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/.
Contacts: Andrew Peller Limited Mr. Peter Patchet CFO and EVP
Human Resources (905) 643-4131 Ext.
2210peter.patchet@andrewpeller.com
Andrew Peller (TSX:ADW.A)
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