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 nine months ended December 31, 2013.
FISCAL 2014 HIGHLIGHTS:
-- Continued sales growth across majority of trade channels primarily in
our premium wine portfolio
-- Gross margins impacted by intense price competition and increased raw
material costs
-- Selling and administrative expenses decrease due to restructuring
initiative that began in Q4 of fiscal 2013
-- High quality vintage 2013 grape crop largest in Company's history
-- Cash flow from operating activities rises to $19.1 million through first
nine months of year
-- 11% increase in common share dividends announced in June 2013
"We were pleased with our performance through the busy holiday season as we
generated solid sales growth in the majority of our established trade channels.
We look for this growth to continue through the balance of the year," commented
John Peller, President and CEO. "We are also seeing the benefits of a number of
programs implemented to reduce costs and enhance efficiencies which we expect to
result in increased profitability in the coming years."
Sales for the three months ended December 31, 2013 rose 2.6% to $81.9 million.
The third quarter is historically the strongest of the year due to increased
consumer purchases of the Company's products during the holiday season. For the
first nine months of fiscal 2014 sales increased 2.8% to $231.8 million.
Gross margin was 36.0% of sales in the third quarter of fiscal 2014 compared to
38.6% in the same period last year. For the nine months ended December 31, 2013
gross margin was 36.8% of sales compared to 38.6% in the same prior year period.
Gross margins in fiscal 2014 have been affected by continued price competition
in certain Western Canadian markets, higher costs for wine and juice purchased
on international markets, and increased costs to expedite production to meet
higher than anticipated demand for certain products during the third quarter.
The decrease in gross margin was 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 $1.5 million in the first nine months of
fiscal 2014 and fiscal 2013.
Selling and administrative expenses declined in the first nine months of fiscal
2014 due to the ongoing restructuring that began in the fourth quarter of fiscal
2013 in the Company's personal winemaking division. As a percentage of sales,
selling and administrative expenses for the nine months ended December 31, 2013
improved to 23.9% from 25.1% last year.
Earnings before interest, amortization, unrealized derivative gains (losses),
other expenses, and income taxes ("EBITA") were $11.4 million and $30.1 million
for the three and nine months ended December 31, 2013 compared to $11.9 million
and $30.4 million for the same periods in fiscal 2013.
Interest expense declined in fiscal 2014 due to lower debt levels resulting from
improved management of working capital.
Through the first nine months of fiscal 2014 the Company incurred restructuring
charges of $0.4 million in the personal winemaking division related to ongoing
cost savings initiatives to outsource distribution and reduce marketing and
administrative expenses.
The Company recorded a non-cash gain in the first nine months 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 non-cash
gain of $1.1 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
during the year.
Other expenses in fiscal 2014 relate primarily to pension liabilities incurred
for prior service that were negotiated as part of the new collective agreement
with the BC labour union signed in June 2013, partially offset by income from
the expropriation of the Company's Port Moody facility which was closed
effective December 31, 2005. The property is temporarily being 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 and are being recognized as other income over the five-year
term of the expropriation, which began on July 1, 2012.
Adjusted net earnings, defined as net earnings not including restructuring
charges, unrealized losses and gains on derivative financial instruments and
other expenses or income, were $14.7 million for the nine months ended December
31, 2013 compared to $14.5 million in the prior year.
Net earnings for the three and nine months ended December 31, 2013 were $6.0
million or $0.43 per Class A Share and $14.6 million or $1.05 per Class A Share
compared to $6.6 million or $0.47 per Class A Share and $15.5 million or $1.11
per Class A Share, respectively, for the comparable prior year periods. The
reduction in net earnings in fiscal 2014 is primarily due to the decrease in
gross margins, one-time restructuring charges, and the change in non-cash gains
on derivative financial instruments and other income and expenses between the
two fiscal years.
Strong Financial Position
Working capital at December 31, 2013 increased to $48.5 million compared to
$41.7 million at March 31, 2013. Higher inventories and a decrease in bank
indebtedness were partially offset by an increase in income taxes payable. The
Company's debt to equity ratio was 0.71:1 at December 31, 2013 compared to
0.83:1 at March 31, 2013. Shareholders' equity as at December 31, 2013 was
$141.5 million or $9.89 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 solid net earnings for the year partially offset by the payment of dividends.
In the first nine months of fiscal 2014 the Company generated cash from
operating activities, after changes in non- cash working capital items, of $19.1
million compared to $6.7 million in the prior year. Cash flow from operating
activities increased due to strong earnings performance, lower income tax
installments, and a smaller increase in non- cash working capital compared to
the prior year.
Financial Highlights (Unaudited)
(Condensed consolidated financial statements to follow)
----------------------------------------------------------------------------
For the three and nine months
ended December 31, Three Months Nine months
(in $000) 2013 2012(1) 2013 2012(1)
----------------------------------------------------------------------------
Sales 81,854 79,813 231,798 225,557
Gross margin 29,475 30,801 85,376 87,108
Gross margin (% of sales) 36.0% 38.6% 36.8% 38.6%
Selling and administrative
expenses 18,097 18,942 55,302 56,697
EBITA 11,378 11,859 30,074 30,411
Restructuring charge 254 - 353 -
Unrealized gains on financial
instruments (252) (683) (519) (1,079)
Other (income) expenses (22) 214 242 (213)
Net earnings 5,967 6,572 14,599 15,454
Earnings per share - Class A $ 0.43 $ 0.47 $ 1.05 $ 1.11
Earnings per share - Class B $ 0.37 $ 0.41 $ 0.91 $ 0.97
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) 19,148 6,655
Working capital 48,492 45,000
Shareholders' equity per share $ 9.89 $ 9.18
----------------------------------------------------------------------------
(1) Amounts for the period ended December 31, 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 nine months ended
December 31, 2013 and 2012 Three Months Nine months
(in $000) 2013 2012(1) 2013 2012(1)
----------------------------------------------------------------------------
Net earnings 5,967 6,572 14,599 15,454
Restructuring costs 254 - 353 -
Net unrealized gains on derivatives (252) (683) (519) (1,079)
Other expenses (income) (22) 214 242 (213)
Income tax effect of the above 5 122 (20) 336
----------------------------------------------------------------------------
Adjusted earnings 5,952 6,225 14,655 14,498
----------------------------------------------------------------------------
(1) Amounts for the period ended December 31, 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
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31 March 31 April 1
2013 2013 2012
Restated(1) Restated(1)
(in thousands of Canadian dollars) $ $ $
----------------------------------------------------------------------------
Assets
Current Assets
Accounts receivable 24,383 25,484 24,937
Inventory 122,330 115,931 110,256
Current portion of biological assets - 938 881
Prepaid expenses and other assets 1,555 1,573 1,338
Income taxes recoverable - 268 -
---------------------------------------
148,268 144,194 137,412
Property, plant, and equipment 89,330 88,841 84,490
Biological assets 13,826 13,405 12,556
Intangibles 13,305 12,606 13,621
Goodwill 37,473 37,473 37,473
---------------------------------------
302,202 296,519 285,552
---------------------------------------
---------------------------------------
Liabilities
Current Liabilities
Bank indebtedness 53,462 60,099 57,495
Accounts payable and accrued
liabilities 34,064 33,616 37,118
Dividends payable 1,391 1,252 1,252
Income taxes payable 2,472 - 40
Current portion of derivative
financial instruments 1,002 1,107 1,272
Current portion of long-term debt 7,385 6,450 5,366
---------------------------------------
99,776 102,524 102,543
Long-term debt 39,921 41,473 41,456
Long-term derivative financial
instruments 508 1,215 1,943
Post-employment benefit obligations 4,248 6,411 6,665
Deferred income 1,010 1,314 -
Deferred income taxes 15,263 13,881 12,038
---------------------------------------
160,726 166,818 164,645
---------------------------------------
Shareholders' Equity
Capital stock 7,026 7,026 7,026
Retained earnings 134,450 122,675 113,881
---------------------------------------
141,476 129,701 120,907
---------------------------------------
302,202 296,519 285,552
---------------------------------------
---------------------------------------
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.
ANDREW PELLER
LIMITED
Condensed
Consolidated
Statements of
Earnings
Unaudited
These financial
statements have not
been reviewed by For the three For the three For the nine For the nine
our auditors months ended months ended months ended months ended
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, December 31,
December 31, 2012 December 31, 2012
(in thousands of 2013 Restated(1) 2013 Restated(1)
Canadian dollars) $ $ $ $
----------------------------------------------------------------------------
Sales 81,854 79,813 231,798 225,557
Cost of goods sold 52,379 49,012 146,422 138,449
Amortization of
plant and equipment
used in production 1,205 1,180 3,600 3,527
--------------------------------------------------------
Gross profit 28,270 29,621 81,776 83,581
Selling and
administration 18,097 18,942 55,302 56,697
Amortization of
plant, equipment,
and intangibles
used in selling and
administration 732 646 2,367 2,426
Interest 1,241 1,359 3,834 4,079
Restructuring costs 254 - 353 -
--------------------------------------------------------
Operating earnings 7,946 8,674 19,920 20,379
Net unrealized gains
on derivative
financial
instruments (252) (683) (519) (1,079)
Other expeses
(income) (22) 214 242 (213)
--------------------------------------------------------
Earnings before
income taxes 8,220 9,143 20,197 21,671
--------------------------------------------------------
Provision for income
taxes
Current 1,926 2,140 4,690 5,089
Deferred 327 431 908 1,128
--------------------------------------------------------
2,253 2,571 5,598 6,217
--------------------------------------------------------
Net earnings for the
period 5,967 6,572 14,599 15,454
--------------------------------------------------------
--------------------------------------------------------
Net earnings per
share
Basic and diluted
Class A shares 0.43 0.47 1.05 1.11
--------------------------------------------------------
--------------------------------------------------------
Class B shares 0.37 0.41 0.91 0.97
--------------------------------------------------------
--------------------------------------------------------
(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.
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 nine For the nine
our auditors months ended months ended months ended months ended
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, December 31,
December 31, 2012 December 31, 2012
(in thousands of 2013 Restated(1) 2013 Restated(1)
Canadian dollars) $ $ $ $
----------------------------------------------------------------------------
Net earnings for the
period 5,967 6,572 14,599 15,454
Items that are never
reclassified to net
income
Net actuarial gains
(losses) on post-
employment benefit
plans 499 (71) 1,822 (1,755)
Deferred income tax
(provision)
recovery (130) 17 (474) 454
--------------------------------------------------------
Other comprehensive
income (loss) for
the period 369 (54) 1,348 (1,301)
--------------------------------------------------------
Net comprehensive
income for the
period 6,336 6,518 15,947 14,153
--------------------------------------------------------
--------------------------------------------------------
(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.
ANDREW PELLER LIMITED
Condensed Consolidated Statements of Cash Flows
Unaudited
These financial statements have not been reviewed by our auditors
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the nine For the nine
months ended months ended
December 31, December 31,
2013 2012
Restated(1)
(in thousands of Canadian dollars) $ $
----------------------------------------------------------------------------
Cash provided by (used in)
Operating activities
Net earnings for the period 14,599 15,454
Adjustments for:
Loss (gain) on disposal of property and
equipment 63 (547)
Amortization of plant, equipment, and
intangibles 5,967 5,953
Interest expense 3,834 4,079
Provision for income taxes 5,598 6,217
Revaluation of biological assets 99 295
Post-employment benefits (341) (727)
Deferred income (304) 1,819
Net unrealized gain on derivative financial
instruments (519) (1,079)
Interest paid (3,638) (3,853)
Income taxes paid (1,950) (3,201)
----------------------------
23,408 24,410
Changes in non-cash working capital items
related to operations (note 5) (4,260) (17,755)
----------------------------
19,148 6,655
----------------------------
Investing activities
Proceeds from disposal of property and equipment 18 514
Purchase of property, equipment, and biological
assets (6,202) (11,266)
Purchase of intangibles (1,512) -
Proceeds from disposal of a business - 1,000
----------------------------
(7,696) (9,752)
----------------------------
----------------------------
Financing activities
Decrease in bank indebtedness (6,637) 4,789
Issuance of long-term debt 4,086 6,500
Repayment of long-term debt (4,868) (4,280)
Deferred financing costs - (155)
Dividends paid (4,033) (3,757)
----------------------------
(11,452) 3,097
----------------------------
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.
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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