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RBC Investor Roadshow November 18, 2015 - Cott ... Nov 18, 2015  · RBC Investor Roadshow November 18, 2015. 2 Safe Harbor Statements Forward Looking Statements: This presentation

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    RBC Investor Roadshow November 18, 2015

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    Safe Harbor Statements

    Forward Looking Statements: This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 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 expected future operating results of the Company, the potential impact the acquisition of DSS Group, Inc. will have on the Company and the estimated synergies resulting from such transaction. The forward- looking statements are based on assumptions regarding management's current plans and estimates. 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: (1) changes in estimates of future earnings; (2) expected synergies and cost savings are not achieved or achieved at a slower pace than expected; (3) integration problems, delays or other related costs; and (4) 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 10-K for the year ended January 3, 2015 and its quarterly reports on Form 10-Q, as well as other periodic reports filed with the securities commissions. 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 routinely supplements its reporting of GAAP measures by utilizing certain non-GAAP measures to separate the impact of certain items from its underlying business results. In this presentation, we use non-GAAP measures such as EBITDA, adjusted EBITDA, adjusted free cash flow and adjusted free cash flow yield and certain ratios using these measures. Since the Company uses these non-GAAP measures in the management of its business, management believes this supplemental information, including on a pro forma basis, is useful to investors for their independent evaluation and understanding of the business. Any non-GAAP financial measures used by the Company 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 reflects 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 this non-GAAP measure may be found on

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    Cott is a Diversified Beverage Company with an Increased Health & Wellness Product Mix and Broad Channel Penetration

    2015 YTD EBITDA by Product (1)  Approximately 75% of EBITDA in growing product categories.

     Steady and dependable Home Office Deliver “HOD” Water revenue growth (3% to 4% per year)

     Sparkling water and mixer product category growth (mid to high single digit growth annually)

     Office Coffee Service “OCS” (single serve coffee growth of high single to low double digits)

     Other includes growing categories of energy, powdered hot chocolate and instant (microground) coffee as well as RTD teas.

     Significant presence in “Good-for-You” beverage categories especially via DS Services with both organic growth and tuck-in acquisitions providing a platform for growth in coming years as well as a growing sparkling water and mixer category within our Traditional Business

     Contract manufacturing growth with a 2 year CAGR of over 50% in categories such as juice and juice drinks, RTD teas, energy drinks, sparkling and flavored waters as well as a variety of other products and packages.

     Less exposure to large format retailers (less than 50% of 2015 revenues) with sparkling water and mixer / contract manufacturing growth offsetting private label CSD and Juice declines.

     Highly cash generative combination driven by well invested fixed assets that are able to manufacture a variety of products and can economically be re-tooled with the changing demands and tastes of the market.

    Source: Cott management. 1. YTD represents nine-months ending October 3, 2015. EBITDA allocated based upon pro-rata revenues using DS Services EBITDA (HOD, OCS and Other) and Traditional Business EBITDA (CSD, Juice / Juice Drinks, Sparkling Waters / Mixers, and Other). 2. 2015 estimated EBITDA by segment including corporate allocations (for reporting purposes Aimia is included as a part of UK/Europe).

    Cott’s diversified beverage platform is more reflective of the total beverage category

    CSD 16%

    Juice / Juice Drinks 11%

    HOD Water 32%

    OCS 6%

    Sparkling Waters/Mixers


    Other 25%

    2015 EBITDA by Segment (2)

    Cott North America


    Cott U.K./EUR Core 9%

    Aimia 5%Other 3%

    DS Services 51%

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    Cott is a Diversified Beverage Company with Strong and Growing Free Cash Flow

    Cott’s diversified beverage platform is expected to drive free cash flow growth in the mid-to- high teens from 2016 to 2018.

    Adjusted Free Cash Flows Per Share

    (in MM's) 2018E 2015E 2014

    Adjusted Free Cash Flows $165 - $185 $114.00 $107.10

    Diluted Stock Count* 110.5 110.5 94.8

    Cash Earnings Per Share $1.50 to $1.65 $1.03 $1.13

    *Assumes flat stock count from 2015 to 2018.

    Traditional Business Free Cash Flow Drivers

    • Six years of consistently generating ≈$100 million of adjusted free cash flows (2009 to 2014)

    • Well invested fixed assets (≈$100 million of depreciation and amortization vs ≈$50 to $55 million of capex


    • Beneficial tax structure (cash taxes ≈$3 to $6 million 2015 to 2018)

    DS Services Free Cash Flow Drivers

    • 3% to 4% of annual top line growth generates incremental EBITDA and free cash flow

    • $30 million of synergy capture from 2015 to 2017

    • Tuck-in customer list acquisitions of $10 to $20 million per year generates incremental EBITDA of $3 - $6 million

    • Refinancing of DS Notes in September 2017 generates significant interest savings ($350 million Notes at 10% creating ≈$10 to $20 million of annual interest savings)

    `Source: Cott Management

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    Cott’s Vision Building Upon the Platform Created – To Further Growth and Value Creation

    Traditional Business – Foundation of the Plan

    Broad stability / cash generation through 4Cs, supported by growth in Copack and Value Added Water offsetting PL CSD and SSJ declines

    + DS Services Organic Growth

    Continue to generate 3%-4% top line growth

    + Mid-to-Larger Scale Acquisitions in HOD Water, OCS, Value Brand or Other Beverage Diversification

    Focus on growing, higher-margin beverage categories outside of CSDs, SSJs and large format retail with appropriate free cash flow and EBITDA growth parameters as well cash-on-cash

    IRR greater than cost of equity.

    Shareholder Value Creation

    Create a more diversified and growth-oriented company with annual EBITDA and free cash flow expansion to drive increased multiple/stock valuation.

    + DS Services Synergy Capture

    Successfully integrate DS Services and Capture full $30 million in synergies by end 2017

    + Market Roll-Up (Tuck-ins)

    Acquire $10-$20 million in HOD Water/OCS businesses annually

    Source: Cott Management

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    Traditional Business – Foundation of the Plan Stability through 4Cs, Copack and VAW growth, and Cash Generation/Deleveraging

     Control capital expenditures

     Deliver significant free cash flow

    • Understand our customers’ needs

    • Build new channel relationships

    • High service standards • One-stop shop philosophy • Supply chain solutions

    • Manage the commodity cycles

    • Control SG&A costs • Improve operating


    • 3-year $30 million cost reduction plan within traditional business (2014- 2017)

    • Manage projects tightly with a focus on cost / efficiency. Use third party funding where possible (eg warehousing)

    • High quality plants - all SQF Level 3 or BRC

    • Focus on efficiency capex with ≈2-3 year payback

    • Cost reduction minimizes capex spend

    • Rigorously manage working capital

    • Assist rapid de-leveraging and interest benefit with the goal of reducing leverage to low 3.0x EBITDA by 2018.

    • Fund HOD and OCS market roll-up by DS Services with post syn

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