Andrew Peller Limited
TSX : ADW.A
TSX : ADW.B

Andrew Peller Limited

June 05, 2008 18:00 ET

Andrew Peller Limited Announces Record Fiscal 2008 Results and Dividend Increase

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.

GRIMSBY, ONTARIO--(Marketwire - June 5, 2008) - Andrew Peller Limited (TSX:ADW.A)(TSX:ADW.B)(the "Company") announced today record results for the three months and year ended March 31, 2008.

FISCAL 2008 HIGHLIGHTS:

- Sales up 3.9% on successful organic growth initiatives

- Gross profit margin increases

- EBITA increases 7.4%

- Normalized net earnings up 10.4%

- Common share dividends increased 10%

- Positive outlook on continued organic growth and strong operating performance

Strong Operating Performance Continues

For the fourth quarter of fiscal 2008, sales increased 4.5% to $52.7 million from $50.4 million last year. For the year ended March 31, 2008, sales were up 3.9% to $237.1 million compared to $228.2 million last year. The increases are due primarily to ongoing initiatives to grow sales of the Company's premium and ultra-premium wines through all trade channels, the introduction of new products over the last twelve months, the return to normal grape supply conditions in Ontario, and improved supply of wine and beer to the Western Canadian markets.

"We continue to build our brands through all our well-established market channels, including our estates wineries, our extensive network of over 100 retail locations, in provincial liquor boards, and at restaurants and other licensed establishments," commented John Peller, President and CEO. "Our investments in acquisitions, our estate wineries, and in enhancing the quality and capacity of our winemaking are continuing to generate significant benefits for our shareholders."

Gross profit as a percentage of sales improved to 44.3% for the three months ended March 31, 2008 compared to 41.4% last year. For fiscal 2008, gross profit as a percentage of sales was 43.3% compared to 41.7% last year. The improved profit margins are the result of increased sales of the Company's premium and ultra-premium wines and the positive impact of the increase in value of the Canadian dollar which partially offset the higher cost of grapes and wine purchased on international markets. Selling and administrative expenses increased marginally for the three months and year ended March 31, 2008 to 35.4% and 30.8% of sales respectively compared with 33.0% and 29.6% of sales for the same periods last year.

As a result of the increased sales and improved gross profit margins, earnings before interest, taxes, amortization, other losses and unusual items (EBITA) increased 10.4% to $4.7 million in the fourth quarter of fiscal 2008 compared to $4.2 million last year. For fiscal 2008, EBITA was up 7.4% to $29.7 million compared to $27.7 million last year.

Net and comprehensive earnings for the three months ended March 31, 2008 were $0.8 million or $0.05 per Class A share compared to $0.4 million or $0.02 per Class A share in the same quarter last year. During the fourth quarter of fiscal 2008 the Company recorded a charge to earnings of approximately $0.3 million related to mark-to-market adjustments on interest rate swaps and foreign exchange contracts. There were no such charges in the fourth quarter of fiscal 2007. For the fiscal year ended March 31, 2008, net and comprehensive earnings increased 20.2% to $11.4 million or $0.78 per Class A share compared to $9.5 million or $0.65 per Class A share last year. Not including the other losses and unusual items in each year, and the impact of changes in future income tax rates, normalized net and comprehensive earnings for the fourth quarter of fiscal 2008 increased to $0.6 million. For the fiscal year ended March 31, 2008, normalized net and comprehensive earnings increased 10.4% to $10.6 million.

Strong Financial Position

The Company's balance sheet remained strong as at March 31, 2008. Working capital was $26.6 million at the end of fiscal 2008 compared to $25.3 million at March 31, 2007. Shareholders' equity at March 31, 2008 rose to $102.7 million or $6.89 per common share from $95.5 million or $6.41 per common share at March 31, 2007 and $89.6 million or $6.02 per Class A share at March 31, 2006.

Common Share Dividend Increase

As a result of the Company's continued strong performance, the Board of Directors was pleased to announce today a 10% increase in common share dividends for shareholders of record on June 30, 2008. The annual dividend on Class A common shares will be increased to $0.33 per share from $0.30 per share. The annual dividend on Class B common shares will be increased to $0.288 per share from $0.261 per share.

"We are very pleased to be implementing our third consecutive dividend increase over the last three years," Mr. Peller commented. "With our record performance in fiscal 2008, and our positive outlook on the future, we are proud to be enhancing value for our shareholders."

Investments to Enhance Future Growth and Performance

A number of investments over the last two years will serve to enhance the Company's growth and financial performance going forward:

- Investments were made to renovate and re-locate a number of the Company's retail stores to provide consumers with a fresh, new and exciting retail format and services. In addition, a new concept store to be located in large grocery retailers was introduced.

- Investments in vineyards located in Ontario and British Columbia are resulting in significant increases in grape supply aimed at increasing production of the Company's high-margin premium and ultra-premium VQA wines.

- New products introduced by Trius, Hillebrand and Peller Estates, as well as other new brands, are experiencing accelerating sales.

- Investments at the Company's Hillebrand Estates winery are generating increased visits and sales.

- The acquisition of Red Rooster, Cascadia Brands and Thirty Bench completed in fiscal 2006, and subsequent investments at these facilities, resulted in strong contributions to fiscal 2008 performance.

"Over the last two years we have made significant investments to increase our presence in the Canadian wine market as well as to enhance the quality of our products and to increase our production capacity to meet the growing demand for our premium and ultra-premium wines," Mr. Peller concluded. "Looking ahead, we are well positioned to capitalize on strong industry fundamentals as wine consumption continues to grow across the country."



Financial Highlights (unaudited - complete consolidated financial statements
to follow)

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Period Ended March 31, Three Months Year
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(in $,000 except per share amounts) 2008 2007 2008 2007
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Sales 52,702 50,419 237,130 228,192
EBITA 4,689 4,249 29,708 27,665
Earnings before other income and
unusual items 1,283 569 15,942 14,325
Other income (loss) and unusual items (417) 7 (718) (206)
Net and comprehensive earnings 802 398 11,381 9,472
Net earnings per share
(Basic per Class A share) $ 0.05 $0.02 $ 0.78 $ 0.65
Cash from operations (after changes
in non-cash working capital items) 3,152 6,856 8,754 4,545
Working capital 26,609 25,316
Shareholders' equity per share $6.89 $ 6.41
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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 vineyards around the world. The Company's award-winning premium and ultra-premium brands include Peller Estates, Trius, Hillebrand, Thirty Bench, Croc Crossing, XOXO, Sandhill, Copper Moon, Calona Vineyards Artist Series and Red Rooster VQA wines. Complementing these premium brands are a number of popular priced products including Hochtaler, Domaine D'Or, Schloss Laderheim, Royal and Sommet. With the acquisition of Cascadia Brands Inc., the Company also markets craft beer under the Granville Island brand. With a focus on serving the needs of all wine consumers, the Company produces and markets consumer-made wine kit products through Winexpert and Vineco International Products. In addition, the Company owns and operates Vineyards Estate Wines and WineCountry Vintners, independent wine retailers in Ontario with more than 100 well-positioned retail locations. Andrew Peller Limited common shares trade on the Toronto Stock Exchange (symbols ADW.A and ADW.B).

The Company utilizes EBITA (defined as earnings before interest, incomes taxes, depreciation, amortization, other income (losses) and unusual items). EBITA is not a recognized measure under GAAP. 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 GAAP 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. In addition, the Company's method of calculating EBITA may differ from the methods used by other companies and, accordingly, may not be comparable to measures used by other companies.

The Company also utilizes normalized net earnings (defined as net earnings before adjustments to income taxes related to changes in future income tax rates, other income (losses) and unusual items). Normalized net earnings is not a recognized measure under GAAP. Management believes that normalized net earnings is a useful supplemental measure to net earnings as it provides an indication to readers of comparable net earnings to the prior year. Readers are cautioned that normalized net earnings should not be construed as an alternative to net earnings determined in accordance with GAAP as an indicator of the Company's performance.

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" provisions of the Securities Act (Ontario) with respect to Andrew Peller Limited ("APL" or the "Company") and its subsidiaries. Such statements include, but are not limited to, statements about the growth of the business in light of the Company's acquisitions; its launch of new premium wines; sales trends in foreign markets; trends in capital expenditures and sales and marketing expenses of the Company; its investments in vineyards; its supply of domestically grown grapes; international grape surplus and price discounting; consumer demand; 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" and similar verbs 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 release, APL has made assumptions and applied certain factors regarding, among other things: future grape, glass bottle and wine prices; the Company's 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 the Company's intellectual property rights; the economic environment; the regulatory requirements regarding producing, marketing, advertising and labelling 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 release and other risks detailed from time to time in the publicly filed disclosure documents of APL 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 release, and except as required by applicable law, APL undertakes no obligation to update or revise these forward-looking statements to reflect new information, future events or circumstances or otherwise, or to explain material differences between actual events after the date of this release and such forward-looking statements.

All information contained in this document is given as at March 31, 2008 unless otherwise indicated.



ANDREW PELLER LIMITED
CONSOLIDATED BALANCE SHEETS
(unaudited) March 31 March 31
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2008 2007
(in thousands of dollars, except per share amounts) $ $
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Assets
Current Assets
Accounts receivable 23,072 21,365
Inventories 93,817 82,990
Prepaid expenses and other assets 4,242 2,983
Income taxes recoverable 823 319
------------------------
121,954 107,657
Property, plant and equipment 94,480 87,143
Goodwill 36,171 36,171
Other assets 7,139 7,985
------------------------
259,744 238,956
------------------------
------------------------

Liabilities
Current Liabilities

Bank indebtedness 57,722 51,449
Accounts payable and accrued liabilities 29,705 24,069
Dividends payable 1,088 917
Current portion of long - term debt 6,830 5,906
------------------------
95,345 82,341

Long-term debt 46,946 44,423
Employee future benefits 3,167 4,007
Future income taxes 11,606 12,663
------------------------
157,064 143,434
------------------------

Shareholders' Equity

Capital stock 7,375 7,375
Retained earnings 95,305 88,147
------------------------
102,680 95,522
------------------------

259,744 238,956
------------------------
------------------------



ANDREW PELLER LIMITED
Consolidated Statements of Earnings and Retained Earnings
(Unaudited)
(in thousands of dollars, For the Three For the Twelve
except per share amounts) Months Ended Months Ended
March 31 March 31
2008 2007 2008 2007
$ $ $ $
-------------------------------------------------------- -------------------
Sales 52,702 50,419 237,130 228,192
Cost of goods sold, excluding
amortization 29,377 29,525 134,403 133,084
-------- -------- --------- ---------
Gross profit 23,325 20,894 102,727 95,108
Selling and administration 18,636 16,645 73,019 67,443
-------- -------- --------- ---------

Earnings before interest and
amortization 4,689 4,249 29,708 27,665
Interest 1,581 1,362 5,964 5,355
Amortization of plant, equipment
and intangible assets 2,137 2,318 7,802 7,985
-------- -------- --------- ---------
Earnings before other items 971 569 15,942 14,325
Other loss 346 0 420 -
Unusual items 71 (7) 298 206
-------- -------- --------- ---------
Earnings before income taxes 554 576 15,224 14,119
-------- -------- --------- ---------

Provision for income taxes
Current 298 101 4,968 4,365
Future (546) 77 (1,125) 282
-------- -------- --------- ---------
(248) 178 3,843 4,647
-------- -------- --------- ---------

Net and comprehensive earnings
for the period 802 398 11,381 9,472

Retained earnings- Beginning of period 95,591 88,666 88,147 82,205

Impact of adopting accounting
pronouncements on April 1, 2007 - - 128 -

Dividends:
Class A and Class B (1,088) (917) (4,351) (3,530)
-------- -------- --------- ---------
Retained earnings- End of period 95,305 88,147 95,305 88,147
-------- -------- --------- ---------
-------- -------- --------- ---------

Net earnings per share
Basic and diluted
Class A shares 0.05 0.02 0.78 0.65
-------- -------- --------- ---------
-------- -------- --------- ---------
Class B shares 0.05 0.03 0.68 0.57
-------- -------- --------- ---------
-------- -------- --------- ---------



ANDREW PELLER LIMITED
Consolidated Statements of Cash Flows
(in thousands of dollars, For the Three For the Twelve
except per share amounts) Months Ended Months Ended
(Unaudited) March 31 March 31
2008 2007 2008 2007
$ $ $ $
-------------------------------------------------------- -------------------
Cash provided by (used in)

Operating activities
Net earnings for the period 802 398 11,381 9,472

Items not affecting cash:
Loss (gain) on disposal of property
and equipment 29 (248) 29 (248)
Amortization of plant, equipment
and intangibles 2,137 2,318 7,802 7,985
Employee future benefits (26) 62 (840) (217)
Unrealized loss on foreign exchange
contracts and interest rate swaps 346 - 420 -
Future income taxes (546) 77 (1,125) 282
Amortization of deferred financing
costs 0 35 - 142
Non-cash interest expense 38 - 150 -
-------- -------- --------- ---------

2,780 2,642 17,817 17,416
Changes in non-cash working capital
items related to operations 372 4,214 (9,063) (12,871)
-------- -------- --------- ---------

3,152 6,856 8,754 4,545
-------- -------- --------- ---------

Investing activities
Proceeds from disposal of property
and equipment 109 297 109 297
Purchase of property and equipment (2,587) (4,096) (14,319) (9,333)
Acquisition of businesses - - - (309)
-------- -------- --------- ---------

(2,478) (3,799) (14,210) (9,345)
-------- -------- --------- ---------

Financing activities
Increase in deferred financing costs (31) - (31) (76)
Increase in (repayment of) bank
indebtedness (3,907) (653) 6,273 14,154
Increase in long-term debt 5,830 - 9,300 -
Repayment of long-term debt (1,478) (1,487) (5,906) (5,887)
Dividends paid (1,088) (917) (4,180) (3,391)
-------- -------- --------- ---------

(674) (3,057) 5,456 4,800
-------- -------- --------- ---------

Increase in cash during the year - - - -

Cash - Beginning of year - - - -
-------- -------- --------- ---------

Cash - End of year - - - -
-------- -------- --------- ---------
-------- -------- --------- ---------


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