Note 16—Retirement Plans

Cott primarily maintains defined contribution retirement plans covering qualifying employees. The total expense with respect to these plans was $8.6 million for the year ended December 31, 2016 (2015—$9.4 million; 2014—$4.1 million).

We also maintain several defined benefit (“DB”) plans acquired as a part of acquisitions covering certain U.S. and non-U.S. employees, referred to as the U.S. and International Plans, respectively. Retirement benefits are based on years of service multiplied by a monthly benefit factor. Pension costs are funded in accordance with the provisions of the applicable law. Our U.S. Plans and some of the International Plans are closed to new participants and frozen. We use a December 31, 2016 measurement date for all DB plans.

Obligations and Funded Status

The following table summarizes the change in the projected benefit obligation, change in plan assets and unfunded status of the DB plans as of December 31, 2016 and January 2, 2016:

December 31, 2016

(in millions of U.S. dollars)

U.S.

International

Total

Change in Projected Benefit Obligation

Projected benefit obligation at beginning of year

16.7

54.0

70.7

Business combinations

—

24.8

Service cost

—

1.8

Interest cost

0.6

2.0

2.6

Benefit payments

(2.7

)

(0.4

)

(3.1

)

Actuarial losses

0.1

9.2

9.3

Settlement gains

(0.1

)

—

(0.1

)

Translation gains

—

(10.0

)

(10.0

)

Projected benefit obligation at end of year

14.6

81.4

96.0

Change in Plan Assets

Plan assets beginning of year

12.7

45.2

57.9

Business combinations

—

17.7

Employer contributions

0.5

2.3

2.8

Plan participant contributions

—

0.2

Benefit payments

(2.6

)

(0.4

)

(3.0

)

Actual return on plan assets

0.8

5.0

5.8

Translation losses

—

(7.6

)

(7.6

)

Fair value at end of year

11.4

62.4

73.8

Funded Status of Plan

Projected benefit obligation

(14.6

)

(81.4

)

(96.0

)

Fair value of plan assets

11.4

62.4

73.8

Unfunded status

(3.2

)

(19.0

)

(22.2

)


	January 2, 2016
(in millions of U.S. dollars)	U.S.			International			Total
Change in Projected Benefit Obligation
Projected benefit obligation at beginning of year	$	17.4		$	60.5		$	77.9
Interest cost		0.7			2.1			2.8
Benefit payments		(0.7	)		(1.0	)		(1.7	)
Actuarial gains		(0.7	)		(4.8	)		(5.5	)
Translation gains		—			(2.8	)		(2.8	)

Projected benefit obligation at end of year	$	16.7		$	54.0		$	70.7

Change in Plan Assets
Plan assets beginning of year	$	13.1		$	46.0		$	59.1


Employer contributions		0.8			2.2			3.0
Benefit payments		(0.6	)		(1.0	)		(1.6	)
Actual return on plan assets		(0.6	)		0.2			(0.4	)
Translation losses		—			(2.2	)		(2.2	)

Fair value at end of year	$	12.7		$	45.2		$	57.9

Funded Status of Plan
Projected benefit obligation	$	(16.7	)	$	(54.0	)	$	(70.7	)
Fair value of plan assets		12.7			45.2			57.9

Unfunded status	$	(4.0	)	$	(8.8	)	$	(12.8	)

The accumulated benefit obligation for the U.S. Plans equaled $14.6 million and $16.7 million at the end of 2016 and 2015, respectively. The accumulated benefit obligation for the International Plans equaled $81.4 million and $54.0 million at the end of 2016 and 2015, respectively.

Periodic Pension Costs

The components of net periodic pension cost were as follows:


	December 31, 2016
(in millions of U.S. dollars)	U.S.			International			Total
Service cost	$	—		$	1.8		$	1.8
Interest cost		0.6			2.0			2.6
Expected return on plan assets		(0.9	)		(2.4	)		(3.3	)
Amortization of prior service costs		0.1			—			0.1
Recognized net loss due to settlement		0.1			0.1			0.2
Amortization of net actuarial loss		0.2			—			0.2
Employees contribution		—			(0.2	)		(0.2	)

Net periodic pension cost	$	0.1		$	1.3		$	1.4


	January 2, 2016
(in millions of U.S. dollars)	U.S.			International			Total
Interest cost	$	0.7		$	2.1		$	2.8
Expected return on plan assets		(0.9	)		(2.3	)		(3.2	)
Amortization of prior service costs		0.1			—			0.1
Amortization of net actuarial loss		0.2			0.2			0.4

Net periodic pension cost	$	0.1		$	—		$	0.1


	January 3, 2015
(in millions of U.S. dollars)	U.S.			International			Total
Service cost	$	—		$	0.2		$	0.2
Interest cost		0.3			2.4			2.7
Expected return on plan assets		(0.4	)		(2.6	)		(3.0	)
Amortization of prior service costs		0.1			—			0.1
Amortization of net actuarial loss		0.1			0.2			0.3

Net periodic pension cost	$	0.1		$	0.2		$	0.3

Accumulated Other Comprehensive Loss

Amounts included in accumulated other comprehensive income, net of tax, at year-end which have not yet been recognized in net periodic benefit cost were as follows:


	December 31, 2016
(in millions of U.S. dollars)	U.S.			International			Total
Unamortized prior service cost	$	—		$	—		$	—
Unrecognized net actuarial loss		(1.2	)		(13.2	)		(14.4	)

Total accumulated other comprehensive loss	$	(1.2	)	$	(13.2	)	$	(14.4	)


	January 2, 2016
(in millions of U.S. dollars)	U.S.			International			Total
Unamortized prior service cost	$	(0.1	)	$	—		$	(0.1	)
Unrecognized net actuarial loss		(1.4	)		(8.6	)		(10.0	)

Total accumulated other comprehensive loss	$	(1.5	)	$	(8.6	)	$	(10.1	)


	January 3, 2015
(in millions of U.S. dollars)	U.S.			International			Total
Unamortized prior service cost	$	(0.1	)	$	—		$	(0.1	)
Unrecognized net actuarial loss		(1.3	)		(11.0	)		(12.3	)

Total accumulated other comprehensive loss	$	(1.4	)	$	(11.0	)	$	(12.4	)

Actuarial Assumptions

The following table summarizes the weighted average actuarial assumptions used to determine the projected benefit obligation:


	For the Year Ended
	December 31,		January 2,			January 3,
	2016		2016			2015
U.S. Plans
Discount rate		3.8%		4.0	%		3.9	%
Expected long-term rate of return on plan assets		7.0%		7.2	%		7.2	%
International Plans
Discount rate		2.0%		3.9	%		3.6	%
Expected long-term rate of return on plan assets		3.7%		5.2	%		6.2	%
Rate of compensation increase		0.2%		n/a			n/a
CPI Inflation factor		1.5%		2.0	%		1.9	%

The following table summarizes the weighted average actuarial assumptions used to determine net periodic benefit cost:


	For the Year Ended
	December 31,		January 2,			January 3,
	2016		2016			2015
U.S. Plans
Discount rate		4.0%		3.9	%		4.2	%
Expected long-term rate of return on plan assets		7.0%		7.2	%		7.2	%
International Plans
Discount rate		2.8%		3.8	%		4.5	%
Expected long-term rate of return on plan assets		3.7%		5.2	%		6.2	%
Inflation factor		1.4%		1.9	%		2.4	%

The Company utilizes a yield curve analysis to determine the discount rates for its DB plan obligations. The yield curve considers pricing and yield information for high quality corporate bonds with maturities matched to estimated payouts of future pension benefits. The Company evaluates its assumption regarding the estimated long-term rate of return on plan assets based on historical experience, future expectations of investment returns, asset allocations, and its investment strategy. The Company’s long-term rate of return on plan assets reflect expectations of projected weighted average market returns of plan assets. Changes in expected returns on plan assets also reflect any adjustments to the Company’s targeted asset allocation.

Asset Mix

Our DB plans weighted-average asset allocations by asset category were as follows:


	December 31,			January 2,
	2016			2016
U.S. Plans
Cash and cash equivalents		—	%		—	%
Equity securities		60.6	%		62.6	%
Fixed income investments		39.4	%		37.4	%
International Plans
Cash and cash equivalents		4.7	%		5.5	%
Equity securities		55.9	%		44.0	%
Fixed income investments		35.1	%		50.5	%
Real Estate		4.3	%		—	%

Plan Assets

Our investment policy is that plan assets will be managed utilizing an investment philosophy and approach characterized by all of the following, listed in priority order: (1) emphasis on total return, (2) emphasis on high-quality securities, (3) sufficient income and stability of income, (4) safety of principal with limited volatility of capital through proper diversification and (5) sufficient liquidity. The target allocation percentages for the U.S. Plans’ assets range between 45% to 55% in equity securities, 35% to 45% in fixed income investments, and 5% to 15% in extended asset class investments. The target allocation percentages for the International Plans’ assets range between 50% to 80% in equity securities, 20% to 50% in fixed income investments, 0% to 30% in real estate and 0% to 15% in alternative investments. None of our equity or debt securities are included in plan assets.

Cash Flows

We expect to contribute $3.6 million to the DB plans during the 2017 fiscal year.

The following benefit payments are expected to be paid in the periods indicated below:


(in millions of U.S. dollars)
Expected benefit payments	U.S.		International		Total
FY 2017	$	0.9	$	2.0	$	2.9
FY 2018		0.9		1.9		2.8
FY 2019		0.8		1.7		2.5
FY 2020		0.8		1.7		2.5
FY 2021		0.8		1.6		2.4
FY 2022 through FY 2026		4.5		8.5		13.0

The fair values of the Company’s U.S. pension plan assets are measured at daily net asset value and valued at $11.4 million and $12.7 million at December 31, 2016 and January 2, 2016, respectively.

The fair values of the Company’s International pension plan assets at December 31, 2016 and January 2, 2016 were as follows:


	December 31, 2016
(in millions of U.S. dollars)	Level 1		Level 2		Level 3
Cash and cash equivalents:
Cash and cash equivalents	$	2.9	$	—	$	—
Mutual funds:
Non-U.S. equity securities		6.9		—		—
Fixed income		20.3		—		—
Balanced		14.3		—		—
Other		0.1		1.3		—
Fixed income:
Non-U.S. bonds		12.3		—		—
Insurance contract		—		1.6		—
Real Estate:
Real Estate		—		2.7		—

Total	$	56.8	$	5.6	$	—


	January 2, 2016
(in millions of U.S. dollars)	Level 1		Level 2		Level 3
Cash and cash equivalents:
Cash and cash equivalents	$	2.5	$	—	$	—
Mutual funds:
Non-U.S. equity securities		4.6		—		—
Fixed income		21.0		—		—
Balanced		15.1		—		—
Other		0.2		—		—
Fixed income:
Insurance contract		—		1.8		—

Total	$	43.4	$	1.8	$	—