CCL Industries Reports Record Fourth Quarter and 2014 Results

TORONTO,ON--(Marketwired - February 26, 2015) - CCL Industries Inc. (TSX: CCL.A) (TSX: CCL.B)

Fourth-Quarter Highlights

• Adjusted basic earnings per share⁽³⁾ of $1.51, up 26.9%,
  basic earnings per share of $1.33, up 129.3%
• 13.4% operating income margin⁽¹⁾, up 0.5% year-over-year
• CCL Label organic sales growth of 5.9%
• Board approves 25% increase to first quarter 2015 dividend.  Annual dividend is $1.50 per class B share for 2015 compared to $1.00 at March 2014
  

2014 Highlights

• Adjusted basic earnings per share⁽³⁾ of $6.53, up 47.4%,
  basic earnings per share of $6.31, up 107.6%
• Avery delivers $109 million operating income⁽¹⁾
• CCL Label delivers 6.5% organic sales growth and 21.0% EBITDA margin⁽²⁾
• Free cash flow⁽⁵⁾ $264 million, 122% earnings conversion
• 20% return on equity⁽⁶⁾ hurdle reached for the first time

CCL Industries Inc. ("CCL" or "the Company"), a world leader in specialty label and packaging solutions for global corporations, small businesses and consumers, today reported fourth quarter and annual financial results for 2014.

Sales for the fourth quarter of 2014 increased 14.0% to $635.8 million, compared to $557.7 million for the fourth quarter of 2013, with 2.8% organic growth, 4.4% positive currency translation impact and the balance primarily from the 2014 acquisitions of Sancoa, Dekopak and Bandfix. 

Operating income (a non-IFRS measure; see note 1 below) for the fourth quarter of 2014 was $85.0 million, an increase of 17.7% compared to $72.2 million for the comparable quarter of 2013. Excluding the impact of currency translation operating income improved 13.5%.

Restructuring and other expenses totalled $7.1 million for fourth quarter of 2014, representing the final activities related to the Avery restructuring plan as well as other costs to close and consolidate smaller plants within the Label Segment. Restructuring and other expenses for Avery and the reorganization of the Canadian Container operation totalled $24.2 million for the final quarter of 2013.

Net earnings improved 133.8% to $45.6 million for the 2014 fourth quarter compared to $19.5 million in the 2013 fourth quarter. Basic and adjusted basic earnings (a non-IFRS measure; see note 3 below) were $1.33 and $1.51 per share, respectively, compared to basic and adjusted basic earnings of $0.58 and $1.19 per share in the prior year fourth quarter.

For the full year 2014 sales, operating income and net earnings improved 36.8%, 46.7% and 109.1%, respectively, compared to 2013. 2014 included results from eight acquisitions completed since January 1, 2013, most notably the July 1, 2013 acquisition of Avery and DES. Organic sales growth of 3.8% delivered solid underlying profit improvement and foreign currency translation added $0.33 per share. For 2014 adjusted basic earnings was a record $6.53 per share compared to $4.43 per share in 2013.

Geoffrey T. Martin, President and Chief Executive Officer, commented, "Robust results for the fourth quarter completed a record year for CCL with earnings exceeding $200 million for the first time. The stronger U.S. dollar benefitted profit translation in the quarter but this largely corresponded to translation and transaction declines in Europe and Emerging Markets. We are pleased with 2014's performance as CCL Label delivered solid sales and profit gains, Avery significantly exceeded expectations, especially in the important label category, and results at CCL Container were steady."

Mr. Martin concluded, "Record free cash flow financed five strategic acquisitions, capital expenditures and debt repayments in 2014. The Company's leverage ratio⁽⁴⁾ improved to 0.9 times EBITDA⁽²⁾ leaving considerable capacity to execute growth plans for 2015 and beyond. Given CCL's financial transformation in 2014, the Board of Directors declared a further 25% increase in the dividend to $0.375 per Class B non-voting share and $0.3625 per Class A voting share, payable to shareholders of record at the close of business on March 17, 2015, to be paid on March 31, 2015. The annualized dividend now stands at $1.50 per class B non-voting share compared to an annual rate of $1.00 for the first two quarters of 2014, an increase of 50%."

Fourth Quarter and 2014 Segment Highlights

CCL Label

• Sales for the fourth quarter increased to $433 million, up organically 5.9% and 6.5% overall for 2014 to $1.72 billion; acquisitions and currency translation the balance.
• Fourth quarter organic sales growth: high single digits in Europe, mid-single digits in North America; Emerging Markets mixed: low double digits in Latin America, low single digits in Asia Pacific.
• Operating income margin up 100 basis points to 13.4% for the fourth quarter and down 40 basis points to 14.1% for 2014 on acquisition mix, underlying margin up. Strong fourth quarter in North America overall and Food & Beverage sector globally; Emerging Markets held in check by currency, slower growth and start-up costs.
• Joint ventures added 6 cents earnings per share in the fourth quarter.
• $5 million fourth quarter restructuring charge to consolidate a number of small, sub-optimal operations.

Avery

• Sales increased 0.5% to $155 million for the fourth quarter, with 5.9% organic decline offset largely by foreign exchange translation. 2014 sales were $666 million.
• Further restriction of year end customer pre-buys and the strong U.S. dollar impact on imports to Canada resulted in modest fourth quarter operating income decline to $23 million; results exceeded expectations at $109 million for 2014.
• $1.4 million final post acquisition restructuring in the quarter, largely in Europe.

CCL Container

• 8.7% organic growth on strong demand in Mexico drove fourth quarter sales to $48 million. Sales for 2014 were up 1.9% organically on soft HPC markets to $201 million.
• Strong U.S. dollar boosted profits on sales produced in Canada partly offset by the reverse effect on aluminum imports in Mexico. Operating income up 37% to $4 million for the fourth quarter and up 8.5% for the year to $18 million.
• Capacity consolidation project now not expected to complete before 2016.

CCL will hold a conference call at 1:30 p.m. EST on February 26, 2015, to discuss these results. The analyst presentation will be posted on the Company's website. 

To access this call, please dial:

416-340-8530 - Local
1-800-769-8320 - Toll Free

Forward-looking Statements

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

Forward-looking statements are not guarantees of future performance. They involve known and unknown risks and uncertainties relating to future events and conditions including, but not limited to, the after-effects of the global financial crisis and its impact on the world economy and capital markets; the impact of competition; consumer confidence and spending preferences; general economic and geopolitical conditions; currency exchange rates; interest rates and credit availability; technological change; changes in government regulations; risks associated with operating and product hazards; and CCL's ability to attract and retain qualified employees. Do not unduly rely on forward-looking statements as the Company's actual results could differ materially from those anticipated in these forward-looking statements. Forward-looking statements are also based on a number of assumptions, which may prove to be incorrect, including, but not limited to, assumptions about the following: global economic recovery and higher consumer spending; improved customer demand for the Company's products; continued historical growth trends, market growth in specific sectors and entering into new sectors; the Company's ability to provide a wide range of products to multinational customers on a global basis; the benefits of the Company's focused strategies and operational approach; the achievement of the Company's plans for improved efficiency and lower costs, including stable aluminum costs; the availability of cash and credit; fluctuations of currency exchange rates; the Company's continued relations with its customers; general business and economic conditions. Should one or more risks materialize or should any assumptions prove incorrect, then actual results could vary materially from those expressed or implied in the forward-looking statements. Further details on key risks can be found in the 2013 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

CCL Industries Inc.
Consolidated income statements
Unaudited

CCL Industries Inc.
Consolidated statements of cash flows
Unaudited

CCL Industries Inc.
Segment Information
Unaudited

Supplemental Financial Information & Non-IFRS Measures

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

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

Reconciliation of Operating Income to EBITDA

Unaudited

Reconciliation of Label EBITDA

Unaudited

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

Reconciliation of Basic Earnings per Class B Share to
Adjusted Basic Earnings per Class B Share

Unaudited

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

Leverage Ratio

⁽⁵⁾ Free Cash Flow from Operations ("FCF") and Earnings Conversion ("EC") are relevant measures to the Company and its shareholders as it indicates the absolute and relative amount of cash generated by the Company during the year and available to fund dividends, debt repayments and acquisitions. FCF is calculated as cash flow from operations less capital expenditures, net of proceeds from the sale of property, plant and equipment. EC is calculated as FCF divided by net earnings.

Reconciliation of Free Cash Flow

⁽⁶⁾ Return on Equity before goodwill impairment loss, restructuring and other items and tax adjustments ("ROE") are important measures for the investment community as it provides insight into the effective use of shareholder capital in generating ongoing net earnings. ROE is calculated by dividing annual net income before goodwill impairment loss, restructuring and other items, Avery and DES finance costs, non-cash acquisition accounting adjustment to finished goods inventory, and tax adjustments by the average of the beginning and the end-of-year equity.

The following table reconciles net earnings used in calculating the ROE measure to IFRS measures reported in the consolidated statements of financial position and in the consolidated income statements for the periods ended as indicated.

Sales Change Analysis
Revenue Growth Rates (%)

Business Description

With headquarters in Toronto, Canada, CCL Industries now employs approximately 10,200 people and operates 101 production facilities in 29 countries on five continents with corporate offices in Toronto, Canada, and Framingham, Massachusetts. CCL Label is the world's largest converter of pressure sensitive and extruded film materials for a wide range of decorative, instructional and functional applications for large global customers in the consumer packaging, healthcare, automotive and consumer durables markets. Extruded & laminated plastic tubes, folded instructional leaflets, precision printed & die cut metal components with LED displays and other complementary products and services are sold in parallel to specific end-use markets. Avery is the world's largest supplier of labels, specialty converted media and software solutions to enable short run digital printing in businesses and homes alongside complementary office products sold through distributors and mass market retailers. CCL Container is a leading producer of impact extruded aluminum aerosol cans and bottles for consumer packaged goods customers in the United States, Canada and Mexico.

Audio replay service will be available from February 26, 2015, at 6:00 p.m. EST until March 12, 2015, at 11:59 p.m. EDT.

To access Conference Replay, please dial:

905-694-9451 - Local
1-800-408-3053 - Toll Free
Access Code: 6786278