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) ("APL" or the "Company") announced
today its results for the three and six months ended September 30, 2013.
FISCAL 2014 HIGHLIGHTS:
-- Strong sales growth of 5.7% in second quarter on solid performance
across majority of trade channels
-- Selling and administrative expenses decrease due to restructuring
initiative completed in Q4 of fiscal 2013
-- EBITA up 1.5% in second quarter
-- Cash flow from operating activities rises significantly to $18.3 million
through first six months of year
-- 11% increase in common share dividends announced in June 2013
"We saw very strong organic sales growth in the second quarter driven by solid
performance in the majority of our key trade channels including provincial
liquor boards, export sales, wine agencies, and our personal winemaking
business. Looking ahead, we are confident we will generate another year of
record sales and earnings for fiscal 2014," commented John Peller, President and
CEO. "We were also pleased to announce an 11% increase in common share dividends
in June, a reflection of our highly positive outlook and our commitment to
enhancing long-term shareholder value."
Sales for the three months ended September 30, 2013 rose 5.7% to $77.2 million.
For the first six months of fiscal 2014 sales increased 2.9% to $149.9 million.
Gross margin was 36.4% of sales in the second quarter of fiscal 2014 compared to
38.4% in the same period last year. For the six months ended September 30, 2013
gross margin was 37.3% of sales compared to 38.6% in the same prior year period.
Gross margin percentage was negatively affected by increased price competition
in Western Canada and by the higher cost for wine and juice purchased on
international markets. These decreases were partially offset by successful cost
control initiatives to reduce distribution, operating, and packaging expenses. A
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 2014 and fiscal 2013.
Selling and administrative expenses declined in the first six months of fiscal
2014 due to the restructuring that occurred in the fourth quarter of fiscal 2013
in our personal winemaking division. As a percentage of sales, selling and
administrative expenses for the three and six months ended September 30, 2013
improved to 24.7% and 24.8%, respectively, from 26.3% and 25.9% in the
comparable periods last year.
Earnings before interest, amortization, unrealized derivative gains (losses),
other expenses, and income taxes ("EBITA") were $9.0 million and $18.7 million
for the three and six months ended September 30, 2013 up from $8.9 million and
$18.6 million for the same periods in fiscal 2013.
Interest expense has declined in fiscal 2014 compared to the prior year due to
lower debt caused primarily by a decrease in inventory.
In the second quarter of fiscal 2014 the Company incurred a one-time
restructuring charge of $0.1 million in its personal winemaking division related
to ongoing cost savings initiatives to outsource distribution and reductions in
marketing and administrative expenses.
The Company recorded a non-cash loss in the second quarter of fiscal 2014
related to mark-to-market adjustments on an interest rate swap and foreign
exchange contracts aggregating approximately $0.5 million compared to a gain of
$0.2 million in the prior year's second quarter. For the six months ended
September 30, 2013 the Company recorded a gain of $0.3 million compared to a
gain of $0.4 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
during the year.
Other expenses related primarily to pension liabilities incurred for prior
service in the collective agreement with the BC union. In fiscal 2013, other
income 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 property has been temporarily
used as a staging area for the construction of a rapid transit project. 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 over the five-year term of the expropriation, which began on July
1, 2012.
Adjusted earnings for the three and six months ended September 30, 2013 were
$4.2 million and $8.7 million compared to $3.8 million and $8.3 million for the
comparable prior year periods.
Net earnings for the three and six months ended September 30, 2013 were $3.5
million or $0.25 per Class A Share and $8.6 million or $0.62 per Class A Share
compared to $4.3 million or $0.31 per Class A Share and $8.9 million or $0.64
per Class A Share for the comparable prior year periods. The reduction in net
earnings in fiscal 2014 is primarily due to the significant change in non-cash
gains and losses on derivative financial instruments and other income and
expenses between the two fiscal years.
Strong Financial Position
Working capital at September 30, 2013 increased to $42.9 million compared to
$41.7 million at March 31, 2013. The increase related to higher accounts
receivable due to the seasonality of sales and a decrease in bank indebtedness
which was partially offset by a reduction in inventory and an increase in
accounts payable and accrued liabilities. The Company's debt to equity ratio was
0.72:1 at September 30, 2013 compared to 0.83:1 at March 31, 2013. Shareholders'
equity as at September 30, 2013 was $136.5 million or $9.55 per common share
compared to $129.7 million or $9.07 per common share as at March 31, 2013. The
increase in shareholders' equity is due to higher net earnings for the year
partially offset by the payment of dividends.
In the first six months of fiscal 2014 the Company generated cash from operating
activities, after changes in non- cash working capital items, of $18.3 million
compared to $11.7 million in the prior year. Cash flow from operating activities
increased due to strong earnings performance, lower income tax installments, and
an increase in non-cash working capital compared to the prior year.
Investor Conference Call
An investor conference call will be hosted by John Peller, President and Chief
Executive Officer and Peter Patchet, Chief Financial Officer on Wednesday,
November 6, 2013 at 9:30 am ET. The telephone numbers for the conference call
are Local Toronto / International: (416) 340-2216 or North American Toll Free:
(866) 226-1792. The telephone numbers to listen to the call after it is
completed (Instant Replay) are (905) 694-9451 or toll free (800) 408-3053. The
Passcode for the Instant Replay is 4431099#. The Instant Replay will be
available until midnight, November 13, 2013. A recording of the conference call
will also be available on the Company's web site at www.andrewpeller.com.
Financial Highlights (Unaudited)
(Condensed consolidated financial statements to follow)
----------------------------------------------------------------------------
For the three and six months ended
September 30, Three Months Six Months
(in $000) 2013 2012(1) 2013 2012(1)
----------------------------------------------------------------------------
Sales 77,226 73,082 149,944 145,744
Gross margin 28,091 28,091 55,901 56,307
Gross margin (% of sales) 36.4% 38.4% 37.3% 38.6%
Selling and administrative expenses 19,070 19,205 37,205 37,755
EBITA 9,021 8,886 18,696 18,552
Restructuring charge 99 - 99 -
Unrealized losses (gains) on
financial instruments 464 (198) (267) (396)
Other expenses (income) 296 (513) 264 (427)
Net earnings 3,540 4,280 8,632 8,882
Earnings per share - Class A $ 0.25 $ 0.31 $ 0.62 $ 0.64
Earnings per share - Class B $ 0.22 $ 0.27 $ 0.54 $ 0.56
Dividend per share - Class A
(annual) $ 0.400 $ 0.360
Dividend per share - Class B
(annual) $ 0.348 $ 0.314
Cash provided by operations (after
changes in non-cash working capital
items) 18,339 11,722
Working capital 42,942 40,953
Shareholders' equity per share $ 9.55 $ 8.82
----------------------------------------------------------------------------
(1) Amounts for the period ended September 30, 2012 were restated to
reflect the adoption of the amendments to IAS 19. Please refer to Note
2 in the Notes to the Financial Statements for the period.
The Company calculates adjusted earnings as follows:
----------------------------------------------------------------------------
For the three and six months ended September
30, 2013 and 2012 Three Months Six Months
(in $000) 2013 2012(1) 2013 2012(1)
----------------------------------------------------------------------------
Net earnings 3,540 4,280 8,632 8,882
Restructuring costs 99 - 99 -
Net unrealized losses (gains) on derivatives 464 (198) (267) (396)
Other expenses (income) 296 (513) 264 (427)
Income tax effect of the above (223) 185 (25) 214
----------------------------------------------------------------------------
Adjusted earnings 4,176 3,754 8,703 8,273
----------------------------------------------------------------------------
(1) Amounts for the period ended September 30, 2012 were restated to
reflect the adoption of the amendments to IAS 19. Please refer to Note
2 in the Notes to the Financial Statements for the period.
About Andrew Peller Ltd.
Andrew Peller Limited 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 brands including Peller Estates
French Cross in the East, Peller Estates Proprietors Reserve in the West, Copper
Moon, XOXO, skinnygrape, Black Cellar and Verano. Hochtaler, Domaine D'Or,
Schloss Laderheim, Royal, and Sommet are our key value priced brands. The
Company imports wines from major wine regions around the world to blend with
domestic wine to craft these popularly priced and value priced 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,
Australia, and China. 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 Cellar Craft.
The Company owns and operates more 102 well-positioned independent retail
locations in Ontario under The Wine Shop and Wine Country 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 produce and
market the Wayne Gretzky 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.
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 adjusted earnings as defined above. The Company's method of
calculating EBITA, gross margin, and adjusted earnings 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
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 April 1
2013 2013 2012
Restated(1) Restated(1)
(in thousands of Canadian
dollars) $ $ $
----------------------------------------------------------------------------
Assets
Current Assets
Accounts receivable 28,725 25,484 24,937
Inventory 108,121 115,931 110,256
Current portion of biological
assets 3,510 938 881
Prepaid expenses and other
assets 1,624 1,573 1,338
Income taxes recoverable - 268 -
---------------------------------------------
141,980 144,194 137,412
Property, plant, and equipment 89,702 88,841 84,490
Biological assets 13,784 13,405 12,556
Intangibles 13,039 12,606 13,621
Goodwill 37,473 37,473 37,473
---------------------------------------------
295,978 296,519 285,552
---------------------------------------------
Liabilities
Current Liabilities
Bank indebtedness 52,373 60,099 57,495
Accounts payable and accrued
liabilities 35,497 33,616 37,118
Dividends payable 1,391 1,252 1,252
Income taxes payable 2,280 - 40
Current portion of derivative
financial instruments 1,007 1,107 1,272
Current portion of long-term
debt 6,490 6,450 5,366
---------------------------------------------
99,038 102,524 102,543
Long-term debt 38,839 41,473 41,456
Long-term derivative financial
instruments 678 1,215 1,943
Post-employment benefit
obligations 4,976 6,411 6,665
Deferred income 1,111 1,314 -
Deferred income taxes 14,806 13,881 12,038
---------------------------------------------
159,448 166,818 164,645
---------------------------------------------
Shareholders' Equity
Capital stock 7,026 7,026 7,026
Retained earnings 129,504 122,675 113,881
---------------------------------------------
136,530 129,701 120,907
---------------------------------------------
295,978 296,519 285,552
---------------------------------------------
Commitments
(1) Restated to reflect the adoption of the amendments to IAS 19.
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.
Condensed
Consolidated
Statements of
Earnings
Unaudited
These financial For the For the For the For the
statements have not three three six six
been reviewed by months months months months
our auditors ended ended ended ended
----------------------------------------------------------------------------
----------------------------------------------------------------------------
September 30, September 30, September 30, September 30,
2013 2012 2013 2012
Restated(1) Restated(1)
(in thousands of
Canadian dollars) $ $ $ $
----------------------------------------------------------------------------
Sales 77,226 73,082 149,944 145,744
Cost of goods sold 49,135 44,991 94,043 89,437
Amortization of
plant and equipment
used in production 1,045 1,138 2,395 2,347
--------------------------------------------------------
Gross profit 27,046 26,953 53,506 53,960
Selling and
administration 19,070 19,205 37,205 37,755
Amortization of
plant, equipment,
and intangibles
used in selling and
administration 909 1,012 1,635 1,780
Interest 1,292 1,403 2,593 2,720
Restructuring costs 99 - 99 -
--------------------------------------------------------
Operating earnings 5,676 5,333 11,974 11,705
Net unrealized
losses (gains) on
derivative
financial
instruments 464 (198) (267) (396)
Other expeses
(income) 296 (513) 264 (427)
--------------------------------------------------------
Earnings before
income taxes 4,916 6,044 11,977 12,528
--------------------------------------------------------
Provision for income
taxes
Current 1,212 1,296 2,764 2,949
Deferred 164 468 581 697
--------------------------------------------------------
1,376 1,764 3,345 3,646
--------------------------------------------------------
Net earnings for the
period 3,540 4,280 8,632 8,882
--------------------------------------------------------
Net earnings per
share
Basic and diluted
Class A shares 0.25 0.31 0.62 0.64
--------------------------------------------------------
Class B shares 0.22 0.27 0.54 0.56
--------------------------------------------------------
(1) Restated to reflect the adoption of the amendments to IAS 19. Refer to note
2 for details.
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 For the three For the three For the six For the six
our auditors months ended months ended months ended months ended
----------------------------------------------------------------------------
----------------------------------------------------------------------------
September 30, September 30, September 30, September 30,
2013 2012 2013 2012
Restated(1) Restated(1)
(in thousands of
Canadian dollars) $ $ $ $
----------------------------------------------------------------------------
Net earnings for the
period 3,540 4,280 8,632 8,882
Items that are never
reclassified to net
income
Net actuarial gains
(losses) on post-
employment benefit
plans 402 (1,425) 1,323 (1,684)
Deferred income tax
(provision)
recovery (105) 371 (344) 437
--------------------------------------------------------
Other comprehensive
income (loss) for
the period 297 (1,054) 979 (1,247)
--------------------------------------------------------
Net comprehensive
income for the
period 3,837 3,226 9,611 7,635
----------------------------------------------------------------------------
(1) Restated to reflect the adoption of the amendments to IAS 19. Refer to note
2 for details.
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,
2013 2012
Restated(1)
(in thousands of Canadian dollars) $ $
----------------------------------------------------------------------------
Cash provided by (used in)
Operating activities
Net earnings for the period 8,632 8,882
Adjustments for:
Loss (gain) on disposal of property and
equipment 63 (547)
Amortization of plant, equipment, and
intangibles 4,030 4,127
Interest expense 2,593 2,720
Provision for income taxes 3,345 3,646
Revaluation of biological assets 66 55
Post-employment benefits (112) (164)
Deferred income (203) 1,919
Net unrealized gain on derivative
financial instruments (267) (396)
Interest paid (2,522) (2,598)
Income taxes paid (216) (1,902)
---------------------------------
15,409 15,742
Changes in non-cash working capital items
related to operations 2,930 (4,020)
---------------------------------
18,339 11,722
---------------------------------
Investing activities
Proceeds from disposal of property and
equipment 18 514
Purchase of property, equipment, and
biological assets (4,349) (8,265)
Purchase of intangibles (927) -
Proceeds from disposal of a business - 1,000
---------------------------------
(5,258) (6,751)
---------------------------------
Financing activities
Decrease in bank indebtedness (7,726) (4,541)
Issuance of long-term debt 586 5,000
Repayment of long-term debt (3,298) (2,770)
Deferred financing costs - (155)
Dividends paid (2,643) (2,505)
---------------------------------
(13,081) (4,971)
---------------------------------
Increase (decrease) in cash during the
period - -
Cash, beginning of period - -
Cash, end of period - -
(1) Restated to reflect the adoption of the amendments to IAS 19. Refer to note
2 for details.
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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Andrew Peller Limited
Mr. Peter Patchet
CFO and EVP Human Resources
(905) 643-4131 Ext. 2210
peter.patchet@andrewpeller.com
www.andrewpeller.com
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