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 months ended June 30,
2011. Effective April 1, 2011 the Company began reporting its
results under International Financial Reporting Standards ("IFRS").
For more information relating to the impact of the transition to
IFRS on the Company's reported financial position, financial
performance and cash flows, please refer to the Company's
Management Discussion and Analysis ("MD&A") for the three
months ended June 30, 2011 available on the Company's web site or
at www.sedar.com.
FIRST QUARTER HIGHLIGHTS:
-- Sales up 7.7% on solid organic growth and new product launches
-- Stronger Canadian dollar and increased sales of high margin products
generate improved profitability
-- EBITA for the quarter rises to $9.5 million from $8.6 million last year
-- Company to celebrate its 50th Anniversary in 2011
"We are pleased with the solid organic growth generated through
the first quarter of fiscal 2012, building on the strong
performance last year" commented John Peller, President and CEO.
"We are particularly proud of the success demonstrated by Crush,
our new VQA brand launched through the LCBO and our retail store
networks in May."
"We are also very proud to be celebrating our 50th Anniversary
this year and our presence as the country's largest Canadian-owned
producer of quality wines," added Mr. Peller.
Sales for the first quarter of fiscal 2012 rose 7.7% to $69.4
million from $64.5 million in the prior year. Ongoing initiatives
to grow sales of the Company's blended varietal table and premium
wines through provincial liquor boards, the successful introduction
of new products and solid performance from the Company's estate
wineries and export sales were partially offset by the impact of
the discriminatory levy introduced by the Province of Ontario on
July 1, 2010 on sales of International and Canadian Blended ("ICB")
wines sold through the Company's retail stores and weaker sales of
consumer-made wines. The Company also benefited from the timing of
sales recorded in April 2011 during the key Easter selling season,
which were not recorded in last year's first quarter.
Gross margin was 39.4% of sales for the three months ended June
30, 2011 compared to 39.5% last year. The strengthening of the
Canadian dollar on world currency markets, increased sales of
higher margin wines, and the Company's successful cost control
initiatives which served to reduce operating and packaging expenses
were offset by the impact of the above-mentioned discriminatory
levy introduced by the Province of Ontario and higher pricing on
wine purchased on international markets. The impact on EBITA of
this levy amounted to approximately $0.6 million in the first
quarter of fiscal 2012. Management remains focused on efforts to
enhance production efficiency and productivity to further improve
overall profitability and to work with the government to eliminate
the discriminatory levy.
Selling and administrative expenses rose in the first quarter of
fiscal 2012 due primarily to increased sales and marketing expenses
compared with the prior year, as well as certain one-time costs
related to the celebration of the Company's 50th Anniversary.
Despite these increases, selling and administration expenses
improved to 25.7% of sales in the first quarter of fiscal 2012
compared to 26.1% in the same quarter last year. Management expects
the level of sales and administrative expenses will increase
slightly in fiscal 2012 due to one-time costs associated with the
Company's 50th Anniversary celebrations.
Interest expense during the first quarter of fiscal 2012
declined to $1.5 million compared to $1.9 million last year due to
lower interest rates on both short and long-term debt.
The Company incurred a non-cash loss in the first quarter of
fiscal 2012 related to mark-to-market adjustments on an interest
rate swap and foreign exchange contracts aggregating $0.3 million
compared to a gain of $0.6 million in the prior year. The Company
has elected not to apply hedge accounting and 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 expenses incurred in the first quarter of fiscal 2012
relate to a $0.1 million fair value adjustment to vines and $0.1
million in ongoing maintenance costs related to the Company's Port
Moody facility which was closed effective December 31, 2005. In the
first quarter of the prior year, other income of $0.3 million was
recorded related to a gain on the sale of a portion of an Okanagan
vineyard.
Earnings before interest, taxes, amortization, and gains or
losses on the above mentioned derivative financial instruments
("EBITA") were $9.5 million for the three months ended June 30,
2011 compared to $8.6 million in the prior year period. Net
earnings excluding gains (losses) on derivative financial
instruments and other expenses for the three months ended June 30,
2011 were $4.3 million compared to $3.4 million in the prior year.
Net earnings for the first quarter of fiscal 2012 were $3.9 million
or $0.28 per Class A Share compared to $4.0 million or $0.28 per
Class A Share in the comparable prior year period.
Strong Financial Position
Working capital was $30.9 million at June 30, 2011 compared to
$27.6 million at March 31, 2011. The increase compared to March 31,
2011 was due primarily to increased accounts receivable on strong
sales during the quarter and increased bank indebtedness partially
offset by the decrease in inventories and accounts payable and
accrued charges due to seasonal fluctuations.
The Company's debt to equity ratio was 0.86:1 at June 30, 2011
compared to 0.85:1 at March 31, 2011 and 0.88:1 at June 30, 2010.
Shareholders' equity as at June 30, 2011 was $116.7 million or
$8.16 per common share compared to $114.3 million or $7.99 per
common share as at March 31, 2011 and $116.8 million or $7.77 per
common share as at June 30, 2010. The increase in shareholders'
equity is primarily due to higher net earnings for the period.
There was also a decline in capital stock and retained earnings due
to the cancellation of 594,412 Class A Shares in the fourth quarter
of fiscal 2011 arising from purchase of shares under the Company's
normal course issuer bid.
In the first quarter of fiscal 2012 the Company used cash from
operating activities, after changes in non-cash working capital
items of $1.3 million compared to generating cash of $2.7 million
in the prior year's first quarter. Cash flow from operating
activities declined due to an increase in accounts receivable
partially offset by stronger earnings performance.
Financial Highlights (Unaudited)
(Complete consolidated financial statements to follow)
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(in $000 except as otherwise stated)
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For the Three Months Ended June 30, 2011 2010
----------------------------------------------------------------------------
Sales 69,407 64,466
Gross margin 27,313 25,490
Gross margin (% of sales) 39.4% 39.5%
Selling general and administrative expenses 17,831 16,846
Earnings before interest, taxes, amortization, and other
expenses 9,482 8,644
Unrealized loss (gain) on derivative financial
instruments 300 (646)
Other expenses 164 (249)
Net earnings 3,911 4,003
Earnings per share - basic and diluted - Class A $0.28 $0.28
Dividend per share - Class A $0.360 $0.330
Dividend per share - Class B $0.314 $0.288
Class A Common Shares outstanding (000 shares) 11,294 11,888
Cash provided by operations
(after changes in non-cash working capital items) (1,294) 2,665
Working capital 30,850 31,688
Shareholders' equity per share $8.16 $7.77
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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, 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, and Croc Crossing. 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, United States, 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, 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's products are sold predominantly in
Canada with a focus on export sales for our icewine products.
Andrew Peller Limited common shares trade on the Toronto Stock
Exchange (symbols ADW.A and ADW.B).
Net earnings before other expenses is defined as net earnings
before the net unrealized loss (gain) on financial instruments, and
other expenses, all adjusted by income tax rates as calculated
below:
Unaudited (in $000) Three Months
----------------------------------------------------------------------------
Period ended June 30, 2011 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings 3,911 4,003
----------------------------------------------------------------------------
Unrealized loss (gain) on financial instruments 300 (646)
----------------------------------------------------------------------------
Other expenses (income) 164 (249)
----------------------------------------------------------------------------
Income tax effect on the above (125) 242
----------------------------------------------------------------------------
Net earnings before other expenses 4,250 3,350
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The Company utilizes EBITA (defined as earnings before interest,
amortization, unrealized derivative loss (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). 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 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
These financial statements have not been reviewed
by our auditors June 30 March 31 April 1
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2011 2011 2010
(in thousands of Canadian dollars) $ $ $
----------------------------------------------------------------------------
Assets
Current Assets
Accounts receivable 28,151 23,390 22,902
Inventories 90,180 94,692 88,818
Current portion of biological assets 1,751 759 615
Prepaid expenses and other assets 1,820 818 1,818
Income taxes recoverable - - 1,327
---------------------------
121,902 119,659 115,480
Property, plant and equipment 84,049 84,744 85,133
Biological assets 12,328 11,950 12,395
Intangibles and other assets 13,015 14,170 14,775
Goodwill 37,473 37,473 37,473
---------------------------
268,767 267,996 265,256
---------------------------
---------------------------
Liabilities
Current Liabilities
Bank indebtedness 54,121 48,758 48,877
Accounts payable and accrued liabilities 28,521 33,883 28,229
Dividends payable 1,252 1,148 1,197
Income taxes payable 1 1,000 -
Current portion of derivative financial
instruments 1,824 1,894 1,922
Current portion of long-term debt 5,333 5,333 6,158
---------------------------
91,052 92,016 86,383
Long-term debt 41,499 42,720 47,633
Long-term derivative financial instruments 1,948 1,578 1,667
Employee future benefits 5,723 5,565 5,414
Other long-term liabilities - - 600
Deferred income taxes 11,830 11,820 9,879
---------------------------
152,052 153,699 151,576
---------------------------
Shareholders' Equity
Capital stock 7,026 7,026 7,375
Retained earnings 109,689 107,271 106,305
---------------------------
116,715 114,297 113,680
---------------------------
268,767 267,996 265,256
---------------------------
---------------------------
ANDREW PELLER LIMITED
Consolidated Statements of Earnings
For the For the
Unaudited three three
These financial statements have not been reviewed by our months months
auditors ended ended
----------------------------------------------------------------------------
----------------------------------------------------------------------------
June 30,June 30,
2011 2010
(in thousands of Canadian dollars) $ $
----------------------------------------------------------------------------
Sales 69,407 64,466
Cost of goods sold, excluding amortization (note 4) 42,094 38,976
------------------
27,313 25,490
Selling and administration (note 4) 17,831 16,846
------------------
Earnings before interest and amortization 9,482 8,644
Interest 1,549 1,942
Amortization of plant, equipment and intangible assets
(note 4) 1,947 1,882
------------------
Earnings before other items 5,986 4,820
Net unrealized losses (gains) on derivative financial
instruments 300 (646)
Other expenses (income) (note 4) 164 (249)
------------------
Earnings before income taxes 5,522 5,715
------------------
Provision for income taxes
Current 1,516 1,553
Deferred 95 159
------------------
1,611 1,712
------------------
Net earnings for the period 3,911 4,003
Net earnings per share
Basic and diluted
Class A shares 0.28 0.28
------------------
Class B shares 0.24 0.24
------------------
ANDREW PELLER LIMITED
Consolidated Statements of Cash Flows
For the For the
Unaudited three three
These financial statements have not been reviewed by our months months
auditors ended ended
----------------------------------------------------------------------------
June 30, June 30,
2011 2010
(in thousands of Canadian dollars) $ $
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Cash provided by (used in)
Operating activities
Net earnings for the period 3,911 4,003
Items not affecting cash:
Gain on disposal of property, plant and equipment - (304)
Amortization of plant, equipment and intangibles 1,947 1,882
Revaluation of vine biological assets 113 6
Employee future benefits (168) (143)
Net unrealized (gain) loss on derivative financial
instruments 300 (646)
Deferred income taxes 95 159
Amortization of deferred financing costs 112 185
--------------------
6,310 5,142
Changes in non-cash working capital items related to
operations (note 5) (7,604) (2,477)
--------------------
(1,294) 2,665
--------------------
Investing activities
Proceeds of disposal of property, plant, equipment and
vine biological assets - 766
Purchase of property, equipment and vine biological
assets (1,582) (811)
Purchases of other assets (6) (42)
Acquisition of businesses - (825)
--------------------
(1,588) (912)
--------------------
Financing activities
Increase in bank indebtedness 5,363 777
Repayment of long-term debt (1,333) (1,333)
Dividends paid (1,148) (1,197)
--------------------
2,882 (1,753)
--------------------
Increase (decrease) in cash during the period - -
Cash, beginning of period - -
Cash, end of period - -
--------------------
--------------------
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest 1,426 1,869
Income taxes 2,515 590
The above statements should be read in conjunction with the entire interim
consolidated financial notes. They will be available through the Investor
Relations section of http://www.andrewpeller.com/ or at
http://www.sedar.com/
Contacts: Andrew Peller Limited Mr. Peter Patchet CFO and EVP
Human Resources (905) 643-4131 Ext. 2210
peter.patchet@andrewpeller.com
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