This news release contains forward-looking information that is based upon
assumptions and is subject to risks and uncertainties as indicated in the
cautionary note contained elsewhere in this news release.
Andrew Peller Limited (TSX:ADW.A)(TSX:ADW.B) (the "Company") announced today
continued strong operating and financial performance for the three and six
months ended September 30, 2012.
FISCAL 2013 HIGHLIGHTS:
-- Sales up 4.6% through first six months of year on solid growth through
majority of trade channels
-- Net earnings up 23.4% to $9.0 million or $0.65 per Class A Share
-- Launch of new brands to contribute to further organic growth
-- Peller Estates remains top-selling wine brand across Canada
-- 300-acre vineyard to increase BC VQA grape crop by 50%
"Our organic growth continued across the majority of our trade channels in the
second quarter, augmented by solid contributions from our recent acquisitions,"
commented John Peller, President and CEO. "Looking ahead, we are confident our
growth in sales and profitability will continue as key brands continue to
perform extremely well and the positive impact of new product launches allow us
to build on our presence as Canada's leading producer and marketer of fine
quality wines."
Sales for the second quarter of fiscal 2013 rose 4.4% to $73.1 million from
$70.0 million in the prior year. For the six months ended September 30, 2012
sales increased 4.6% to $145.7 million from $139.4 million last year. The
positive impact from the agreement with Wayne Gretzky and from the acquisition
of Cellar Craft augmented solid organic growth arising from new product
introductions particularly skinnygrape, increased sales of premium blended and
varietal table wine brands sold through provincial liquor boards, growth in
sales at the Company's retail store network, and strong export sales. The
increase was partially offset by lower sales of the Company's personal
winemaking products (excluding the sales of these products from the acquisition
of Cellar Craft).
Gross margin was 38.5% of sales in the second quarter and 38.6% for the first
six months of fiscal 2013 compared to 39.0% and 39.2% respectively in the same
periods last year. Gross margin percentage was negatively affected by higher
costs for wine purchased on international markets in fiscal 2013 as well as
increased price competition in certain markets. The decrease in gross margin
percentage was partially offset by the positive impact of sales of higher margin
products and successful cost control initiatives to reduce distribution,
operating, and packaging expenses. During fiscal 2013 the Company implemented
programs to enhance a number of supply chain and distribution contracts that it
expects will contribute to improved profitability over the long term. Management
believes gross margin for the full 2013 fiscal year will be approximately 38%.
The special levy implemented by the Ontario government on July 1, 2010 served to
reduce sales and gross margin by approximately $1.0 million in the first six
months of fiscal 2013 and fiscal 2012.
Selling and administrative expenses increased in the second quarter and first
six months of fiscal 2013 due to an increase in advertising and promotional
initiatives to invest in the launches of skinnygrape and Verano, investments
made to increase tourism at estate wineries, and consulting expenses incurred to
implement cost control and information technology initiatives. As a percentage
of sales, selling and administrative expenses for the six months ended September
30, 2012 were 25.9%, down marginally from 26.0% in the prior year.
Interest expense has declined in fiscal 2013 compared to the prior year due to a
decrease in short and long-term interest rates partially offset by higher debt
levels.
The Company recorded a non-cash gain in the first six months of fiscal 2013
related to mark-to-market adjustments on an interest rate swap and foreign
exchange contracts aggregating approximately $0.4 million compared to a loss of
$0.4 million in the prior year. The Company has elected not to apply hedge
accounting and accordingly these financial instruments are reflected in the
Company's financial statements at fair value each reporting period. These
instruments are considered to be effective economic hedges and have enabled
management to mitigate the volatility of changing costs and interest rates.
Other income received in fiscal 2013 related primarily to $0.5 million recorded
upon the expropriation of a small part of the property that surrounds the
Company's Port Moody facility which was closed effective December 31, 2005. The
entire idle property is also being used, on a temporary basis, while
construction of a rapid transit project takes place. Payments amounting to $2.0
million for the use of the property were received in advance and were recorded
as deferred income. The amount received is being reported as other (income)
expenses over the five-year term of the expropriation, which began on July 1,
2012.
Net earnings excluding gains (losses) on derivative financial instruments, other
expenses, and the related income tax effect of these items for the three and six
months ended September 30, 2012 were $3.8 million and $8.4 million, respectively
compared to $3.8 million and $8.1 million in the same periods last year. Net
earnings for the second quarter of fiscal 2013 were $4.3 million or $0.31 per
Class A Share compared to $3.4 million or $0.24 per Class A Share in the prior
year. For the six months ended September 30, 2012 net earnings were $9.0 million
or $0.65 per Class A Share compared to $7.3 million or $0.52 per Class A Share
last year.
Strong Financial Position
Working capital at September 30, 2012 increased to $41.0 million compared to
$34.9 million at March 31, 2012. The change related to higher levels of accounts
receivable and inventory and a reduction in bank indebtedness which were offset
by higher levels of accounts payable and accrued charges. The Company's debt to
equity ratio was 0.81:1 at September 30, 2012 compared to 0.87:1 at March 31,
2012. Shareholders' equity as at September 30, 2012 was $125.7 million or $8.79
per common share compared to $120.6 million or $8.43 per common share as at
March 31, 2012. The increase in shareholders' equity is primarily due to higher
net earnings for the year partially offset by the payment of dividends.
In the first six months of fiscal 2013 the Company generated cash from operating
activities, after changes in non-cash working capital items, of $11.7 million
compared to $10.2 million in the prior year. Cash flow from operating activities
has increased in fiscal 2013 due to strong earnings performance, the $2.0
million advance payments received for the use of the Port Moody property and the
higher levels of accounts payable partially offset by higher accounts receivable
due to the increase in sales for the period and higher inventory due to the
earlier harvest of grapes in the current year.
Recent Events
The Company is pleased to confirm that its popular Peller Estates wines remain
the top-selling brand in Provincial liquor stores across Canada. In addition,
the Company's Trius portfolio stands as one of the top-three Vintner's Quality
Alliance (VQA) brands in the country, and its new Crush brand was among the top
new VQA product launches at the Liquor Control Board of Ontario (LCBO). The
Company is also pleased to announce that its Peller Estates wines have been
selected by world-famous chef Jamie Oliver to be listed on the menu of his
popular and well-respected London restaurant "Fifteen".
"We are very proud of the performance of our key brands, a testament to the
quality and value proposition of our wine portfolio and the success of our
proven sales and marketing strategies," Mr. Peller stated.
During fiscal 2013 the Company launched its new Verano wines imported from
Spain, as well as skinnygrape, Canada's first low calorie wine. Thirty Bench's
award-winning Riesling has been included in the "Vintages Essentials Collection"
at the LCBO, while the Company's Red Rooster wines are now fully distributed and
available in all British Columbia markets. In addition, the Company is now
approaching the capability to harvest a full crop from its 300 acre vineyard
that was recently planted in BC's Okanagan Valley, increasing the Company's VQA
grape production by 50% in the Province.
Financial Highlights (Unaudited)
(Complete condensed consolidated financial statements to follow)
----------------------------------------------------------------------------
(in $000 except as otherwise stated) Three Months Six Months
For the Period Ended September 30, 2012 2011 2012 2011
----------------------------------------------------------------------------
Sales 73,082 69,990 145,744 139,397
Gross margin 28,102 27,272 56,329 54,585
Gross margin (% of sales) 38.5% 39.0% 38.6% 39.2%
Selling and administrative expenses 19,205 18,467 37,755 36,298
EBITA 8,897 8,805 18,574 18,287
Unrealized (gain) loss on financial
instruments (198) 113 (396) 413
Other (income) expenses (513) 492 (427) 656
Net earnings 4,340 3,385 9,002 7,296
Earnings per share - Class A $ 0.31 $ 0.24 $ 0.65 $ 0.52
Earnings per share - Class B $ 0.27 $ 0.22 $ 0.56 $ 0.46
Dividend per share - Class A
(annual) $ 0.360 $ 0.360
Dividend per share - Class B
(annual) $ 0.314 $ 0.314
Cash provided by operations (after
changes in non-cash working capital
items) 11,722 10,155
Working capital 40,953 37,101
Shareholders' equity per share $ 8.79 $ 8.43
----------------------------------------------------------------------------
The Company calculates net earnings excluding gains (losses) on derivative
financial instruments, other expenses, and the related income tax effect as
follows:
----------------------------------------------------------------------------
For the three For the six
months ended months ended
(Unaudited) September 30, September 30,
(in thousands of $) 2012 2011 2012 2011
----------------------------------------------------------------------------
Net earnings 4,340 3,385 9,002 7,296
Net unrealized losses (gains) on derivatives (198) 113 (396) 413
Other (income) expenses (513) 492 (427) 656
Income tax effect of the above 185 (164) 214 (289)
----------------------------------------------------------------------------
Net earnings excluding gains (losses) on
derivative financial instruments, other
expenses, and the related income tax effect 3,814 3,826 8,393 8,076
----------------------------------------------------------------------------
Andrew Peller Limited ('APL' or the 'Company') is a leading producer and
marketer of quality wines in Canada. With wineries in British Columbia, Ontario,
and Nova Scotia, the Company markets wines produced from grapes grown in
Ontario's Niagara Peninsula, British Columbia's Okanagan and Similkameen
Valleys, and from vineyards around the world. The Company's award-winning
premium and ultra-premium VQA brands include Peller Estates, Trius, Hillebrand,
Thirty Bench, Crush, Wayne Gretzky, Sandhill, Calona Vineyards Artist Series,
and Red Rooster. Complementing these premium brands are a number of popularly
priced varietal wine brands including Peller Estates French Cross in the East,
Peller Estates Proprietors Reserve in the West, Copper Moon, XOXO, skinnygrape
and Verano. Hochtaler, Domaine D'Or, Schloss Laderheim, Royal, and Sommet are
our key value priced wine blends. The Company imports wines from major wine
regions around the world to blend with domestic wine to craft these popularly
priced and value priced wine brands. With a focus on serving the needs of all
wine consumers, the Company produces and markets premium personal winemaking
products through its wholly-owned subsidiary, Global Vintners Inc., the
recognized leader in personal winemaking products. Global Vintners distributes
products through over 250 Winexpert and Wine Kitz authorized retailers and
franchisees and more than 600 independent retailers across Canada, the United
States, the United Kingdom, New Zealand, and Australia. Global Vintners
award-winning premium and ultra-premium winemaking brands include Selection,
Vintners Reserve, Island Mist, Kenridge, Cheeky Monkey, Ultimate Estate Reserve,
Traditional Vintage, Cellar Craft, and Artful Winemaker. The Company owns and
operates more than 100 well-positioned independent retail locations in Ontario
under the Vineyards Estate Wines, Aisle 43, and WineCountry Vintners store
names. The Company also owns Grady Wine Marketing Inc. based in Vancouver and
The Small Winemaker's Collection Inc. based in Ontario; both of these wine
agencies are importers of premium wines from around the world and are marketing
agents for these fine wines. The Company has entered into a partnership to
market the Wayne Gretzky Estate Winery brands across Canada. The Company's
products are sold predominantly in Canada with a focus on export sales for its
icewine and personal winemaking products. Andrew Peller Limited common shares
trade on the Toronto Stock Exchange (symbols ADW.A and ADW.B).
The Company utilizes EBITA (defined as earnings before interest, amortization,
unrealized derivative (gain) loss, other expenses, and income taxes). EBITA is
not a recognized measure under IFRS. Management believes that EBITA is a useful
supplemental measure to net earnings, as it provides readers with an indication
of cash available for investment prior to debt service, capital expenditures,
and income taxes. Readers are cautioned that EBITA should not be construed as an
alternative to net earnings determined in accordance with IFRS as an indicator
of the Company's performance or to cash flows from operating, investing and
financing activities as a measure of liquidity and cash flows. The Company also
utilizes gross margin (defined as sales less cost of goods sold, excluding
amortization) and net earnings excluding gains (losses) on derivative financial
instruments, other expenses, and the related income tax effect as defined above.
The Company's method of calculating EBITA and gross margin may differ from the
methods used by other companies and, accordingly, may not be comparable to
measures used by other companies.
Andrew Peller Limited common shares trade on the Toronto Stock Exchange (symbols
ADW.A and ADW.B).
FORWARD-LOOKING INFORMATION
Certain statements in this news release may contain "forward-looking statements"
within the meaning of applicable securities laws, including the "safe harbour
provision" of the Securities Act (Ontario) with respect to Andrew Peller Limited
( the "Company") and its subsidiaries. Such statements include, but are not
limited to, statements about the growth of the business in light of the
Company's recent acquisitions; its launch of new premium wines; sales trends in
foreign markets; its supply of domestically grown grapes; and current economic
conditions. These statements are subject to certain risks, assumptions, and
uncertainties that could cause actual results to differ materially from those
included in the forward-looking statements. The words "believe", "plan",
"intend", "estimate", "expect", or "anticipate" and similar expressions, as well
as future or conditional verbs such as "will", "should", "would", and "could"
often identify forward-looking statements. We have based these forward-looking
statements on our current views with respect to future events and financial
performance. With respect to forward-looking statements contained in this news
release, the Company has made assumptions and applied certain factors regarding,
among other things: future grape, glass bottle, and wine prices; its ability to
obtain grapes, imported wine, glass, and its ability to obtain other raw
materials; fluctuations in the U.S./Canadian dollar exchange rates; its ability
to market products successfully to its anticipated customers; the trade balance
within the domestic Canadian wine market; market trends; reliance on key
personnel; protection of its intellectual property rights; the economic
environment; the regulatory requirements regarding producing, marketing,
advertising, and labeling its products; the regulation of liquor distribution
and retailing in Ontario; and the impact of increasing competition.
These forward-looking statements are also subject to the risks and uncertainties
discussed in this news release, in the "Risk Factors" section and elsewhere in
the Company's MD&A and other risks detailed from time to time in the publicly
filed disclosure documents of Andrew Peller Limited which are available at
www.sedar.com. Forward-looking statements are not guarantees of future
performance and involve risks, uncertainties, and assumptions which could cause
actual results to differ materially from those conclusions, forecasts, or
projections anticipated in these forward-looking statements. Because of these
risks, uncertainties and assumptions, you should not place undue reliance on
these forward-looking statements. The Company's forward-looking statements are
made only as of the date of this news release, and except as required by
applicable law, the Company undertakes no obligation to update or revise these
forward-looking statements to reflect new information, future events or
circumstances or otherwise.
ANDREW PELLER LIMITED
Condensed Consolidated Balance Sheets
Unaudited
These financial statements have not been reviewed by our auditors
----------------------------------------------------------------------------
----------------------------------------------------------------------------
September 30 March 31
2012 2012
(in thousands of Canadian dollars) $ $
----------------------------------------------------------------------------
Assets
Current Assets
Accounts receivable 29,186 24,937
Inventory 112,033 110,256
Current portion of biological assets 3,587 881
Prepaid expenses and other assets 2,431 1,338
------------------------------
147,237 137,412
Property, plant, and equipment 88,072 84,490
Biological assets 13,134 12,556
Intangibles 13,004 13,621
Goodwill 37,473 37,473
------------------------------
298,920 285,552
------------------------------
------------------------------
Liabilities
Current Liabilities
Bank indebtedness 52,954 57,495
Accounts payable and accrued liabilities 43,736 37,118
Dividends payable 1,252 1,252
Income taxes payable 1,087 40
Current portion of derivative financial
instruments 1,174 1,272
Current portion of long-term debt 6,081 5,366
------------------------------
106,284 102,543
Long-term debt 42,956 41,456
Long-term derivative financial instruments 1,645 1,943
Post-employment benefit obligations 8,631 7,151
Deferred income 1,515 -
Deferred income taxes 12,178 11,907
------------------------------
173,209 165,000
------------------------------
Shareholders' Equity
Capital stock 7,026 7,026
Retained earnings 118,685 113,526
------------------------------
125,711 120,552
------------------------------
298,920 285,552
------------------------------
------------------------------
The above statements should be read in conjunction with the entire interim
consolidated financial statements and notes.
They will be available on the Investor Relations section of www.andrewpeller.com
or at www.sedar.com.
ANDREW PELLER LIMITED
Condensed Consolidated Statements of Earnings
Unaudited
These financial statements have not been reviewed by our auditors
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the three For the six months
months ended ended
September 30 September 30
2012 2011 2012 2011
(in thousands of Canadian dollars) $ $ $ $
----------------------------------------------------------------------------
Sales 73,082 69,990 145,744 139,397
Cost of goods sold 44,980 42,718 89,415 84,812
Amortization of plant and equipment
used in production 1,138 1,211 2,347 2,444
--------------------------------------
Gross profit 26,964 26,061 53,982 52,141
Selling and administration 19,205 18,467 37,755 36,298
Amortization of plant, equipment, and
intangibles used in selling and
administration 1,012 717 1,780 1,431
Interest 1,332 1,482 2,578 3,031
--------------------------------------
Operating earnings 5,415 5,395 11,869 11,381
Net unrealized losses (gains) on
derivative financial instruments (198) 113 (396) 413
Other (income) expenses (513) 492 (427) 656
--------------------------------------
Earnings before income taxes 6,126 4,790 12,692 10,312
--------------------------------------
Provision for income taxes
Current 1,296 1,311 2,949 2,827
Deferred 490 94 741 189
--------------------------------------
1,786 1,405 3,690 3,016
--------------------------------------
Net earnings for the period 4,340 3,385 9,002 7,296
Net earnings per share
Basic and diluted
Class A shares 0.31 0.24 0.65 0.52
--------------------------------------
--------------------------------------
Class B shares 0.27 0.22 0.56 0.46
--------------------------------------
--------------------------------------
The above statements should be read in conjunction with the entire interim
consolidated financial statements and notes.
They will be available on the Investor Relations section of www.andrewpeller.com
or at www.sedar.com.
ANDREW PELLER LIMITED
Condensed Consolidated Statements of Comprehensive Income
Unaudited
These financial statements have not been reviewed by our auditors
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the three For the six
months ended months ended
September 30 September 30
2012 2011 2012 2011
(in thousands of Canadian dollars) $ $ $ $
----------------------------------------------------------------------------
Net earnings for the period 4,340 3,385 9,002 7,296
Net actuarial losses on post-employment
benefit plans (1,487) (1,531) (1,808) (1,857)
Deferred income taxes 387 398 470 483
------------------------------------
Other comprehensive loss for the period (1,100) (1,133) (1,338) (1,374)
------------------------------------
Net comprehensive income for the period 3,240 2,252 7,664 5,922
------------------------------------
------------------------------------
The above statements should be read in conjunction with the entire interim
consolidated financial statements and notes.
They will be available on the Investor Relations section of www.andrewpeller.com
or at www.sedar.com.
ANDREW PELLER LIMITED
Condensed Consolidated Statements of Cash Flows
Unaudited
These financial statements have not been reviewed by our auditors
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the six For the six
months ended months ended
September 30, September 30,
2012 2011
(in thousands of Canadian dollars) $ $
----------------------------------------------------------------------------
Cash provided by (used in)
Operating activities
Net earnings for the period 9,002 7,296
Adjustments for:
Gain (loss) on disposal of property and
equipment (547) 110
Amortization of plant, equipment, and
intangibles 4,127 3,875
Interest expense 2,578 3,031
Provision for income taxes 3,690 3,016
Revaluation of biological assets 55 556
Post-employment benefits (328) (330)
Deferred income 1,919 -
Net unrealized (gain) loss on derivative
financial instruments (396) 413
Interest paid (2,456) (2,962)
Income taxes paid (1,902) (3,770)
---------------------------------
15,742 11,235
Changes in non-cash working capital items
related to operations (4,020) (1,080)
---------------------------------
11,722 10,155
---------------------------------
Investing activities
Proceeds from disposal of property and
equipment 514 -
Purchase of property, equipment, and
biological assets (8,265) (3,591)
Purchases of intangibles - (28)
Proceeds from disposal of a business 1,000 -
Acquisition of businesses - (600)
---------------------------------
(6,751) (4,219)
---------------------------------
Financing activities
Decrease in bank indebtedness (4,541) (4,891)
Issuance of long-term debt 5,000 50,263
Repayment of long-term debt (2,770) (48,278)
Deferred financing costs (155) (629)
Dividends paid (2,505) (2,401)
---------------------------------
(4,971) (5,936)
---------------------------------
Increase (decrease) in cash during the
period - -
Cash, beginning of period - -
Cash, end of period - -
---------------------------------
---------------------------------
The above statements should be read in conjunction with the entire interim
consolidated financial statements and notes.
They will be available on the Investor Relations section of www.andrewpeller.com
or at www.sedar.com.
FOR FURTHER INFORMATION PLEASE CONTACT:
Andrew Peller Limited
Mr. Peter Patchet
CFO and EVP Human Resources
(905) 643-4131 Ext. 2210
peter.patchet@andrewpeller.com
Andrew Peller (TSX:ADW.B)
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