Cott to Acquire Eden Springs. Expanding Our Home and Office Delivery Business and Platforms

Transcription

1 Cott to Acquire Eden Springs Expanding Our Home and Office Delivery Business and Platforms

2 Safe Harbor Statements Forward Looking Statements: This presentation contains forward-looking statements within the meaning of Section 7A of the Securities Act of 9, Section E of the Securities Exchange Act of 94 and applicable Canadian securities laws conveying management's expectations as to the future based on plans, estimates and projections at the time the Company makes the statements. Forward-looking statements involve inherent risks and uncertainties and the Company cautions you that a number of important factors could cause actual results to differ materially from those contained in any such forward-looking statement. The forward-looking statements contained in this presentation include, but are not limited to, statements related to the anticipated timing of the transaction, the completion of the transaction on the terms proposed, the financing of the transaction on terms currently anticipated, and the potential impact the acquisition will have on the Company. Management believes these assumptions to be reasonable but there is no assurance that they will prove to be accurate. Factors that could cause actual results to differ materially from those described in this presentation include, among others: () the ability to consummate the proposed transaction; () receipt of regulatory approvals without unexpected delays or conditions; () changes in estimates of future earnings and cash flows; (4) changes in expectations as to the closing of the transaction; (5) expected synergies and cost savings are not achieved or achieved at a slower pace than expected; (6) integration problems, delays or other related costs; (7) retention of customers and suppliers; (8) the cost of capital necessary to finance the transaction; and (9) unanticipated changes in laws, regulations, or other industry standards affecting the companies. The foregoing list of factors is not exhaustive. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Readers are urged to carefully review and consider the various disclosures, including but not limited to risk factors contained in the Company's Annual Report in the Form 0-K for the year ended January, 06. The Company does not, except as expressly required by applicable law, undertake to update or revise any of these statements in light of new information or future events. Non-GAAP Measures: The Company utilizes certain non-gaap financial measures, including 06 estimated Eden Springs adjusted EBITDA, to separate the impact of certain items from the underlying Eden Springs business. Management believes this supplemental information is useful to investors for their independent evaluation and understanding of the transaction with Eden Springs. Additionally, the Company supplements its reporting of net cash provided by (used in) operating activities determined in accordance with GAAP by excluding capital expenditures to present, free cash flow (on a stand-alone and pro forma basis), and by excluding acquisition, integration and transaction costs to present adjusted free cash flow (on a stand-alone and pro forma basis), which management believes provides useful information to investors. With respect to our expectations of performance of Eden as it is being integrated, reconciliations of free cash flow accretion and adjusted free cash flow accretion are not available, as we are unable to quantify certain amounts that would be required to be included in the relevant GAAP measures without unreasonable effort. We expect that the unavailable reconciling items, which primarily include foreign exchange impact, interest costs associated with yet to be issued debt and phasing of capex, could significantly affect our financial results. These items depend on highly variable factors and any such reconciliations would imply a degree of precision that would be confusing or misleading to investors. We expect the variability of these factors to have a significant, and potentially unpredictable, impact on our future GAAP financial results. The non-gaap financial measures described above are in addition to, and not meant to be considered superior to, or a substitute for, the Company s financial statements prepared in accordance with GAAP. In addition, the non-gaap financial measures included in this presentation reflect management's judgment of particular items, and may be different from, and therefore may not be comparable to, similarly titled measures reported by other companies. A reconciliation of these non-gaap measures may be found on

3 Today s Management Attendees Jerry Fowden Chief Executive Officer Jay Wells Chief Financial Officer Tom Harrington Chief Executive Officer DS Services Jarrod Langhans Head of Investor Relations

4 Today s Agenda Introduction Strategic Rationale and Transaction Overview Q&A

5 Cott s Vision Create a More Diversified Higher Margin and/or Growth Company Acquisition of Eden Springs Builds Cott s HOD Water, Coffee and Filtration Platform Across Europe Stable, strong cash generation through 4Cs, supported by growth in contract manufacturing and Value Added Water offsetting PL CSD and SSJ declines Traditional Business DS Services Growth Continue to generate top-line growth Small tuck-in acquisitions of $0 - $0 million in HOD Water/OCS businesses annually Shareholder Value Creation Focus on cash generative HOD water, coffee and tea in growing and/or highermargin beverage categories (cash-on-cash IRR greater than cost of equity) Mid-to-Larger Scale Acquisitions Create a more diversified higher margin and/or growth-oriented company with annual EBITDA and free cash flow expansion to drive increased multiple/stock valuation. Acquisition Synergy Capture Successfully integrate DS Services and Aquaterra to drive synergy capture 4

6 Eden Springs Europe s Leading Direct-to-Consumer (Home and Office) Water and Office Coffee Services Provider Water Services Office Coffee Services 05 Revenue: 8mm ($66mm) 05 Revenue: 67mm ($408mm) Filtration Retail 6% 0% 05 Revenue: 70mm ($77mm) Filtration Office Coffee Services 9% Water Services 65% Retail 05 Revenue: mm ($4mm) Note: Figures converted at EUR:USD rate of. Source: Company information 05 Revenue: 7mm ($4mm) 5

7 Eden Springs Multiple Strong Leadership Positions and Platforms Across Europe Leading Platforms Across Europe 05 Adj. EBITDA () By Country Broad Spread of EBITDA Contribution UK Norway Sweden Denmark Netherlands Germany Luxembourg Poland Finland Estonia Latvia Lithuania Russia Nordics 6% Poland 6% Germany 7% Netherlands 5% () 9% United Kingdom 8% Israel 7% Portugal Spain France Switzerland Switzerland 8% Russia 9% France 5% Eden geographic presence Israel BWC water position () Water activity Coffee activity () Excludes corporate allocations. Adjustments to EBITDA include acquisition integration cost, restructuring charges, business development and establishment costs () Includes Baltics, Portugal and Spain () BWC represents total bottled water coolers but is not a market in and of itself as the HOD water business consists of coolers, bottled water as well as other products such as case pack water and single serve products Source: Company information 6

8 Eden Springs - Strong Strategic and Complementary Rationale Similar to DS Services Finland Norway Russia Poland Germany Luxembourg Lithuania Netherlands UK Estonia Latvia Denmark Sweden France Switzerland Portugal Spain Eden geographic presence BWC water DSS Strategic Rationale Market leader in HOD water Attractive entry multiple Improves channel mix and reduces customer concentration Improves Cott s overall growth profile Product and package diversification Decreases proportional exposure to commodities Meaningful cost synergies Enhances margin profile and accretive to adjusted free cash flow Strong platforms for follow on tuck-ins position() Israel Eden Springs () BWC represents total bottled water coolers but is not a market in and of itself as the HOD water business consists of coolers, bottled water as well as other products such as case pack water and single serve products Source: Company information 7

9 Today s Agenda Introduction Strategic Rationale and Transaction Overview Q&A 8

10 Cott s Eden Springs Transaction Overview and Strategic Rationale Eden Springs to be acquired for approximately 470 million. The acquisition creates a business with $. billion in revenue and adds Europe's leading provider of water and coffee solutions while further enhancing Cott s margins and free cash flow alongside product and channel diversification. Cott has received committed acquisition financing and the acquisition is expected to close in Q Improves product and channel mix while reducing exposure to Big Box retail and commodities, proportionally (Cott s 05 EBITDA from private label in large format retail is down to %) Creates a strong international HOD platform with multiple leading positions and further tuck-in opportunities Meaningful scale across Europe with access to attractive end-markets with positive growth outlook (A leading European player with multiple value-creative tuck-in acquisition opportunities) Expands direct to consumer business High-quality and loyal customer base (Combination of DS Services, Aquaterra and Eden has over million direct to customer delivery points) 5 Financially attractive and consistent with Cott s acquisition and diversification strategy clear synergy potential, accretive to adjusted EBITDA margins (Eden adjusted EBITDA margins 7% versus Cott %), adjusted free cash flow, and cash flow conversion () () FCF conversion defined as EBITDA less capex / EBITDA 9

11 Better For You Channels Products Improves Product and Channel Mix While Reducing Exposure to Big Box Retail and Commodities Traditional Cott 05 Adj. EBITDA Cott + DSS 05 Adj. EBITDA Cott + DSS + Eden 05 Adj. EBITDA CSD + Juices = 55% Traditional Cott = 00% CSD + Juices = 7% Traditional Cott = 48% CSD + Juices = % Traditional Cott = 40% 4% Sparkling Waters % CSD % Juice / Juice Drinks % OCS 6% Water 8% 6% HOD Water % CSD 6% Juice / Juice Drinks % Sparkling Waters 0% OCS 8% Water 8% 5% HOD Water 8% CSD % Juice / Juice Drinks 9% Sparkling Waters 8% Branded Retail 5% Contract Packaging % % 9% Private Label Retail 7% 0% Private Label Retail % Private Label Retail 70% HOD Water Delivery % Branded Retail % HOD Water Delivery 8% Branded Retail % Better For You % 4% Better For You 57% 79% Note: Financials based on FY 05 Adjustments to EBITDA include acquisition integration costs, unrealized foreign exchange gains, purchase accounting adjustments and restructuring and business development costs product category includes concentrates, Eden s filtration services and other. Sparkling water includes mixers channels include contract packaging (except Cott standalone), office coffee services and other Better For You grouping includes HOD Water, Water, OCS and Sparkling Waters / Mixers Source: Company information, Management estimates 7% Better For You 6% 0

12 Creates a Strong International HOD Platform with Multiple Leading Positions and Further Tuck-In Acquisition Opportunities Cott becomes a leading HOD player across North America and Europe. Opportunity exists for further accretive acquisitions Finland Norway Estonia Sweden Denmark UK Poland Germany Luxembourg France Portugal Switzerland Netherlands Latvia Lithuania Russia Spain Eden geographic presence Israel BWC water position() European HOD Water Players Revenue European Office Coffee Players Revenue Company A 6% Eden 4% Eden 0% Company A % 6% Company B % Next 5 % 89% Source: Company information, Management estimates () BWC represents total bottled water coolers but is not a market in and of itself as the HOD water business consists of coolers, bottled water as well as other products such as case pack water and single serve products

13 Meaningful Scale Across Europe with Access to Attractive End-Markets with Positive Growth Outlook A Clear Leader in the European Market Clear leader in HOD water with largest competitor being a distant second More than 800,000 customers across Europe Installed base of ~ million water coolers and coffee machines Water Services Office Coffee Services Filtration Fragmented market presents multiple potential tuck-in acquisition opportunities Highly fragmented market provides tuckin acquisition and cross sell into water customer opportunities Small, but growing market with only other large market participant On-trend category with health & wellness and environmental focus Consumers increasingly expecting highquality, premium brand coffee at work Strong growth and creating highly synergistic opportunity European Category Size: ~$.bn European Category Size: ~$.8bn European Category Size: ~$80mm Note: Figures converted as EUR:USD rate of.. Source: Zenith International 05, Euromonitor

14 4 Expands Direct Route-to-Market Business With High-Quality and Loyal Customer Base and Low Customer Concentration Key Highlights Manages relationships with >600k offices and >00k homes Client retention reached a record level of 87% Average length of customer relationship is over 7.5 years Top-0 clients aggregate to less than 5% of total sales Strong and Loyal Customer Base 84.8% 85.% 86.5% 87.0% Retention rate Client lifetime years Highly Diversified Customer Base Commercial 5% 7% Public 6% Industrial 0% Service firms 4% CH 5% Nordics 5% GE 5% RU 6% PL 0% ES 8% 4% FR % ISR 6% UK 9% Revenue By End-Market () Revenue By Geography ()() () Percentage of total revenue () Israel includes leading retail small pack water business Source: Company information

15 5 Financially Attractive and Consistent with Cott s Acquisition Strategy Eden s 7% EBITDA margins are accretive to Cott s overall EBITDA margin Financial Impact Accretive to free cash flow in Year (excluding acquisition, integration and transaction costs) High free cash flow conversion () > 60% (capex 0 to 5 million) IRR in excess of cost of equity Purchase Price of 470 million on a cash-free and debt-free basis representing a Mid-7x EBITDA purchase multiple Attractive Multiple Estimated run rate adjusted 06 EBITDA above 60 million Approximately 0 million in synergies by the end of 09 Estimated Mid-6x EBITDA post synergy multiple Attractive long term cost of capital Improves channel diversification Reduces customer concentration and exposure proportionally to large format retail Consistent with Cott s Acquisition Strategy Low commodity exposure Expands Better For You platform Growing product categories and end-markets Significant tuck-in acquisition opportunities at accretive multiples Clear synergy potential across Cott, DS Services, Aimia Foods and Eden Springs Note: Figures converted as EUR:USD rate of. () FCF conversion defined as EBITDA less capex / EBITDA Source: Management estimates Strong international management team 4

16 Today s Agenda Introduction Strategic Rationale and Transaction Overview Q&A 5