TORONTO, ON--(Marketwired - February 23, 2017) -
Fourth Quarter Highlights
- Record fourth quarter adjusted basic earnings per Class B share
(3) of $2.98, up 38.0%; basic earnings per Class B share of $2.80, up 36.6%; includes $0.06 currency headwind - Sales increased 32.5%, supported by 6.9% CCL Label organic sales growth
- Checkpoint delivered $27.3 million operating income
(1) - Announced $1.13 billion acquisition of Innovia Group, necessary approvals in place to close the transaction in the first quarter 2017
- Board approves 15.0% increase to annual dividend
2016 Highlights
- Record full-year 2016 adjusted basic earnings per Class B share
(3) of $11.41, up 32.5%; record basic earnings per Class B share of $9.90 up 16.5% - Sales increased 30.8% supported by 7.2% CCL Label organic sales growth
- Closed eight acquisitions for an aggregate $669 million purchase price
- Closed US$500 million public bond offering at 3.25% for ten years
CCL Industries Inc. (TSX: CCL.A) (TSX: CCL.B) ("CCL" or "the Company"), a world leader in specialty label and packaging solutions for global corporations, government institutions, small businesses and consumers, today reported record fourth quarter and annual financial results for 2016.
Sales for the fourth quarter of 2016 increased 32.5% to $1,058.4 million, compared to $798.8 million for the fourth quarter of 2015, with 4.0% organic growth, 2.1% negative currency translation impact and 30.6% acquisition-related growth, primarily driven by the May 13, 2016 acquisition of Checkpoint Systems, Inc. ("Checkpoint").
Operating income
Restructuring and other items of $6.7 million ($6.4 million after tax) was reported for the fourth quarter of 2016. This consisted of severance costs of $4.7 million and $2.5 million for the Checkpoint and Worldmark acquisitions, respectively, as well as other acquisition related transaction costs of $1.5 million partially offset by a reversal of the Avery Segment acquisition accrual of $2.0 million due to the repurposing of the Meridian, Mississippi facility as a distribution centre. There was a net expense for restructuring and other items of $4.2 million ($3.7 million after tax) in the 2015 fourth quarter.
Tax expense in the fourth quarter of 2016 was $33.6 million compared to $27.8 million in the prior year period. The effective tax rates for these two periods were 25.7% and 28.4%, respectively. The decrease in the effective tax rate can be attributed to the recognition of previously unrecognized deferred tax assets and other discrete tax deductions partially offset by an increase in taxable income in higher taxed jurisdictions. The net impact of these fourth quarter adjustments was an approximate $3.5 million reduction in tax expense or $0.10 per class B share.
Net earnings were $98.3 million for the 2016 fourth quarter compared to $71.9 million for the 2015 fourth quarter. Basic and adjusted basic earnings per Class B share
For 2016, sales, operating income and net earnings improved 30.8%, 21.5% and 17.4% to $3,974.7 million, $603.3 million and $346.3 million, respectively, compared to 2015. Included in the 2016 annual results was a $33.9 million non-cash acquisition accounting adjustment to the acquired finished goods inventory from the Checkpoint and Worldmark businesses that was expensed in the Company's cost of goods sold for the period. Excluding this non-cash adjustment, operating income was $637.2 million and improved 28.3% compared to 2015. 2016 included results from fourteen acquisitions completed since January 1, 2015, delivering acquisition-related sales growth for the period of 25.5%. Organic sales growth of 4.0% provided the foundation for solid profit improvement and foreign currency translation added $0.07 per share. For 2016, basic and adjusted basic earnings per Class B share
Geoffrey T. Martin, President and Chief Executive Officer, commented, "Record fourth quarter results were underpinned by strong performance in our core businesses and a second consecutive quarter of solid performance at Checkpoint. CCL Label posted robust 6.9% organic growth with profit gains broad based by business and geography augmented by recent acquisitions. Avery continued to expand operating margins despite tough conditions in North America driven by office superstore closures while CCL Container had a strong finish to a record year."
Mr. Martin added, "Although Checkpoint's last two quarters are the seasonally strongest of the year, results were still better than expected as cost savings kicked in faster than anticipated. The coming first quarter has traditionally been loss making for Checkpoint in the low 'sale season' for retailers. So far, $20.7 million of reorganization costs have been recorded of an expected $30.0 million total, recently reduced from $40.0 million. We expect this to yield at least $40.0 million in annualized savings, likely delivering earlier than the previously indicated 2018."
Mr. Martin continued, "Foreign currency translation reduced earnings $0.06 per share for the quarter, largely driven by the slightly lower U.S. dollar and euro and the significant devaluations of the Mexican peso and U.K. pound compared to the exchange rates in effect at the end of 2015. At today's Canadian dollar exchange rates, currency translation would remain a modest headwind for the first quarter of 2017, if sustained."
Mr. Martin concluded, "Late last year we announced the acquisition of Innovia for $1.13 billion. Closing prerequisites are in place so we expect the transaction to complete in the first quarter. Our balance sheet and liquidity positions are strong with a net leverage ratio
Fourth Quarter 2016 Segment Highlights
CCL Label
- Sales increased 14.2% to $632 million, with 6.9% organic growth, 9.4% acquisitions and 2.1% negative currency translation
- Regional organic sales growth: mid-single digit in North America and Europe, high single digit in Asia Pacific and strong double digit in Latin America
- Solid 14.4% operating margin
(1) diluted 30 bps by the impact of acquisitions - Label joint ventures added $0.05 earnings per Class B share
Avery
- Sales were $181 million, 4.8% organic sales decline, 1.5% negative currency translation partially offset by a 0.7% increase from acquisitions
- Office superstore closures impacted demand in North America, International up modestly
- Operating margin
(1) expanded 170 bps to 19.7%. Results improved 6.2% excluding the impact of currency translation and acquisitions.
Checkpoint
- $191 million sales met expectations for the retail high season
- Operating income
(1) of $27.3 million, better than expected 14.3% operating margin - Additional $4.7 million of restructuring recorded for the quarter
CCL Container
- Sales increased 1.3% to $55 million with 5.5% organic sales growth partially offset by 4.2% negative currency translation
- Operating income
(1) of $7.1 million, operating margin expanded 130 bps to 12.9% - 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 8:00 a.m. EST on February 23, 2017, to discuss these results. The analyst presentation will be posted on the Company's website.
To access this call, please dial:
416-340-2219 - Local
1-866-225-0198 - Toll Free
Audio replay service will be available from February 23, 2017, at 10:00 a.m. EST until March 26, 2017, at 11:59 p.m. EDT.
To access Conference Replay, please dial:
905-694-9451 - Local
1-800-408-3053 - Toll Free
Access Code: 2928302
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; the Company's estimated annual cost reductions from the restructuring of the Checkpoint Systems, Inc. acquisition; the expected closing of the Innovia acquisition and financial impact; 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 2015 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 December As at December
31, 2016 31, 2015
--------------- ----------------
Assets
Current assets
Cash and cash equivalents $ 585,077 $ 405,692
Trade and other receivables 672,253 524,621
Inventories 351,480 260,600
Prepaid expenses 25,760 20,562
Income taxes recoverable 26,231 18,389
Derivative instruments 68 -
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Total current assets 1,660,869 1,229,864
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Non-current assets
Property, plant and equipment 1,216,946 1,085,506
Goodwill 1,131,784 876,838
Intangible assets 549,604 285,340
Deferred tax assets 21,177 12,293
Equity accounted investments 64,057 61,502
Other assets 34,404 30,962
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Total non-current assets 3,017,972 2,352,441
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Total assets $ 4,678,841 $ 3,582,305
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Liabilities
Current liabilities
Trade and other payables $ 844,510 $ 710,999
Current portion of long-term debt 4,213 167,103
Income taxes payable 58,301 33,652
Derivative instruments - 1,095
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Total current liabilities 907,024 912,849
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Non-current liabilities
Long-term debt 1,597,080 838,416
Deferred tax liabilities 67,825 59,860
Employee benefits 279,228 135,216
Provisions and other long-term
liabilities 52,484 13,833
Derivative instruments - 253
----------------------------------------------------------------------------
Total non-current liabilities 1,996,617 1,047,578
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Total liabilities 2,903,641 1,960,427
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Equity
Share capital 261,352 276,882
Contributed surplus 64,234 50,584
Retained earnings 1,450,495 1,182,686
Accumulated other comprehensive income (881) 111,726
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Total equity 1,775,200 1,621,878
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Total liabilities and equity $ 4,678,841 $ 3,582,305
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CCL Industries Inc.
Consolidated income statements
Unaudited
Three Months Ended Twelve Months Ended
December 31 December 31
---------------------- ----------------------
In thousands of Canadian
dollars, except per share 2015
information 2016 2015 2016
Sales $1,058,449 $ 798,841 $3,974,749 $3,039,112
Cost of sales 735,866 569,676 2,806,853 2,179,694
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Gross profit 322,583 229,165 1,167,896 859,418
Selling, general and 120,062 612,825
administrative expenses 173,042 415,086
Restructuring and other
items 6,757 4,219 34,637 6,023
Earnings in equity accounted
investments (1,279) (1,614) (4,528) (3,477)
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144,063 106,498 524,962 441,786
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Finance cost 13,719 7,700 41,772 28,172
Finance income (1,494) (925) (3,853) (2,535)
---------------------------------------------------------------------------
Net finance cost 12,225 6,775 37,919 25,637
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Earnings before income tax 131,838 99,723 487,043 416,149
Income tax expense 33,507 27,853 140,734 121,071
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Net earnings $ 98,331 $ 71,870 $ 346,309 $ 295,078
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Attributable to:
Shareholders of the
Company $ 98,331 $ 71,870 $ 346,753 $ 295,078
Non-controlling interest - - (444) -
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Net earnings $ 98,331 $ 71,870 $ 346,309 $ 295,078
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Earnings per share
Basic earnings per Class B
share $ 2.80 $ 2.05 $ 9.90 $ 8.50
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Diluted earnings per Class B
share $ 2.76 $ 2.03 $ 9.77 $ 8.38
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CCL Industries Inc.
Consolidated statements of cash flows
Unaudited
Three Months Ended Twelve Months Ended
December 31 December 31
---------------------- ----------------------
In thousands of Canadian
dollars 2016 2015 2016 2015
Cash provided by (used for)
Operating activities
Net earnings $ 98,331 $ 71,870 $ 346,309 $ 295,078
Adjustments for:
Depreciation and
amortization 54,801 44,101 203,692 164,081
Earnings in equity
accounted investments,
net of dividends received (1,279) (1,614) (1,722) (618)
Net finance costs 12,225 6,775 37,919 25,637
Current income tax expense 20,536 17,915 125,928 121,677
Deferred taxes 12,971 9,938 14,806 (606)
Equity-settled share-based
payment transactions 3,861 1,077 15,381 8,425
Gain on sale of property,
plant and equipment (238) (1,906) (1,444) (2,863)
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201,208 148,156 740,869 610,811
Change in inventories 35,944 (6,008) 61,380 (38,268)
Change in trade and other
receivables 62,042 32,960 22,834 (83,103)
Change in prepaid expenses 3,966 4,603 (4,346) (225)
Change in trade and other
payables (221) 63,651 (100,148) 129,445
Change in income taxes
receivable and payable (5,375) (5,984) (2,471) (6,608)
Change in employee
benefits 3,799 (26,439) 16,633 (3,378)
Change in other assets and
liabilities (3,519) 16,742 (9,895) 2,827
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297,844 227,681 724,856 611,501
Net interest paid (2,970) (1,479) (35,991) (23,909)
Income taxes paid (40,751) (44,721) (124,829) (112,332)
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Cash provided by operating
activities 254,123 181,481 564,036 475,260
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Financing activities
Proceeds on issuance of
long-term debt (2,880) 268,795 835,194 324,610
Repayment of debt (69,913) (1,612) (302,219) (99,845)
Proceeds from issuance of
shares - 5,556 5,614 18,316
Purchase of shares held in
trust - - (28,836) -
Dividends paid (17,565) (13,131) (70,174) (52,296)
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Cash provided by (used for)
financing activities (90,358) 259,608 439,579 190,785
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Investing activities
Additions to property, plant
and equipment (33,911) (41,814) (234,663) (172,214)
Proceeds on disposal of
property, plant and
equipment 2,662 5,019 9,331 17,595
Business acquisitions and
other long-term investments (2,762) (310,247) (571,482) (356,703)
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Cash used for investing
activities (34,011) (347,042) (796,814) (511,322)
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Net increase in cash and
cash equivalents 129,754 94,047 206,801 154,723
Cash and cash equivalents at
beginning of period 458,297 298,757 405,692 221,873
Translation adjustments on
cash and cash equivalents (2,974) 12,888 (27,416) 29,096
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Cash and cash equivalents at
end of the period $ 585,077 $ 405,692 $ 585,077 $ 405,692
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CCL Industries Inc.
Segment Information
Unaudited
In thousands of Canadian dollars
Three Months Ended December 31
------------------------------------------
Sales Operating income
--------------------- --------------------
2016 2015 2016 2015
---------- ---------- --------- ---------
Label $ 631,794 $ 553,093 $ 90,686 $ 81,847
Avery 180,578 191,246 35,457 34,384
Checkpoint 190,869 - 27,369 -
Container 55,208 54,502 7,056 6,328
---------- ---------- --------- ---------
Total operations $1,058,449 $ 798,841 160,568 $ 122,559
---------- ----------
Corporate expense (11,027) (13,456)
Restructuring and other items (6,757) (4,219)
Earnings in equity accounted
investments 1,279 1,614
Finance cost (13,719) (7,700)
Finance income 1,494 925
Income tax expense (33,507) (27,853)
--------- ---------
Net earnings $ 98,331 $ 71,870
--------- ---------
Twelve Months Ended December 31
------------------------------------------
Sales Operating income
--------------------- --------------------
2016 2015 2016 2015
---------- ---------- --------- ---------
Label $2,497,592 $2,030,322 $ 378,028 $ 317,252
Avery 787,727 782,686 166,732 152,753
Checkpoint 458,999 - 28,204 -
Container 230,431 226,104 30,290 26,593
---------- ---------- --------- ---------
Total operations $3,974,749 $3,039,112 603,254 496,598
---------- ----------
Corporate expense (48,183) (52,266)
Restructuring and other items (34,637) (6,023)
Earnings in equity accounted
investments 4,528 3,477
Finance cost (41,772) (28,172)
Finance income 3,853 2,535
Income tax expense (140,734) (121,071)
--------- ---------
Net earnings $ 346,309 $ 295,078
--------- ---------
Total assets Total liabilities
--------------------- -----------------------
2016 2015 2016 2015
---------- ---------- ---------- ------------
Label $2,451,904 $2,285,169 $ 639,546 $ 596,902
Avery 566,569 615,893 201,274 230,293
Checkpoint 935,802 - 441,817 -
Container 156,114 173,688 42,266 50,929
Equity accounted investments 64,057 61,502 - -
Corporate 504,395 446,053 1,578,738 1,082,303
----------------------------------------------
Total $4,678,841 $3,582,305 $2,903,641 $ 1,960,427
----------------------------------------------
Depreciation and
amortization Capital expenditures
--------------------- ---------------------
2016 2015 2016 2015
---------- ---------- ---------- ----------
Label $ 152,603 $ 132,796 $ 194,754 $ 145,974
Avery 16,105 15,123 16,229 13,765
Checkpoint 18,702 - 5,892 -
Container 15,305 15,191 17,788 12,475
Equity accounted investments - - - -
Corporate 977 971 - -
-------------------------------------------
Total $ 203,692 $ 164,081 $ 234,663 $ 172,214
-------------------------------------------
Non-IFRS Measures
Reconciliation of operating income to EBITDA
Unaudited
----------------------------------------------------------------------------
(In millions of Canadian dollars)
Three months ended
December 31 Twelve months ended
December 31
---------------------- ----------------------
2015
Sales 2016 2015 2016
---------- ---------- ---------- ----------
Label $ 631.8 $ 553.1 $ 2,497.6 $ 2,030.3
Avery 180.5 191.2 787.7 782.7
Checkpoint 190.9 - 459.0 -
Container 55.2 54.5 230.4 226.1
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Total sales $ 1,058.4 $ 798.8 $ 3,974.7 $ 3,039.1
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Operating income
Label $ 90.7 $ 81.9 $ 378.0 $ 317.2
Avery 35.5 34.4 166.8 152.8
Checkpoint 27.3 - 28.2 -
Container 7.1 6.3 30.3 26.6
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Total operating income 160.6 122.6 603.3 496.6
Less: Corporate expenses (11.0) (13.5) (48.2) (52.3)
Add: Depreciation &
amortization 54.7 44.1 203.7 164.1
Add: Non-cash acquisition
accounting adjustment to
finished goods inventory - - 33.9 -
---------------------------------------------------------------------------
EBITDA $ 204.3 $ 153.2 $ 792.7 $ 608.4
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Reconciliation of Basic Earnings per Class B Share to
Adjusted Basic Earnings per Class B Share
Unaudited
----------------------------------------------------------------------------
Three months ended Twelve months ended
December 31 December 31
--------------------- ---------------------
2016 2015 2016 2015
---------- ---------- ---------- ----------
Basic earnings per Class B Share $2.80 $2.05 $9.90 $8.50
Net loss from restructuring and
other items 0.18 0.11 0.79 0.11
Non-cash acquisition accounting
adjustment related to finished
goods inventory - - 0.72 -
----------------------------------------------------------------------------
Adjusted Basic Earnings per
Class B Share $2.98 $2.16 $11.41 $8.61
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For the years ended December 31 2016 2015
---------------------------------------------------------------------------
Unaudited
(In millions of Canadian dollars)
Current debt $ 4.2 $ 167.1
Long-term debt 1,597.1 838.4
---------------------------------------------------------------------------
Total debt $ 1,601.3 $ 1,005.5
Cash and cash equivalents (585.1) (405.7)
---------------------------------------------------------------------------
Net debt $ 1,016.2 $ 599.8
EBITDA for 12 months ending December 31, $ 792.7 $ 608.4
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Leverage Ratio 1.28 0.99
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Supplemental Financial Information
Sales Change Analysis
Revenue Growth Rates (%)
Twelve Months Ended December 31,
Three Months Ended December 31, 2016 2016
----------------------------------------------------------------------------
Acquisi- FX Acquisi- FX
Organic tion Transl- Organic tion Transl-
Growth Growth ation Total Growth Growth ation Total
Label 6.9% 9.4% (2.1%) 14.2% 7.2% 14.7% 1.1% 23.0%
Avery (4.8%) 0.7% (1.5%) (5.6%) (4.1%) 2.2% 2.5% 0.6%
Checkpoint 0.0% 100% 0.0% 100% 0.0% 100% 0.0% 100%
Container 5.5% 0.0% (4.2%) 1.3% 3.4% 0.0% (1.5%) 1.9%
CCL 4.0% 30.6% (2.1%) 32.5% 4.0% 25.5% 1.3% 30.8%
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Business Description
CCL Industries employs almost 19,000 people operating 146 production facilities in 35 countries on 6 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 and chemicals, consumer durable, electronic device and automotive markets. Extruded and laminated plastic tubes, folded instructional leaflets, precision decorated and die cut components, electronic 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 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 and Mexico. Checkpoint is a leading manufacturer of technology-driven, loss prevention, inventory management and labeling solutions, including RF and RFID-based, to the retail and apparel industry. CCL partly backward integrates into materials science with capabilities in polymer extrusion, adhesive development and coating, surface engineering and metallurgy that are deployed across all four business segments.
For more information on CCL, visit our website - www.cclind.com or contact:
Sean Washchuk
Senior Vice President and Chief Financial Officer
416-756-8526
