Andrew Peller Limited Reports Strong Results for Fiscal 2014 and 5% Increase in Common Share Dividends

GRIMSBY, ONTARIO--(Marketwired - June 4, 2014) -

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 6^th 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 March 31,	Three Months		Year
(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 (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)			25,018	13,325
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, 2014		March 31, 2013(1)		April 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.