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, 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 nine months ended December 31, 2011
available on the Company's web site or at www.sedar.com.
NINE MONTH HIGHLIGHTS:
-- Sales up 3.6% on solid performance in majority of trade channels
-- Gross margin increases due to strong dollar and benefit from cost
reduction initiatives
-- EBITA up 9.2% to $30.1 million
-- Net earnings up 25.9% to $13.6 million or $0.98 per Class A share
"We continue to capitalize on strong market demand and our high quality product
offering to generate solid growth in both sales and profitability," commented
John Peller, President and CEO. "Looking ahead, we are confident we will see
further solid performance through the majority of our trade channels."
Sales for the third quarter of fiscal 2012 rose 2.1% to $76.6 million from $75.0
million in the prior year. For the nine months ended December 31, 2011 sales
rose 3.6% to $216.0 million from $208.5 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.
Gross margin was 40.1% of sales for the three months ended December 31, 2011
compared to 38.1% last year. For the first nine months of fiscal 2012 gross
margin was 39.5% of sales compared to 38.9% in the same prior-year period.
Increased sales of higher margin products, the continued strength of the
Canadian dollar on world currency markets, favourable overhead absorption
variances, increased production from company vineyards and the Company's
successful efforts to control costs and generate production efficiencies were
partially offset by the impact of the above-mentioned discriminatory levy
introduced by the Province of Ontario, higher pricing on wine purchased from
international markets, and increased distribution costs. The impact on EBITA of
the Ontario levy amounted to approximately $1.9 million in the first nine months
of fiscal 2012. Management remains focused on efforts to enhance production
efficiency and productivity to further improve overall profitability.
Selling and administrative expenses rose in the third quarter and first nine
months of fiscal 2012 due primarily to increased sales and marketing expenses
compared with the prior year. Selling and administration expenses as a
percentage of sales were consistent or reduced in the third quarter and first
nine months of fiscal 2012 to 24.6% and 25.5% respectively compared to 24.6% and
25.7% in the comparable prior year periods. Management expects the level of
sales and administrative expenses will remain at slightly higher levels in
fiscal 2012 due to the one-time costs associated with the Company's 50th
Anniversary celebrations.
Interest expense during the third quarter and first nine months of fiscal 2012
declined compared to last year due to a decrease in short and long-term interest
rates partially offset by higher levels of short-term borrowings.
The Company incurred a non-cash gain in the third 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 $0.3 million in the prior year.
For the first nine months of fiscal 2012, the Company incurred a non-cash loss
of $0.3 million compared to $0.2 million last year. The Company has elected not
to apply hedge accounting and accordingly 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 nine months of the prior year, a fair value adjustment to vines of
$1.1 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, other expenses and gains or
losses on the above mentioned derivative financial instruments ("EBITA") were
$11.9 million for the three months ended December 31, 2011 compared to $10.2 for
the comparable prior year period. For the nine months ended December 31, 2011
EBITA was $30.1 million compared to $27.6 million last year. Net earnings
excluding gains (losses) on derivative financial instruments and other expenses
for the three months ended December 31, 2011 were $6.3 million compared to $4.7
million in the prior year, and $14.3 million for the first nine months of fiscal
2012 compared to $11.6 million last year. Net earnings for the third quarter of
fiscal 2012 were $6.3 million or $0.46 per Class A Share compared to $4.9
million or $0.34 per Class A Share last year. Net earnings for the nine months
ended December 31, 2011 were $13.6 million or $0.98 per Class A Share compared
to $10.8 million or $0.75 per Class A Share in the comparable prior year period.
The third quarter of the Company's fiscal year is typically the strongest in
terms of sales, gross margin, and net earnings due to higher sales volumes
during the holiday season.
Strong Financial Position
Working capital was $39.7 million at December 31, 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, higher
inventories due to the recent strategic alliance with Wayne Gretzky Estate
Winery and the acquisition of the inventories of Cellar Craft International, as
well as anticipated future sales growth, partially offset by an increase in bank
indebtedness.
The Company's debt to equity ratio was 0.87:1 at December 31, 2011 compared to
0.85:1 at March 31, 2011 and 0.83:1 at December 31, 2010. Shareholders' equity
as at December 31, 2011 was $122.4 million or $8.56 per common share compared to
$114.3 million or $7.99 per common share as at March 31, 2011 and $120.0 million
or $8.06 per common share as at December 31, 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 the
purchase of shares under the Company's normal course issuer bid.
Through the first nine months of fiscal 2012 the Company generated cash from
operating activities, after changes in non-cash working capital items, of $0.7
million compared to $10.9 million in the prior year period. Cash flow from
operating activities declined primarily due to the aforementioned increase in
accounts receivable and inventory during the period, partially offset by the
stronger earnings performance.
Recent Events
On November 8, 2011, the Company finalized a ten-year licensing agreement with
Wayne Gretzky, which gives the Company the exclusive right to use certain Wayne
Gretzky related brand names in the manufacturing and selling of wine products in
Canada. On the same date, the Company purchased $2.7 million of inventories from
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 $2.7 million. Cellar Craft is a
leader in the consumer-made wine business utilizing grape skins as well as
juice.
Financial Highlights (Unaudited)
(Complete consolidated financial statements to follow)
----------------------------------------------------------------------------
(in $000 except as otherwise stated) Three Months Nine Months
----------------------------------------------------------------------------
For the Period Ended December 31, 2011 2010 2011 2010
----------------------------------------------------------------------------
Sales 76,595 74,983 215,992 208,480
Gross margin 30,719 28,588 85,304 81,116
--------------------------------------
Gross margin (% of sales) 40.1% 38.1% 39.5% 38.9%
--------------------------------------
Selling and administrative expenses 18,861 18,415 55,159 53,517
Earnings before interest, taxes,
amortization, unrealized gain (loss)
and other expenses 11,858 10,173 30,145 27,599
Unrealized (gain) loss on derivative
financial instruments (117) (342) 296 174
Other expenses 44 57 700 916
Net earnings 6,309 4,930 13,605 10,806
--------------------------------------
Earnings per share - Class A $0.46 $0.34 $0.98 $0.75
Earnings per share - Class B $0.39 $0.30 $0.85 $0.65
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) (9,460) (5,319) 695 10,928
--------------------------------------
Working capital 39,654 34,638
Shareholders' equity per share $8.56 $8.06
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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 Nine Months
----------------------------------------------------------------------------
Period ended December 31, 2011 2010 2011 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings 6,309 4,930 13,605 10,806
----------------------------------------------------------------------------
Unrealized (gain) loss on financial
instruments (117) (342) 296 174
----------------------------------------------------------------------------
Other expenses 44 57 700 916
----------------------------------------------------------------------------
Income tax effect on the above 20 77 (269) (294)
----------------------------------------------------------------------------
Net earnings before other expenses 6,256 4,722 14,332 11,602
----------------------------------------------------------------------------
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, the United States, the 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
has entered into an agreement to market the Wayne Gretzky Estate Winery brands
across Canada. The Company's products are sold predominantly in Canada with a
focus on export sales for its icewine and personal winemaking 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 (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 December 31 March 31
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2011 2011
(in thousands of Canadian dollars) $ $
----------------------------------------------------------------------------
Assets
Current Assets
Accounts receivable 29,298 23,390
Inventories 108,028 94,692
Current portion of biological assets - 759
Prepaid expenses and other assets 1,713 818
------------------------
139,039 119,659
Property, plant and equipment 83,973 84,744
Biological assets 12,240 11,950
Intangibles and other assets 13,716 14,170
Goodwill 37,473 37,473
------------------------
286,441 267,996
------------------------
------------------------
Liabilities
Current Liabilities
Bank indebtedness 58,704 48,758
Accounts payable and accrued liabilities 32,070 33,883
Dividends payable 1,252 1,148
Income taxes payable 704 1,000
Current portion of derivative financial instruments 1,289 1,894
Current portion of long-term debt 5,366 5,333
------------------------
99,385 92,016
Long-term debt 42,723 42,720
Long-term derivative financial instruments 2,609 1,578
Employee future benefits 7,213 5,565
Deferred income taxes 12,064 11,820
------------------------
163,994 153,699
------------------------
Shareholders' Equity
Capital stock 7,026 7,026
Retained earnings 115,421 107,271
------------------------
122,447 114,297
------------------------
286,441 267,996
------------------------
------------------------
ANDREW PELLER LIMITED
Consolidated Statements of Earnings
Unaudited
These financial statements have not been reviewed by our auditors
For the three months For the nine months
ended ended
December 31 December 31
2011 2010 2011 2010
(in thousands of Canadian dollars) $ $ $ $
------------------------------------------------------- --------------------
Sales 76,595 74,983 215,992 208,480
Cost of goods sold, excluding
amortization 45,876 46,395 130,688 127,364
---------- ---------- --------- ----------
30,719 28,588 85,304 81,116
Selling and administration 18,861 18,415 55,159 53,517
---------- ---------- --------- ----------
Earnings before interest and
amortization 11,858 10,173 30,145 27,599
Interest 1,170 1,605 4,201 5,432
Amortization of plant, equipment
and intangible assets 1,921 1,896 5,796 5,654
---------- ---------- --------- ----------
Earnings before other items 8,767 6,672 20,148 16,513
Net unrealized (gains) losses on
derivative financial instruments (117) (342) 296 174
Other expenses 44 57 700 916
---------- ---------- --------- ----------
Earnings before income taxes 8,840 6,957 19,152 15,423
---------- ---------- --------- ----------
Provision for income taxes
Current 1,879 1,887 4,706 4,971
Deferred 652 140 841 (354)
---------- ---------- --------- ----------
2,531 2,027 5,547 4,617
---------- ---------- --------- ----------
Net earnings for the period 6,309 4,930 13,605 10,806
Net earnings per share
Basic and diluted
Class A shares 0.46 0.34 0.98 0.75
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Class B shares 0.39 0.30 0.85 0.65
---------- ---------- --------- ----------
---------- ---------- --------- ----------
ANDREW PELLER LIMITED
Consolidated Statements of Comprehensive Income
Unaudited
These financial statements have not been reviewed by our auditors
For the three months For the nine months
ended ended
December 31 December 31
2011 2010 2011 2010
(in thousands of Canadian
dollars) $ $ $ $
------------------------------------------------------ ---------------------
Net earnings for the period 6,309 4,930 13,605 10,806
Other comprehensive income (loss)
Net actuarial gains (losses) on
employee future benefits (438) 1,057 (2,295) (1,212)
Deferred income taxes 114 (275) 597 315
---------- ---------- ---------- ----------
(324) 782 (1,698) (897)
---------- ---------- ---------- ----------
Net comprehensive income 5,985 5,712 11,907 9,909
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
ANDREW PELLER LIMITED
Consolidated Statements of Cash Flows
Unaudited
These financial statements have not For the nine For the nine
been reviewed by our auditors months ended months ended
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2011 December 31, 2010
(in thousands of Canadian dollars) $ $
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash provided by (used in)
Operating activities
Net earnings for the period 13,605 10,806
Items not affecting cash:
Loss (gain) on disposal of property,
plant and equipment 158 (304)
Amortization of plant, equipment and
intangibles 5,796 5,654
Revaluation of vine biological
assets net of insurance recovery 563 822
Employee future benefits (647) (508)
Net unrealized (gain) loss on
derivative financial instruments 296 174
Deferred income taxes 841 (354)
Amortization of deferred financing
costs 288 404
------------------- -------------------
20,900 16,694
Changes in non-cash working capital
items related to operations (note 5) (20,205) (5,766)
------------------- -------------------
695 10,928
------------------- -------------------
Investing activities
Proceeds of disposal of property,
plant, equipment and vine biological
assets - 766
Purchase of property, equipment and
vine biological assets (5,097) (4,669)
Purchases of intangibles and other
assets (1,039) (90)
Acquisition of businesses (600) (825)
------------------- -------------------
(6,736) (4,818)
------------------- -------------------
Financing activities
Increase (decrease) in bank
indebtedness 9,946 1,481
Increase in long-term debt 50,263 -
Repayment of long-term debt (49,611) (4,000)
Deferred financing costs (904) -
Dividends paid (3,653) (3,591)
------------------- -------------------
6,041 (6,110)
------------------- -------------------
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 4,043 5,426
Income taxes 5,002 2,905
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
http://www.andrewpeller.com/ or at http://www.sedar.com/.
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