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 six months ended September 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 and six months ended September 30, 2011
available on the Company's web site or at www.sedar.com.
SIX MONTH HIGHLIGHTS:
-- Sales up 4.4% on solid performance in majority of trade channels
-- Gross margin remains strong due to cost controls and production
efficiencies
-- EBITA up 5.0% to $18.3 million
-- Net earnings up 24.2% to $7.3 million or $0.52 per Class A share
-- Two accretive acquisitions completed subsequent to quarter end
"Our solid growth and strong operating performance continued in the second
quarter as we generated strong volume increases through the majority of our
trade channels," commented John Peller, President and CEO. "Looking ahead, we
believe this organic growth will continue, augmented by our new strategic
partnership with Wayne Gretzky and the recent accretive acquisition of Cellar
Craft, a leading consumer-made wine business in Western Canada."
Sales for the second quarter of fiscal 2012 rose 1.4% to $70.0 million from
$69.0 million in the prior year. For the six months ended September 30, 2011
sales rose 4.4% to $139.4 million from $133.5 million in the same period last
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. Sales in the first quarter of fiscal 2012
were positively impacted by the higher volume during the Easter holiday.
Gross margin was 39.0% of sales for the three months ended September 30, 2011
compared to 39.2% last year. For the first six months of fiscal 2012 gross
margin was 39.2%, compared to 39.3% in the same prior-year period. The
strengthening of the Canadian dollar on world currency markets and the Company's
successful efforts to control costs and generate production efficiencies that
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 $1.0 million in the first six
months 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 second quarter and first six
months 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 were 26.4% of sales during the second quarter of
both fiscal years, and 26.0% in the first six months of fiscal 2012 compared to
26.3% in the same period 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 second quarter and first six months of fiscal 2012
declined compared to last year due to a decrease in short and long-term interest
rates.
The Company incurred a non-cash loss in the second quarter of fiscal 2012
related to mark-to-market adjustments on an interest rate swap and foreign
exchange contracts aggregating $0.1 million compared to $1.2 million in the
prior year. For the first six months of fiscal 2012 the non-cash loss was $0.4
million compared to $0.5 million last 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 fiscal 2012 relate to a $0.6 million fair value
adjustment to vines and $0.1 million in ongoing maintenance related to the
Company's Port Moody facility which was closed effective December 31, 2005. In
the first six months of the prior year, a fair value adjustment to vines of $1.0
million was recorded, partially offset by other income of $0.3 million 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 $8.8 million for the
three months ended September 30, 2011 and September 30, 2010. For the six months
ended September 30, 2011 EBITA was $18.3 million compared to $17.4 million last
year. Net earnings excluding gains (losses) on derivative financial instruments
and other expenses for the three months ended September 30, 2011 were $3.8
million compared to $3.5 million in the prior year, and $8.1 million for the
first six months of fiscal 2012 compared to $6.9 million last year. Net earnings
for the second quarter of fiscal 2012 were $3.4 million or $0.24 per Class A
Share compared to $1.9 million or $0.13 per Class A Share last year. Net
earnings for the six months ended September 30, 2011 were $7.3 million or $0.52
per Class A Share compared to $5.9 million or $0.41 per Class A Share in the
comparable prior year period.
Strong Financial Position
Working capital was $37.1 million at September 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 fiscal 2012
and a decrease in bank indebtedness partially offset by a decline in
inventories.
The Company's debt to equity ratio was 0.79:1 at September 30, 2011 compared to
0.85:1 at March 31, 2011 and 0.79:1 at September 30, 2010. Shareholders' equity
as at September 30, 2011 was $117.7 million or $8.23 per common share compared
to $114.3 million or $7.99 per common share as at March 31, 2011 and $115.5
million or $7.75 per common share as at September 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.
Through the first six months of fiscal 2012 the Company generated cash from
operating activities, after changes in non-cash working capital items, of $10.2
million compared to $16.2 million in the prior year period. Cash flow from
operating activities declined primarily due to an increase in accounts
receivable during the period partially offset by stronger earnings performance
and lower levels of inventory.
Recent Events
On October 28, 2011 the Company announced the formation of a strategic alliance
with Wayne Gretzky Estate Winery Limited.
On October 28, 2011 the Company completed the purchase of the inventory and
intangible assets of Cellar Craft International, a consumer made wine business
located in Western Canada for approximately $2.8 million. Cellar Craft is a
leader in the consumer-made wine business utilizing grape skins as well as
juice.
On September 16, 2011 the Company completed a refinancing package with its
existing bank group and entered into a new $125.0 million syndicated loan
facility maturing on September 16, 2015. The operating loan facility in the
amount of $75.0 million matures on September 16, 2015 and bears interest at the
one to six-month Canadian Dealer Offered Rate ("CDOR") plus 1.75%. The term
facility in the amount of $50.0 million matures on September 16, 2015. The
Company maintains an interest rate swap on $45.6 million of the term facility
that effectively fixes the interest rate at 6.19%. This loan is repayable in
monthly principal payments of $0.444 million. The balance of the term facility
in the amount of $4.4 million incurs interest at the one-month CDOR plus 1.75%
with no scheduled principal payments.
Financial Highlights (Unaudited)
(Complete consolidated financial statements to follow)
----------------------------------------------------------------------------
(in $000 except as otherwise
stated) Three Months Six Months
----------------------------------------------------------------------------
For the Period Ended September 30, 2011 2010 2011 2010
----------------------------------------------------------------------------
Sales 69,990 69,031 139,397 133,497
Gross margin 27,272 27,038 54,585 52,528
-----------------------------------------
Gross margin (% of sales) 39.0% 39.2% 39.2% 39.3%
-----------------------------------------
Selling and administrative expenses 18,467 18,256 36,298 35,102
Earnings before interest, taxes,
amortization, unrealized gain
(loss) and other expenses 8,805 8,782 18,287 17,426
Unrealized (gain) loss on
derivative financial instruments 113 1,162 413 516
Other expenses 492 1,108 656 859
-----------------------------------------
Net earnings 3,385 1,873 7,296 5,876
-----------------------------------------
Earnings per share - Class A $ 0.24 $ 0.13 $ 0.52 $ 0.41
Earnings per share - Class B $ 0.22 $ 0.11 $ 0.46 $ 0.35
Dividend per share - Class A
(annual) $ 0.360 $ 0.330
Dividend per share - Class B
(annual) $ 0.314 $ 0.288
-----------------------------------------
Cash provided by operations
(after changes in non-cash working
capital items) 11,449 13,582 10,155 16,247
-----------------------------------------
Working capital 37,101 32,822
Shareholders' equity per share $ 8.23 $ 7.75
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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 Six Months
----------------------------------------------------------------------------
Period ended September 30, 2011 2010 2011 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings 3,385 1,873 7,296 5,876
----------------------------------------------------------------------------
Unrealized loss on financial
instruments 113 1,162 413 516
----------------------------------------------------------------------------
Other expenses 492 1,108 656 859
----------------------------------------------------------------------------
Income tax effect on the above (164) (613) (289) (371)
----------------------------------------------------------------------------
Net earnings before other expenses 3,826 3,530 8,076 6,880
----------------------------------------------------------------------------
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).
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 September 30 March 31
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2011 2011
(in thousands of Canadian dollars) $ $
----------------------------------------------------------------------------
Assets
Current Assets
Accounts receivable 27,926 23,390
Inventories 88,578 94,692
Current portion of biological assets 2,664 759
Prepaid expenses and other assets 2,378 818
-----------------------------
121,546 119,659
Property, plant and equipment 84,075 84,744
Biological assets 11,993 11,950
Intangibles and other assets 12,874 14,170
Goodwill 37,473 37,473
-----------------------------
267,961 267,996
-----------------------------
-----------------------------
Liabilities
Current Liabilities
Bank indebtedness 43,867 48,758
Accounts payable and accrued liabilities 32,554 33,883
Dividends payable 1,252 1,148
Income taxes payable 57 1,000
Current portion of derivative financial
instruments 1,349 1,894
Current portion of long-term debt 5,366 5,333
-----------------------------
84,445 92,016
Long-term debt 44,267 42,720
Long-term derivative financial instruments 2,917 1,578
Employee future benefits 7,092 5,565
Deferred income taxes 11,526 11,820
-----------------------------
150,247 153,699
-----------------------------
Shareholders' Equity
Capital stock 7,026 7,026
Retained earnings 110,688 107,271
-----------------------------
117,714 114,297
-----------------------------
267,961 267,996
-----------------------------
-----------------------------
The above statements should be read in conjunction with the entire interim
consolidated financial statements and notes. They will be available through the
Investor Relations section of www.andrewpeller.com or at www.sedar.com.
ANDREW PELLER LIMITED
Consolidated Statements of Earnings
Unaudited
These financial statements have not been reviewed by our auditors
For the three For the six months
months ended ended
September 30 September 30
2011 2010 2011 2010
(in thousands of Canadian dollars) $ $ $ $
----------------------------------------------------------------------------
Sales 69,990 69,031 139,397 133,497
Cost of goods sold, excluding
amortization 42,718 41,993 84,812 80,969
---------------------------------------
27,272 27,038 54,585 52,528
Selling and administration 18,467 18,256 36,298 35,102
---------------------------------------
Earnings before interest and
amortization 8,805 8,782 18,287 17,426
Interest 1,482 1,885 3,031 3,827
Amortization of plant, equipment and
intangibles 1,928 1,876 3,875 3,758
---------------------------------------
Earnings before other items 5,395 5,021 11,381 9,841
Net unrealized losses on derivative
financial instruments 113 1,162 413 516
Other expenses 492 1,108 656 859
---------------------------------------
Earnings before income taxes 4,790 2,751 10,312 8,466
---------------------------------------
Provision for income taxes
Current 1,311 1,531 2,827 3,084
Deferred 94 (653) 189 (494)
---------------------------------------
1,405 878 3,016 2,590
---------------------------------------
Net earnings for the period 3,385 1,873 7,296 5,876
Net earnings per share
Basic and diluted
Class A shares 0.24 0.13 0.52 0.41
---------------------------------------
---------------------------------------
Class B shares 0.22 0.11 0.46 0.35
---------------------------------------
---------------------------------------
The above statements should be read in conjunction with the entire interim
consolidated financial statements and notes.
They will be available through the Investor Relations section of
www.andrewpeller.com or at www.sedar.com.
ANDREW PELLER LIMITED
Consolidated Statements of Comprehensive Income
Unaudited
These financial statements have not been reviewed by our auditors
For the three For the six months
months ended ended
September 30 September 30
2011 2010 2011 2010
(in thousands of Canadian dollars) $ $ $ $
----------------------------------------------------------------------------
Net earnings for the period 3,385 1,873 7,296 5,876
Other comprehensive income (loss)
Net actuarial losses on employee
future benefits (1,531) (1,303) (1,857) (2,269)
Deferred income taxes 398 339 483 590
---------------------------------------
(1,133) (964) (1,374) (1,679)
---------------------------------------
Net comprehensive income 2,252 909 5,922 4,197
---------------------------------------
---------------------------------------
The above statements should be read in conjunction with the entire interim
consolidated financial statements and notes. They will be available through the
Investor Relations section of www.andrewpeller.com or at www.sedar.com.
ANDREW PELLER LIMITED
Consolidated Statements of Cash Flows
Unaudited For the For the
These financial statements have not been six months six months
reviewed by our auditors ended ended
------------------------------------------------------------------------
------------------------------------------------------------------------
September September
30, 2011 30, 2010
(in thousands of Canadian dollars) $ $
------------------------------------------------------------------------
------------------------------------------------------------------------
Cash provided by (used in)
Operating activities
Net earnings for the period 7,296 5,876
Items not affecting cash:
Loss (gain) on disposal of property, plant
and equipment 110 (304)
Amortization of plant, equipment and
intangibles 3,875 3,758
Revaluation of vine biological assets net of
insurance recovery 556 804
Employee future benefits (330) (214)
Net unrealized (gain) loss on derivative
financial instruments 413 516
Deferred income taxes 189 (494)
Amortization of deferred financing costs 224 369
--------------------------
12,333 10,311
Changes in non-cash working capital items
related to operations (2,178) 5,936
--------------------------
10,155 16,247
--------------------------
Investing activities
Proceeds of disposal of property, plant,
equipment and vine biological assets - 766
Purchase of property, equipment and vine
biological assets (3,591) (2,910)
Purchases of other assets (28) (72)
Acquisition of businesses (600) (825)
--------------------------
(4,219) (3,041)
--------------------------
Financing activities
Deferred financing costs (629) -
Increase (decrease) in bank indebtedness (4,891) (8,146)
Increase in long-term debt 50,263 -
Repayment of long-term debt (48,278) (2,666)
Dividends paid (2,401) (2,394)
--------------------------
(5,936) (13,206)
--------------------------
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 2,962 3,845
Income taxes 3,770 2,080
The above statements should be read in conjunction with the entire interim
consolidated financial statements and notes. They will be available through the
Investor Relations section of www.andrewpeller.com or at www.sedar.com.
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