COTT CORP /CN/ - 10-Q Quarterly Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

----------------

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 28, 2002

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____to_____

Commission File Number 000-19914
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COTT CORPORATION
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(Exact name of registrant as specified in its charter)

CANADA None
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

207 Queen's Quay W., Suite 340, Toronto, Ontario M5J 1A7
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(Address of principal executive offices) (Postal Code)

(416) 203-3898
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(Registrant's telephone number, including area code)

not applicable
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(Former name, former address and former fiscal year, if
changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---

There were 68,465,255 shares of common stock outstanding as of October 31, 2002.

1

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Income for the three and nine month periods
ended September 28, 2002 and September 29, 2001............................ Page 3

Consolidated Balance Sheets as of September 28, 2002 and December 29, 2001........ Page 4

Consolidated Statements of Shareowners' Equity as of September 28, 2002
and September 29, 2001..................................................... Page 5

Consolidated Statements of Cash Flows for the three and nine month periods
ended September 28, 2002 and September 29, 2001............................ Page 6

Notes to the Consolidated Financial Statements ................................... Page 7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations ....................................................................... Page 15

Item 3. Quantitative and Qualitative Disclosures about Market Risk ....................... Page 20

Item 4. Controls and Procedures ........................................................ Page 20

PART II - OTHER INFORMATION

Item 1. Legal Proceedings ................................................................ Page 21

Item 6. Financial Statement Schedules, Exhibits and Reports on Form 8-K .................. Page 21

Signatures .................................................................................. Page 22

Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 .................... Page 23

2

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

COTT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
- ------------------------------------------------------------------------------
(in millions of U.S. dollars, except per share amounts)
Unaudited

The accompanying notes are an integral part of these consolidated
financial statements.

3

COTT CORPORATION
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
(in millions of U.S. dollars)

The accompanying notes are an integral part of these consolidated
financial statements.

4

COTT CORPORATION
CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
- -------------------------------------------------------------------------------
(in millions of U.S. dollars)
Unaudited

The accompanying notes are an integral part of these consolidated
financial statements.

5

COTT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
(in millions of U.S. dollars)
Unaudited

The accompanying notes are an integral part of these consolidated
financial statements.

6

COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(in millions of U.S. dollars)
Unaudited

NOTE 1 - BASIS OF PRESENTATION

The interim consolidated financial statements have been prepared in accordance
with United States ("U.S.") generally accepted accounting principles ("GAAP")
for interim financial information. Accordingly, they do not include all
information and notes presented in the annual consolidated financial statements
in conformity with U.S. GAAP. In the opinion of management, the financial
statements reflect all adjustments that are necessary for a fair statement of
the results for the interim periods presented. All such adjustments are of a
normal recurring nature.

These financial statements should be read in conjunction with the most recent
annual consolidated financial statements. The accounting policies used in these
interim consolidated financial statements are consistent with those used in the
annual consolidated financial statements except as indicated in note 5.

Certain comparative amounts have been restated to conform to the financial
statement presentation adopted in the current year.

Consolidated financial statements in accordance with Canadian GAAP, in U.S.
dollars, are made available to all shareowners and filed with various Canadian
regulatory authorities.

NOTE 2 - BUSINESS SEASONALITY

Cott's results from continuing operations for the three and nine month periods
ended September 28, 2002 are not necessarily indicative of the results that may
be expected for the full year due to business seasonality. Operating results are
significantly impacted by business seasonality, which arises from higher sales
in the second and third quarters versus the first and fourth quarters of the
year in contrast to fixed costs such as depreciation, amortization and interest,
which are not significantly impacted by seasonal trends.

7

COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(in millions of U.S. dollars)
Unaudited

NOTE 3 - INCOME TAXES

The following table reconciles income taxes calculated at the basic Canadian
corporate rates with the income tax provision:

NOTE 4 - EXTRAORDINARY ITEM

On January 22, 2002, Cott redeemed the $276.4 million remaining balance of its
senior unsecured notes maturing in 2005 and 2007 and paid the related accrued
interest and early redemption penalties using the funds placed in an irrevocable
trust for this purpose. A charge of $9.6 million, net of a deferred tax recovery
of $4.5 million, was recorded on the early extinguishment of these senior notes.
The charge is comprised of the early redemption penalty and the write off of the
unamortized financing fees.

NOTE 5 - CHANGE IN ACCOUNTING PRINCIPLE

Effective December 30, 2001, Cott adopted SFAS No. 142, Goodwill and Other
Intangible Assets, for goodwill and other intangibles acquired prior to June 30,
2001. Cott adopted SFAS No. 142 for goodwill and other intangible assets
acquired subsequent to June 30, 2001 in 2001. Under this standard, goodwill and
intangible assets with indefinite lives are no longer amortized but are subject
to an annual impairment test. Other intangible assets continue to be amortized
over their estimated useful lives and are also tested for impairment.

Cott completed a goodwill impairment test as of the adoption date for the
standard and determined that unamortized goodwill of $44.8 million relating to
the United Kingdom reporting unit was impaired under the new rules. The
impairment write down has been recorded as a change in accounting principle.
There is no tax recovery on the impairment write down.

8

COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(in millions of U.S. dollars)
Unaudited

NOTE 5 - CHANGE IN ACCOUNTING PRINCIPLE (continued)

The goodwill amortization charged on the consolidated statement of income in the
three and nine month periods ended September 29, 2001 was $0.9 million and $2.8
million, respectively. Cott continues to amortize intangible assets acquired
prior to June 30, 2001, other than goodwill, over their estimated useful lives.

NOTE 6 - COMPREHENSIVE INCOME (LOSS)

NOTE 7 - INCOME (LOSS) PER SHARE

Basic net income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding during the
period. Diluted net income (loss) per share includes the effect of exercising
stock options and converting the preferred shares, only if dilutive.

The following table reconciles the basic weighted average number of shares
outstanding to the diluted weighted average number of shares outstanding:

As of September 28, 2002, Cott had 68,458,755 common shares and 4,866,990 common
share options outstanding. Of the common share options outstanding, 2,513,333
shares were exercisable as of September 28, 2002. The preferred shares were
converted into common shares on June 27, 2002.

9

COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(in millions of U.S. dollars)
Unaudited

NOTE 8 - INVENTORIES

NOTE 9 - PROPERTY, PLANT AND EQUIPMENT

NOTE 10 - INTANGIBLES AND OTHER ASSETS

Amortization expense related to intangibles and other assets was $7.8 million
for the period ended September 28, 2002 ($5.1 million - September 29, 2001). The
amortization expense is estimated to be approximately $10 million for 2002, $11
million per year for 2003 and 2004 and $9 million per year for 2005 and 2006.

10

COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(in millions of U.S. dollars)
Unaudited

NOTE 11 - NET CHANGE IN NON-CASH WORKING CAPITAL

The changes in non-cash working capital components, net of effects of
acquisitions and unrealized foreign exchange gains and losses, are as follows:

NOTE 12 - STOCK OPTION PLANS

Pursuant to the SFAS No. 123, Accounting for Stock-Based Compensation, Cott has
elected to account for its employee stock option plan under APB opinion No. 25,
Accounting for Stock Issued to Employees. Accordingly, no compensation expense
has been recognized for stock options issued under these plans. Had compensation
expense for the plans been determined based on the fair value at the grant date
consistent with SFAS No. 123, Cott's net income and income per common share
would have been as follows:

The pro forma compensation expense has been tax effected to the extent it
relates to stock options granted to employees in jurisdictions where the
related benefits are deductible for income tax purposes. Prior periods have
been restated to reflect the current year presentation.

11

COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(in millions of U.S. dollars)
Unaudited

NOTE 12 - STOCK OPTION PLANS (continued)

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:

NOTE 13 - ACQUISITIONS

Effective June 21, 2002, the Company formed a new venture in Mexico, Cott
Embotelladores de Mexico S.A. de C.V. ("CEMSA"), with Embotelladora de Puebla,
S.A. de C.V. ("EPSA") in order to establish manufacturing and marketing
capabilities in Mexico. Cott acquired a 90% interest in this new venture. EPSA
has the remaining 10% interest. The purchase price was allocated to working
capital, machinery and equipment and customer list.

Effective June 25, 2002, Cott acquired all of the outstanding capital stock of
Premium Beverage Packers, Inc. ("Wyomissing"). Wyomissing's assets include
working capital, machinery and equipment, a customer list, trademarks and
goodwill. The acquisition is expected to add manufacturing strength to Cott's
growing presence in the Northeast United States.

These acquisitions have been accounted for using the purchase method. The
results of operations have been included in Cott's consolidated statements of
income from the effective dates of purchase. The total purchase price for both
acquisitions was $28.8 million, including estimated acquisition costs of $1.8
million and an equity investment of $1.0 million for a 35% share of a Mexican
distribution company and before working capital adjustments. The acquisitions
were funded from borrowings on Cott's short-term credit facility.

In January 2002, Cott made equity investments in two spring water companies
totalling $1.8 million to strengthen its position in the spring water segment
across Canada.

NOTE 14 - CONTINGENCIES

Cott is subject to various claims and legal proceedings with respect to matters
such as governmental regulations, income taxes, and other actions arising in the
normal course of business. Management believes that the resolution of these
matters will not have a material adverse effect on Cott's financial position or
results from operations.

12

COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(in millions of U.S. dollars)
Unaudited

NOTE 15 - SEGMENT REPORTING

Cott produces, packages and distributes retailer brand and branded bottled and
canned soft drinks to regional and national grocery, mass-merchandise and
wholesale chains in the United States, Canada and the United Kingdom &
International. The Mexican acquisitions of June 2002 and the concentrate assets
acquired in July 2001, including the related results of operations, have been
included in the Corporate & Other Segment from their respective acquisition
dates. Cott manages its beverage business by geographic segments as described
below:

BUSINESS SEGMENTS

13

COTT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(in millions of U.S. dollars)
Unaudited

NOTE 15 - SEGMENT REPORTING (continued)

Intersegment sales and total assets under the Corporate & Other caption include
the elimination of intersegment sales, receivables and investments.

Sales to two major customers accounted for 38% and 9%, respectively, of Cott's
total sales for the three months ended September 28, 2002 and 40% and 10%,
respectively, for the nine month period then ended (39% and 13% - three months
ended September 29, 2001; 39% and 12% - nine months ended September 29, 2001).

NOTE 16 - ACCOUNTING DEVELOPMENTS

In May 2002, the Financial Accounting Standards Board issued SFAS 145 indicating
that certain debt extinguishment activities do not meet the criteria for
classification as extraordinary items and should no longer be classified as
extraordinary items. Cott will adopt the standard in 2003. Once adopted, the
comparative figures for the nine months ended September 28, 2002 will disclose
income before income taxes and equity loss of $56.1 million, income tax expense
of $18.7 million and income from continuing operations of $37.0 million. There
will be no impact on the results for the third quarter of 2002.

14

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Cott Corporation is the world's largest retailer brand soft drink supplier, with
the leading take home carbonated soft drink market shares in this segment in its
core markets of the U.S., Canada and the U.K.

RESULTS OF OPERATIONS

Cott reported net income of $19.8 million, $0.28 per diluted share, for the
third quarter ended September 28, 2002, an increase of 78% as compared with the
$11.1 million, $0.16 per diluted share, for the third quarter of 2001 led by
higher sales and improved margins. Cott continues to show steady progress in
line with its growth strategy. Through nine months, income from continuing
operations increased 52% to $46.6 million, from $30.7 million in the same period
last year. Including extraordinary charges for early redemption of senior
unsecured notes maturing in 2005 and 2007 (the "2005 & 2007 Notes") and the
effect of a change in accounting principle to write down the entire goodwill in
the U.K. business unit, Cott had a net loss of $7.8 million or $0.12 per diluted
share for the first three quarters of 2002 as compared with net income of $30.7
million or $0.45 per diluted share in 2001.

SALES - Sales were up 12% to $338.8 million in the third quarter of 2002
compared to $302.5 million for the third quarter of 2001. Excluding the impact
of the CEMSA and Wyomissing acquisitions in June 2002 and the Northeast Retailer
Brand LLC ("NRB") business combination in September 2001, sales for the third
quarter were $305.8 million, an increase of 1% from the same period last year.
K-Mart's insolvency led to a $10.1 million decline in Cott's sales for the third
quarter. Excluding the impact of the acquisitions and the K-Mart insolvency,
sales were 5% higher as a result of growth in the U.S. business. Sales volume in
8-oz equivalent cases for the quarter was up 3% compared with the third quarter
of 2001 after excluding the impact of the acquisitions and the K-Mart
insolvency.

For the first nine months, sales increased to $918.3 million, 10% higher than
the same period last year. Sales were up 4% when the impact of acquiring certain
assets of Royal Crown Company Inc. ("Royal Crown"), the CEMSA, Wyomissing and
NRB acquisitions and the K-Mart insolvency are excluded. Sales volume in
equivalent cases was up 2% from the prior year excluding the impact of the
acquisitions and K-Mart.

Sales in the U.S. during the third quarter of 2002 increased to $247.9 million,
up 16% from $214.5 million in the third quarter of 2001. Through three quarters
of 2002, sales of $675.1 grew by 12% compared with the same period last year.
The Wyomissing and NRB acquisition added $29.2 million to sales for the third
quarter and $57.3 million for the nine-month period. Excluding the impact of
acquisitions and the K-Mart insolvency, sales volume in the U.S. increased 8%
and 5% for the three and nine month periods ended September 28, 2002,
respectively.

Sales in Canada were $46.1 million for the quarter, an increase of 5% over $43.8
million for the same period last year primarily due to higher water sales and
growth of the ice tea program. Through the first nine months, sales of $128.3
million were 3% higher than $124.8 million for the same period last year.

Sales in the U.K. & International were $40.6 million for the third quarter, a
decrease of 8% from $44.0 million in 2001 as some U.K. retailers continue to
emphasize national brand products over their own retailer brands and Cott
continues its cost savings efforts by eliminating unprofitable stock-keeping
units (SKUs). For the first three quarters of 2002, sales of $110.7 million were
up 1% over the prior year. Acquiring the Royal Crown assets added sales of $7.3
million for the nine month period ended September 28, 2002. This increase was
offset the impact of the SKU rationalization and the emphasis on national brands
by some by UK retailers.

15

GROSS PROFIT - Gross profit in the third quarter increased to 19.7% of sales, up
by 3.0 percentage points as compared with the same period last year. This
brought the gross profit for the first nine months to 19.6%, a 2.7 percentage
point increase compared with the same period of 2001. Higher margins resulted
primarily from operating efficiency improvements and the impact of acquiring the
Royal Crown assets. Higher than normal inventories of concentrates at the time
of the Royal Crown acquisition delayed realization of cost savings to the fourth
quarter of 2001 extending the positive impact of this acquisition through the
third quarter of 2002. The gross profit increase for the nine month period was
partially offset by higher interest expense on the debt incurred to finance the
acquisition of the Royal Crown assets and NRB.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") - SG&A was $27.6 million
for the third quarter, up $3.4 million from $24.2 million last year. For the
first nine months of 2002, SG&A of $83.6 million was $10.7 million higher than
the same period of 2001. The increase was due primarily to the impact of
acquisitions, which added $2.3 million and $7.7 million, respectively, to the
SG&A for the third quarter and nine months ended September 2002. SG&A would have
been higher by $0.9 million for the third quarter and $2.8 million higher
through nine months if goodwill had been amortized as it was in 2001. Under SFAS
142, goodwill is no longer amortized.

INTEREST EXPENSE - Net interest expense was $8.1 million for the quarter
compared with $9.1 million in the third quarter of 2001, down primarily as a
result of the lower interest rate achieved through refinancing the 2005 & 2007
Notes at the end of last year.

Through three quarters of 2002, net interest expense totaled $25.4 million, up
$2.6 million from the same period last year. Interest on the term loan used to
finance the acquisition of the Royal Crown assets in July 2001 resulted in an
interest expense increase as compared with the same period last year of $3.3
million and was partially offset by lower interest from the 2005 & 2007 Notes
refinancing.

INCOME TAXES - For the third quarter, Cott recorded an income tax provision of
$10.7 million reflecting an effective tax rate of 34.9% as compared with $6.7
million or an effective rate of 37.6% in 2001. The decrease in the effective tax
rate principally reflects the restructuring of internal debt in July.

The overall effective tax rate through three quarters of 2002 was 33.0% compared
with 35.6% for the same period last year. The reduction for the nine month
period primarily results from the internal debt restructuring in the third
quarter and realization of the benefit of a capital loss in the first quarter.
The 2001 effective rate was also lowered as Cott recognized the previously
unrecorded tax benefit on losses from prior years through a reduction in the
valuation allowance.

ACQUISITIONS - In June 2002, Cott completed two acquisitions. First, Cott
acquired both a 90% stake in a new Mexican soft drink bottling venture, CEMSA,
and a 35% share in a Mexican distribution company in order to establish
manufacturing and marketing capabilities in Mexico. Assets of CEMSA consist of
working capital, machinery and equipment and a customer list. Second, Cott
acquired all of the outstanding capital stock of Wyomissing, Cott's largest
carbonated soft drinks co-packer in the United States, to add manufacturing
strength in the Northeast United States. The Wyomissing acquisition included
working capital, machinery and equipment, a customer list, trademarks and
goodwill.

The aggregate purchase price of these acquisitions was $28.8 million including
estimated acquisition costs of $1.8 million and an equity investment of $1.0
million and before working capital adjustments. Cott financed the acquisitions
with borrowings under its short-term credit facility.

16

In January 2002, Cott made equity investments in two spring water companies
totaling $1.8 million to strengthen its position in the spring water segment
across Canada.

FINANCIAL CONDITION - Cash provided by operating activities through three
quarters of 2002 was $44.5 million, including capital expenditures of $27.1
million but excluding the $10.6 million cash portion of early redemption costs
on the 2005 & 2007 Notes. This was a $1.5 million increase from $43.0 million
provided by operating activities for the first nine months of 2001. Cott used
cash from operations to reduce borrowings on its revolving credit facility.

The $297.3 million of cash in trust at December 29, 2001 was used to redeem the
$276.4 million principal amount of the 2005 & 2007 Notes and to pay the related
accrued interest and early redemption penalties on January 22, 2002.

Cash and cash equivalents increased $9.3 million to date in 2002 to $13.2
million as of September 28, 2002.

CAPITAL EXPENDITURES - Capital expenditures for the first nine months of 2002
were $27.1 million compared with $23.4 million in the same period last year.
Major expenditures to date in 2002 included $5.7 million relating to the
purified drinking water filling line projects in the Florida and Texas plants,
$4.8 million for improvements to the Concordville, Pennsylvania plant that was
acquired in October 2000 and $1.5 million relating to the upgrade and
standardization of company-wide information and accounting systems. Capital
spending is expected to range between $45 million and $50 million in 2002.

CAPITAL STRUCTURE - Cott's sources of capital include operating cash flows,
short term borrowings under a committed revolving credit facility, issuance of
public and private debt and issuance of equity securities. Management believes
Cott has adequate financial resources to meet its ongoing cash requirements for
operations and capital expenditures, as well as its other financial obligations
based on its operating cash flows and currently available credit.

Cott's current revolving credit facilities provide maximum credit of $90.6
million. At September 28, 2002, approximately $61.1 million of the committed
revolving credit facility in the U.S. and Canada and the entire $15.6 million of
the demand credit facility in the U.K. were available. The weighted average
interest rate on outstanding borrowings under the credit facilities was 6.0% as
of September 28, 2002.

As of September 28, 2002, Cott's long-term debt totaled $363.8 million as
compared with $364.9 million at the end of 2001, adjusted for the redemption of
the 2005 and 2007 Notes in January 2002. At quarter end, debt consisted of
$268.0 million in 8% senior subordinated notes with a face value of $275
million, $94.7 million on the term loan and $1.1 million of other debt. Cott is
exposed to interest rate risk as its term loan, which represents approximately
26% of its long-term debt at September 28, 2002, bears interest at floating
rates. The weighted average interest rate on the term loan as of September 28,
2002 was 5.1%.

On June 27, 2002, all of the 4,000,000 outstanding Convertible Participating
Voting Second Preferred Shares, Series I with a book value of $40.0 million were
converted into 6,286,453 common shares of Cott. The total number of common
shares issued and outstanding was 68,458,755 as of September 28, 2002.

NEW ACCOUNTING STANDARDS - In May 2002, the Financial Accounting Standards Board
issued SFAS 145 indicating that certain debt extinguishment activities do not
meet the criteria for classification as extraordinary items and should no longer
be classified as extraordinary items. Cott will adopt the standard in 2003. Once
adopted, the comparative figures for the nine months ended September 28, 2002
will disclose income before income taxes and equity loss of $56.1 million,
income tax expense of $18.7

17

million and income from continuing operations of $37.0 million. There will be no
impact on the results for the third quarter of 2002.

CANADIAN GAAP - Consolidated financial statements in accordance with Canadian
GAAP are made available to all shareowners and are filed with Canadian
securities regulatory authorities. Under Canadian GAAP in the first nine months
of 2002, Cott reported net income of $47.2 million and total assets of $799.9
million compared to the net loss and total assets under U.S. GAAP of $7.8
million and $798.1 million, respectively. There are no material U.S./Canadian
GAAP differences for the third quarter. There are two primary differences
between results reported under U.S. and Canadian GAAP in the nine months ended
September 28, 2002.

First, under Canadian GAAP, the 2005 & 2007 Notes were considered discharged on
December 21, 2001 when the funds to redeem the notes were transferred to an
irrevocable trust. As a result, debt extinguishment costs were recorded in the
fourth quarter of 2001 under Canadian GAAP in results from continuing
operations. Under U.S. GAAP, the 2005 & 2007 Notes were considered discharged on
January 22, 2002 and the debt extinguishment costs of $9.6 million were recorded
as an extraordinary item in the nine months ended September 28, 2002.

Second, under Canadian GAAP, the impairment loss of $44.8 million relating to
the change in the method for valuing goodwill is charged to opening retained
earnings in the first quarter of 2002. Under U.S. GAAP, the change in accounting
principle is recorded as a charge to net income for the nine month period ended
September 28, 2002.

OUTLOOK - At this point, Cott expects sales to grow by 8% to 10% in 2002 as
compared with 2001 and earnings per diluted share to be between $0.79 and $0.81
for the year, before the one-time charges recorded in the first quarter. Cott's
ongoing focus is to increase sales, market share and profitability for Cott and
its customers. The carbonated soft drink industry continues to experience modest
growth, especially in the U.S. Facing intense price competition from heavily
promoted global and regional brands, Cott's major opportunity for growth depends
on management's continued emphasis on this focus and on retailers' continued
commitment to their retailer brand soft drink programs. Cott continues to strive
to expand the business through growth with key customers, the pursuit of new
customers and channels and through new acquisitions and alliances. Additional
financing may be required to fund future acquisitions, and there can be no
assurance that such financing will be available on favorable terms.

RISKS AND UNCERTAINTIES - Risks and uncertainties that could adversely impact
Cott's financial performance include pricing strategies of the national brands,
commitment of major customers to retailer brand programs, stability of
procurement costs for and availability of such items as packaging materials,
sweeteners and other ingredients, the successful integration of new
acquisitions, seasonality of sales, the ability to protect intellectual property
and fluctuations in interest rates and foreign currencies versus the U.S.
dollar.

Sales to the top two customers in the first nine months of 2002 accounted for
40% and 10% of total sales (39% and 12% in through three quarters of 2001). The
loss of any significant customer or any significant portion of Cott's sales
could have a material adverse effect on Cott's operating results and cash flows.

FORWARD-LOOKING STATEMENTS - In addition to historical information, this report
contains statements relating to future events and Cott's future results. These
statements are "forward-looking" within the meaning of the Private Securities
Litigation Reform Act of 1995 and include, but are not limited to, statements
that relate to projections of revenues, earnings, earnings per share, cash
flows, capital expenditures or other financial items, discussions of estimated
future revenue enhancements and cost savings. These statements also relate to
Cott's business strategy, goals and expectations concerning its

18

market position, future operations, margins, profitability, liquidity and
capital resources. Generally, words such as "anticipate," "believe," "continue,"
"could," "estimate," "expect," "intend," "may," "plan," "predict," "project,"
"should," "will" and similar terms and phrases are used to identify
forward-looking statements.

Although Cott believes the assumptions underlying these forward-looking
statements are reasonable, any of these assumptions could prove to be inaccurate
and, as a result, the forward-looking statements based on those assumptions
could be incorrect. Cott's operations involve risks and uncertainties, many of
which are outside its control, and any one or a combination of which could also
affect whether the forward-looking statements ultimately prove to be correct.

The following, in addition to the risks and uncertainties discussed above, are
some of the factors that could affect Cott's financial performance, including
but not limited to sales, earnings and cash flows, or could cause actual results
to differ materially from estimates contained in or underlying the
forward-looking statements:

o Loss of key customers, particularly Wal-Mart, and the commitment of Cott's
private label beverage customers to their private label beverage programs;

o Increases in competitor consolidations and other market-place competition,
particularly among branded beverage products;

o Cott's ability to identify and acquire acquisition candidates and to
integrate into its operations the businesses and product lines that are
acquired;

o Fluctuations in the cost and availability of beverage ingredients and
packaging supplies and Cott's ability to maintain favorable arrangements and
relationships with suppliers;

o Unseasonably cold or wet weather, which could reduce demand for Cott's
beverages;

o Cott's ability to protect the intellectual property inherent in new and
existing products;

o Adverse rulings, judgments or settlements in Cott's existing litigation, and
the possibility that additional litigation will be brought against Cott;

o Product recalls or changes in or increased enforcement of the laws and
regulations that affect Cott's business;

o Currency fluctuations that adversely affect the U.S. dollar exchange with the
pound sterling, the Canadian dollar and other currencies;

o Changes in interest rates;

o Changes in consumer tastes and preference and market demand for new and
existing products;

o Changes in tax laws and to interpretations of tax laws;

o Changes in general economic and business conditions; and

o Increased acts of terrorism or war.

The foregoing list of important factors is not exclusive or exhaustive. Many of
these factors are described in greater detail in other filings with the U.S.
Securities and Exchange Commission. All future written and oral forward-looking
statements attributable to Cott or persons acting on Cott's behalf are expressly
qualified in their entirety by the previous statements. These statements are
made as of the date of this report. Cott undertakes no obligation to update any
information contained in this report or to publicly release the results of any
revisions to forward-looking statements to reflect events or circumstances that
Cott may become aware of after the date of this report.

Undue reliance should not be placed on forward-looking statements.

19

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Reference is made to Item 7A: Quantitative and Qualitative Disclosures about
Market Risk described in Cott's Annual Report on Form 10-K for the fiscal year
ended December 29, 2001.

ITEM 4. CONTROLS AND PROCEDURES

Cott's Chief Executive Officer and Chief Financial Officer have concluded that
its disclosure controls and procedures are effective, based on their evaluation
of these controls and procedures within 90 days of this report. There have been
no significant changes in Cott's internal controls or in other factors that
could significantly affect these controls subsequent to the date of their
evaluation.

20

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Reference is made to Item 3: Legal Proceedings described in Cott's Annual Report
on Form 10-K for the fiscal year ended December 29, 2001.

Cott (along with others) was named as a defendant in an action filed by
Victoriatea.com, Inc., The Torimiro Corporation and Rachael F. Parray in the
Supreme Court for the State of New York on May 30, 2002. The complaint seeks,
among other things, compensatory damages in an amount not less than $3 million,
punitive damages in an amount not less than $5 million and unspecified
attorney's fees, costs and disbursements. The complaint alleges breach of
contract, negligence, breach of implied warranties and breach of implied
covenant of good faith in connection with Cott's manufacture of beverages for
one of the plaintiffs.

On August 15, 2002, the case was removed to the U.S. District Court for the
Southern District of New York. Subsequently, Cott filed a motion to dismiss the
case based on forum non conviens, lack of personal jurisdiction and failure to
state a claim and has requested that the case be transferred to the U.S.
District Court for Western New York.

Cott believes that it has valid defenses to the claims made by the plaintiffs
and, in any event, any damages likely to be awarded to the plaintiffs are not
expected to be material.

ITEM 6. FINANCIAL STATEMENT SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K

(a) Financial Statement Schedules and Exhibits

(i) Financial Statement Schedules:

Schedule III - Consolidating Financial Statements

(ii) Exhibits:

(b) Reports on Form 8-K

Cott filed a Current Report on Form 8-K, dated August 14, 2002, stating that
Frank E. Weise III, Chairman, President and Chief Executive Officer, and Raymond
P. Silcock, Executive Vice President and Chief Financial Officer, had submitted
a certification to the SEC relating to Cott's Quarterly Report on Form 10-Q for
the quarter ended June 29, 2002. This filing was furnished pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

21

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

COTT CORPORATION
(Registrant)

Date: November 12, 2002
/s/ Raymond P. Silcock
-------------------------------
Raymond P. Silcock
Executive Vice President &
Chief Financial Officer
(On behalf of the Company)

Date: November 12, 2002
/s/ Tina Dell'Aquila
-------------------------------
Tina Dell'Aquila
Vice President, Controller and
Assistant Secretary
(Principal accounting officer)

22

CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.

I, Frank E. Weise III, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cott Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects, the financial condition, results of operations and
cash flows of Cott Corporation as of, and for, the periods presented in
this quarterly report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for Cott Corporation
and we have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and

(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.

November 12, 2002 /s/ Frank E. Weise III
-----------------------------------------------
Frank E. Weise III
Chairman, President and Chief Executive Officer

23

I, Raymond P. Silcock, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cott Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and

(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.

November 12, 2002
/s/ Raymond P. Silcock
----------------------------------------------------
Raymond P. Silcock
Executive Vice-President and Chief Financial Officer

24

SCHEDULE III - CONSOLIDATING FINANCIAL STATEMENTS

Cott Beverages Inc., a wholly owned subsidiary of Cott, has entered into
financing arrangements that are guaranteed by Cott and certain other wholly
owned subsidiaries of Cott (the "Guarantor Subsidiaries"). Such guarantees are
full, unconditional and joint and several.

The following supplemental financial information sets forth on an unconsolidated
basis, balance sheets, statements of income and cash flows for Cott Corporation,
Cott Beverages Inc., Guarantor Subsidiaries and Cott's other subsidiaries (the
"Non-guarantor Subsidiaries"). The balance sheets, statements of income and cash
flows for Cott Beverages Inc. have been adjusted retroactively to include
Concord Beverage LP, Concord Holdings GP Inc. and Concord Holdings LP Inc. that
were amalgamated with Cott Beverages Inc. on December 29, 2001. The supplemental
financial information reflects the investments of Cott and Cott Beverages Inc.
in their respective subsidiaries using the equity method of accounting.

COTT CORPORATION
CONSOLIDATING STATEMENTS OF INCOME
- -------------------------------------------------------------------------------
(in millions of U.S. dollars, unaudited)

25

COTT CORPORATION
CONSOLIDATING STATEMENTS OF INCOME
- -------------------------------------------------------------------------------
(in millions of U.S. dollars, unaudited)

26

COTT CORPORATION
CONSOLIDATING BALANCE SHEETS
- -------------------------------------------------------------------------------
(in millions of U.S. dollars, unaudited)

27

COTT CORPORATION
CONSOLIDATING STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
(in millions of U.S. dollars, unaudited)

28

COTT CORPORATION
CONSOLIDATING STATEMENTS OF INCOME
- -------------------------------------------------------------------------------
(in millions of U.S. dollars, unaudited)

29

COTT CORPORATION
CONSOLIDATING STATEMENTS OF INCOME
- -------------------------------------------------------------------------------
(in millions of U.S. dollars, unaudited)

30

COTT CORPORATION
CONSOLIDATING BALANCE SHEETS
- -------------------------------------------------------------------------------
(in millions of U.S. dollars, audited)

31

COTT CORPORATION
CONSOLIDATING STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------
(in millions of U.S. dollars, unaudited)