MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2011 and 2010 (Tabular amounts in millions of Canadian dollars, except per share data) The Company’s approach to managing liquidity risk is to ensure that it will always have sufficient liquidity to meet liabilities when they are due. The Company believes its liquidity will be satisfactory for the foreseeable future due to its significant cash balances, its expected positive operating cash flow and the availability of its unused revolving credit line. The Company anticipates funding all of its future commitments from the above sources but may raise further funds by entering into new debt financing arrangements or issuing further equity to satisfy its future additional obligations or investment opportunities. In 2011, cash provided by operating activities was $171.4 million, compared to $168.4 million in 2010. The increase in cash flow compared to last year was primarily due to higher net earnings in the current year offset by increase in non-cash working capital driven by the increase in sales in the fourth quarter of 2011 compared to 2010. Free cash flow from operations reached $92.1 million in 2011, an increase of $5.1 million or 6% over the prior year. The Company maintains a rigorous focus on its investment in non-cash working capital. Days of working capital employed (a non-IFRS measure; see “Key Performance Indicators and Non-IFRS Measures” in Section 5A below) were 15 days at December 31, 2011, compared to 10 days at December 31, 2010. Cash used in financing activities in 2011 was $99.1 million, consisting primarily of the net repayment of long-term debt of $83.4 million, payment of dividends of $23.3 million offset by proceeds from the issuance of stock options of $8.1 million. Cash used for investing activities in 2011 of $104.5 million was primarily for capital expenditures of $81.4 million (see below), and the acquisition of Sertech of $7.8 million and the 50% equity investment of $18.3 million in Pacman-CCL. Consequently, cash and cash equivalents declined by $32.5 million in 2011 to $140.7 million. Capital spending in 2011 amounted to $81.4 million compared to $85.8 million in 2010. This decrease is in line with annual depreciation and reflects the planned expenditures for the year. Prior to 2009, the level of spending was significantly higher in order to take advantage of new market opportunities and to create a global world-class manufacturing platform in the Label Segment. Capital expenditures in 2012 are planned at levels similar to those of 2011. The Company is continuing to seek investment opportunities to expand its business geographically, add capacity in its facilities and improve its competitiveness. As in previous years, capital spending will be monitored closely and adjusted based on the level of cash flow generated. Depreciation and amortization in 2011 amounted to $100.2 million, compared to $95.4 million in 2010. 24 CCL Industries Inc. 2011 Annual Report NET DEBT TO  TOTAL CAPITALIZATION  ( % ) CAPITAL SPENDING (i n m illio n s of Ca n adia n  dolla r s) BOOK VALUE  PER CLASS B SHARE (i n  Ca n adia n  dolla r s) 40 30 20 10 0 07 08 09 10 11 07 08 09 10 11 200 150 100 50 0 07 08 09 10 11 25 15 20 10 5 0 2011 2010 Cash provided by operating activities $ 171.4 $ 168.4 Cash used in financing activities (99.1) (53.3) Cash used for investing activities (104.5) (82.6) Effect of exchange rates on cash (0.3) (9.9) (Decrease) increase in cash and cash equivalents $ (32.5) $ 22.6 Cash and cash equivalents – end of year $ 140.7 $ 173.2 Summary of Cash Flows B) Cash Flow