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 its results for the three and nine months ended
December 31, 2008.
Solid Growth Continues
Sales for the three months ended December 31, 2008 increased
10.4% to $72.9 million from $66.1 million in the prior year. For
the first nine months of fiscal 2009 sales rose 9.5% to $201.9 from
$184.4 million for the same period last year. The increases are due
primarily to ongoing initiatives to grow sales of the Company's
blended varietal table and ultra-premium wines through all trade
channels, the introduction of new products and the acquisition of
World Vintners Inc. ("WVI") on June 30, 2008 and Small Winemakers
Collection Inc. ("SWM") on October 8, 2008.
Gross profit as a percentage of sales declined to 41.3% for the
three months ended December 31, 2008 compared to 43.5% in the same
period last year. For the first nine months of fiscal 2009, gross
profit as a percentage of sales was 41.7% compared to 43.1% 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, the decline in value of the Canadian dollar
combined with higher packaging costs. Selling and administrative
expenses as a percentage of sales on a comparable basis for the
nine months ended December 31, 2008 were flat compared to the same
periods last year. The increase in dollar amounts is primarily due
to the acquisitions of WVI and SWM, the launch of new products and
increased efforts to market the Company's premium and ultra-premium
wines.
Not including net unrealized loss on derivative financial
instruments, unusual items in each year and the impact of future
federal income tax rate reductions, net earnings for the first nine
months of fiscal 2009 increased 5.4% to $10.6 million compared to
the same period last year. Included in net earnings (losses) in the
nine and three months ended December 31, 2008 were after-tax
non-cash charges of $7.1 million and $6.2 million related to
mark-to-market adjustments on interest rate swaps and foreign
exchange contracts. These derivative financial instruments are
considered to be effective economic hedges and have enabled
management to mitigate the volatility of changing prices on
operating costs and interest expense. The Company has not applied
hedge accounting to these instruments, however management expects
to hold these contracts to maturity and accordingly no gain or loss
would ultimately be recognized. For the period ended December 31,
2007, the Company recorded a one-time reduction in its income tax
provision which related to future federal income tax rate
reductions that took effect and resulted in saving of $0.75
million. For the nine months ended December 31, 2008, net earnings
were $3.1 million or $0.22 per Class A share compared to $10.6
million or $0.73 per Class A share for the same period last year
and a net loss of $2.0 million or $0.13 per Class A share for the
three months ended December 31, 2008 compared to net earnings of
$5.0 million or $0.35 per Class A share for the three months ended
December 31, 2007.
"We were pleased with our growth in the third quarter and first
nine months of fiscal 2009," commented John Peller, President and
CEO. "Looking ahead, we are beginning to experience a moderate
softening in demand within certain of our trade channels, including
our estate wineries, restaurant sales and our consumer made wine
business, due primarily to reduced consumer spending resulting from
the slowing of the North American economy. In addition, we expect
to see a slight reduction over the near term in sales of our
ultra-premium brands as consumers' trade down to lower priced
wines, resulting in some margin pressure through the next few
quarters."
Financial Position
Working capital was $36.3 million at the end of the third
quarter of fiscal 2009 compared to $26.6 million at March 31, 2008.
Excluding the after-tax impact of mark-to-market adjustments on
interest rate swaps and foreign exchange contracts, shareholders'
equity at December 31, 2008 amounts to $108.2 million or $7.27 per
common share compared to $102.7 million or $6.89 per common share
at March 31, 2008. 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.
Acquisition Completed
On October 8, 2008 the Company completed the acquisition of 100%
of the common shares of SWM, a premium wine importer and marketing
agent for fine wines in the Province of Ontario for consideration
of approximately $1.6 million.
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.
"With the moderate softening in demand we expect to experience
in the coming quarters, we are closely monitoring all of our costs
and will react should we see any significant reduction in business
levels going forward," Mr. Peller concluded.
Financial Highlights (unaudited - complete consolidated
financial statements to follow)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Period Ended December 31, Three Months Nine Months
----------------------------------------------------------------------------
(in $000 except per share amounts) 2008 2007 2008 2007
----------------------------------------------------------------------------
Sales $ 72,892 $ 66,052 $201,866 $184,428
EBITA 10,436 9,823 25,914 25,019
Earnings before unrealized
derivative losses, and unusual
items 6,559 6,457 15,194 14,971
Net unrealized derivative losses,
and unusual items (9,412) (221) (10,704) (301)
Net and comprehensive earnings (1,973) 5,013 3,124 10,579
Net earnings (loss) per share
(Basic per Class A share) ($ 0.13) $ 0.35 $ 0.22 $ 0.73
Cash from operations (1,373) (6,188)
(after changes in non-cash working
capital items) 1,322 5,602
Working capital 36,301 24,439
Shareholders' equity per share $6.79 $ 6.91
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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, unrealized derivative
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
December 31 March 31
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2008 2008
(expressed in thousands of Canadian dollars) $ $
----------------------------------------------------------------------------
Assets
Current Assets
Accounts receivable 29,276 23,072
Inventories 108,083 93,817
Prepaid expenses and other assets 5,114 4,242
Income taxes recoverable 2,617 823
-------------------------
145,090 121,954
Property, plant and equipment 101,860 94,480
Goodwill (note 3) 45,684 36,171
Other assets 7,121 7,139
-------------------------
299,755 259,744
-------------------------
-------------------------
Liabilities
Current Liabilities
Bank indebtedness 58,836 57,722
Accounts payable and accrued liabilities 37,860 29,272
Dividends payable 1,197 1,088
Current derivative financial instruments (note 4) 4,738 432
Current portion of long - term debt (note 4) 6,158 6,831
-------------------------
108,789 95,345
Long-term debt (note 4) 72,911 46,412
Long-term derivative financial instruments (note 4) 5,857 534
Employee future benefits 2,950 3,167
Future income taxes 8,102 11,606
-------------------------
198,609 157,064
-------------------------
Shareholders' Equity
Capital Stock 7,375 7,375
Retained Earnings 93,771 95,305
-------------------------
101,146 102,680
-------------------------
299,755 259,744
-------------------------
-------------------------
The accompanying notes are an integral part of these interim consolidated
financial statements
ANDREW PELLER LIMITED
Consolidated Statements of (Loss) Earnings, Comprehensive (Loss) Earnings
and Retained Earnings
These financial statements have not been reviewed by our auditors
(expressed in thousands of Canadian dollars)
For the Three For the Nine
Months Ended Months Ended
December 31 December 31
2008 2007 2008 2007
$ $ $ $
------------------------------------------------------- ------------------
Sales 72,892 66,052 201,866 184,428
Cost of goods sold, excluding
amortization 42,809 37,312 117,745 105,026
------- ------- ------- --------
Gross profit 30,083 28,740 84,121 79,402
Selling and administration 19,647 18,917 58,207 54,383
------- ------- ------- --------
Earnings before interest and
amortization 10,436 9,823 25,914 25,019
Interest 1,828 1,519 4,735 4,383
Amortization of plant, equipment
and intangibles 2,049 1,847 5,985 5,665
------- ------- ------- --------
Earnings before other items 6,559 6,457 15,194 14,971
Net unrealized loss on derivative
financial instruments (8,969) (118) (10,147) (74)
Unusual items (443) (103) (557) (227)
------- ------- ------- --------
Earnings (loss) before income taxes (2,853) 6,236 4,490 14,670
------- ------- ------- --------
Provision for income taxes
Current 1,810 1,945 4,385 4,670
Future (2,690) (722) (3,019) (579)
------- ------- ------- --------
(880) 1,223 1,366 4,091
------- ------- ------- --------
Net and comprehensive (loss)
earnings for the period (1,973) 5,013 3,124 10,579
Retained earnings - Beginning
of period 96,941 91,666 95,305 88,147
Impact of adopting accounting
pronouncements on April 1, 2007 - - - 128
Impact of adopting accounting
pronouncement on April 1, 2008
(note 1) - - (1,067) -
------- ------- ------- --------
Retained earnings - Beginning of
period as restated 96,941 91,666 94,238 88,275
------- ------- ------- --------
Dividends:
Class A and Class B (1,197) (1,088) (3,591) (3,263)
------- ------- ------- --------
Retained earnings - End of period 93,771 95,591 93,771 95,591
------- ------- ------- --------
------- ------- ------- --------
Net (loss) earnings per share
Basic and diluted
Class A shares (0.13) 0.35 0.22 0.73
------- ------- ------- --------
------- ------- ------- --------
Class B shares (0.12) 0.30 0.19 0.63
------- ------- ------- --------
------- ------- ------- --------
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 of Canadian dollars)
For the Three For the Nine
Months Ended Months Ended
December 31 December 31
2008 2007 2008 2007
$ $ $ $
------------------------------------------------------- ------------------
Cash provided by (used in)
Operating activities
Net (loss) earnings for the period (1,973) 5,013 3,124 10,579
Items not affecting cash:
Amortization of plant, equipment
and intangibles 2,049 1,847 5,985 5,665
Employee future benefits (14) (627) (217) (814)
Net unrealized loss on derivative
financial instruments 8,969 118 10,147 74
Future income taxes (2,690) (722) (3,019) (579)
Write-off of deferred financing
costs 366 - 366 -
Amortization of deferred financing
costs 51 39 144 112
------- ------- ------- --------
6,758 5,668 16,530 15,037
Changes in non-cash working capital
items related to operations (note 5) (8,131) (11,856) (15,208) (9,435)
------- ------- ------- --------
(1,373) (6,188) 1,322 5,602
------- ------- ------- --------
Investing activities
Acquisition of businesses (note 3) (1,610) - (16,582) -
Purchase of property and equipment (2,258) (2,640) (7,689) (11,732)
------- ------- ------- --------
(3,868) (2,640) (24,271) (11,732)
------- ------- ------- --------
Financing activities
Increase in deferred financing
costs (17) - (304) -
Increase in bank indebtedness 7,789 11,392 1,113 10,180
Increase in long-term debt (note 4) - - 29,036 3,470
Repayment of long-term debt (1,334) (1,477) (3,414) (4,428)
Dividends paid (1,197) (1,087) (3,482) (3,092)
------- ------- ------- --------
5,241 8,828 22,949 6,130
------- ------- ------- --------
Cash at beginning and end of period - - - -
------- ------- ------- --------
------- ------- ------- --------
Supplemental disclosure of cash flow
information
Cash paid during the period for
Interest 2,190 1,380 4,846 4,067
Income taxes 2,199 960 4,558 4,254
The accompanying notes are an integral part of these interim consolidated
financial statements
Notes to the Interim Consolidated Financial Statements
December 31, 2008 and 2007
(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 years ended March 31, 2008 and 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, 2008 and for the three and nine-month period then
ended.
Recently adopted accounting pronouncements
On April 1, 2008 the Company adopted the Canadian Institute of
Chartered Accountants (CICA) handbook Sections 3031 "Inventories,"
Section 3862 "Financial Instruments - Disclosures," Section 3863
"Financial Instruments - Presentation" and Section 1535 "Capital
Disclosures."
a) Inventories
On April 1, 2008 the Company adopted the CICA Handbook Section
3031 "Inventories". This pronouncement 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 Company's fiscal years
beginning on April 1, 2008. As required, this standard has been
adopted prospectively and comparative amounts have not been
restated. The change predominately relates to changes in the
application of overhead cost allocations to bulk and finished goods
inventory. As a result, on adoption of this standard, the Company
recorded an adjustment on April 1, 2008 to reduce inventories by
$1,552, reduce future income taxes by $485, and reduce opening
retained earnings by $1,067.
b) Financial Instruments Presentation and Disclosures, and
Capital Disclosures
On April 1, 2008 the Company adopted CICA handbook Section 3862
"Financial Instruments - Disclosures," section 3863 "Financial
Instruments - Presentation" and section 1535 "Capital Disclosures."
These sections require additional disclosures surrounding the
Company's financial instruments and capital. The following
disclosures are required under the new pronouncement:
Interest rate risk
The Company's interest rate risk arises mainly from the interest
rate impact on our cash, floating rate debt and interest rate swap.
Our interest rate management policy is to borrow at fixed rates to
match the duration of long lived assets. Floating rate funding is
used for short term borrowing.
The Company has fixed interest on long-term debt at 5.64% until
April 30, 2015 by entering into an interest rate swap. The
Company's short-term borrowings are funded using a floating
interest rate and as such are sensitive to interest rate movements.
As at December 31, 2008, with other variables unchanged, a 1%
change in interest rates would impact the Company's net earnings by
approximately $350, exclusive of the mark to market adjustments on
the interest rate swap.
Credit Risk
The Company's exposure to credit risk is very limited. Credit
risk for trade receivables is monitored through established credit
monitoring activities. Over 50% of the Company's accounts
receivable balance relates to amounts owing from Canadian
provincial liquor boards. Excluding accounts receivable from
Canadian provincial liquor board amounts, the Company does not have
a significant concentration of credit risk with any single
counterparty or group of counterparties. The maximum exposure to
credit risk is equal to the carrying value of the financial
assets.
Amounts owing from Canadian provincial liquor boards represent
$14,740 of the $29,276 in total accounts receivables all of which
has been deemed to be collectible. Of the remaining non provincial
liquor board balances, $2,734 had aged over sixty days as of
December 31, 2008. An allowance for doubtful accounts of $504 has
been provided against these accounts receivable amounts which the
Company has determined to represent a reasonable estimate of
amounts that may be uncollectible.
Liquidity Risk
The Company manages liquidity risk by maintaining adequate cash
and cash equivalent balances and by appropriately utilizing its
line of credit. Company management continuously monitors and
reviews both actual and forecasted cash flows and matches the
maturity profile of financial assets and financial liabilities.
Accounts payable are generally due within 30 days and long-term
debt payment requirements are disclosed in note 4.
The following table outlines the Company's contractual
obligations, including long-term debt, operating leases, and
commitments on short-term forward foreign exchange contracts used
to hedge the currency risk on U.S. dollar purchases as at December
31, 2008.
Less Greater
Than 1 2 - 3 4 - 5 Than 5
Total Year Years Years Years
Long-term debt 79,345 6,158 11,492 10,667 51,028
Operating leases 19,061 4,439 5,728 1,749 7,145
Pension obligations 5,707 847 2,541 1,694 625
Long-term grape contracts 357,461 25,845 51,637 51,179 228,800
----------------------------------------------
Total contractual obligations 461,574 37,289 71,398 65,289 287,598
----------------------------------------------
----------------------------------------------
Foreign exchange risk
The Company's foreign exchange risk arises on the purchase of
bulk wine and concentrate which are made in U.S. dollars and Euros.
The Company's strategy is to hedge approximately 50% - 80% of its
foreign exchange requirements prior to the beginning of each fiscal
year. The Company has entered into a series of foreign exchange
contracts as a hedge against movements in U.S. dollar and Euro
exchange rates. These contracts are reviewed regularly. A one
percent change in the value of the U.S. dollar and Euro would
impact the Company's net earnings by approximately $100 and $30
respectively.
Capital Disclosures
The Company's objective when managing capital is to safeguard
the Company's ability as a going concern, to provide an adequate
return to shareholders and to meet external capital requirements on
our debt and credit facilities. Unfunded capital expenditures are
limited to $10,000 on an annual basis and this is reviewed
quarterly.
As part of the existing debt agreement, three key financial
covenants are monitored on an ongoing basis by management to ensure
compliance with the agreement as follows:
- Funded debt to a rolling twelve month EBITDA
- Working capital ratio
- Fixed charge coverage ratio
In order to facilitate management of its capital requirements,
the Company prepares annual budgets that are updated as necessary
depending on various factors including general industry conditions.
The annual budget is approved by the Board of Directors. As at
December 31, 2008, the Company has remained in compliance with all
external lending agreement covenants.
Recently issued accounting pronouncements
International Financial Reporting Standards
In February 2008, the Canadian Accounting Standards Board
confirmed that the use of International Financial Reporting
Standards ("IFRS") will be required for Canadian publicly
accountable companies for fiscal years beginning on or after
January 1, 2011. The Company is currently evaluating the impact of
adopting IFRS.
Goodwill and intangible assets
In February 2008, The Canadian Institute of Chartered
Accountants issued Section 3064, "Goodwill and Intangible Assets"
which replaces Section 3062, "Goodwill and Other Intangible
Assets". The new standard provides guidance on the recognition,
measurement and disclosure of goodwill and intangible assets and is
effective for annual periods beginning on or after October 1, 2008.
The Company is currently evaluating the impact of adopting this
standard.
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. Acquisitions
On June 13, 2008 the Company acquired 50% of the shares of Rocky
Ridge Vineyards Inc. ("Rocky Ridge") of Oliver, British Columbia
for consideration of $4,016, including acquisition costs. The
Company previously owned 50% of the shares of Rocky Ridge and as a
result of this transaction Rocky Ridge becomes a wholly-owned
subsidiary of the Company. The allocation of purchase price is
preliminary and is based on management's estimates of the fair
value of the assets acquired and liabilities assumed. Management is
currently obtaining fair market values for the net assets acquired,
including the estimated remaining useful lives. Details of net
assets acquired are as follows: vineyards - $4,400; goodwill -
$219; bank indebtedness - ($603). This transaction was accounted
for using the purchase method. The results of operations have been
fully consolidated with those of the Company's effective June 14,
2008.
On June 30, 2008 the Company's wholly-owned subsidiary, 1773008
Ontario Inc. acquired 100% of the common shares of World Vintners
Inc. for consideration of $10,956, including acquisition costs. The
allocation of purchase price is preliminary and is based on
management's estimates of the fair value of the assets acquired and
liabilities assumed. Management is currently obtaining fair market
values for the net assets and intangible assets acquired, including
the estimated remaining useful lives. Details of net assets
acquired based on preliminary allocations are as follows: accounts
receivable - $1,170; inventories - $1,269; income taxes recoverable
- $1,625; property, plant and equipment - $844; intangible assets -
$380; goodwill - $8,125; other assets - $72; accounts payable and
accrued liabilities - ($2,529). This transaction was accounted for
using the purchase method. The results of operations have been
included in the consolidated financial statements of the Company,
effective July 1, 2008.
On October 8, 2008 the Company acquired 100% of the outstanding
shares of The Small Winemakers Collection Inc. of Toronto, Ontario
for consideration of $1,610 including acquisition costs. The
allocation of purchase price is preliminary and is based on
management's estimates of the fair value of the assets acquired and
liabilities assumed. Management is currently obtaining fair market
values for the net assets and intangible assets acquired, including
the estimated remaining useful lives. Details of net assets
acquired based on preliminary allocations are as follows: accounts
receivables - $632; property, plant and equipment - $34; other
assets - $36; goodwill - $1,169; accounts payable and accrued
liabilities - $261. This transaction was accounted for using the
purchase method. The results of operations have been included in
the consolidated financial statements of the Company, effective
October 9, 2008.
The value assigned to goodwill in all three acquisitions is not
deductible for tax purposes.
4. Long-term debt and derivative financial instruments
On May 15, 2008, the Company's four existing term loans were
replaced with one seven year variable rate term facility in the
amount of $80,000. The new term loan is repayable in monthly
principal payments of $444 plus interest and matures on April 30,
2015. Subsequent to the repayment of the old term loans, the
Company unwound the three interest rate swaps related to the term
loans. The Company entered into a new interest rate swap which
effectively fixes the interest rate on the $80,000 term loan at
5.64% for the term of the debt effective July 2, 2008. However, the
Company does not apply hedge accounting to these interest rate
swaps. Accordingly mark-to- market losses of $8,929 and $9,629, for
the three and nine month periods were recorded through earnings
respectively.
As part of the acquisition of Rocky Ridge, on June 13, 2008 the
Company issued a promissory note to the seller of Rocky Ridge in
the amount of $1,650. The note incurs interest at 6% compounded
annually and is to be paid in two equal annual installments of
principal and interest on June 13, 2009 and June 13, 2010.
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 For the Nine
Months Ended Months Ended
December 31, December 31,
2008 2007 2008 2007
---- ---- ---- ----
$ $ $ $
Accounts receivable 1,077 (339) (4,402) (4,422)
Inventories (13,368) (8,824) (14,549) (8,165)
Prepaid expenses and other assets 498 201 (1,283) (70)
Accounts payable and accrued
liabilities 4,052 (2,062) 5,200 2,806
Income taxes recoverable (390) 1,712 (174) 416
--------- -------- -------- -------
(8,131) (11,856) (15,208) (9,435)
--------- -------- -------- -------
--------- -------- -------- -------
6. Comparative Figures
Certain of the prior year balances have been restated to conform
with the current year's presentation.
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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