Andrew Peller Limited (the "Company") (TSX:ADW.A)(TSX:ADW.B) announced today its
results for the three and six months ended September 30, 2008.
Strong Growth Continues
For the three and six months ended September 30, 2008 sales increased 13.3% to
$69.4 million and 9.0% to $129.0 from $61.2 million and $118.4 million for the
same periods last year. The increase was due primarily to ongoing initiatives to
grow sales of the Company's blended table, premium and ultra-premium wines
through all trade channels, the acquisition of World Vintners Inc. on June 30,
2008 and the introduction of new products over the last twelve months.
Gross profit as a percentage of sales declined slightly to 42.0% for the three
months ended September 30, 2008 compared to 42.8% in the same period last year.
For the first six months of fiscal 2009, gross profit as a percentage of sales
was 41.9% compared to 42.8% for the same period last year. The changes were due
primarily to an increase in the cost of domestic grapes and wine purchased on
international markets combined with higher packaging costs. Selling and
administrative expenses decreased marginally for the three and six months ended
September 30, 2008 to 30.0% and 29.9% of sales respectively, compared to 30.1%
and 30.0% of sales respectively, for the same periods last year due primarily to
the launch of new products over the last twelve months and increased efforts to
market the Company's premium and ultra-premium wines.
Net and comprehensive earnings for the three and six months ended September 30,
2008 were $2.4 million or $0.17 per Class A share and $5.1 million or $0.35 per
Class A share compared to $2.7 million or $0.18 per Class A share and $5.6
million of $0.38 per Class A share for the same periods last year. Included in
net and comprehensive earnings in fiscal 2009 were other charges of $1.2 million
related to non-cash mark-to-market adjustments on interest rate swaps and
foreign exchange contracts compared to a gain of $0.04 million last year. Not
including the other losses and unusual items in each year, net and comprehensive
earnings for the first six months of fiscal 2009 increased 6.8% to $6.0 million
compared to the same period last year.
"We are pleased with our performance in the second quarter and first six months
of fiscal 2009," commented John Peller, President and CEO. "The acquisitions of
World Vintners Inc. and the remaining 50% interest in Rocky Ridge Vineyards
completed during the second quarter are making a solid contribution to the
performance of our Company, while our successful sales and marketing efforts
continue to build our brands across all of our targeted trade channels."
Solid Financial Position
The Company's balance sheet remained strong as at September 30, 2008. Working
capital was $39.6 million at the end of the second quarter of fiscal 2009
compared to $26.6 million at March 31, 2008. Shareholders' equity at September
30, 2008 increased to $104.3 million or $7.00 per Class A share compared to
$102.7 million or $6.89 per Class A share at March 31, 2008 and $99.0 million or
$6.65 per Class A share at September 30, 2007. While credit markets have
tightened in recent months, the Company has successfully refinanced its
long-term debt to April 30, 2015 and is working on converting its demand
operating facility to a one year committed facility.
Dividend Increase
As previously announced, common share dividends were increased by 10% for
shareholders of record on June 30, 2008. The annual dividend on Class A shares
was increased to $0.33 per share from $0.30 per share. The dividend on Class B
shares was increased to $0.288 per share from $0.261 per share.
"Looking ahead, in the near term we expect our sales levels and gross margin
will remain stable through this unsettled economic period, and we will be
increasing our emphasis on generating production efficiencies and reducing
overhead costs to enhance our bottom line. Over the longer term, we remain
confident that our focus on quality, our leading presence in all our
distribution channels, and our strong brand recognition will generate solid and
sustainable growth," Mr. Peller concluded.
Financial Highlights (unaudited - complete consolidated financial statements to
follow)
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Period Ended September 30, Three Months Six Months
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(in $000 except per share amounts) 2008 2007 2008 2007
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Sales $ 69,356 $ 61,236 $ 128,974 $ 118,376
EBITA 8,294 7,765 15,478 15,196
Earnings before
other income and unusual items 4,663 4,408 8,635 8,514
Other income (loss)
and unusual items (1,073) (394) (1,292) (80)
Net and comprehensive earnings 2,444 2,652 5,097 5,566
Net earnings per share
(Basic per Class A share) $ 0.17 $ 0.18 $ 0.35 $ 0.38
Cash from operations 1,251 12,811 2,695 10,910
(after changes in
non-cash working capital items)
Working capital $ 39,586 $ 23,939
Shareholders' equity per share $7.00 $6.65
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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, Aisle 43 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
These financial statements have not been reviewed
by our auditors September 30 March 31
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2008 2008
(expressed in thousands of Canadian dollars) $ $
----------------------------------------------------------------------------
Assets
Current Assets
Accounts receivable 29,721 23,072
Inventories 94,715 93,817
Prepaid expenses and other assets 5,617 4,242
Income taxes recoverable 2,232 823
--------------------------
132,285 121,954
Property, plant and equipment 101,354 94,480
Goodwill (note 3) 44,515 36,171
Other assets 7,383 7,139
--------------------------
285,537 259,744
--------------------------
--------------------------
Liabilities
Current Liabilities
Bank indebtedness 51,046 57,722
Accounts payable and accrued liabilities 34,298 29,705
Dividends payable 1,197 1,088
Current portion of long - term debt (note 4) 6,158 6,830
--------------------------
92,699 95,345
Long-term debt (note 4) 74,767 46,946
Employee future benefits 2,964 3,167
Future income taxes 10,791 11,606
--------------------------
181,221 157,064
--------------------------
Shareholders' Equity
Capital Stock 7,375 7,375
Retained Earnings 96,941 95,305
--------------------------
104,316 102,680
--------------------------
285,537 259,744
--------------------------
--------------------------
The accompanying notes are an integral part of these interim consolidated
financial statements
ANDREW PELLER LIMITED
Consolidated Statements of Earnings, Comprehensive Earnings and Retained
Earnings
These financial statements have not been reviewed by our auditors
(expressed in thousands For the For the
of Canadian dollars) Three Months Six Months
Ended Ended
September 30 September 30
2008 2007 2008 2007
$ $ $ $
----------------------------------------------------- -------------------
Sales 69,356 61,236 128,974 118,376
Cost of goods sold,
excluding amortization 40,254 35,040 74,936 67,714
-------- -------- ------- ----------
Gross profit 29,102 26,196 54,038 50,662
Selling and administration 20,808 18,431 38,560 35,466
-------- -------- ------- ----------
Earnings before interest
and amortization 8,294 7,765 15,478 15,196
Interest 1,505 1,439 2,907 2,864
Amortization of plant,
equipment and intangibles 2,126 1,918 3,936 3,818
-------- -------- ------- ----------
Earnings before other items 4,663 4,408 8,635 8,514
Other (loss) income (1,017) (325) (1,178) 44
Unusual items (56) (69) (114) (124)
-------- -------- ------- ----------
Earnings before income taxes 3,590 4,014 7,343 8,434
-------- -------- ------- ----------
Provision for income taxes
Current 1,480 1,409 2,575 2,725
Future (334) (47) (329) 143
-------- -------- ------- ----------
1,146 1,362 2,246 2,868
-------- -------- ------- ----------
Net and comprehensive
earnings for the period 2,444 2,652 5,097 5,566
Retained earnings
- Beginning of period 95,694 90,101 95,305 88,147
Impact of adopting
accounting pronouncements on
April 1, 2007 - - - 128
Impact of adopting
accounting pronouncement on
April 1, 2008 - - (1,067) -
-------- -------- ------- ----------
Retained earnings
- Beginning of period as restated 95,694 90,101 94,238 88,275
-------- -------- ------- ----------
Dividends:
Class A and Class B (1,197) (1,087) (2,394) (2,175)
-------- -------- ------- ----------
Retained earnings - End of period 96,941 91,666 96,941 91,666
-------- -------- ------- ----------
-------- -------- ------- ----------
Net earnings per share
Basic and diluted
Class A shares 0.17 0.18 0.35 0.38
-------- -------- ------- ----------
-------- -------- ------- ----------
Class B shares 0.15 0.16 0.31 0.33
-------- -------- ------- ----------
-------- -------- ------- ----------
The accompanying notes are an integral part of these interim consolidated
financial statements
ANDREW PELLER LIMITED
Consolidated Statements of Cash Flows
These financial statements have not been reviewed by our auditors
(expressed in thousands For the For the
of Canadian dollars) Three Months Six Months
Ended Ended
September 30 September 30
2008 2007 2008 2007
$ $ $ $
----------------------------------------------------- -------------------
Cash provided by (used in)
Operating activities
Net earnings for the period 2,444 2,652 5,097 5,566
Items not affecting cash:
Amortization of plant, equipment
and intangibles 2,126 1,918 3,936 3,818
Employee future benefits (154) (162) (203) (187)
Net unrealized loss (gain)
on foreign exchange contracts
and interest rate swaps 1,017 325 1,178 (44)
Future income taxes (334) (47) (329) 143
Amortization of
deferred financing costs 55 37 93 73
-------- -------- ------- ----------
5,154 4,723 9,772 9,369
Changes in non-cash
working capital items
related to operations (note 5) (3,903) 8,088 (7,077) 1,541
-------- -------- ------- ----------
1,251 12,811 2,695 10,910
-------- -------- ------- ----------
Investing activities
Acquisition
of World Vintners Inc. (note 3) (16) - (10,956) -
Acquisition
of Rocky Ridge
Vineyards Inc. (note 3) - - (4,016) -
Purchase of property
and equipment (2,933) (4,396) (5,431) (8,212)
-------- -------- ------- ----------
(2,949) (4,396) (20,403) (8,212)
-------- -------- ------- ----------
Financing activities
Increase
in deferred financing costs (73) - (287) -
Increase (decrease)
in bank indebtedness 3,882 (9,321) (6,676) (1,212)
Increase in
long-term debt (note 4) - 3,470 29,036 3,470
Repayment of long-term debt (914) (1,476) (2,080) (2,951)
Dividends paid (1,197) (1,088) (2,285) (2,005)
-------- -------- ------- ----------
1,698 (8,415) 17,708 (2,698)
-------- -------- ------- ----------
Cash at beginning
and end of period - - - -
-------- -------- ------- ----------
-------- -------- ------- ----------
Supplemental disclosure
of cash flow information
Cash paid during the period for
Interest 1,594 1,372 2,656 2,687
Income taxes 1,532 2,235 2,359 3,294
The accompanying notes are an integral part of these interim consolidated
financial statements
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.
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