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
continued growth and strong operating and financial performance for the three
months and year ended March 31, 2014.
FISCAL 2014 HIGHLIGHTS:
-- Sales up 3.8% in fourth quarter, 3.0% for full fiscal year on new
product launches and solid performance across majority of trade channels
-- Selling and administrative expenses decrease due to restructuring
initiatives
-- Cash flow from operating activities rises to $25.0 million from $13.3
million in fiscal 2013
-- 5% increase in common share dividends announced
"Fiscal 2014 was another strong year for the Company as we successfully launched
a number of new products and continued to build our presence across all of our
trade channels, specifically with our high-margin premium and ultra-premium
brands," commented John Peller, President and CEO. "We are also pleased to see
recent improvement in our gross margin as we benefit from programs implemented
over the last two years to reduce costs and enhance production efficiencies. We
look for this progress to continue in fiscal 2015."
Sales for the three months ended March 31, 2014 rose 3.8% to $66.0 million from
$63.6 million in the same quarter last year. For the year ended March 31, 2014
sales increased 3.0% to $297.8 million. The Company experienced solid
performance across the majority of its sales channels, including provincial
liquor stores, the network of company-owned retail stores in Ontario, our export
business, and from our award-winning estate wineries. Performance also improved
at the Company's consumer-made wine business.
Gross margin was 34.2% of sales in the fourth quarter of fiscal 2014 compared to
35.6% in the same period last year. For the year ended March 31, 2014 gross
margin was 36.3% of sales compared to 38.0% in fiscal 2013. Gross margins in
fiscal 2014 have been affected by higher costs for wine, juice, and concentrate
purchased on international markets and intense price competition in Western and
Atlantic Canada. 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 $2.0 million in fiscal
2014 and fiscal 2013.
Selling and administrative expenses declined in 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 year ended March 31, 2014 improved to 24.9% from
26.4% last year.
Earnings before interest, amortization, unrealized derivative gains (losses),
other expenses, and income taxes ("EBITA") were $3.7 million and $33.7 million
for the three months and year ended March 31, 2014 compared to $3.1 million and
$33.5 million for the same periods in fiscal 2013.
In fiscal 2014 the Company incurred restructuring charges of $1.4 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 fiscal 2014 related to mark-to-market
adjustments on an interest rate swap and foreign exchange contracts aggregating
approximately $0.8 million compared to a non-cash gain of $1.3 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 which were 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 $14.6 million for the year ended March 31, 2014
compared to $14.0 million in the prior year.
Net earnings (loss) for the three months and year ended March 31, 2014 were
$(0.6) million or $(0.04) per Class A Share and $14.0 million or $1.01 per Class
A Share compared to $(0.9) million or $(0.07) per Class A Share and $14.5
million or $1.04 per Class A Share for the comparable prior year periods. The
reduction in net earnings in fiscal 2014 is primarily due to the decrease in
gross margins, the one-time restructuring charges, 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 March 31, 2014 increased to $44.6 million compared to $41.7
million at March 31, 2013. An increase in inventory and a decrease in bank
indebtedness more than offset an increase in accounts payable and accrued
charges and a decrease in accounts receivable. The Company's debt to equity
ratio was 0.73:1 at March 31, 2014 compared to 0.83:1 at March 31, 2013.
Shareholders' equity as at March 31, 2014 was $138.0 million or $9.65 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 fiscal 2014 the Company generated cash from operating activities, after
changes in non-cash working capital items, of $25.0 million compared to $13.3
million in the prior year. Cash flow from operating activities increased due to
strong earnings performance and improved use of working capital compared to the
prior year.
On April 28, 2014 the Company renegotiated its credit facilities to support its
strategic direction and to capitalize on lower debt service costs. These
facilities now mature on April 28, 2019. The operating loan facility was
increased to $90.0 million and the term loan was increased to $60.0 million. The
interest rate on the term loan was effectively fixed at 4.93% through August 31,
2015 and at 3.91% for the period from September 1, 2015 to April 28, 2019. The
Company also added a $15.0 million facility to fund future capital expenditures
that will also mature on April 28, 2019. Monthly amortization payments on the
term loan were reduced to $0.333 million.
Increase in Common Share Dividends
On June 4, 2014 the Company's Board of Directors announced a 5% increase in
common share dividends for shareholders of record on June 30, 2014 payable on
July 4, 2014. The annual dividends on Class A Shares were increased to $0.420
from $0.400 per share and the dividends on Class B Shares were increased to
$0.365 per share from $0.348 per share.
"We are very pleased to be increasing our common share dividends, the 6th
increase in 9 years, and a testament to our commitment to enhance shareholder
value over the long term," Mr. Peller stated.
Investor Conference Call
An investor conference call hosted by John Peller, President and CEO and Peter
Patchet, CFO, will be held Thursday, June 5, 2014 at 10:00 a.m. EST. The
telephone numbers for the conference call are: Local/International: (416)
340-2216, North American Toll Free: (866) 226-1792. The telephone numbers to
listen to the call after it is completed (Instant Replay) are
local/international (905) 694-9451 or North American toll free (800) 408-3053.
The Passcode for the Instant Replay is 6016172#. The Instant Replay will be
available until midnight, June 12, 2014. The call will also be archived on the
Company's website at www.andrewpeller.com
Financial Highlights (Unaudited)
(Condensed consolidated financial statements to follow)
----------------------------------------------------------------------------
For the three months and year ended Three Months Year
March 31,
(in $000 ) 2014 2013(1) 2014 2013(1)
----------------------------------------------------------------------------
Sales 66,026 63,586 297,824 289,143
Gross margin 22,606 22,635 107,982 109,743
Gross margin (% of sales) 34.2% 35.6% 36.3% 38.0%
Selling and administrative expenses 18,951 19,557 74,253 76,254
EBITA 3,655 3,078 33,729 33,489
Restructuring charge 1,056 1,118 1,409 1,118
Net unrealized gains on derivatives (231) (216) (750) (1,295)
Other (income) expenses (97) (331) 145 (544)
Net earnings (578) (935) 14,021 14,519
Earnings per share - Class A $(0.04) $(0.07) $1.01 $1.04
Earnings per share - Class B $(0.03) $(0.06) $0.88 $0.91
Dividend per share - Class A $0.400 $0.360
(annual)
Dividend per share - Class B $0.348 $0.314
(annual)
Cash provided by operations (after 25,018 13,325
changes in non-cash working capital
items)
Working capital 44,564 41,670
Shareholders' equity per share $9.65 $9.07
----------------------------------------------------------------------------
(1) Amounts for the periods ended March 31, 2013 were restated to reflect the
adoption of the amendments to IAS 19. Please refer to the Notes to the
Consolidated Financial Statements for the year.
The Company calculates adjusted earnings as follows:
----------------------------------------------------------------------------
For the three months and year ended
March 31, 2014 and 2013 Three Months Year
(in $000)
Unaudited 2014 2013(1) 2014 2013(1)
----------------------------------------------------------------------------
Net earnings (578) (935) 14,021 14,519
Restructuring costs 1,056 1,118 1,409 1,118
Net unrealized gains on derivatives (231) (216) (750) (1,295)
Other expenses (income) (97) (331) 145 (544)
Income tax effect of the above (189) (148) (209) 187
----------------------------------------------------------------------------
Adjusted earnings (39) (512) 14,616 13,985
----------------------------------------------------------------------------
(1) Amounts for the periods ended March 31, 2013 were restated to reflect the
adoption of the amendments to IAS 19. Please refer to the Notes to the
Consolidated Financial Statements for the year.
About Andrew Peller Limited
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, Wine Country Vintners, and Wine
Country Merchants 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. More information about the
Company can be found at www.andrewpeller.com.
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
Consolidated Balance Sheets
----------------------------------------------------------------------------
Unaudited
(in thousands of Canadian dollars)
March 31, March 31, April 1,
2014 2013(1) 2012(1)
Assets
Current assets
Accounts receivable $ 22,693 $ 25,484 $ 24,937
Inventories 120,751 115,931 110,256
Current portion of biological
assets 1,062 938 881
Prepaid expenses and other
assets 1,381 1,573 1,338
Income taxes recoverable 240 268 -
----------------------------------------
146,127 144,194 137,412
Property, plant and equipment 90,152 88,841 84,490
Biological assets 14,054 13,405 12,556
Intangible assets 13,209 12,606 13,621
Goodwill 37,473 37,473 37,473
----------------------------------------
$ 301,015 $ 296,519 $ 285,552
----------------------------------------
----------------------------------------
Liabilities
Current liabilities
Bank indebtedness $ 54,407 $ 60,099 $ 57,495
Accounts payable and accrued
liabilities 37,371 33,616 37,118
Dividends payable 1,391 1,252 1,252
Income taxes payable - - 40
Current portion of derivative
financial instruments 1,002 1,107 1,272
Current portion of long-term
debt 7,392 6,450 5,366
----------------------------------------
101,563 102,524 102,543
Long-term debt 38,328 41,473 41,456
Long-term derivative financial
instruments 268 1,215 1,943
Post-employment benefit
obligations 6,132 6,411 6,665
Deferred income 910 1,314 -
Deferred income taxes 15,811 13,881 12,038
----------------------------------------
163,012 166,818 164,645
----------------------------------------
Shareholders' Equity
Capital stock 7,026 7,026 7,026
Retained earnings 130,977 122,675 113,881
----------------------------------------
138,003 129,701 120,907
----------------------------------------
$ 301,015 $ 296,519 $ 285,552
----------------------------------------
----------------------------------------
Commitments
(1) Restated to reflect the adoption of IAS 19.
The above statements should be read in conjunction with the entire annual
consolidated financial statements and notes.
They will be available on the Investor Relations section of
http://www.andrewpeller.com/ or at http://www.sedar.com/ on June 26, 2014.
Andrew Peller Limited
Consolidated Statements of Earnings
For the years ended March 31, 2014 and 2013
----------------------------------------------------------------------------
Unaudited
(in thousands of Canadian dollars, except per share amounts)
2014 2013 (1)
Sales $ 297,824 $ 289,143
Cost of goods sold 189,842 179,400
Amortization of plant and equipment used in
production 4,979 5,098
--------------------------
Gross profit 103,003 104,645
Selling and administration 74,253 76,254
Amortization of equipment and intangible assets
used in selling and administration 3,316 3,030
Interest 5,386 5,427
Restructuring costs 1,409 1,118
--------------------------
Operating earnings 18,639 18,816
Net unrealized gains on derivative financial
instruments (750) (1,295)
Other expenses (income) 145 (544)
--------------------------
Earnings before income taxes 19,244 20,655
--------------------------
Provision for income taxes
Current 3,239 4,045
Deferred 1,984 2,091
--------------------------
5,223 6,136
--------------------------
Net earnings for the year $ 14,021 $ 14,519
--------------------------
--------------------------
Net earnings per share
Basic and diluted
Class A shares $ 1.01 $ 1.04
--------------------------
--------------------------
Class B shares $ 0.88 $ 0.91
--------------------------
--------------------------
(1) Restated to reflect the adoption of IAS 19.
The above statements should be read in conjunction with the entire annual
consolidated financial statements and notes.
They will be available on the Investor Relations section of
http://www.andrewpeller.com/ or at http://www.sedar.com/ on June 26, 2014.
Andrew Peller Limited
Consolidated Statements of Comprehensive Income
For the years ended March 31, 2014 and 2013
----------------------------------------------------------------------------
Unaudited
(in thousands of Canadian dollars)
2014 2013(1)
Net earnings for the year $ 14,021 $ 14,519
--------------------------
Items that are never reclassified to net
earnings
Net actuarial losses on post-employment benefit
plans (210) (964)
Deferred income taxes 54 248
--------------------------
Other comprehensive loss for the year (156) (716)
--------------------------
Net comprehensive income for the year $ 13,865 $ 13,803
--------------------------
--------------------------
(1) Restated to reflect the adoption of IAS 19.
The above statements should be read in conjunction with the entire annual
consolidated financial statements and notes.
They will be available on the Investor Relations section of
http://www.andrewpeller.com/ or at http://www.sedar.com/ on June 26, 2014.
Andrew Peller Limited
Consolidated Statements of Cash Flows
For the years ended March 31, 2014 and 2013
----------------------------------------------------------------------------
Unaudited
(in thousands of Canadian dollars)
2014 2013 (1)
Cash provided by (used in)
Operating activities
Net earnings for the year $ 14,021 $ 14,519
Adjustments for
Loss (gain) on disposal of property and
equipment 154 (536)
Amortization of plant, equipment and
intangible assets 8,295 8,128
Interest expense 5,386 5,427
Provision for income taxes 5,223 6,136
Revaluation of biological assets - net of
insurance recovery 67 (33)
Net unrealized loss on derivative
financial instruments (750) (1,295)
Post-employment benefits (489) (1,218)
Deferred income (404) 1,718
Interest paid (4,904) (5,108)
Income taxes paid (3,211) (4,353)
--------------------------
23,388 23,385
Change in non-cash working capital items related
to operations 1,630 (10,060)
--------------------------
25,018 13,325
--------------------------
Investing activities
Proceeds from disposal of property, plant and
equipment 18 533
Purchase of property, equipment and vine
biological assets (9,388) (12,949)
Purchase of intangible assets (1,797) -
Proceeds from disposal of a business - 1,000
--------------------------
(11,167) (11,416)
--------------------------
Financing activities
(Decrease) increase in bank indebtedness (5,692) 2,604
Issuance of long-term debt 4,086 6,500
Repayment of long-term debt (6,821) (5,849)
Deferred financing costs - (155)
Dividends paid (5,424) (5,009)
--------------------------
(13,851) (1,909)
--------------------------
Cash - Beginning and end of year $ - $ -
--------------------------
--------------------------
(1) Restated to reflect the adoption of IAS 19
The above statements should be read in conjunction with the entire annual
consolidated financial statements and notes.
They will be available on the Investor Relations section of
http://www.andrewpeller.com/ or at http://www.sedar.com/ on June 26, 2014.
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
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