United States
Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

þ		Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the quarterly period ended:                March 31, 2007               

o		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               

COTT CORPORATION

(Exact name of registrant as specified in its charter)

CANADA		NONE
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)
207 QUEEN’S QUAY WEST, SUITE 340, TORONTO, ONTARIO, CANADA 4211 W. BOY SCOUT BOULEVARD, SUITE 290 TAMPA, FLORIDA, UNITED STATES		M5J 1A7 33607
(Address of principal executive offices)		(Zip Code)

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

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 þ   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).          Yes o   No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at March 31, 2007
Common Stock, no par value per share		71,754,630 shares

 

 

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item 1.		Financial Statements
		Consolidated Statements of Income for the three months ended March 31, 2007 and April 1, 2006		Page 3
		Consolidated Balance Sheets as of March 31, 2007 and December 30, 2006		Page 4
		Consolidated Statements of Shareowners’ Equity as of March 31, 2007 and April 1, 2006		Page 5
		Consolidated Statements of Cash Flows for the three months ended March 31, 2007 and April 1, 2006		Page 6
		Notes to Consolidated Financial Statements		Page 7
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		Page 20
Item 3.		Quantitative and Qualitative Disclosures about Market Risk		Page 25
Item 4.		Controls and Procedures		Page 25
PART II — OTHER INFORMATION
Item 1.		Legal Proceedings		Page 26
Item 1A.		Risk Factors		Page 26
Item 6.		Exhibits		Page 26
Signatures				Page 27
Financial Statement Schedules				Page 28
EX-3.2
EX-10.1
EX-10.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Cott Corporation
Consolidated Statements of Income (Loss)
(in millions of U.S. dollars, except per share amounts)
Unaudited

		For the three months ended
		March 31,				April 1,
		2007				2006
Revenue		$	400.2			$	394.2
Cost of sales			346.7				341.5
Gross profit			53.5				52.7
Selling, general and administrative expenses			37.7				39.9
Loss on disposal of property, plant and equipment			—				0.1
Restructuring, asset impairments and other charges — note 2
Restructuring			0.3				1.6
Asset impairments			—				1.4
Other			—				2.0
Operating income			15.5				7.7
Other expense (income), net			0.2				(0.2	)
Interest expense, net			7.8				8.2
Minority interest			0.7				1.0
Income (loss) before income taxes			6.8				(1.3	)
Income tax expense — note 4			2.0				0.8
Net income (loss) — note 5		$	4.8			$	(2.1	)
Per share data — note 6
Income (loss) per common share
Basic		$	0.07			$	(0.03	)
Diluted		$	0.07			$	(0.03	)

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

Cott Corporation
Consolidated Balance Sheets
(in millions of U.S. dollars)
Unaudited

		March 31,				December 30,
		2007				2006
Assets
Current assets
Cash		$	6.2			$	13.4
Accounts receivable			196.6				187.0
Income taxes recoverable			16.3				17.8
Inventories — note 7			147.9				131.2
Prepaid expenses and other assets			11.9				10.3
Deferred income taxes			12.9				11.7
			391.8				371.4
Property, plant and equipment — note 9			364.6				360.2
Goodwill			159.1				158.4
Intangibles and other assets — note 10			247.8				250.7
Deferred income taxes			9.8				—
		$	1,173.1			$	1,140.7
Liabilities
Current liabilities
Short-term borrowings — note 11		$	103.7			$	107.7
Current maturities of long-term debt			1.7				2.0
Accounts payable and accrued liabilities			201.0				186.5
			306.4				296.2
Long-term debt			276.7				275.2
Deferred income taxes			49.7				48.2
Other tax liabilities — note 4			31.0				11.5
			663.8				631.1
Minority interest			21.0				20.9
Shareowners’ Equity
Capital stock
Common shares — 71,754,630 shares issued (December 30, 2006 — 71,749,630)			273.4				273.4
Restricted shares			(0.6	)			(0.7	)
Additional paid-in-capital			27.7				29.8
Retained earnings			169.2				168.7
Accumulated other comprehensive income			18.6				17.5
			488.3				488.7
		$	1,173.1			$	1,140.7

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

Cott Corporation
Consolidated Statements of Shareowners’ Equity
(in million of U.S. dollars)
Unaudited

																						Accumulated
		Number of												Additional								Other
		Common				Common				Restricted				Paid-in-				Retained				Comprehensive				Total
		Shares				Shares				Shares				Capital				Earnings				Income				Equity
		(IN THOUSANDS)
Balance at December 31, 2005			71,712			$	273.0			$	—			$	18.4			$	186.2			$	4.3			$	481.9
Options exercised			2				—				—				—				—				—				—
Share-based compensation			—				—				—				2.7				—				—				2.7
Comprehensive income — note 5
Currency translation adjustment			—				—				—				—				—				(0.6	)			(0.6	)
Unrealized losses on cash flow hedges — note 8			—				—				—				—				—				0.1				0.1
Net loss			—				—				—				—				(2.1	)			—				(2.1	)
			—				—				—				—				(2.1	)			(0.5	)			(2.6	)
Balance at April 1, 2006			71,714			$	273.0			$	—			$	21.1				184.1				3.8				482.0
Balance at December 30, 2006			71,750			$	273.4			$	(0.7	)		$	29.8			$	168.7			$	17.5			$	488.7
Options exercised			5				—				—				—				—				—				—
Restricted shares — note 13			—				—				0.1				—				—				—				0.1
Share-based compensation			—				—				—				2.5				—				—				2.5
Change in accounting policy— note 1			—				—				—				(4.6	)			(4.3	)			—				(8.9	)
Comprehensive income — note 5
Currency translation adjustment			—				—				—				—				—				1.1				1.1
Net income			—				—				—				—				4.8				—				4.8
			—				—				—				—				4.8				1.1				5.9
Balance at March 31, 2007			71,755			$	273.4			$	(0.6	)		$	27.7			$	169.2			$	18.6			$	488.3

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

Cott Corporation
Consolidated Statements of Cash Flows
(in millions of U.S. dollars)
Unaudited

		For the three months ended
		March 31,				April 1,
		2007				2006
Operating Activities
Net income (loss)		$	4.8			$	(2.1	)
Depreciation and amortization			17.9				19.3
Amortization of financing fees			0.3				0.3
Share-based compensation expense			2.5				2.7
Deferred income taxes			0.2				0.2
Increase in other income tax liabilities — note 4			0.8				—
Minority interest			0.7				1.0
Loss on disposal of property, plant and equipment			—				0.1
Asset impairments			—				1.4
Other non-cash items			0.3				0.3
Net change in non-cash working capital — note 12			(12.1	)			(15.8	)
Cash provided by operating activities			15.4				7.4
Investing Activities
Additions to property, plant and equipment			(16.2	)			(8.3	)
Additions to intangibles and other assets			(0.4	)			(2.4	)
Proceeds from disposition of property, plant and equipment			0.2				0.7
Cash used in investing activities			(16.4	)			(10.0	)
Financing Activities
Payments of long-term debt			(1.2	)			(0.2	)
Short-term borrowings			(4.2	)			(7.0	)
Distributions to subsidiary minority shareowner			(0.6	)			(1.1	)
Other financing activities			(0.1	)			(0.1	)
Cash used in financing activities			(6.1	)			(8.4	)
Effect of exchange rate changes on cash			(0.1	)			0.1
Net decrease in cash			(7.2	)			(10.9	)
Cash, beginning of period			13.4				21.7
Cash, end of period		$	6.2			$	10.8

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

Cott Corporation
Notes to the Consolidated Financial Statements
Unaudited

Note 1
Summary of Significant Accounting Policies

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 our opinion, the financial statements reflect all adjustments that are necessary for a fair presentation 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 for the Accounting for Uncertainty in Income Taxes as outlined below.

The presentation of these interim consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Determining whether an impairment has occurred requires various estimates and assumptions including evaluating the lowest level of cash flows associated with groups of assets as well as estimates of cash flows that are directly related to the potentially impaired asset or groups of assets, the useful life over which cash flows will occur and their amounts. The measurement of an impairment loss requires an estimate of fair value, which is also based on estimates of future cash flows. These estimates could change in the near term and any such changes could be material.

Accounting for Uncertainty in Income Taxes

In 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (“FIN 48”), which provides specific guidance on the financial statement recognition, measurement, reporting and disclosure of uncertain tax positions taken or expected to be taken in a tax return. FIN 48 addresses the determination of whether tax benefits, either permanent or temporary, should be recorded in the financial statements. We adopted FIN 48 as of the beginning of our 2007 fiscal year and, as a result, recognized a $4.3 million decrease to retained earnings and $4.6 million decrease in additional paid-in- capital from the cumulative effect of the adoption. As of the beginning of our 2007 fiscal year, we recorded a liability for uncertain tax positions in our Consolidated Balance Sheet of $30.2 million. This liability consists of the $4.3 million and $4.6 million decreases in retained earnings and additional paid-in-capital, respectively; $11.5 million of amounts reclassified from income taxes recoverable and deferred income tax liabilities and $9.8 million recognition of deferred income tax assets. Of the $30.2 million, approximately $24.2 million would, if recognized, impact our effective tax rate over time. In addition, we accrue interest and any necessary penalties related to unrecognized tax positions in our provision for income taxes. As of December 31, 2006, we accrued approximately $3.0 million of interest and penalties, which are included in Other Tax Liabilities.

Fair Value Measurements

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”), which establishes a framework for reporting fair value and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact of this standard on our Consolidated Financial Statements.

Cott Corporation
Notes to the Consolidated Financial Statements
Unaudited

Note 2
Restructuring, Asset Impairments and Other Charges

		For the three months ended
		March 31,				April 1,
(IN MILLIONS OF U.S. DOLLARS)		2007				2006
Restructuring		$	0.3			$	1.6
Asset impairments			—				1.4
Other			—				2.0
		$	0.3			$	5.0

On October 26, 2006, we announced the closures of our manufacturing plants in Elizabethtown, Kentucky (“Elizabethtown”) and Wyomissing, Pennsylvania (“Wyomissing”).

Restructuring

The following table is a summary of our cash restructuring charges for the three months ended March 31, 2007 and the year ended December 30, 2006:

		Balance at				Charged to Costs				Payments
(IN MILLIONS OF		December 31,				and Expenses				made during				Balance at
U.S. DOLLARS)		2006				during the period				the period				March 31, 2007
Severance and termination benefits		$	5.4			$	0.3			$	(2.0	)		$	3.7
Contract loss			7.3				—				(0.3	)			7.0
Total		$	12.7			$	0.3			$	(2.3	)		$	10.7

						Charged to Costs				Payments
(IN MILLIONS OF		Balance at				and Expenses				made during				Balance at
U.S. DOLLARS)		January 1, 2006				during the year				the year				December 30, 2006
Severance and termination benefits		$	1.0			$	12.1			$	(7.7	)		$	5.4
Contract loss			—				7.7				(0.4	)			7.3
Other			—				0.7				(0.7	)			—
Total		$	1.0			$	20.5			$	(8.8	)		$	12.7

In the fourth quarter of 2006, we announced that we would record an estimated $115 to $125 million in aggregate charges for cost reduction programs including additional plant closures, office consolidation and organizational streamlining. This range was revised from the $60 to $80 million in estimated charges associated with the North American realignment plan and other asset impairments that we initially announced on September 29, 2005. Since September 29, 2005 through the end of the first quarter of 2007, we have recorded pre-tax charges of $86.3 million. In 2005, we recorded pre-tax charges of $36.9 million relating to the North American realignment and other asset impairments, of which $20.0 million related to customer relationship impairment. In 2006, we recorded pre-tax charges of $49.1 million, of which $30.4 million was in connection with the Elizabethtown and Wyomissing closures announced on October 26, 2006. The pre-tax charges of $30.4 million consisted of $10.6 million for accelerated depreciation and amortization recorded in cost of sales, $14.2 million for impairment charges relating to property, plant, equipment and intangible assets, and $5.6 million for severance of approximately 350 employees. In the first quarter of 2007, we recorded pre-tax charges of $0.3 million,

Cott Corporation
Notes to the Consolidated Financial Statements
Unaudited

primarily for severance costs relating the closures of Elizabethtown and Wyomissing. We estimate that the remainder of the cost reduction program charges (approximately $29 million to $39 million) will be incurred over the next 12 months.

We may also rationalize products, customers and production capacity but have not yet completed our analysis nor have we completed our detailed plans. Accordingly, the ultimate amount of any asset impairment charges or change in useful lives of assets that may result is uncertain. It is reasonably possible that our estimates of future cash flows generated by, the useful lives of, or both related to certain equipment and intangibles will be significantly reduced in the near term. As a result, the carrying value of the related assets may also be reduced materially in the near term.

Note 3
Business Seasonality

Our net income for the first quarter ending March 31, 2007 is not necessarily indicative of the results that may be expected for the full year due to business seasonality. Operating results are impacted by business seasonality, which normally leads to higher revenues in the second and third quarters versus the first and fourth quarters of the year. Conversely, fixed costs such as depreciation, amortization and interest are not impacted by seasonal trends.

Note 4
Income Taxes

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

		For the three months ended
		March 31,				April 1,
(IN MILLIONS OF U.S. DOLLARS)		2007				2006
Income tax (recovery) provision based on Canadian statutory rates		$	2.3			$	(0.5	)
Foreign tax rate differential			(1.1	)			(1.1	)
Non-deductible expenses and other items			—				1.2
Increase to other tax liabilities			0.8				—
Increase in valuation allowance			—				1.2
		$	2.0			$	0.8

As of March 31, 2007, we recognized $0.3 million of interest and penalties in the income statement and $3.3 million of interest and penalties in the balance sheet. We have classified the interest and penalties as income tax expense.

The total amount of gross unrecognized tax benefits as at December 31, 2006 was $28.9 million.

We are currently under audit by the Canada Revenue Agency for tax years 2000 through 2004 and by the Internal Revenue Service for tax years 2002 and 2003. The amounts that may ultimately be payable by us as a result of these audits are uncertain. We believe that the amounts provided for these audits in our tax liabilities are adequate; however, it is reasonably possible that our estimates of tax liabilities for these audits may change materially in the near term.

As of March 31, 2007, the tax years prior to 1997 are closed to examination by major tax jurisdictions.

Cott Corporation
Notes to the Consolidated Financial Statements
Unaudited

Note 5
Comprehensive Income (Loss)

		For the three months ended
		March 31,				April 1,
(IN MILLIONS OF U.S. DOLLARS)		2007				2006
Net income (loss)		$	4.8			$	(2.1	)
Foreign currency translation			1.1				(0.6	)
Unrealized gains on cash flow hedges — note 9			—				0.1
		$	5.9			$	(2.6	)

Note 6
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 is calculated using the weighted average number of common shares outstanding adjusted to include the effect, if dilutive, that would occur if in-the-money stock options were exercised.

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

		For the three months ended
		March 31,				April 1,
(IN THOUSANDS)		2007				2006
Weighted average number of shares outstanding — basic			71,752				71,712
Dilutive effect of stock options			43				43
Adjusted weighted average number of shares outstanding — diluted			71,795				71,755

At March 31, 2007, options to purchase 2,508,389 shares (4,420,764 — April 1, 2006) of common stock at a weighted average exercise price of C$30.45 per share (C$43.53 — April 1, 2006) were outstanding, but were not included in the computation of diluted net income per share because the exercise price of such options was greater than the average market price of our common stock during the period.

As of March 31, 2007, we had 71,754,630 common shares and 2,615,680 common share options outstanding. Of our common share options outstanding, 1,979,054 options were exercisable as of March 31, 2007.

During the first quarter ended March 31, 2007, no common share options were issued and 5,000 common share options were exercised at an exercise price of C$14.00.

Cott Corporation
Notes to the Consolidated Financial Statements
Unaudited

Note 7
Inventories

		March 31,				December 30,
(IN MILLIONS OF U.S. DOLLARS)		2007				2006
Raw materials		$	54.4			$	52.2
Finished goods			75.9				61.5
Other			17.6				17.5
		$	147.9			$	131.2

Note 8
Derivative Financial Instruments

At March 31, 2007 and December 30, 2006 there were no outstanding derivatives that were accounted for as hedges.

In 2006, we entered into cash flow hedges to mitigate exposure to declines in the value of the Canadian dollar attributable to certain forecasted U.S. dollar raw material purchases of the Canadian business. The hedges consisted of monthly foreign exchange options to buy U.S. dollars at fixed rates per Canadian dollar and matured at various dates through December 28, 2006. The fair market value of the foreign exchange options was included in prepaid expenses and other assets.

As of April 1, 2006, the hedges consisted of foreign exchange options to buy U.S. dollars at fixed rates per Canadian dollar at a cost of $0.6 million. The fair value of the options of $0.2 million had been included in prepaid expenses and other assets at April 1, 2006 and the unrealized loss of $0.4 million was recorded in other comprehensive income, reflecting a $0.1 million decrease in the unrealized loss in comprehensive income in the first quarter of 2006.

Note 9
Property, Plant and Equipment

		March 31,				December 30,
(IN MILLIONS OF U.S. DOLLARS)		2007				2006
Cost		$	703.3			$	684.7
Accumulated depreciation			(338.7	)			(324.5	)
		$	364.6			$	360.2

Cott Corporation
Notes to the Consolidated Financial Statements
Unaudited

Note 10
Intangibles and Other Assets

		March 31, 2007												December 30, 2006
						Accumulated												Accumulated
(IN MILLIONS OF U.S. DOLLARS)		Cost				Amortization				Net				Cost				Amortization				Net
Intangibles
Not subject to amortization
Rights		$	80.4			$	—			$	80.4			$	80.4			$	—			$	80.4
Subject to amortization
Customer relationships			165.8				52.7				113.1				165.7				50.0				115.7
Trademarks			29.4				11.9				17.5				29.4				11.3				18.1
Information technology			57.7				34.8				22.9				57.0				32.8				24.2
Other			3.6				1.3				2.3				3.6				1.2				2.4
			256.5				100.7				155.8				255.7				95.3				160.4
			336.9				100.7				236.2				336.1				95.3				240.8
Other Assets
Financing costs			4.8				2.6				2.2				4.8				2.3				2.5
Other			13.4				4.0				9.4				11.2				3.8				7.4
			18.2				6.6				11.6				16.0				6.1				9.9
		$	355.1			$	107.3			$	247.8			$	352.1			$	101.4			$	250.7

Amortization expense of intangible assets was $5.4 million for the period ended March 31, 2007 ($6.0 million — April 1, 2006).

Note 11
Short-Term Borrowings

Short-term borrowings include bank overdrafts and borrowings under our credit facilities and receivables securitization facility.

The credit facilities are collateralized by substantially all of our personal property with certain exceptions including the receivables sold as part of our receivables securitization facility discussed below.

In general, borrowings under the credit facilities bear interest at either a floating or fixed rate for the applicable currency plus a margin based on our consolidated total leverage ratio. A facility fee of between 0.15% and 0.375% per annum is payable on the entire line of credit. The level of the facility fee is dependent on financial covenants.

As at March 31, 2007, credit of $168.1 million was available after borrowings of $52.5 million and standby letters of credit of $4.4 million. The weighted average interest rate was 7.05% on these facilities as of March 31, 2007.

The amount of funds available under the receivables securitization facility is based upon the amount of eligible receivables and various reserves required by the facility. Accordingly, availability may fluctuate over time, as a result of changes in eligible receivables balances and calculation of reserves, but will not exceed the $75.0 million program limit. This facility bears interest at a variable rate, based on the cost of borrowing of an unaffiliated entity, Park Avenue Receivables Company, LLC, and certain other financial institutions. A fee of between 0.20% and 0.40% per annum is currently payable on the unused portion of the facility. The level of the facility fee is dependent on financial covenants. As of March 31, 2007, $41.7 million of eligible receivables, net of reserves, were available for purchase and $41.6 million was outstanding under this facility, at a weighted average interest rate of 6.34%.

Cott Corporation
Notes to the Consolidated Financial Statements
Unaudited

We were in compliance with our covenants as of March 31, 2007. Our financial covenants are calculated and determined at the end of each quarter. Based on our current financial projection, we expect to be in compliance with the total leverage ratio financial covenant set forth in our senior secured credit facilities as of the end of the second quarter of 2007. If we determine that relief is required, however, we will work with our lenders to ease this covenant. Based on preliminary discussions with our lenders, we believe we can reach agreement on a new total leverage ratio financial covenant, if necessary, that is acceptable to us, although there can be no assurance that we will. Since a covenant default in our senior secured credit facilities would result in a default in our unsecured senior subordinated notes due in 2011, our notes due in 2011 would, in the event of such default, become currently due and accordingly, classified as a current liability. If we are not in compliance with our total leverage ratio financial covenant and our lenders do not agree to amend the covenant on terms that are acceptable to us, our lenders could terminate our facilities and we would have to replace them. Should our credit facilities and 2011 notes become currently due, we may have to incur additional fees and higher interest costs to replace them.

Note 12
Net Change in Non-Cash Working Capital

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

		For the three months ended
		March 31,				April 1,
(IN MILLIONS OF U.S. DOLLARS)		2007				2006
(Increase) decrease in accounts receivable		$	(9.3	)		$	8.4
Increase in inventories			(16.2	)			(27.4	)
Increase in prepaid expenses and other assets			(1.6	)			(2.5	)
Increase in accounts payable and accrued liabilities			15.0				5.7
		$	(12.1	)		$	(15.8	)

Note 13
Share-Based Compensation

As of March 31, 2007, we had three share-based compensation plans, which are described below. The share-based compensation plans have been approved by the shareholders, except for our Common Share Option Plan, which was adopted prior to our initial public offering. Subsequent amendments to that plan that required shareholder approval have been so approved.

The table below summarizes the compensation expense for the period ended March 31, 2007 and the unrecognized compensation expense on non-vested awards at that date. This compensation expense was recorded in selling, general and administrative expenses.

						Unrecognized
						compensation
(IN MILLIONS OF U.S. DOLLARS)		Compensation expense				expense
Stock options		$	1.5			$	3.7
Performance share units			0.9				14.4
Share appreciation rights			0.1				4.5
Total		$	2.5			$	22.6

Cott Corporation
Notes to the Consolidated Financial Statements
Unaudited

Common Share Option Plan

Under the 1986 Common Share Option Plan, as amended, we have reserved 14.0 million common shares for future issuance. Options are granted at a price not less than fair value of the shares on the grant date.

There were no options granted during the first quarter of either fiscal 2007 or 2006.

Option activity was as follows:

						Weighted				Weighted average
		Shares				average exercise				remaining contractual
		(IN THOUSANDS)				price (C$)				term (in years)
Balance at December 31, 2005			4,605			$	30.69
Granted			—				—
Exercised			(2	)			5.95
Forfeited or expired			(64	)			30.20
Outstanding at April 1, 2006			4,539				42.59				4.5
Exercisable at April 1, 2006			2,298			$	28.09				4.5
Balance at December 30, 2006			2,696			$	29.65
Granted			—				—
Exercised			(5	)			14.00
Forfeited or expired			(75	)			32.17
Outstanding at March 31, 2007			2,616				29.61				3.3
Exercisable at March 31, 2007			1,979			$	28.54				2.9

Total compensation cost related to non-vested awards not yet recognized is $2.6 million. The weighted average period over which this is expected to be recognized is 1.1 years.

Outstanding options at March 31, 2007 are as follows:

						Options Outstanding								Options Exercisable
										Weighted								Weighted
		Number				Remaining				Average				Number				Average
		Outstanding				Contractual Life				Exercise Price				Exercisable				Exercise Price
Range of Exercise Prices (C$)		(IN THOUSANDS)				(Years)				(C$)				(IN THOUSANDS)				(C$)
$8.15 — $16.10			107				1.1			$	9.90				107			$	9.90
$16.68 — $24.25			473				2.0			$	17.93				414			$	17.67
$26.57 — $33.30			1,401				3.7			$	29.89				1,074			$	30.14
$35.73 — $43.64			635				4.1			$	40.98				384			$	40.98
			2,616				3.3			$	29.61				1,979			$	28.54

Long-Term Incentive Plans

During the second quarter of 2006, our shareowners approved and adopted two new long-term incentive plans for 2006 and future periods, the Performance Share Unit Plan (“PSU Plan”) and the Share Appreciation Rights Plan (“SAR Plan”).

Cott Corporation
Notes to the Consolidated Financial Statements
Unaudited

PSU Plan

Under the PSU Plan, performance share units (“PSUs”) may be granted to employees of our Company and its subsidiaries. The value of an employee’s award under our PSU Plan will depend on (i) our performance over a three-year performance cycle; and (ii) the market price of our common shares at the time of vesting. Performance targets will be established annually by the Human Resources and Compensation Committee of the Board of Directors. PSUs granted will vest over a term not to exceed three fiscal years.

SAR Plan

Under the SAR Plan, share appreciation rights (“SARs”) may be granted to employees and directors of our Company and its subsidiaries. SARs will typically vest on the third anniversary of the grant date. On vesting, each SAR will represent the right to be paid the difference, if any, between the price of our common shares on the date of grant and their price on the SAR’s vesting date. Payments in respect of vested in-the-money SARs will be made in the form of our common shares purchased on the open market by an independent trust with cash contributed by us. If our share price on the date of vesting is lower than on the date of grant, no payment will be made in respect of those vested SARs. Prior to vesting, there are no dividends paid on the share appreciation rights, and holders do not have the right to vote the common shares represented by their SARs.

We recognize the compensation cost of the PSUs and SARs based on the fair value of the grant. We recognize these compensation costs net of a forfeiture rate on a straight-line basis over the requisite service period of the award, which is generally the vesting term of three years. Compensation cost of the PSUs may vary depending on management’s estimates of the probability of the performance measures being achieved and the number of PSUs expected to vest.

During the first quarter of 2007, the PSU activity was as follows:

														Total Value
		Number of PSUs				Target Value				Total Value				(IN MILLIONS OF
		(IN THOUSANDS)				per PSU (C$)				(IN MILLIONS OF C$)				U.S. DOLLARS)
Granted
March 26, 2007			44			$	16.13			$	0.7			$	0.6
February 19, 2007			529				17.08				9.0				7.8
Total			573							$	9.7			$	8.4

The number of PSUs granted and target values per PSU noted above are based on an assumption that our performance target will be achieved. The number of units and target values can vary from 0 to 150% depending on the level of performance achieved relative to the performance target. Subject to the terms of the PSU Plan, the vesting date for the PSUs granted in fiscal 2006 and 2007 will be December 27, 2008 and December 26, 2009, respectively. The target value per PSU noted above was determined based on the closing market price of our common shares on the Toronto Stock Exchange on the last trading day prior to the grant date. Compensation costs of $0.9 million were recognized in selling, general and administrative expenses in the period ended March 31, 2007. As of March 31, 2007 there was approximately $13.2 million of unearned compensation relating to the grants that is expected to be recognized on a straight-line basis over a period of 18 to 33 months.

During the first quarter of 2007, we granted 217,836 SARs to our employees at a fair value of $3.2 million. Subject to the terms of the SAR plan, the vesting date for the SARs granted in fiscal 2006 and 2007 will be July 26, 2009, October 25, 2009 and February 19, 2010. Compensation costs of $0.1 million were recognized in selling, general and administrative expenses in the period ended March 31, 2007. As of March 31, 2007 there was $4.5 million of unearned compensation relating to the grants that is expected to be recognized on a straight-line basis over a period of 28 to 36 months.

Cott Corporation
Notes to the Consolidated Financial Statements
Unaudited

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

		March 31, 2007				December 30, 2006
Risk-free interest rate			5.05	%			5.05	%
Average expected life (years)			4				4
Expected volatility			33.9	%			33.9	%
Expected dividend yield			—				—

Other Share-Based Compensation

In 2006, Brent Willis, our Chief Executive Officer, received a net cash award of $0.9 million at commencement of employment to purchase shares of the Company. The purchased shares must be held for a minimum of three years and must be transferred to the Company (or as the Company may otherwise direct) for no additional consideration on a prorated basis if the service condition of three years is not met. This award is recognized as compensation expense over the vesting period. For the period ended March 31, 2007, $0.1 million was expensed as compensation expense and the remaining balance is classified as restricted shares which is a reduction in shareowners’ equity. In addition, in 2006, 204,000 common shares with a fair value of $3.2 million, which vest over three years, were granted to Mr. Willis. Compensation costs of $0.3 million were recognized in selling, general and administration expenses in the period ended March 31, 2007 with respect to this grant. As of March 31, 2007 there was $2.2 million of unearned compensation relating to the grant that is being recognized on a straight-line basis over a period of three years from the date of grant.

Note 14
Contingencies

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

In January 2005, we were named as one of many defendants in a class action suit alleging the unauthorized use by the defendants of container deposits and the imposition of recycling fees on customers. On June 2, 2006, the British Columbia Supreme Court granted the summary trial application, which resulted in the dismissal of the plaintiffs’ action against us and the other defendants. The plaintiffs appealed the dismissal, and we and the other defendants are defending the appeal, which is currently scheduled to be heard in June 2007. As complicated legal issues are raised in the appeal, it is difficult to assess the chances of its success at this time. In February 2005 similar class action claims were filed in a number of other Canadian provinces. The claims which were filed in Quebec have since been discontinued.

Cott Corporation
Notes to the Consolidated Financial Statements
Unaudited

Note 15
Segment Reporting

We produce, package and distribute retailer brand and branded bottled and canned soft drinks to regional and national grocery, mass-merchandise and wholesale chains in North America and International business segments. The International segment includes our United Kingdom business, our European business, our Mexican business, our Royal Crown International business and our business in Asia. The concentrate manufacturing plant assets, sales and related expenses have been included in the North America segment. Total assets under the heading “Eliminations” include the elimination of intersegment receivables and investments. For comparative purposes, segmented information has been restated to conform to the way we currently manage our beverage business.

		Business Segments
		North
		America				International				Eliminations				Total
For the three months ended March 31, 2007
External revenue		$	295.6			$	104.6			$	—			$	400.2
Depreciation and amortization			13.1				4.8				—				17.9
Restructuring, asset impairments and other charges — note 2
Restructuring			0.2				0.1				—				0.3
Asset impairments			—				—				—				—
Other			—				—				—				—
Operating income			10.6				4.9				—				15.5
Additions to property, plant and equipment			11.2				5.0				—				16.2
As of March 31, 2007
Property, plant and equipment			238.5				126.1				—				364.6
Goodwill			79.4				79.7				—				159.1
Intangibles and other assets			213.0				34.8				—				247.8
Total assets			1,720.6				414.9				(962.4	)			1,173.1

Cott Corporation
Notes to the Consolidated Financial Statements
Unaudited

		North
(IN MILLIONS OF U.S. DOLLARS)		America				International				Eliminations				Total
For the three months ended April 1, 2006
External revenue		$	310.9			$	83.3			$	—			$	394.2
Depreciation and amortization			15.0				4.3				—				19.3
Restructuring, asset impairments and other charges — note 2
Restructuring			1.6				—				—				1.6
Asset impairments			1.4				—				—				1.4
Other			—				2.0				—				2.0
Operating income (loss)			5.0				2.7				—				7.7
Additions to property, plant and equipment			6.5				1.8				—				8.3
As of December 30, 2006
Property, plant and equipment			235.3				124.9				—				360.2
Goodwill			79.1				79.3				—				158.4
Intangibles and other assets			215.5				35.2				—				250.7
Total assets			1,560.3				404.9				(824.5	)			1,140.7

Credit risk arises from the potential default of a customer in meeting its financial obligations with us. Concentrations of credit exposure may arise with a group of customers which have similar economic characteristics or that are located in the same geographic region. The ability of such customers to meet obligations would be similarly affected by changing economic, political or other conditions.

Revenue attributable to our top customer (Wal-Mart Stores, Inc.) in the first quarter of 2007 and 2006 accounted for 39% and 42%, respectively, of our total revenue. Revenue attributable to the top ten customers in the first quarter of 2007 and 2006 accounted for 59% and 63%, respectively, of our total revenue. The loss of any significant customer, or customers which in the aggregate represent a significant portion of our revenue, could have a material adverse effect on our operating results and cash flows.

Revenues by geographic area are as follows:

		For the three months ended
		March 31,				April 1,
(IN MILLIONS OF U.S. DOLLARS)		2007				2006
United States		$	264.1			$	276.5
Canada			39.3				40.6
United Kingdom			79.4				63.2
Other countries			17.4				13.9
		$	400.2			$	394.2

Revenues are attributed to countries based on the location of the plant.

Property, plant and equipment by geographic area are as follows:

Cott Corporation
Notes to the Consolidated Financial Statements
Unaudited

		March 31,				December 30,
(IN MILLIONS OF U.S. DOLLARS)		2007				2006
United States		$	183.9			$	181.5
Canada			54.6				53.8
United Kingdom			116.6				114.9
Other countries			9.5				10.0
		$	364.6			$	360.2

Note 16
Subsequent Events

On April 25, 2007, we entered into a Shareowner Rights Plan Agreement with Computershare Investor Services Inc. (the “Rights Plan”), which provides for the issuance of one right for each outstanding common share without nominal or par value outstanding at 8:01 p.m. (Toronto time) on April 25, 2007. The rights issued under the Rights Plan become exercisable only when a person, including any party related to it, acquires or announces its intention to acquire 20% or more of the Company’s outstanding common shares without complying with the “Permitted Bid” provisions of the Rights Plan or without the approval of the Board of Directors. Should such an acquisition occur, each right would entitle its holder, other than the “Acquiring Person” and persons related to it, to purchase that number of common shares having an aggregate market price equal to twice the exercise price of the rights. Each right will have an initial exercise price of $100 (subject to anti-dilution adjustments). The adoption of the Rights Plan is subject to the approval of the Toronto Stock Exchange, and the Rights Plan will expire on the earlier of the “Termination Time” and October 24, 2007.

Note 17
Certain of the comparative figures have been reclassified to conform to the current year’s presentation.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are one of the world’s largest non-alcoholic beverage companies and the world’s largest retailer brand soft drink provider.

Results of Operations

						For the three months ended
		March 31, 2007								April 1, 2006
		MILLIONS OF				PERCENT OF				MILLIONS OF				PERCENT OF
		DOLLARS				SALES				DOLLARS				SALES
Revenue		$	400.2				100.0	%		$	394.2				100.0	%
Cost of sales			346.7				86.6	%			341.5				86.6	%
Gross profit			53.5				13.4	%			52.7				13.4	%
Selling, general and administrative expenses			37.7				9.4	%			39.9				10.1	%
Loss on disposal of property, plant and equipment			—				—				0.1				—
Restructuring, asset impairments and other charges			0.3				0.1	%			5.0				1.3	%
Operating income			15.5				3.9	%			7.7				2.0	%
Other (income) expense			0.2				—				(0.2	)			(0.1	)%
Interest expense			7.8				1.9	%			8.2				2.1	%
Minority interest			0.7				0.2	%			1.0				0.3	%
Income (loss) before income taxes			6.8				1.7	%			(1.3	)			(0.3	)%
Income taxes			2.0				0.5	%			0.8				0.2	%
Net income (loss)		$	4.8				1.2	%		$	(2.1	)			(0.5	)%
Depreciation & amortization			17.9				4.5	%			19.3				4.9	%

We reported net income of $4.8 million or $0.07 per diluted share for the first quarter ended March 31, 2007, compared with a net loss of $2.1 million, or $(0.03) per diluted share, for the first quarter of 2006. The increase was primarily due to:

	•		higher volume;
	•		decrease in selling, general and administrative expenses;
	•		decrease in restructuring, asset impairment and other charges; and
	•		decrease in interest expense due to lower debt indebtedness.

The increase in net income was partially offset by an increase in income tax expense of $0.8 million, recognized in the first quarter ended March 31, 2007 for uncertain tax positions as required by Financial Accounting Standards Board (“FASB”) Interpretation No. 48 (“FIN 48”) which we adopted effective December 31, 2006.

Revenue — Revenue in the first quarter of 2007 was $400.2 million, an increase of 1.5% from $394.2 million in the first quarter of 2006. Excluding the impact of foreign exchange, revenue was relatively flat compared to prior year same quarter. Total 8-ounce equivalent volume in the first quarter of 2007 was 317.8 million cases, an increase of 7.7% compared to the first quarter of 2006. The increase was driven by a 31.8% volume increase in the International business unit compared to the prior year first quarter. The majority of the increase came from Royal Crown concentrate volume growth. The volume increase in the International business unit was partially offset by the volume decrease in North America of 8.0% as compared to the prior year first quarter.

(IN MILLIONS OF DOLLARS)		Cott				North America				International
Change in revenue		$	6.0			$	(15.3	)		$	21.3
Impact of foreign exchange			(6.5	)			0.5				(7.0	)
Change excluding foreign exchange		$	(0.5	)		$	(14.8	)		$	14.3
Percentage change excluding foreign exchange			(0.1	)%			(4.8	)%			15.8	%

In North America, revenue was $295.6 million in the first quarter of 2007, a decrease of 4.9% as compared to the first quarter of 2006. Excluding the impact of foreign exchange, revenue decreased by 4.8%. The decrease was caused by overall industry softness and actions we have taken to rationalize underperforming stock keeping units (“SKUs”), product lines and customers. These actions have had a positive impact on North American gross profit and we plan to continue rationalization of unprofitable products, product lines and customers where it makes sense to do so, despite the potential for short-term negative impact on volume and revenue.

The International segment includes our U.K. and Europe business, our Mexican business, our Royal Crown International business and our business in Asia. Revenue from this segment was $104.6 million in the first quarter of 2007, an increase of 25.6% when compared with the first quarter of 2006. Case volume in 8-ounce equivalents increased by 31.8% in the first quarter of 2007 when compared with the first quarter of 2006. The U.K., Europe, Mexico and all of our other international markets combined contributed to the strong revenue growth in the quarter.

Cost of Sales — Cost of sales was $346.7 million or 86.6% of revenue for the first quarter of 2007, as compared with $341.5 million or 86.6% of revenue in the first quarter of 2006. Variable costs represented 89.6% of total cost of sales in the first quarter of 2007, up from 88.3% in the first quarter of 2006. Major elements of these variable costs included ingredients and packaging costs, fees paid to third party manufacturers and distribution costs.

Increase (decrease)		Cott				North America				International
Volume impact			(3	)%			(7	)%			12	%
Ingredients & packaging costs			3	%			3	%			4	%
Foreign exchange			2	%			—				9	%
Other			—				—				—
Total cost of sales change			2	%			(4	)%			25	%