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 continued strong operating and financial
performance for the three and six months ended September 30,
2012.
FISCAL 2013 HIGHLIGHTS:
-- Sales up 4.6% through first six months of year on solid growth through
majority of trade channels
-- Net earnings up 23.4% to $9.0 million or $0.65 per Class A Share
-- Launch of new brands to contribute to further organic growth
-- Peller Estates remains top-selling wine brand across Canada
-- 300-acre vineyard to increase BC VQA grape crop by 50%
"Our organic growth continued across the majority of our trade
channels in the second quarter, augmented by solid contributions
from our recent acquisitions," commented John Peller, President and
CEO. "Looking ahead, we are confident our growth in sales and
profitability will continue as key brands continue to perform
extremely well and the positive impact of new product launches
allow us to build on our presence as Canada's leading producer and
marketer of fine quality wines."
Sales for the second quarter of fiscal 2013 rose 4.4% to $73.1
million from $70.0 million in the prior year. For the six months
ended September 30, 2012 sales increased 4.6% to $145.7 million
from $139.4 million last year. The positive impact from the
agreement with Wayne Gretzky and from the acquisition of Cellar
Craft augmented solid organic growth arising from new product
introductions particularly skinnygrape, increased sales of premium
blended and varietal table wine brands sold through provincial
liquor boards, growth in sales at the Company's retail store
network, and strong export sales. The increase was partially offset
by lower sales of the Company's personal winemaking products
(excluding the sales of these products from the acquisition of
Cellar Craft).
Gross margin was 38.5% of sales in the second quarter and 38.6%
for the first six months of fiscal 2013 compared to 39.0% and 39.2%
respectively in the same periods last year. Gross margin percentage
was negatively affected by higher costs for wine purchased on
international markets in fiscal 2013 as well as increased price
competition in certain markets. The decrease in gross margin
percentage was partially offset by the positive impact of sales of
higher margin products and successful cost control initiatives to
reduce distribution, operating, and packaging expenses. During
fiscal 2013 the Company implemented programs to enhance a number of
supply chain and distribution contracts that it expects will
contribute to improved profitability over the long term. Management
believes gross margin for the full 2013 fiscal year will be
approximately 38%. The special levy implemented by the Ontario
government on July 1, 2010 served to reduce sales and gross margin
by approximately $1.0 million in the first six months of fiscal
2013 and fiscal 2012.
Selling and administrative expenses increased in the second
quarter and first six months of fiscal 2013 due to an increase in
advertising and promotional initiatives to invest in the launches
of skinnygrape and Verano, investments made to increase tourism at
estate wineries, and consulting expenses incurred to implement cost
control and information technology initiatives. As a percentage of
sales, selling and administrative expenses for the six months ended
September 30, 2012 were 25.9%, down marginally from 26.0% in the
prior year.
Interest expense has declined in fiscal 2013 compared to the
prior year due to a decrease in short and long-term interest rates
partially offset by higher debt levels.
The Company recorded a non-cash gain in the first six months of
fiscal 2013 related to mark-to-market adjustments on an interest
rate swap and foreign exchange contracts aggregating approximately
$0.4 million compared to a loss of $0.4 million in the prior 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 income received in fiscal 2013 related primarily to $0.5
million recorded upon the expropriation of a small part of the
property that surrounds the Company's Port Moody facility which was
closed effective December 31, 2005. The entire idle property is
also being used, on a temporary basis, while construction of a
rapid transit project takes place. Payments amounting to $2.0
million for the use of the property were received in advance and
were recorded as deferred income. The amount received is being
reported as other (income) expenses over the five-year term of the
expropriation, which began on July 1, 2012.
Net earnings excluding gains (losses) on derivative financial
instruments, other expenses, and the related income tax effect of
these items for the three and six months ended September 30, 2012
were $3.8 million and $8.4 million, respectively compared to $3.8
million and $8.1 million in the same periods last year. Net
earnings for the second quarter of fiscal 2013 were $4.3 million or
$0.31 per Class A Share compared to $3.4 million or $0.24 per Class
A Share in the prior year. For the six months ended September 30,
2012 net earnings were $9.0 million or $0.65 per Class A Share
compared to $7.3 million or $0.52 per Class A Share last year.
Strong Financial Position
Working capital at September 30, 2012 increased to $41.0 million
compared to $34.9 million at March 31, 2012. The change related to
higher levels of accounts receivable and inventory and a reduction
in bank indebtedness which were offset by higher levels of accounts
payable and accrued charges. The Company's debt to equity ratio was
0.81:1 at September 30, 2012 compared to 0.87:1 at March 31, 2012.
Shareholders' equity as at September 30, 2012 was $125.7 million or
$8.79 per common share compared to $120.6 million or $8.43 per
common share as at March 31, 2012. The increase in shareholders'
equity is primarily due to higher net earnings for the year
partially offset by the payment of dividends.
In the first six months of fiscal 2013 the Company generated
cash from operating activities, after changes in non-cash working
capital items, of $11.7 million compared to $10.2 million in the
prior year. Cash flow from operating activities has increased in
fiscal 2013 due to strong earnings performance, the $2.0 million
advance payments received for the use of the Port Moody property
and the higher levels of accounts payable partially offset by
higher accounts receivable due to the increase in sales for the
period and higher inventory due to the earlier harvest of grapes in
the current year.
Recent Events
The Company is pleased to confirm that its popular Peller
Estates wines remain the top-selling brand in Provincial liquor
stores across Canada. In addition, the Company's Trius portfolio
stands as one of the top-three Vintner's Quality Alliance (VQA)
brands in the country, and its new Crush brand was among the top
new VQA product launches at the Liquor Control Board of Ontario
(LCBO). The Company is also pleased to announce that its Peller
Estates wines have been selected by world-famous chef Jamie Oliver
to be listed on the menu of his popular and well-respected London
restaurant "Fifteen".
"We are very proud of the performance of our key brands, a
testament to the quality and value proposition of our wine
portfolio and the success of our proven sales and marketing
strategies," Mr. Peller stated.
During fiscal 2013 the Company launched its new Verano wines
imported from Spain, as well as skinnygrape, Canada's first low
calorie wine. Thirty Bench's award-winning Riesling has been
included in the "Vintages Essentials Collection" at the LCBO, while
the Company's Red Rooster wines are now fully distributed and
available in all British Columbia markets. In addition, the Company
is now approaching the capability to harvest a full crop from its
300 acre vineyard that was recently planted in BC's Okanagan
Valley, increasing the Company's VQA grape production by 50% in the
Province.
Financial Highlights (Unaudited)
(Complete condensed consolidated financial statements to follow)
----------------------------------------------------------------------------
(in $000 except as otherwise stated) Three Months Six Months
For the Period Ended September 30, 2012 2011 2012 2011
----------------------------------------------------------------------------
Sales 73,082 69,990 145,744 139,397
Gross margin 28,102 27,272 56,329 54,585
Gross margin (% of sales) 38.5% 39.0% 38.6% 39.2%
Selling and administrative expenses 19,205 18,467 37,755 36,298
EBITA 8,897 8,805 18,574 18,287
Unrealized (gain) loss on financial
instruments (198) 113 (396) 413
Other (income) expenses (513) 492 (427) 656
Net earnings 4,340 3,385 9,002 7,296
Earnings per share - Class A $ 0.31 $ 0.24 $ 0.65 $ 0.52
Earnings per share - Class B $ 0.27 $ 0.22 $ 0.56 $ 0.46
Dividend per share - Class A
(annual) $ 0.360 $ 0.360
Dividend per share - Class B
(annual) $ 0.314 $ 0.314
Cash provided by operations (after
changes in non-cash working capital
items) 11,722 10,155
Working capital 40,953 37,101
Shareholders' equity per share $ 8.79 $ 8.43
----------------------------------------------------------------------------
The Company calculates net earnings excluding gains (losses) on
derivative financial instruments, other expenses, and the related
income tax effect as follows:
----------------------------------------------------------------------------
For the three For the six
months ended months ended
(Unaudited) September 30, September 30,
(in thousands of $) 2012 2011 2012 2011
----------------------------------------------------------------------------
Net earnings 4,340 3,385 9,002 7,296
Net unrealized losses (gains) on derivatives (198) 113 (396) 413
Other (income) expenses (513) 492 (427) 656
Income tax effect of the above 185 (164) 214 (289)
----------------------------------------------------------------------------
Net earnings excluding gains (losses) on
derivative financial instruments, other
expenses, and the related income tax effect 3,814 3,826 8,393 8,076
----------------------------------------------------------------------------
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, Wayne Gretzky, 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, skinnygrape and Verano.
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, Cellar Craft, 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 a partnership 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) and net earnings excluding
gains (losses) on derivative financial instruments, other expenses,
and the related income tax effect as defined above. 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 labeling 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
Condensed Consolidated Balance Sheets
Unaudited
These financial statements have not been reviewed by our auditors
----------------------------------------------------------------------------
----------------------------------------------------------------------------
September 30 March 31
2012 2012
(in thousands of Canadian dollars) $ $
----------------------------------------------------------------------------
Assets
Current Assets
Accounts receivable 29,186 24,937
Inventory 112,033 110,256
Current portion of biological assets 3,587 881
Prepaid expenses and other assets 2,431 1,338
------------------------------
147,237 137,412
Property, plant, and equipment 88,072 84,490
Biological assets 13,134 12,556
Intangibles 13,004 13,621
Goodwill 37,473 37,473
------------------------------
298,920 285,552
------------------------------
------------------------------
Liabilities
Current Liabilities
Bank indebtedness 52,954 57,495
Accounts payable and accrued liabilities 43,736 37,118
Dividends payable 1,252 1,252
Income taxes payable 1,087 40
Current portion of derivative financial
instruments 1,174 1,272
Current portion of long-term debt 6,081 5,366
------------------------------
106,284 102,543
Long-term debt 42,956 41,456
Long-term derivative financial instruments 1,645 1,943
Post-employment benefit obligations 8,631 7,151
Deferred income 1,515 -
Deferred income taxes 12,178 11,907
------------------------------
173,209 165,000
------------------------------
Shareholders' Equity
Capital stock 7,026 7,026
Retained earnings 118,685 113,526
------------------------------
125,711 120,552
------------------------------
298,920 285,552
------------------------------
------------------------------
The above statements should be read in conjunction with the
entire interim consolidated financial statements and notes.
They will be available on the Investor Relations section of
www.andrewpeller.com or at www.sedar.com.
ANDREW PELLER LIMITED
Condensed 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
2012 2011 2012 2011
(in thousands of Canadian dollars) $ $ $ $
----------------------------------------------------------------------------
Sales 73,082 69,990 145,744 139,397
Cost of goods sold 44,980 42,718 89,415 84,812
Amortization of plant and equipment
used in production 1,138 1,211 2,347 2,444
--------------------------------------
Gross profit 26,964 26,061 53,982 52,141
Selling and administration 19,205 18,467 37,755 36,298
Amortization of plant, equipment, and
intangibles used in selling and
administration 1,012 717 1,780 1,431
Interest 1,332 1,482 2,578 3,031
--------------------------------------
Operating earnings 5,415 5,395 11,869 11,381
Net unrealized losses (gains) on
derivative financial instruments (198) 113 (396) 413
Other (income) expenses (513) 492 (427) 656
--------------------------------------
Earnings before income taxes 6,126 4,790 12,692 10,312
--------------------------------------
Provision for income taxes
Current 1,296 1,311 2,949 2,827
Deferred 490 94 741 189
--------------------------------------
1,786 1,405 3,690 3,016
--------------------------------------
Net earnings for the period 4,340 3,385 9,002 7,296
Net earnings per share
Basic and diluted
Class A shares 0.31 0.24 0.65 0.52
--------------------------------------
--------------------------------------
Class B shares 0.27 0.22 0.56 0.46
--------------------------------------
--------------------------------------
The above statements should be read in conjunction with the
entire interim consolidated financial statements and notes.
They will be available on the Investor Relations section of
www.andrewpeller.com or at www.sedar.com.
ANDREW PELLER LIMITED
Condensed Consolidated Statements of Comprehensive Income
Unaudited
These financial statements have not been reviewed by our auditors
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the three For the six
months ended months ended
September 30 September 30
2012 2011 2012 2011
(in thousands of Canadian dollars) $ $ $ $
----------------------------------------------------------------------------
Net earnings for the period 4,340 3,385 9,002 7,296
Net actuarial losses on post-employment
benefit plans (1,487) (1,531) (1,808) (1,857)
Deferred income taxes 387 398 470 483
------------------------------------
Other comprehensive loss for the period (1,100) (1,133) (1,338) (1,374)
------------------------------------
Net comprehensive income for the period 3,240 2,252 7,664 5,922
------------------------------------
------------------------------------
The above statements should be read in conjunction with the
entire interim consolidated financial statements and notes.
They will be available on the Investor Relations section of
www.andrewpeller.com or at www.sedar.com.
ANDREW PELLER LIMITED
Condensed Consolidated Statements of Cash Flows
Unaudited
These financial statements have not been reviewed by our auditors
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the six For the six
months ended months ended
September 30, September 30,
2012 2011
(in thousands of Canadian dollars) $ $
----------------------------------------------------------------------------
Cash provided by (used in)
Operating activities
Net earnings for the period 9,002 7,296
Adjustments for:
Gain (loss) on disposal of property and
equipment (547) 110
Amortization of plant, equipment, and
intangibles 4,127 3,875
Interest expense 2,578 3,031
Provision for income taxes 3,690 3,016
Revaluation of biological assets 55 556
Post-employment benefits (328) (330)
Deferred income 1,919 -
Net unrealized (gain) loss on derivative
financial instruments (396) 413
Interest paid (2,456) (2,962)
Income taxes paid (1,902) (3,770)
---------------------------------
15,742 11,235
Changes in non-cash working capital items
related to operations (4,020) (1,080)
---------------------------------
11,722 10,155
---------------------------------
Investing activities
Proceeds from disposal of property and
equipment 514 -
Purchase of property, equipment, and
biological assets (8,265) (3,591)
Purchases of intangibles - (28)
Proceeds from disposal of a business 1,000 -
Acquisition of businesses - (600)
---------------------------------
(6,751) (4,219)
---------------------------------
Financing activities
Decrease in bank indebtedness (4,541) (4,891)
Issuance of long-term debt 5,000 50,263
Repayment of long-term debt (2,770) (48,278)
Deferred financing costs (155) (629)
Dividends paid (2,505) (2,401)
---------------------------------
(4,971) (5,936)
---------------------------------
Increase (decrease) in cash during the
period - -
Cash, beginning of period - -
Cash, end of period - -
---------------------------------
---------------------------------
The above statements should be read in conjunction with the
entire interim consolidated financial statements and notes.
They will be available on the Investor Relations section of
www.andrewpeller.com or at www.sedar.com.
Contacts: Andrew Peller Limited Mr. Peter Patchet CFO and EVP
Human Resources (905) 643-4131 Ext.
2210peter.patchet@andrewpeller.com
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