Andrew Peller Limited (TSX:ADW.A)(TSX:ADW.B) (the "Company")
announced today continued strong operating and financial
performance for the three months and year ended March 31, 2013.
FISCAL 2013 HIGHLIGHTS:
-- Sales up 4.4% to record levels on solid growth through majority of trade
channels
-- Net earnings rise 13.5% to $14.8 million or $1.06 per Class A Share
-- Net earnings excluding restructuring charge up 19.9% to $15.6 million or
$1.12 per Class A Share
-- Launch of new brands contributed to organic growth
-- Peller Estates remains top-selling wine brand across Canada
-- Brands continue to win top awards at international wine competitions
-- 11% increase in common share dividends announced
"We are very pleased with our solid growth and strong operating
results in fiscal 2013, and look forward to continued growth in
sales and earnings in the future," commented John Peller, President
and CEO. "With our record results, we were pleased to announce an
11% increase in common share dividends, our 5th increase in 8 years
and a reflection of a highly positive outlook on our future and
commitment to enhancing long-term shareholder value."
Sales for the fourth quarter of fiscal 2013 rose 4.4% to $63.6
million from $60.9 million in the prior year. For the year ended
March 31, 2013 sales increased 4.4% to $289.1 million from $276.9
million last year. The increases in revenues are due primarily to
the positive impact on sales from the licensing agreement with the
Wayne Gretzky winery effective November 8, 2011, the acquisition of
Cellar Craft that was effective October 28, 2011, as well as solid
organic growth arising from new product introductions, 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.
Gross margin was 35.6% of sales in the fourth quarter and 38.0%
for the year ended March 31, 2013 compared to 36.1% and 38.7%
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. A special
levy implemented by the Ontario government on July 1, 2010 served
to reduce sales and gross margin by approximately $2.0 million and
$1.9 million in fiscal 2013 and fiscal 2012 respectively.
Selling and administrative expenses increased in fiscal 2013 due
to an increase in advertising and promotional initiatives across
all trade channels and an increase in consulting expenses incurred
to implement cost control and information technology initiatives.
However, as a percentage of sales, selling and administrative
expenses for the year ended March 31, 2013 decreased to 26.4% from
26.9% last year.
In the fourth quarter of fiscal 2013 the Company incurred a
one-time charge of $1.1 million in its personal winemaking
division. The expenses related to the closing of a Western Canadian
distribution centre as the Company implemented a cost savings
initiative to outsource all of its distribution to an experienced
third-party and reduced certain marketing and administrative
positions.
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 fiscal 2013 related to
mark-to-market adjustments on an interest rate swap and foreign
exchange contracts aggregating approximately $1.3 million compared
to a gain of $0.3 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 income in fiscal 2013 related primarily to $0.5 million
recorded upon expropriation of a small part of the property that
surrounds the Company's Port Moody facility. The entire property is
being temporarily used, as a staging area, 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 over the five-year term of the
expropriation, which began on July 1, 2012. Other expenses in
fiscal 2012 included a $0.4 million fair value adjustment to vines,
$0.2 million in maintenance costs for the Company's Port Moody
facility, and a one-time charge of approximately $0.4 million
related to reassessment of employee payroll taxes from prior
periods.
Net earnings excluding the one-time restructuring charge
incurred in the fourth quarter of fiscal 2013, gains (losses) on
derivative financial instruments, other expenses, and the related
income tax effect of these items for the year ended March 31, 2013
were $14.2 million compared to $13.7 million in the prior year.
Net earnings for the year ended March 31, 2013 were $14.8
million or $1.06 per Class A Share compared to $13.0 million or
$0.93 per Class A Share in fiscal 2012. Excluding the one-time
restructuring charge taken in the fourth quarter of fiscal 2013,
net earnings would have been $15.6 million or $1.12 per Class A
Share.
Strong Financial Position
Working capital at March 31, 2013 increased to $41.7 million
compared to $34.9 million at March 31, 2012. The increase related
to a larger harvest of grapes due to warmer summer temperatures,
higher accounts receivable due to the seasonality of sales, and a
reduction in accounts payable and accrued charges. These amounts
were partially offset by an increase in bank indebtedness. The
Company's debt to equity ratio was 0.83:1 at March 31, 2013
compared to 0.87:1 at March 31, 2012. Shareholders' equity as at
March 31, 2013 was $129.4 million or $9.05 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 due to higher net
earnings for the year partially offset by the payment of
dividends.
In fiscal 2013 the Company generated cash from operating
activities, after changes in non-cash working capital items, of
$13.3 million compared to $7.0 million in the prior year. Cash flow
from operating activities has increased in fiscal 2013 due to
strong earnings performance, the advance payments received for the
use of the Port Moody property, lower income tax installments and a
smaller increase in working capital than in the prior year.
Increase in Common Share Dividends
On June 5, 2013 the Company's Board of Directors announced an
11% increase in common share dividends for shareholders of record
on June 28, 2013 payable on July 5, 2013. The annual dividend on
Class A Shares was increased to $0.400 per share from $0.360 per
share and the Class B Shares increased to $0.348 per share from
$0.314 per share.
Prestigious Awards
The Company's VQA brands in Western Canada received a total of
237 medals in fiscal 2013: of note was the Gold Medal awarded to
Sandhill Small Lots Chardonnay 2011 at Chardonnay du Monde. Other
top gold medals were awarded to Calona Vineyards Chardonnay 2011 at
the Canadian Wine Awards, Red Rooster Pinot Gris 2011 and Peller
Estates Family Series Pinot Gris at the All Canadian Wine
Championships. Red Rooster Cabernet Merlot 2010 was awarded top 25
under $25 in the world by Wine Access.
Eastern Canada VQA brands won a total of 120 awards during the
year. Key awards included Thirty Bench Small Lots Chardonnay 2010
winning Grand Gold at Concours Mondial Bruxelles, 2012 Trius
Sauvignon Blanc winning Gold Medal and Best General List White Wine
at Cuvee 2012, Peller Estates Private Reserve Cabernet Sauvignon
2010 being awarded Best Cabernet Sauvignon at Cuvee 2012, Crush Red
2010 winning Double Gold and Best Non-Bordeaux Blend at the San
Francisco International Wine Competition and 2012 Trius Brut Rose
winning a Gold medal at the All Canadian Wine Championships, 2012.
In addition, Verano Tempranillo Cabernet has recently won two Best
in Class awards in international wine competitions.
Top Market Positions
The Company is pleased to confirm that its popular Peller
Estates wines remained the top-selling brand in Provincial liquor
stores across Canada. The Company's Trius portfolio stands as one
of the top three Vintner's Quality Alliance (VQA) brands in the
country, and the new brand Crush was among the top new VQA product
launches at the Liquor Control Board of Ontario (LCBO).
The Company's export business continues to grow as icewine sales
were strong in airport duty free stores and continued to grow in 21
countries around the world. Today Peller icewine is listed in some
of the top culinary establishments including Jean Georges and Per
Se in New York City and Gordon Ramsay and Jamie Oliver in London,
England. Peller Estates icewine is now served on flights with
British Airways and on board cruise ships such as Celebrity in the
USA and P&O and Cunard in Europe. New duty free listings were
secured in the following airports: Jeju Korea, Gatwick in London,
Las Vegas, Houston and Orlando. An exclusive supply agreement was
reached with the Nuance Duty Free stores at Pearson Airport in
Toronto - the world's single largest retailer of Icewine. Only
Peller Estates, Wayne Gretzky, Trius and Hillebrand icewines will
be sold by Nuance for the next three years.
Financial Highlights (Unaudited)
(Complete condensed consolidated financial statements to follow)
---------------------------------------------------------------------------
(in $000 except as otherwise
stated) Three Months Year
For the Period Ended March 31, 2013 2012 2013 2012
---------------------------------------------------------------------------
Sales 63,586 60,891 289,143 276,883
Gross margin 22,646 21,953 109,787 107,257
Gross margin (% of sales) 35.6% 36.1% 38.0% 38.7%
Selling and administrative
expenses 19,557 19,447 76,254 74,606
EBITA 3,089 2,506 33,533 32,651
Restructuring charge 1,118 - 1,118 -
Unrealized gain on financial
instruments (216) (553) (1,295) (257)
Other (income) expenses (331) 463 (544) 1,163
Net earnings (875) (604) 14,759 13,001
(Loss) earnings per share -
Class A $ (0.06) $ (0.05) $ 1.06 $ 0.93
(Loss) earnings per share -
Class B $ (0.06) $ (0.04) $ 0.92 $ 0.81
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) 13,325 6,993
Working capital 41,670 34,869
Shareholders' equity per share $ 9.05 $ 8.43
---------------------------------------------------------------------------
The Company calculates net earnings excluding restructuring charges, gains
(losses) on derivative financial instruments, other expenses, and the
related income tax effect as follows:
---------------------------------------------------------------------------
For the three months For the year ended
ended March 31, March 31,
Unaudited (in thousands of $) 2013 2012 2013 2012
---------------------------------------------------------------------------
Net earnings (875) (604) 14,759 13,001
Restructuring costs 1,118 - 1,118 -
Net unrealized losses (gains)
on derivatives (216) (553) (1,295) (257)
Other expenses (income) (331) 463 (544) 1,163
Income tax effect of the above (154) 24 195 (245)
---------------------------------------------------------------------------
Net earnings excluding
restructuring charges, gains
(losses) on derivative
financial instruments, other
expenses, and the related
income tax effect (458) (670) 14,233 13,662
---------------------------------------------------------------------------
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,
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, Cellar Craft, and Artful Winemaker.
The Company owns and operates more than 100 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 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.
The Company utilizes EBITA (defined as earnings before interest,
amortization, restructuring costs, 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 restructuring costs, gains (losses) on
derivative financial instruments, other expenses, and the related
income tax effect as defined above. The Company's method of
calculating EBITA, gross margin, and net earnings excluding
restructuring costs, gains (losses) on derivative financial
instruments, other expenses, and the related income tax effect 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)
As at March 31, 2013 and 2012
(in thousands of Canadian dollars)
2013 2012
Assets
Current assets
Accounts receivable $ 25,484 $ 24,937
Inventories 115,931 110,256
Current portion of biological assets 938 881
Prepaid expenses and other assets 1,573 1,338
Income taxes recoverable 268 -
--------------------
144,194 137,412
Property, plant and equipment 88,841 84,490
Biological assets 13,405 12,556
Intangibles 12,606 13,621
Goodwill 37,473 37,473
--------------------
$ 296,519 $ 285,552
--------------------
Liabilities
Current liabilities
Bank indebtedness $ 60,099 $ 57,495
Accounts payable and accrued liabilities 33,616 37,118
Dividends payable 1,252 1,252
Income taxes payable - 40
Current portion of derivative financial instruments 1,107 1,272
Current portion of long-term debt 6,450 5,366
--------------------
102,524 102,543
Long-term debt 41,473 41,456
Long-term derivative financial instruments 1,215 1,943
Post-employment benefit obligations 6,816 7,151
Deferred income 1,314 -
Deferred income taxes 13,772 11,907
--------------------
167,114 165,000
--------------------
Shareholders' Equity
Capital stock 7,026 7,026
Retained earnings 122,379 113,526
--------------------
129,405 120,552
--------------------
$ 296,519 $ 285,552
--------------------
Commitments
The above statements should be read in conjunction with the entire
consolidated financial statements and notes. They will be available through
the Investor Relations section of www.andrewpeller.com or at www.sedar.com
by June 26 2013.
Andrew Peller Limited
Consolidated Statements of Earnings
(Unaudited)
For the years ended March 31, 2013 and 2012
(in thousands of Canadian dollars, except per share amounts)
2013 2012
Sales $ 289,143 $ 276,883
Cost of goods sold 179,356 169,626
Amortization of plant and equipment used in
production 5,098 4,826
--------------------
Gross profit 104,689 102,431
Selling and administration 76,254 74,606
Amortization of equipment and intangibles used in
selling and administration 3,030 3,026
Interest 5,142 5,354
Restructuring costs 1,118 -
--------------------
Operating earnings 19,145 19,445
Net unrealized gains on derivative financial
instruments (1,295) (257)
Other (income) expenses (544) 1,163
--------------------
Earnings before income taxes 20,984 18,539
--------------------
Provision for income taxes
Current 4,045 4,841
Deferred 2,180 697
--------------------
6,225 5,538
--------------------
Net earnings for the year $ 14,759 $ 13,001
--------------------
Net earnings per share
Basic and diluted
Class A shares $ 1.06 $ 0.93
--------------------
Class B shares $ 0.92 $ 0.81
--------------------
The above statements should be read in conjunction with the entire
consolidated financial statements and notes. They will be available through
the Investor Relations section of www.andrewpeller.com or at www.sedar.com
by June 26 2013.
Andrew Peller Limited
Consolidated Statements of Comprehensive Income
(Unaudited)
For the years ended March 31, 2013 and 2012
(in thousands of Canadian dollars)
2013 2012
Net earnings for the year $ 14,759 $ 13,001
Net actuarial losses on post-employment benefit plans (1,212) (2,347)
Deferred income taxes 315 610
--------------------
Other comprehensive loss for the year (897) (1,737)
--------------------
Net comprehensive income for the year $ 13,862 $ 11,264
--------------------
The above statements should be read in conjunction with the entire
consolidated financial statements and notes. They will be available through
the Investor Relations section of www.andrewpeller.com or at www.sedar.com
by June 26 2013.
Andrew Peller Limited
Consolidated Statements of Cash Flows
(Unaudited)
For the years ended March 31, 2013 and 2012
(in thousands of Canadian dollars)
2013 2012
Cash provided by (used in)
Operating activities
Net earnings for the year $ 14,759 $ 13,001
Adjustments for
(Gain) loss on disposal of property and
equipment (536) 203
Amortization of plant, equipment and intangible
assets 8,128 7,852
Impairment of intangible assets - 200
Interest expense 5,142 5,354
Provision for income taxes 6,225 5,538
Revaluation of biological assets - net of
insurance recovery (33) 412
Post-employment benefits (1,547) (761)
Deferred income 1,718 -
Net unrealized loss on derivative financial
instruments (1,295) (257)
Interest paid (4,823) (5,520)
Income taxes paid (4,353) (5,801)
--------------------
23,385 20,221
Change in non-cash working capital items related to
operations (10,060) (13,228)
--------------------
13,325 6,993
--------------------
Investing activities
Proceeds from disposal of property, plant and
equipment 533 27
Purchase of property, equipment and vine biological
assets (12,949) (7,272)
Purchase of intangible assets - (1,395)
Proceeds from disposal of a business 1,000
Acquisition of businesses - (600)
--------------------
(11,416) (9,240)
--------------------
Financing activities
Decrease in bank indebtedness 2,604 8,737
Issuance of long-term debt 6,500 50,263
Repayment of long-term debt (5,849) (50,944)
Deferred financing costs (155) (904)
Dividends paid (5,009) (4,905)
--------------------
(1,909) 2,247
--------------------
Net change in cash during the year - -
Cash - Beginning and End of year $ - $ -
--------------------
The above statements should be read in conjunction with the entire
consolidated financial statements and notes. They will be available through
the Investor Relations section of www.andrewpeller.com or at www.sedar.com
by June 26 2013.
Contacts: Andrew Peller Limited Mr. Peter Patchet CFO and EVP
Human Resources (905) 643-4131 Ext.
2210peter.patchet@andrewpeller.com www.andrewpeller.com
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