 12, 2004, CCL completed the merger of its European Custom
Manufacturing operations with COLEP Europe to create the largest contract
manufacturing company in Europe of personal care, cosmetic and over-the-
counter medication and household care products. COLEP contributed its four
contract manufacturing plants including its metal packaging business to the
joint venture and CCL contributed its two European plants and $24 million to
acquire a 40% investment in the joint venture named ColepCCL. CCL is
proportionately consolidating its interest in the joint venture.
Also in July 2004, the Label Division acquired Graphiques Apex Inc.
located in Boucherville, QuDebec and divested its non-core Winnipeg label
business.
On January 31, 2005, the Label Division acquired Steinbeis Packaging,
based in Holzkirchen, Germany for $64 million. Steinbeis supplies battery
labels on a global basis and produces premium decorative label solutions for
the European consumer products market.
Effective July 1, 2005, the Plastic Packaging Division acquired the
remaining 30% of CCL Dispensing Systems that it did not already own for
$3 million.
On August 2, 2005, the Label Division acquired the remaining 49% of the
CCL-Pachem European joint venture for $23 million including debt assumed and
in addition, purchased the assets of Merroc Ltd., a label converter located in
Cumbernauld, Scotland for $2 million.
On September 13, 2005, the Label Division acquired the business of
Inprint Systems headquartered in Ashford, England with plants in the United
Kingdom, the Netherlands, Italy and the USA for approximately $63 million.
Net earnings from continuing operations for the third quarter of 2005 of
$15.3 million were up by 13% from the $13.6 million recorded in the third
quarter of 2004. There were no unusual items in the third quarter of 2005. In
the third quarter of 2004, included in net earnings was a net gain from
unusual items of $1.4 million ($3.9 million after tax). Operating income
improved from last year's third quarter due to a substantially stronger
performance in the Label Division and the Container Division (in both the
aluminum and plastic packaging units), and slightly higher income from the new
ColepCCL joint venture in 2005 than 2004. These improvements in operating
income were partly offset by the negative effect of currency translation and
transactions due to the lower value of the U.S. dollar and the Euro relative
to the Canadian dollar.
Net interest expense allocated to continuing operations was $0.3 million
lower than last year in the quarter due primarily to the higher level of cash
on hand than a year ago. Since the sale of Custom Manufacturing in mid-May,
all interest expense and the interest income received on the cash from the
sale of Custom Manufacturing are included in continuing operations. Corporate
expenses for the quarter were $2.0 million higher than last year due to higher
public company costs, additional incentive-based compensation provisions and
inflation. In addition, Corporate expenses allocated to Discontinued
Operations in third quarter 2004 were $0.3 million. The tax rate for
continuing operations was 31% for the quarter compared to a small tax recovery
in last year's third quarter due to the unusual items. The tax rate in 2004
before unusual items would have been 20%. The tax rate is higher this year due
to significant earnings improvements in countries with higher tax rates and
the inability to recover income tax in certain operations with operating
losses.
For the first nine months of 2005, net earnings from continuing
operations were $36.5 million, up 7% from the $34.2 million in the comparable
2004 period. Net earnings for the nine months were affected by the unusual
losses of $15.5 million ($15.4 million after tax) in the second quarter of
2005 and the net unusual gains of $1.4 million ($3.9 million after tax) in the
third quarter of 2004. Operating income in the first nine months improved in
all divisions, compared to 2004, but was partially offset by the negative
effect of currency translation and transactions due to the weaker U.S. dollar
and Euro. Net interest expense allocated to continuing operations before
unusual items for the nine months was up $1.2 million compared to last year,
due to higher floating interest rates and acquisition debt offset in part by
interest income from higher levels of cash on hand in third quarter 2005. The
tax rate from continuing operations for the nine months was 22% but would have
been 29% excluding the benefit of utilizing previously unrecognized tax losses
as a result of the gain on the disposition of Custom ($4.3 million) in the
second quarter. The tax rate for the first nine months of 2004 was 19% but
would have been 25% before unusual items. The tax rate is higher this year due
to significant earnings improvements in countries with higher tax rates and
the inability to recover income tax in certain operations with operating
losses.
Earnings from continuing operations per Class B share were $0.48 in the
third quarter of 2005 compared to the $0.42 earned in the same period last
year, an increase of 14%. In last year's third quarter, unusual items
increased earnings per share by $0.13. For comparative purposes, if the
unusual items were excluded, operational earnings were significantly higher in
third quarter 2005 versus 2004. The impact of the unusual items on a per share
basis is measured by dividing the after-tax income of the unusual items by the
average number of shares outstanding in the relevant period. Management will
continue to disclose the impact of significant unusual items on its results
because the timing and extent of such items do not reflect or relate to the
Company's ongoing operating performance. Management evaluates the operating
income of its divisions before the effect of unusual items.
For the first nine months of 2005, earnings from continuing operations
per Class B share were $1.14 compared to $1.06, an 8% increase from the
previous year. Unusual items reduced earnings per share by $0.48 for the nine
months of 2005 and the tax benefit from unrecognized tax losses positively
impacted earnings per share by $0.13 for the nine months of 2005. Unusual
items in the first nine months of 2004 increased earnings per Class B share by
$0.13. Diluted earnings per Class B share from continuing operations were
$0.02 lower than the basic earnings for the third quarter of 2005 and $0.03
lower than basic earnings year-to-date.
There were two unusual items in the second quarter of 2005 totaling
$15.5 million ($15.4 million after tax). In the third quarter of 2003, the
Company sold four non-core business units in its Container Division to
IntraPac L.P. for $71.5 million and retained a 50% equity interest. The value
of this equity interest had been impaired and had been written-down by
$11.7 million ($11.6 million after tax) to its net expected realizable value
in the second quarter of 2005. In October 2005, CCL divested all of its
interest in IntraPac L.P. primarily in exchange for certain real estate of the
business. There was no further gain or loss recorded on this transaction.
Additionally, the Company restructured its Mexican Plastic Container business
in the second quarter of 2005, giving rise to the impairment of certain
equipment and inventory write-downs. This unusual expense was $3.8 million
with no tax benefit recognized. The earnings impact of these unusual items was
$0.48 per Class B share for the year to date.
The unusual items in the third quarter and year-to-date in 2004 were as
follows:
Tax
Gain/ Expense Net
(Loss) (Recovery) Earnings
------ ---------- --------
Gain on sale of Label Leeds,
U.K. property $ 8.7 $ 1.8 $ 6.9
Gain on sale of Label Winnipeg $ 4.4 $ - $ 4.4
Plastic Packaging restructuring costs
and asset write-down $ (9.6) $ (3.6) $ (6.0)
Label asset write-down $ (2.1) $ (0.7) $ (1.4)
----- ----- -----
Total unusual items $ 1.4 $ (2.5) $ 3.9
----- ----- -----
On May 17, 2005, CCL completed the sale of its North American CCL Custom
Manufacturing Division ("Custom") to KCP Income Fund for approximately
Cdn $273 million in cash, resulting in an after tax gain of $107.0 million.
This transaction completed the transformation of CCL into a focused specialty
packaging company. The proceeds of the sale are continuing to fund the
expansion of CCL's higher growth Label and Container businesses through
further accretive acquisitions and capital spending for organic internal
growth and technology enhancements. The Company may also repay debt and
repurchase stock under its Normal Course Issuer Bid.
CCL has recorded this divestiture as a Discontinued Operation and
consequently its sales and income contribution have been excluded from the
disclosure of Continuing Operations.
The following table is presented to provide context to the change in the
Company's business in 2005 as a result of the sale of Custom. CCL's strategy
is to replace the ongoing income previously generated by Custom. The plan to
replace this income by the end of 2006 includes investing in its existing
businesses by capital expenditures and accretive acquisitions, generating
interest income on the cash proceeds from the sale, paying down debt and
potentially repurchasing stock at appropriate prices. The progress of the
replacement of the Custom income is of primary importance to our shareholders
and the financial community. This progress is measured based on earnings per
Class B share from the following table. The gain from the sale of the Custom
business is excluded for this purpose. If the net negative impact of unusual
items and the tax benefit from previously unrecognized tax losses is excluded
from these results, there is meaningful improvement over the prior year
performance.
(in Canadian dollars)
Three Months Nine Months
----------------------------------------------
Earnings per Class B shares 2005 2004 2005 2004
---------------------------
From Continuing Operations $ 0.48 $ 0.42 $ 1.14 $ 1.06
From Discontinued
Operations - $ 0.16 $ 0.17 $ 0.35
Net (loss) gain from
Unusual Items and Tax
Benefit included in
Continuing Operations - $ 0.13 $ (0.35) $ 0.13
----------------------------------------------
The gain, after tax, on the sale of Custom recorded in the second quarter
of 2005 is $107.0 million or $3.31 per Class B share. Adjustments to the gain
on disposal may be required upon resolution of contingencies related to the
disposal. Interest expense was allocated based on the ratio of the net assets
employed in the business (not the proceeds from the sale) to the total net
assets of CCL. The income tax expense was based on Custom operating as an
independent business in Canada and the USA and incurring income tax at the
appropriate federal, provincial and state tax rates.
The following is selected financial information for the eleven most
recently completed quarters.
(in millions of Canadian dollars, except per share amounts)
-----------------------------------------------------------
Qtr 1 Qtr 2 Qtr 3 Qtr 4 Total
----- ----- ----- ----- -----
Sales-Continuing
Operations
2005 $ 265.7 $ 280.1 $ 281.9 $ $ 827.7
2004 240.7 232.0 220.0 221.2 913.9
2003 254.2 245.7 215.0 205.9 920.8
Net earnings-Continuing
Operations
2005 16.1 5.1 15.3 36.5
2004 11.5 9.1 13.6 9.8 44.0
2003 7.6 9.0 1.8 11.3 29.7
Net earnings
2005 19.7 113.8 15.3 148.8
2004 14.8 11.9 18.6 13.9 59.2
2003 $ 14.1 $ 14.7 $ 6.8 $ 17.4 $ 53.0
Qtr 1 Qtr 2 Qtr 3 Qtr 4 Total
----- ----- ----- ----- -----
Net earnings per
Class B share
Continuing Operations
Basic
2005 $ 0.50 $ 0.16 $ 0.48 $ $ 1.14
2004 0.36 0.28 0.42 0.30 1.36
2003 0.23 0.28 0.05 0.35 0.91
Diluted
2005 0.49 0.16 0.46 1.11
2004 0.35 0.27 0.42 0.30 1.34
2003 0.23 0.28 0.05 0.34 0.90
Net earnings per
Class B share
Basic
2005 0.61 3.53 0.48 4.62
2004 0.46 0.37 0.58 0.43 1.84
2003 0.43 0.46 0.21 0.54 1.64
Unusual items and
one-time gains
2005 - 2.96 - 2.96
2004 - 0.00 0.13 (0.07) 0.06
2003 (0.04) (0.03) (0.22) 0.13 (0.16)
Diluted
2005 0.60 3.45 0.46 4.51
2004 0.45 0.36 0.57 0.43 1.81
2003 $ 0.42 $ 0.45 $ 0.21 $ 0.53 $ 1.61
-------------------------------------------------------------------------
Included in the above chart are the impact on net earnings per Class B
share of unusual items and the gain on sale of Custom in the second quarter of
2005. Net earnings per Class B share have fluctuated significantly due to
these items.
Over 85% of CCL's sales from continuing operations are generated in
foreign currencies and are then translated into Canadian dollars for reporting
purposes. The United States dollar is the functional currency for
approximately 40% of CCL's total sales from continuing operations and it has
depreciated on average by 8% compared to the Canadian dollar in the third
quarter 2005 versus last year's third quarter. In addition, European
currencies are now the measurement currencies for over 40% of CCL's sales and
the Euro has also weakened by 8% versus the Canadian dollar. Changes in
foreign exchange rates have reduced earnings per share from continuing
operations due to currency translation by $0.03 in the third quarter compared
to 2004 and $0.08 year-to-date.
Additionally, CCL has a hedging program to lock in a portion of its
expected U.S. dollar revenues earned in Canada. These hedge transactions were
at an average rate of $1.35 (US$ 1.0 million sold forward) for the third
quarter of 2004 but, due to the decline in the U.S. dollar over the last year,
the average rate on the 2005 hedges was $1.23 (US$ 6.8 million sold forward)
for the third quarter of 2005. The change in the rates on U.S. currency
transactions reduced comparative income for continuing operations by
$0.9 million in the third quarter of 2005 ($2.1 million year-to-date) and
reduced comparative earnings per share by $0.02 for the quarter ($0.06
year-to-date). In addition, during the second quarter of 2005, the Company
cancelled foreign exchange contracts for the Custom business at a cost of
$0.9 million, which was expensed against the gain on disposition. As at
September 30, 2005, the remaining outstanding foreign exchange contracts for
2005 and 2006 had a fair value of $1.6 million.
Net interest expense for continuing operations was $4.4 million for the
third quarter of 2005, down from $4.7 million from the comparable period last
year due to the impact of interest income from higher levels of cash on hand.
The depreciation of the U.S. dollar and the Euro has also had the effect of
reducing reported interest expense as CCL's borrowings are primarily
denominated in U.S. dollars in the form of private placements from U.S.
institutional investors. Net interest expense is net of interest earned on
both short-term investments and interest rate swaps. The Interest Rate Swap
Agreements ("IRSA") have had the effect of converting U.S. dollar fixed rate
debt into U.S. dollar floating rate debt. The Company is also amortizing a
gain realized on the sale of an IRSA in 2001. In addition, the Company entered
into two Cross Currency Interest Rate Swap Agreements ("CCIRSA") in June 2005
that had the effect of converting $68.5 million U.S. dollar fixed rate debt
into Euro floating rate debt for a notional amount of 56.6 million Euros.
These two CCIRSA's reflect the terms of the Company's existing U.S. dollar
borrowings and are a hedge against CCL's European investments and cash flow.
The CCIRSA's expire in 2010 and 2012.
The unrealized loss on all of the above agreements as at September 30,
2005 amounted to approximately $2.1 million. The effect of these four IRSAs
and two CCIRSA's has been to reduce interest expense by $1.0 million in the
third quarter of 2005 compared to a reduction of $1.6 million in the third
quarter of 2004. For the first nine months, the impact was a reduction of
$2.9 million in 2005 and $5.3 million in 2004. Interest coverage (defined as
operating income before unusual items and net interest expense divided by net
interest expense calculated on a 12-month rolling basis) improved to
5.58 times in 2005 compared to 4.40 times in 2004.
The income tax rate for continuing operations, excluding unusual items,
and the tax benefit from previously unrecognized tax losses was 31% in the
third quarter of this year (year-to-date 29%), compared to 20% in last year's
third quarter (year-to-date 25%). The tax rate is higher this year due to
significant earnings improvements in countries with higher tax rates and the
inability to recover income tax in certain operations with operating losses.
This effective tax rate is lower than the combined Canadian federal and
provincial tax rates of 34.2% for the year 2005 due to the benefit of lower
tax rates in foreign subsidiaries net of income and expense items not subject
to tax expense or tax recovery.
The Company's financial position is very solid. At the end of
September 30, 2005, cash and cash equivalents amounted to $119 million
compared to $45 million as at September 30, 2004 and $71 million at
December 31, 2004. Net debt amounted to $293 million at September 30, 2005,
$62 million lower than the net debt of $355 million at the end of 2004 and
$103 million lower than the $396 million on September 30, 2004. The decrease
in net debt since December 31, 2004 is primarily due to the Custom divestiture
offset in part by the previously noted acquisitions, capital spending and the
seasonal working capital increase. The decrease in net debt from a year ago is
due primarily to the Custom sale offset in part by the acquisitions and
capital spending initiatives. Capital spending in the third quarter of
$33.2 million compared to $33.4 million last year. The major capital
expenditures in the third quarter were the production line down payments and
the plant expansion in the Container Hermitage operation, printing equipment
for the Plastic tube business, new presses for the Label Division, and new
plant installations in Poland and China. As is usual in CCL's business,
working capital increased in its traditional seasonal pattern in the first
nine months of both 2005 and 2004 after the typically lower levels at the end
of each year.
In June 2005, the Company announced its intention to acquire, via a
Normal Course Issuer Bid ("Bid"), up to 10,000 Class A voting shares and
2,100,000 of its issued and outstanding Class B non-voting shares between
June 16, 2005 and June 15, 2006. This Bid represents 0.4% of the issued and
outstanding Class A shares and 9.8% of the public float of the Class B shares.
As of today's date, no shares have been acquired under this Bid. Under its
previous Bid that expired on May 24, 2005, the Company repurchased 2,200 Class
A shares and 658,500 Class B shares at an average price of $23.91 per share in
the 12-month period. During the second quarter of 2005, the Company
repurchased 560,000 Class B shares under the previous Bid at an average price
of $25.16.
During the third quarters of 2005 and 2004, the Company generated cash
from all operations of $22.7 million and $23.8 million, respectively. Working
capital consumed $9.7 million of cash in the third quarter of 2005 while
consuming $12.0 million in last year's third quarter. In addition,
$33.2 million was spent on capital additions in the third quarter as CCL
continues to reinvest in its businesses to take advantage of current and
future expected organic growth. This level of capital spending was higher than
the $17.4 million of depreciation and amortization in the third quarter of
2005. Plans for capital spending in 2005 are expected to be about $140 million
as the Company continues to expand its business base into new markets, and
invest in assets to add capacity and improve its competitiveness.
Net debt to total capitalization, defined as net debt divided by net debt
plus shareholders' equity, at September 30, 2005 was 34.8%, down from 44.2% at
the end of 2004 and 47.1% a year ago due primarily to the Custom sale. Book
value per share, defined as shareholders' equity divided by total period end
shares, was $17.18 at the end of the third quarter of 2005, 25% higher than
the year ago level of $13.77 and 24% above $13.89 at year-end 2004. The
increase is primarily the result of earnings retained in the Company including
the significant gain on the sale of Custom.
Discussion of Divisional Business Segments
------------------------------------------
ColepCCL Joint Venture/Custom Manufacturing - Europe
----------------------------------------------------
The ColepCCL joint venture was created in mid-July 2004. For the third
quarter of 2005, CCL's proportionate share of the joint venture's sales was
$46.5 million. This sales level was 1% lower than the comparative sales last
year of CCL's two former European operations and the joint venture itself of
$46.8 million due to the 8% decline in the value of the Euro for the
comparable quarter. However, in local currency, sales were up modestly. On a
year-to-date basis, CCL's share of the joint venture sales was $145.7 million;
this is 1% less than the $147.6 million of sales from our former operations
and the joint venture in 2004. Comparative sales have been reduced by the 5%
decline in the value of the Euro since last year.
Operating income in the third quarter of 2005 for ColepCCL was
$3.6 million indicating a return on sales of 7.7%. CCL's former operations and
the joint venture in the third quarter of 2004 had operating income of
$3.5 million and a return on sales of 7.5%. Operating income on a year-to-date
basis was $13.1 million in 2005 versus $8.0 million from our former operations
and the joint venture in 2004 reflecting the synergies of the merger and CCL's
share of the income derived from Colep's more profitable operations.
Sales growth for the joint venture in local currency was 9% higher than
the combined former operations for the first nine months of 2005 versus 2004
with higher volumes in the Contract Manufacturing Operations due to the
synergies of this business combination. Metal Packaging sales were ahead of
last year but have been impacted by conversions from steel to aluminum
aerosols by its customers due to the high cost of tinplate. Profitability from
these operations has been strong, with Contract Operations benefiting from the
volume increase and Metal Packaging from significant price increases that have
more than offset the added tinplate costs. However, temporary indirect costs
were incurred due to a plant closure described below which reduced the level
of improved profitability over last year in the third quarter.
In June 2005, ColepCCL completed the closure of its plant in Madrid,
Spain. Some of its production lines were moved to the U.K., Poland and
Portugal. Significant closing costs that were accrued as part of the formation
of the joint venture of $5.5 million were incurred on this closure. The land
and building are up for sale. During the third quarter, temporary indirect
costs were incurred to effectively service the business transferred from
Madrid to the other operations. This plant closure is expected to improve
overall profitability in ColepCCL going forward and certain qualifying costs
associated with its closure were accounted for as part of the formation of the
joint venture in 2004. Direct closing costs that were expensed in the quarter
were immaterial.
Container
---------
Sales in the third quarter were $66.2 million, up 23% from $54.0 million
last year and for the first nine months of 2005 were $188.3 million, up 18%
from the $159.4 million last year. Sales increased for the quarter by 29%
(year-to-date 25%) due to internal growth and the increased ownership of CCL
Dispensing offset in part by a decrease of 6% (year-to-date 7%) due to foreign
exchange translation.
The Container Division continued to benefit in the third quarter from the
strong demand for aluminum aerosol containers, the growth in usage of aluminum
bottles, and other new applications for this technology with sales up 42% over
last year. Personal care volume in the aerosol format continued to be very
strong as our customers are ramping up many new products. This demand required
the Division to outsource significant amounts of production to overseas
suppliers to support customer requirements. The outsourcing had a negative
effect on profit margins. The beverage business continues to benefit from the
new aluminum beer bottle. Beverage container sales were down slightly from a
year ago. Mexican aerosol container sales were also strong in the third
quarter. The backlog for aluminum container products remains very high even as
new capacity continues to be added to meet this demand and to improve service
levels.
In the Plastic Packaging unit of the Container Division, sales were down
6% in the third quarter compared to last year, due to unfavourable currency
translation and slightly lower volume that was partially offset by the
increase in ownership of the CCL Dispensing business. The demand for plastic
tubes continues to show improvement in the quarter and new orders to be
manufactured in the next few months appear to be reasonable. New management,
improved operational performance and new equipment installations have improved
credibility with the customer base. Plastic closure sales volumes were up over
last year's performance.
Operating income for the Container Division for the third quarter of 2005
was $6.9 million, up 73% from $4.0 million in the third quarter of 2004
despite the unfavourable foreign exchange impact. The improvement in operating
income is due to the higher aluminum container volumes and improved
operational performance in the Plastic Packaging business. Plastic Packaging
operated at profit in the third quarter of 2005 with a return on sales of 7%
compared to a small loss in the prior year quarter, a turnaround of
$1.6 million reflecting overhead reductions and improvements in manufacturing.
For the nine months to date, operating income for the Container Division was
$20.2 million versus $13.0 million last year, up 55%.
The aluminum container plant in Penetanguishene, Ontario sells a large
part of its production to the United States market. During 2004, this
operation hedged some of its sales by selling forward the U.S. dollar into
Canadian dollars at the rate of $1.35. However, as the U.S. dollar has
weakened, the contracts for 2005 were transacted at only $1.23, which further
reduced the Division's comparable income by $0.9 million for the quarter and
$2.1 million for the first nine months compared to last year.
After a review of the Mexican Container plant's profitability and its
investment base, the operation was restructured to concentrate on profitable
product lines only and, consequently, certain machinery and inventory,
primarily in the plastic tube side of the business, were written off in the
second quarter. The Mexican operation's metal container business is now
profitable and plans for significant investment in this business are under
consideration.
The Container Division has invested $14.7 million in capital in the third
quarter of 2005 compared to $14.1 million last year, to maintain and expand
its manufacturing base and reduce its production costs. Depreciation and
amortization amounted to $5.0 million in the third quarter of 2005 compared to
$4.7 million in the third quarter of 2004. The Division has successfully
installed three new aluminum container lines in the last two years and has now
installed a fourth new line which was operational in early third quarter 2005.
The fifth and sixth lines are on order for installation during early 2006 and
are destined for the expanded Hermitage, Pennsylvania plant. The seventh new
line is on order for later in 2006 although its destination has not yet been
determined.
The Container Division continues to hedge some of its anticipated future
aluminum purchases through futures contracts. The value of these futures at
September 30, 2005 was $8.2 million.
Label
-----
Sales for the Label Division of $169.2 million for the third quarter were
up 42% from $119.2 million in the same quarter last year. For the nine months
to date, sales were $493.7 million in 2005, up 28% from the $385.7 million of
the comparable prior year period. Sales increased for the quarter by 50%
(year-to-date 37%) split between acquisitions of 37% (27% year-to-date) and
organic growth of 13% (10% year-to-date) partially offset by foreign exchange
and a disposition of 8% (year-to-date 9%).
Sales growth in the third quarter was predominantly due to the Steinbeis
acquisition but the business also experienced a continuation of the positive
volume trends in its other businesses seen since late last year. North
American personal care volume, particularly with its largest international
customers was well ahead of last year for the quarter, with continued
improvements in Mexico. Specialty products were also ahead of last year's
third quarter in both agricultural chemical labels, where CCL increased market
share, and promotional labels, which has enjoyed new business. The North
American healthcare business recorded sales volumes that were up modestly over
last year with growth in the insert business and in Canada. European sales
were ahead of last year generally across the board, including personal care,
healthcare, batteries and food and beverage, all of which enjoyed good organic
growth. The Steinbeis, Merroc, Inprint (for half of one month only)
acquisitions along with the increased ownership of Pachem significantly
improved our European position in all categories. Sales in Thailand were over
30% ahead of last year with further growth expected and the existing plant in
Hefei, China performed well. Product is now being shipped from our new plant
in Poznan, Poland and the Guangzhou, China operation will commence trading
around year-end. The business continues to benefit from its international
presence dealing with large multinational customers. There are many new
opportunities for growth in the developing countries and from new product
introductions.
Operating income for the third quarter of 2005 was an exceptional
$19.1 million, up 82% from $10.5 million in the third quarter of 2004 and as a
percentage of sales at 11.3% continues to exceed internal targets. This
improvement was driven primarily by higher volumes and operating margins in
most of the Division's operations and the incremental effect of acquisitions
completed in the last three years. Year-to-date operating income was
$57.5 million versus $39.1 million last year, up 47%. Operating income as a
percentage of sales was 11.6% for the first nine months of 2005.
CCL acquired Inprint Systems on September 13, 2005 for approximately
$63 million in cash. Inprint, based in Ashford, England, primarily produces
specialty healthcare labels and rounds out CCL's European presence in this
business with plants in England, the Netherlands, Italy and the USA. At the
beginning of August 2005, the Label Division acquired the 49% of the Austrian-
based CCL-Pachem joint venture it did not already own for $23 million paid in
a combination of cash, 200,000 CCL Class B shares and debt assumed. At the
same time, CCL also acquired the assets of Merroc Ltd. located in Cumbernauld,
Scotland for $2 million in cash. Merroc provides leading European paint
manufacturers with pressure-sensitive colour chip labels.
The Steinbeis Packaging business was acquired by CCL on January 31, 2005
for approximately $64 million in cash. The transaction was paid for with cash
on hand and a bridge bank line of credit. Steinbeis Packaging, based in
Germany, supplies battery labels on a global basis and provides premium
product decorating solutions for the European consumer products market.
Steinbeis' plants are located in Germany, France, the United States and China.
Incremental sales and operating income in the third quarter for the above
noted four acquisitions were $44.7 million and $5.4 million, respectively.
In July 2004, the Division acquired Graphiques Apex Inc. in Boucherville,
QuDebec to expand its healthcare offerings. Also, in the beginning of July
2004, the non-core Winnipeg business was sold.
Sales backlogs for the label business are generally low due to short
customer lead times but indications are that customers' orders will be firm
through the end of 2005. However, it is important to note that there is
seasonality in the overall label business with the first and fourth quarters
being generally stronger than the second and third quarters. This seasonality
slowdown is a result of summer vacations primarily in Europe, strong agchem
label production before the spring planting season, and then increased battery
label production in the late summer and fall for the Christmas season. Certain
locations are impacted by the lengthy holiday season at year-end. Raw material
pricing and supply are of potential concern going into next year.
The Label Division invested $16.8 million in capital in the third quarter
of 2005 compared to $13.1 million in the same period last year. The capital
was spent throughout the Division to maintain and expand its manufacturing
base by adding presses in strategic locations including the construction of
new plants in Poland and China and the beginning of the plant construction for
the new relocated Robbinsville, NJ operation. The Division expects to continue
to spend capital to increase its capabilities, expand geographically, and
replace or upgrade existing plants and equipment to improve efficiencies over
the next few years. Depreciation and amortization for the Label Division were
$10.6 million for the third quarter of 2005 and $8.3 million in the comparable
2004 period.
Liquidity and Capital Structure
-------------------------------
The Company's debt structure is primarily comprised of three private debt
placements completed in 1996, 1997 and 1998 totaling US$ 295.5 million
(Cdn$ 343.6 million) at September 30, 2005, with an average interest rate of
5.9%, factoring in the related Interest Rate and Cross Currency Swap
Agreements. The US$ 120 million notes issued in 1996 are due to be repaid in
March 2006. Repayment of these notes is expected to come primarily from cash
on hand and a further potential debt financing to support the Company's future
growth plans. Net debt has decreased from year-end 2004 and from the year ago
period due primarily to the Custom sale offset in part by acquisitions and our
extensive capital spending program. The net debt analysis is as follows:
$ Millions September 30, 2005 December 31, 2004 September 30, 2004
---------- ------------------ ----------------- ------------------
Total debt $412.4 $426.4 $441.6
Cash on hand 119.3 71.4 45.3
------ ------ ------
Net debt $293.1 $355.0 $396.3
------ ------ ------
------ ------ ------
Non-cash working capital traditionally increases during the first part of
each year to accommodate increased customer activity following the slower
year-end period, before reducing to its lowest point at the next year-end.
This increase in working capital in the first nine months of $37.9 million in
2005 compared to an increase of $26.7 million in the comparable 2004 period.
Capital spending was $33.2 million in the third quarter of 2005;
$0.2 million lower than the $33.4 million spent in the same quarter last year.
Year-to-date capital spending of $117.9 million is substantially higher than
the $82.4 million spent in the first three quarters of 2004. Overall, the
level of capital spending exceeded last year's level and this year's
depreciation and amortization to provide for increased capacity and geographic
reach, to implement cost reduction programs, and to maintain the existing
business and asset base. It is expected that capital spending will continue at
a strong pace for the balance of 2005 and is expected to be about $140 million
for the year. Plans for 2006 are not finalized but it is anticipated that
capital spending will again exceed the $100 million level, well above expected
depreciation for the year.
Dividends declared in the first nine months of 2005 and 2004, were
$9.6 million and $9.3 million, respectively. The total number of shares
outstanding at September 30, 2005 of 32.4 million is at the same level as the
32.4 million outstanding a year ago due to the exercise of stock options and
the issuance of shares for the Pachem acquisition offsetting the shares
repurchased under Normal Course Issuer Bids. The current annualized dividend
rate is $0.35 per Class A share and $0.40 per Class B share. The Company has
historically paid out dividends at a rate of 20-25% of normalized earnings.
Since the Company's cash flow is strong, the Board approved a continuation of
the quarterly dividend rate of $0.0875 per Class A share and $0.10 per Class B
share to shareholders as of December 13, 2005 and payable on January 3, 2006.
Effective January 1, 2005, the Company has adopted the Canadian Institute
of Chartered Accountants ("CICA") amendments to the Emerging Issues Committee
rules with respect to the recording of vendor rebates by a purchaser. The
adoption of this change did not have a material impact on the Company. A new
CICA guideline on the consolidation of variable interest entities had no
impact on the Company since it is not a party to any variable interest
entities.
The Company has no material "off-balance sheet" financing obligations
except for typical long-term operating lease agreements. The nature of these
commitments is described in note 14 of the December 31, 2004 Annual
Consolidated Financial Statements. The Company does not have any material
related party transactions. Additionally, the vast majority of the Company's
post-employment obligations are defined contribution pension plans. There are
no defined benefit plans funded with CCL stock.
Risks and Strategies
--------------------
The 2004 Management's Discussion and Analysis in the Annual Report
detailed the risks to the Company's business and the strategies that were
planned for 2005 and beyond. The disposition of the North American Custom
Manufacturing business has eliminated or reduced certain risks applicable to
that business segment. CCL will have less dependence on the international
competitiveness of North American manufacturing; less reliance on the long-
term currency effects of the U.S. dollar relative to the Canadian dollar and
less overall dependence on a concentrated number of consumer products
companies. CCL will now be more dependent on the inherent risks associated
with running a more internationally diverse specialty packaging business
without the diversification effect of the divested business. The Company will
also have more dependence on the European and Asian economies and their
currencies. These non-Canadian risks were described in the 2004 Management's
Discussion and Analysis.
Outlook
-------
Through the balance of 2005 and into 2006, the Company will be more
focused on the growth prospects of its specialty packaging business and the
prudent management of the cash generated from the disposition of Custom with a
view to improving shareholder value. The Company is investigating a number of
mid-sized potential acquisition candidates that meet its criteria of core
products and customers, and the expectation of immediate earnings accretion.
The organic growth in sales and income experienced in the first nine months of
2005 is anticipated to continue through the balance of the year into 2006 as
the Company is focused on replacing the Custom income and growing as a
specialty packaging business. There are potential concerns that the volatility
of energy and oil-based commodity prices and the availability of supply for
CCL and our customers may be problematic as a result of the recent hurricanes
in the Gulf of Mexico.
Stock Symbol: TSX - CCL.A and CCL.NV.B
CCL Industries Acquires Full Ownership of European Joint Venture
CCL-Pachem and the Assets of Merroc Ltd. in the U.K.
Toronto, August 2, 2005 - CCL Industries Inc., a world leader in
developing and producing specialty-packaging solutions for the consumer
products industry, announced today that it has completed the purchase of the
remaining 49% of its European joint venture, CCL-Pachem. CCL entered into a
joint venture with Pachem AG, based in Austria, in 2003, by purchasing a 51%
interest. CCL-Pachem provides global consumer companies with innovative
package decorating solutions for their premium European brands. Their
operations in Austria, France and the United Kingdom produce state-of-the-art
pressure sensitive, shrink sleeve and in mould labels.
CCL also announced today that it will acquire the assets of Merroc Ltd.,
a privately owned label converter based in Cumbernauld, Scotland. Merroc
provides leading European paint manufacturers with pressure sensitive colour
chip labels. CCL Pachem's U.K. site also provides the paint industry with
decorative labeling systems for plastic paint containers. Merroc had sales of
approximately Cdn $10 million in 2004.
Donald Lang, Vice Chairman and CEO of CCL Industries Inc. said, "Over the
last two years, both parties have become very comfortable with the CCL-Pachem
partnership and its achievements, including increased revenues of
approximately 30% and excellent cash flow."
Geoffrey Martin, President and COO of CCL Industries Inc. added,
"Guenther Birkner and Thomas Summer, the founders of Pachem, will continue as
leading members of the CCL Label global management team and are looking
forward to the many growth opportunities ahead. The change in ownership
structure will enable the business and the management team to participate more
fully in the opportunities provided by our rapidly expanding European network
of label companies as evidenced by the acquisition of Merroc."
CCL Industries Inc. (TSX CCL.A and CCL.NV.B) provides state-of-the-art
packaging solutions, including specialty aluminum containers, plastic tubes
and closures and innovative product labelling, to some of the world's largest
producers of consumer brands, helping them to get their products to market
quickly and cost-effectively. CCL develops and provides specialty-packaging
solutions for producers of leading consumer brands in personal care, cosmetic,
pharmaceutical, household and specialty food and beverage products. With
headquarters in Toronto, Canada, CCL directly employs 4,000 people and
directly operates 38 production facilities in North America, Europe and Asia.
For further information, contact:
Steve Lancaster Executive Vice-President 416-756-8517
and Chief Financial Officer
For more details on CCL, visit our web site - www.cclind.com
Stock Symbol: TSX - CCL.A and CCL.NV.B
CCL INDUSTRIES ACQUIRES INPRINT SYSTEMS
Toronto, September 13, 2005 - CCL Industries Inc., a world leader in
specialty packaging solutions for the consumer products and healthcare
industries, announced today that it has acquired Inprint Systems Ltd.
Headquartered in Ashford, England, Inprint Systems is a privately held
manufacturer of specialty label products with plants in the Netherlands,
United Kingdom, Italy and the USA. The Company is a world leader for labelling
solutions requiring "expanded content" in the form of folded printed data
attached to a pressure sensitive label.
Inprint Systems had revenues of approximately C$53 million in 2004 and an
adjusted EBITDA of C$11.2 million. The purchase price was approximately
C$64 million and was paid in cash.
Donald Lang, Vice Chairman and CEO of CCL Industries commented, "This
acquisition fits our strategy to redeploy cash into value enhancing businesses
that are immediately accretive to earnings. In addition, Inprint is in a
sector and in geographies that bring increased value to our existing customers
and in which our management team has continued to demonstrate expertise."
Geoffrey Martin, President and COO of CCL Industries said, "Inprint
Systems is an acknowledged industry leader in designing and developing
expanded content label solutions for the highly regulated label demands of the
Healthcare and Chemical markets. Their strong European presence in the UK,
Holland and Italy complements our existing businesses in this sector in
Scandinavia, Germany and France, as does the US plant with our existing North
American operations. We are delighted to welcome them to CCL's global network
of 34 label plants."
CCL Industries Inc. provides state-of-the-art packaging solutions,
including specialty aluminum containers, plastic tubes and closures and
innovative product labelling, to some of the world's largest producers of
consumer brands, helping them to get their products to market quickly and
cost-effectively. CCL develops and provides specialty-packaging solutions for
producers of leading consumer brands in personal care, cosmetic,
pharmaceutical, household and specialty food and beverage products. With
headquarters in Toronto, Canada, CCL employs 4,000 people directly and
operates 40 production facilities in North America, Europe and Asia.
Statements contained in this Press Release, other than statements of
historical facts, are forward-looking statements subject to a number of
uncertainties that could cause actual events or results to differ
materially from some statements made.
For more information, contact:
Steve Lancaster Executive Vice President 416-756-8517
and Chief Financial Officer
For more details on CCL, visit our web site - www.cclind.com
>>
