Changes in Financial Reporting Announced - Cott Announces Charges For Restructuring And Non-Recurring Expenses; Targets Full Payback Within Three Years.

TORONTO--(BUSINESS WIRE)--Oct. 22, 1998--(NASDAQ:COTTF) (TSE:BCB.) (ME:BCB.) Cott Corporation today announced that it will take a charge for restructuring and non-recurring expenses in the third quarter.

According to Frank E. Weise, President and Chief Executive Officer, this action is key to Cott's strategy for profitable growth in its core markets. The company expects the pre-tax charge to total approximately C$120 million (US$80 million), with a net cash impact expected not to exceed 10 percent.

"As we wind up our first 100 days, our new leadership team has now set a focused course for the business. Going forward, we see improvements in both our earnings profile and in our all-important customer service," Weise said. "This charge will lead to bottom-line benefits during the first year and we are targeting for its full recovery within three years.

"We are taking decisive steps to bolster our performance: focusing on core business; fixing our cost structure; and building management strength," Weise said. "At the same time, we will be adopting new accounting methods to reflect our approach to the marketplace."

Near-term results will continue to show the effects of downward pressure on sales and earnings especially in the United States, according to Weise. "Improvements in operating results depend on gaining efficiencies in our new manufacturing plants and in re-establishing high levels of customer service."

Charges cover a range of restructuring costs aimed at sharpening the company's focus on its primary beverage products and key geographies, and on improving the company's cash generation. In addition, provision will be made for non-recurring expenses including various manufacturing and software assets.

"The foundation for Cott's turnaround starts with a rigorous review of all operations and a determination to make our assets sweat," Weise said. "That means giving our stakeholders full value for their investment in our company - - employees who seek to perform, customers who expect outstanding products and services and shareowners who deserve rewards as risk-bearers.

"Restructuring allows us to turn the page and begin a new chapter for Cott. In the end, restructuring arose as we were forced to face up to a number of changes in the marketplace. At the same time, this action prepares the way for delivering better operating performance." Changes in Financial Reporting

Raymond P. Silcock, Cott's Chief Financial Officer and Executive Vice President, also announced two changes in how the company will be reporting its financial results. First, subject to regulatory approval, the company's fiscal year will more closely follow the pattern of the beverage and soft drink industry. Specifically, each new fiscal year will close the Saturday closest to December 31; that means January 2, 1999 for this fiscal year.

In allied actions, Silcock said the company would now report results utilizing US, as well as Canadian Generally Accepted Accounting Principles (GAAP) and would also begin reporting its results in US dollars. "Using US dollars as our reporting currency  and adding US GAAP reporting reflect two new realities. In the past year, our investor base shifted to a clear majority ownership in the United States. Also, with the Hero acquisition in the United Kingdom, Cott's Canadian business is now less than 25 percent of the company's total," he said.

Focus on Core, Fix Cost Structure

As Silcock explained, major restructuring charges of about C$40 million (US$26 million) are concentrated in driving core businesses in core markets. The company will also continue its strategy to dispose of non-strategic businesses outside its soft drink category. These will not be immediately declared but divestitures will be pursued vigorously.

Concentration on profitable growth in the US, Canada and the UK will also bring decisions such as the recent sale of operations in Norway. Divestitures in non-core geographic markets are being examined.

Silcock pointed out that improvements in the company's cost structure are among the most essential gains from restructuring. The approximately C$35 million (US$23 million) set aside for these charges will be for US and UK operations where streamlining of plants, equipment and systems will produce substantial improvement in ongoing manufacturing costs.

Building Management Strength

Charges of C$15 million (US$10 million) include provision for eliminating layers of regional management as the company implements its recently announced reorganization of North American operations. Provision also includes costs for redesign of the corporate executive structure. Non-recurring Charges

The company will be taking charges to account for several changes in accounting treatment. For example, its previous practice of capitalizing certain costs for retailer sales agreements will be discontinued. "Only those capital assets such as printing plates and other related items will continue to be amortized," Silcock said.

In addition, various manufacturing and software assets including certain trade contracts will be written down. Non-recurring charges will total C$30 million (US$20 million).

Cott is the leading supplier of retail brand beverages and the world's fourth largest manufacturer of soft drinks. Its priorities for profitable business growth have been defined by a new management team under Weise, who became CEO in June 1998. Forward-looking Statement 

The foregoing information may contain forward-looking statements relating to the future performance of Cott. Forward-looking statements, specifically those concerning future performance, are subject to certain risks and uncertainties and actual results may differ materially. These risks and uncertainties are detailed from time to time in the company's filings with the appropriate securities commissions.