Cott Corporation has announced higher sales and earnings for the second quarter to 3 July, 2004. Sales rose to US$463.7 m, an increase of 19% over the second quarter last year, while earnings per diluted share were US$0.41, an increase of 17% from last year's reported US$0.35. Excluding the impact of foreign exchange and acquisitions, sales were up 13%.

"As retailer brand soft drinks continued their strong growth and momentum in the US, we outpaced category growth in the second quarter", said Frank E. Weise, Cott's chairman and chief executive officer in a statement. "The UK and International business units also delivered strong performance in the quarter, and we worked closely with our retail partners around the world to innovate and drive sales."

The company's US business unit reported a 22% improvement over last year, up 16% excluding the impact of acquisitions, while sales in the UK/Europe business unit rose by 19%, up 6% excluding foreign exchange. Sales in Canada were down 1%, a decrease of 5% excluding foreign exchange. Sales in the International business unit rose to US$16.1 m of which sales in Mexico amounted to US$9.9 m.

Gross margin for the quarter of 18.4% was down from 19.8% last year. This decrease was as a consequence of higher input costs, combined with the impact of excess logistics costs resulting from higher than projected volume in the US, the company said. Operating income for the second quarter increased by 15% to US$51.9 m.

Sales in the first six months were up 22% to US$834.6 m, an increase of 19% excluding the impact of foreign exchange and up 15% excluding both foreign exchange and acquisitions. This improvement was led by a 22% gain in the US. In the UK/Europe business unit, sales were up 29% for the first half, up 14% excluding the impact of foreign exchange, while in Canada sales rose by 8%, up 1% excluding foreign exchange. Sales in the International business unit were US$30.8 m of which sales in Mexico were US$18.9 m.

Gross margin was 18.7% for the first half of the year compared to 19.5% last year, primarily reflecting second quarter cost increases. Operating income rose 19% to US$83.6 m. In the first quarter of 2004, the company created a reserve against certain Canadian export receivables, resulting in a charge of US$2.3 m in the first quarter.

Following up on its announcement last month, the company announced that its planned new US beverage manufacturing facility will be located in Dallas/Fort Worth, Texas. Construction is expected to start in the third quarter of 2004 and it is anticipated that the plant will be in full production by the fourth quarter of 2005.

During the quarter, the company announced that it had been advised by Thomas H. Lee Partners, L.P. (THL), that parties related to, or affiliated with them, distributed approximately 12.7 m shares of Cott common stock to their respective general and limited partners in two separate transactions that took place in May and June. As a result of these distributions, THL no longer has a significant shareholding in Cott Corporation. THL has advised the company that its three representatives on Cott's board of directors would be resigning their positions effective 23 July, 2004. Commenting on the transaction, Frank Weise said: "On behalf of the board and the entire Cott team, I would like to thank David Harkins, Hunter Boll and Tom Hagerty for their support and contributions to our company over the past six years." Weise also said that Cott is in the process of recruiting additional board members.