GRIMSBY, ONTARIO (TSX: ADW.A)(TSX: ADW.B) announced today its
results for the three and nine months ended December 31, 2007.
HIGHLIGHTS:
- Sales continue to increase due to solid growth in existing
brands and the introduction of new products
- Higher volumes of premium and ultra-premium brands drive
increased profitability
- Gross profit up 9.1% and 7.0% in the quarter and in the nine
months respectively
- Nine months net and comprehensive earnings up 16.6% to $10.6
million due to strong operating performance and the impact of the
reduction in future income tax rates
- Positive outlook on continued organic growth and strong
operating performance
Strong Operating Performance Continues
For the three months ended December 31, 2007 sales increased
4.5% to $66.1 million from $63.2 million last year. For the nine
months ended December 31, 2007, sales were up 3.7% to $184.4
million compared to $177.8 million for the same period last year.
The increases are due primarily to ongoing initiatives to grow
sales of the Company's premium and ultra-premium wines through all
trade channels and the introduction of new products over the last
twelve months.
"Our effective sales and marketing programs are generating solid
organic growth across our trade channels, and we look for this
growth to continue going forward," commented John Peller, President
and CEO.
Gross profit as a percentage of sales improved to 43.5% for the
three months ended December 31, 2007 compared to 41.7% in the same
period last year. For the first nine months of fiscal 2008, gross
profit as a percentage of sales was 43.1% compared to 41.7% last
year. The improved profit margins are the result of increased sales
of the Company's premium and ultra-premium wines and the positive
impact of the increase in value of the Canadian dollar which
partially offset the higher cost of grapes and wine purchased on
international markets. Selling and administrative expenses
increased marginally for the three and nine months ended December
31, 2007 at 28.6% and 29.5% of sales respectively, compared with
27.0% and 28.6% of sales for the same periods last year.
As a result of the increased sales and improved gross margins,
earnings before interest, taxes, amortization, other losses and
unusual items (EBITA) increased 5.8% to $9.8 million in the third
quarter of fiscal 2008 compared to $9.3 million last year. For the
first nine months of fiscal 2008, EBITA was up 6.8% to $25.0
million compared to $23.4 million for the same period last
year.
Net and comprehensive earnings for the three months ended
December 31, 2007 rose 21.0% to $5.0 million or $0.35 per Class A
share compared to $4.1 million or $0.29 per Class A share last
year. For the nine months ended December 31, 2007, net and
comprehensive earnings were up 16.6% to $10.6 million or $0.73 per
Class A share compared to $9.1 million or $0.63 per Class A share
for the same period last year. The Company's provision for future
income taxes were reduced during the third quarter of fiscal 2008
due to changes in future income tax rates that were part of the
most recent federal budget. Not including the other losses and
unusual items in each year and the impact of changes in future
income tax rates, net and comprehensive earnings for the third
quarter of fiscal 2008 increased 6.3% to $4.4 million compared to
the same period last year and for the nine months ended December
31, 2007, net and comprehensive earnings increased 8.8% to $10.0
million.
"We were very pleased to see strong growth in our gross margins
and profitability as we continue to implement programs aimed at
increasing operating efficiency while driving sales of our
higher-margin premium and ultra-premium brands," Mr. Peller
continued. "As the largest Canadian-owned winery in the country,
our goal is to produce the highest quality products, and going
forward we will maintain this commitment in all that we do."
Strong Financial Position
The Company's balance sheet remained strong as at December 31,
2007. Working capital was $24.4 million at the end of the third
quarter of fiscal 2008 compared to $25.3 million at March 31, 2007.
Shareholders' equity at December 31, 2007 rose to $103.0 million or
$6.91 per Class A share from $95.5 million or $6.41 per Class A
share at March 31, 2007 and $96.0 million or $6.45 per Class A
share at December 31, 2006.
"Looking ahead, we are confident that our growth and strong
operating performance will continue. Our solid presence in all our
trade channels, combined with increasing consumer demand for
premium and ultra-premium Canadian wines, provides a solid
foundation on which to grow and underpins the strength and
stability of our common share dividends," Mr. Peller concluded.
Financial Highlights (unaudited - complete consolidated financial
statements to follow)
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Period Ended December 31, Three Months Nine Months
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(in $,000 except per share amounts) 2007 2006 2007 2006
---------------------------------------------------------------------------
Sales 66,052 63,225 184,428 177,773
EBITA 9,823 9,286 25,019 23,416
Earnings before other income and
unusual items 6,457 6,085 14,971 13,756
Other income (loss) and unusual
items (221) (15) (301) (213)
Net and comprehensive earnings 5,013 4,142 10,579 9,074
Net earnings per share
(Basic per Class A share) $ 0.35 $ 0.29 $ 0.73 $ 0.63
Cash from operations
(after changes in non-cash
working capital items) (6,188) (3,289) 5,602 (2,311)
Working capital 24,439 28,882
Shareholders' equity per share $ 6.91 $ 6.41
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Andrew Peller Limited 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 vineyards around the world. The
Company's award-winning premium and ultra-premium brands include
Peller Estates, Trius, Hillebrand, Thirty Bench, Croc Crossing,
XOXO, Sandhill, Copper Moon, Calona Vineyards Artist Series and Red
Rooster VQA wines. Complementing these premium brands are a number
of popular priced products including Hochtaler, Domaine D'Or,
Schloss Laderheim, Royal and Sommet. With the acquisition of
Cascadia Brands Inc., the Company also markets craft beer under the
Granville Island brand. With a focus on serving the needs of all
wine consumers, the Company produces and markets consumer-made wine
kit products through Winexpert and Vineco International Products.
In addition, the Company owns and operates Vineyards Estate Wines
and WineCountry Vintners, independent wine retailers in Ontario
with more than 100 well-positioned retail locations. 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,
incomes taxes, depreciation, amortization, other income (losses)
and unusual items). EBITA is not a recognized measure under GAAP.
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 GAAP 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. In
addition, the Company's method of calculating EBITA may differ from
the methods used by other companies and, accordingly, may not be
comparable to measures used by other companies.
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 labelling 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
CONSOLIDATED BALANCE SHEETS
(Unaudited) December 31 March 31
---------------------------------------------------------------------------
---------------------------------------------------------------------------
2007 2007
(000's) $ $
---------------------------------------------------------------------------
Assets
Current Assets
Accounts receivable 25,787 21,365
Inventories 91,155 82,990
Prepaid expenses 3,053 2,983
Income taxes recoverable - 319
-----------------------------
119,995 107,657
Property, plant and equipment 93,395 87,143
Goodwill 36,171 36,171
Other assets 7,275 7,985
-----------------------------
256,836 238,956
-----------------------------
-----------------------------
Liabilities
Current Liabilities
Bank indebtedness (Note 3) 61,629 51,449
Accounts payable and accrued liabilities 26,875 24,069
Dividends payable 1,088 917
Income taxes payable 97 -
Current portion of long - term debt 5,867 5,906
-----------------------------
95,556 82,341
Long-term debt 42,968 44,423
Employee future benefits 3,193 4,007
Future income taxes 12,153 12,663
-----------------------------
153,870 143,434
-----------------------------
Shareholders' Equity
Capital Stock (Note 4) 7,375 7,375
Retained Earnings 95,591 88,147
-----------------------------
102,966 95,522
-----------------------------
256,836 238,956
-----------------------------
-----------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
ANDREW PELLER LIMITED
Consolidated Statements of Earnings, Comprehensive Earnings and Retained
Earnings
(Unaudited)
(000's) For the For the
Three Months Ended Nine Months Ended
December 31 December 31
2007 2006 2007 2006
$ $ $ $
---------------------------------------------------------------------------
Sales 66,052 63,225 184,428 177,773
Cost of goods sold, excluding
amortization 37,312 36,885 105,026 103,559
------------------------------------------
Gross profit 28,740 26,340 79,402 74,214
Selling and administration 18,917 17,054 54,383 50,798
------------------------------------------
Earnings before interest,
amortization, other items and
income taxes 9,823 9,286 25,019 23,416
Interest 1,519 1,335 4,383 3,993
Amortization of plant,
equipment and intangibles 1,847 1,866 5,665 5,667
------------------------------------------
Earnings before other items
and income taxes 6,457 6,085 14,971 13,756
Other losses (Note 1) 118 - 74 0
Unusual items 103 15 227 213
------------------------------------------
Earnings before income taxes 6,236 6,070 14,670 13,543
------------------------------------------
Provision for (recovery of)
income taxes
Current 1,945 1,856 4,670 4,264
Future (722) 72 (579) 205
------------------------------------------
1,223 1,928 4,091 4,469
------------------------------------------
Net and comprehensive earnings
for the period 5,013 4,142 10,579 9,074
------------------------------------------
Retained earnings- Beginning
of period 91,666 85,442 88,147 82,205
Impact of adopting accounting
pronouncements on April 1,
2007 (Note 1) - - 128 -
------------------------------------------
Retained earnings - Beginning
of period as restated 91,666 85,442 88,275 82,205
------------------------------------------
Dividends:
Class A and Class B 1,088 918 3,263 2,613
------------------------------------------
Retained earnings- End of
period 95,591 88,666 95,591 88,666
------------------------------------------
------------------------------------------
Net earnings per share
Basic and Diluted
Class A shares 0.35 0.29 0.73 0.63
------------------------------------------
------------------------------------------
Class B shares 0.30 0.25 0.63 0.54
------------------------------------------
------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
ANDREW PELLER LIMITED
Consolidated Statements of Cash Flows
(Unaudited) For the For the
(000's) Three Months Ended Nine Months Ended
December 31 December 31
2007 2006 2007 2006
$ $ $ $
---------------------------------------------------------------------------
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Cash provided by (used in)
Operating activities
Net earnings for the period 5,013 4,142 10,579 9,074
Items not affecting cash:
Amortization of plant, equipment and
intangibles 1,847 1,866 5,665 5,667
Unrealized loss on foreign exchange
contracts and interest rate
swaps (Note 1) 118 - 74 -
Employee future benefits (627) (93) (814) (279)
Future income taxes (722) 72 (579) 205
Non-cash interest expense 39 - 112 -
Amortization of deferred financing
costs - 36 - 107
--------------------------------------
--------------------------------------
5,668 6,023 15,037 14,774
Changes in non-cash working capital
items related to operations (Note 5) (11,856) (9,312) (9,435) (17,085)
--------------------------------------
(6,188) (3,289) 5,602 (2,311)
--------------------------------------
Investing activities
Acquisition of Cascadia, net of cash
acquired - - - (309)
Purchase of property and equipment (2,640) (2,293) (11,732) (5,237)
--------------------------------------
(2,640) (2,293) (11,732) (5,546)
--------------------------------------
Financing activities
Increase in deferred financing costs - (49) - (76)
Repayment of long-term debt (1,477) (1,472) (4,428) (4,400)
Increase in long-term debt - - 3,470 -
Increase in (repayment of) bank
indebtedness 11,392 8,021 10,180 14,807
Dividends paid (1,087) (918) (3,092) (2,474)
--------------------------------------
8,828 5,582 6,130 7,857
--------------------------------------
Cash at beginning and end of period - - - -
--------------------------------------
--------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
Notes to the Interim Consolidated Financial Statements
December 31, 2007 and 2006
(in thousands of dollars, except per share amounts)
UNAUDITED
1. Summary of Significant Accounting Policies
The interim consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in
Canada. The note disclosure for these interim consolidated
financial statements only presents material changes to the
disclosure found in the Company's audited consolidated financial
statements for the year ended March 31, 2007. These interim
consolidated financial statements should be read in conjunction
with those consolidated financial statements and follow the same
accounting policies as the audited consolidated financial
statements except as disclosed below. In the opinion of management,
the accompanying unaudited interim consolidated financial
statements contain all adjustments necessary to present fairly, in
all material respects the financial position of the Company as at
December 31, 2007 and for the three and nine-month periods then
ended.
Recently adopted accounting pronouncements
On April 1, 2007 the Company adopted the Canadian Institute of
Chartered Accountants (CICA) handbook sections 1530 "Comprehensive
Income," section 3251 "Equity," section 3855 "Financial Instruments
- Recognition and Measurement" and section 3865 "Hedges." As
required, these standards have been adopted prospectively and
comparative amounts for the periods have not been restated.
a) Comprehensive Income
Comprehensive income is comprised of net earnings or loss and
other comprehensive income (OCI). OCI represents the change in
equity for a period that arises from unrealized gains and losses on
available-for-sale securities and changes in the fair market value
of derivative instruments designated as hedges.
b) Equity
This section requires for separate presentation of changes in
equity for the period arising from net income, OCI, contributed
surplus, retained earnings, share capital and reserves. Accumulated
OCI would be included in the consolidated balance sheet as a
separate component of shareholders' equity. The Company does not
currently have any accumulated OCI.
c) Financial Instruments
This section establishes standards for the recognition and
measurement of financial instruments; which is comprised of
financial assets, financial liabilities, derivatives and
non-financial derivatives. All financial instruments are initially
recorded at fair value and are subsequently accounted for based on
one of four classifications: held for trading, held to maturity,
loans and receivables or available for sale. The classification of
a financial instrument depends on its characteristics and the
purpose for which it was acquired. Fair values are based upon
quoted market prices from active markets or are otherwise
determined using a variety of valuation techniques and models. The
Company's interest rate swaps and foreign exchange contracts are
derivatives and are recorded at fair value through other income. As
a result, on adoption of this standard, the Company recorded a net
increase of $216 to other assets, a net increase of $68 to future
income taxes, a net increase of $20 to long-term debt and an
opening retained earnings adjustment of $128.
d) Hedges
Hedge accounting is optional. When hedge accounting is not
applied, the change in the fair value of the hedging instrument is
recorded directly into earnings. The Company has chosen not to
designate any of its current hedging instruments as hedges for the
purpose of this section and has recorded the fair value adjustments
of these instruments through other income.
e) Transaction Costs
Transaction costs related to long-term debt are netted against
the carrying value of the liability and are then amortized over the
expected life of the instrument using the effective interest
method. On adoption of this new standard the Company recorded an
adjustment on April 1, 2007 to reduce other assets by $599 and
long-term debt by $599.
Recently issued accounting pronouncements
The Canadian Institute of Chartered Accountants ("CICA") issued
the following accounting standards effective for the fiscal years
beginning after October 1, 2007 and January 1, 2008:
a) Accounting Standards Section 3031 "Inventories" provides
guidance on the determination of cost and its subsequent
recognition as an expense, including any write-down to net
realizable value. It also provides guidance on the cost formulas
that are used to assign costs to inventories and is effective for
the fiscal years beginning after January 1, 2008.
b) Accounting Standards Section 3862 "Financial Instruments -
Disclosures" requires disclosures in the financial statements that
will enable users to evaluate: the significance of financial
instruments for a company's financial position and performance; and
the nature and extent of risks arising from financial instruments
to which a company is exposed during the period and at the balance
sheet date, and how a company manages those risks. This accounting
standard is effective for fiscal years beginning after October 1,
2007.
c) CICA Handbook Section 1535 "Capital Disclosures" establishes
standards for disclosing information about a Company's capital and
how it is managed to enable users of the financial statements to
evaluate the Company's objectives, policies and procedures for
managing capital. This section is effective for the fiscal years
beginning on or after October 1, 2007.
d) CICA Handbook Section 3863 "Financial Instruments -
Presentation" establishes standards for presentation of financial
instruments and non-financial derivatives. This section compliments
the existing CICA Handbook Section 3861 - Financial Instruments -
Disclosure and Presentation and is effective for fiscal years
beginning on or after October 1, 2007.
The Company has not yet determined the impact of adopting the
above accounting standards.
2. Seasonality
The third quarter of each year is historically the strongest in
terms of sales, gross profit and net earnings due to increased
consumer purchasing of the Company's products during the holiday
season.
3. Bank Indebtedness
On October 2, 2007, the Company obtained additional financing
from the Royal Bank of Canada in the form of a bulge demand
facility to finance additional working capital requirements. The
facility is in the amount of $10,000 and is available during the
months of November to January each year which increases the
Company's borrowing limit to $70,000 during this period. On January
28, 2008, the availability of the bulge demand facility was
extended further to April 30, 2008. As at December 31, 2007, $1,629
was drawn on this facility.
4. Capital Stock
At the Company's Annual and Special Meeting of Shareholders held
on September 20, 2006, Class B shareholders approved a
three-for-one split of the Class A and Class B shares for
shareholders of record at October 31, 2006. The Company recorded
the effect of the split retroactively to all disclosures of share
capital and per share amounts.
As at December 31, 2007 there were 11,888,241 Class A shares
issued and outstanding (March 31, 2007 - 11,888,241) and 3,004,041
Class B shares issued and outstanding (March 31, 2007 - 3,004,041).
There were 11,888,241 weighted average Class A shares outstanding
(2006 - 11,887,645) and 3,004,041 weighted average Class B shares
outstanding (2006 - 3,004,637) for the three and nine months ended
December 31, 2007.
5. Changes in non-cash working capital items
The change in non-cash working capital items is comprised of the
change in the following items:
For the Three Months For the Nine Months
Ended December 31 Ended December 31
2007 2006 2007 2006
-------- -------- ------- --------
$ $ $ $
Accounts receivable (1,815) (339) (4,422) (9,582)
Inventories (8,134) (8,824) (8,165) (10,165)
Prepaid expenses 1,716 201 (70) (1,310)
Accounts payable and accrued
liabilities (4,608) (2,062) 2,806 1,882
Income taxes payable/recoverable 985 1,712 416 2,090
-------- -------- ------- --------
(11,856) (9,312) (9,435) (17,085)
-------- -------- ------- --------
-------- -------- ------- --------
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.
Contacts: Andrew Peller Limited Mr. Peter Patchet CFO and EVP
Human Resources (905) 643-4131 Ext. 2210 Email:
peter.patchet@andrewpeller.com
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