Magnotta Winery Corporation
TSX : MGN

Magnotta Winery Corporation

December 14, 2011 09:57 ET

Magnotta Winery Corporation Announces October 31, 2011 Quarterly Results

VAUGHAN, ONTARIO--(Marketwire - Dec. 14, 2011) - Magnotta Winery Corporation (TSX:MGN), announces the release of its financial results for the third quarter ended October 31, 2011.

Net sales (sales retained by the Company after alcohol consumption taxes are paid) for the quarter ended October 31, 2011 increased to $7,638,539 compared to $7,466,633 for the corresponding period of the prior year and for the nine month period were relatively constant at $19,809,543 compared to $19,849,654 for the corresponding period of the prior year. The Company experienced a slight net earnings increase to $695,909 compared to $657,256 for the quarter ended October 31, 2010 and net earnings decreased to $2,014,262 compared to $2,218,971 for the nine month period ended October 31, 2010. The 10% Cellared in Canada (CIC) consumption tax imposed by the Ontario government on July 1, 2010 was the primary factor in affecting net earnings for the nine month period ended October 31, 2011. It is payable only on CIC wine product sold outside of the Liquor Control Board of Ontario (LCBO) in all Ontario winery retail stores.

Overall gross profit margin for the quarter ended October 31, 2011 remained relatively constant at 40.3% compared to 40.2% for the corresponding period of the prior year and for the nine month period ended October 31, 2011, decreased to 39.6% from 41.1% for the corresponding period of the prior year. Even though the Company experienced cost pressures for raw inputs which decreased the gross margin, it was able to mitigate this through better and more efficient operations for the quarter ended October 31, 2011. For the nine months ended October 31, 2011, the 10% Cellared in Canada (CIC) wine tax introduced July 1, 2010 was the primary factor in decreasing the gross margin.

Selling, administration and other expenses were $1,655,255 for the three months ended October 31, 2011 compared to $1,598,198 for the corresponding period of the prior year. For the nine month period ended October 31, 2011, selling, administration and other expenses were $3,724,142 compared to $3,628,462 for the corresponding period of the prior year. The increase is due to increased marketing and advertising costs, energy as well as compensation costs.

Finance costs for the three months ended October 31, 2011 decreased to $133,692 compared to $167,746 and for the nine month period ended October 31, 2011 decreased to $430,198 compared to $442,985 for the corresponding period of the prior year. The change is due to lower average bank indebtedness and long-term debt balances outstanding during the period compared to the corresponding period of the previous year. Total debt including both long-term debt and bank indebtedness decreased by $872,886 during the quarter ended October 31, 2011, and decreased by $1,232,300 during the nine month period ended October 31, 2011.

On November 21, 2011, the Company was advised by Magnotta Family Holdings Ltd, a corporation controlled by members of the Magnotta family, that it has proposed a going-private transaction to acquire all of the outstanding common shares of the Company other than shares held by the Magnottas at a price of $2.90 per share. The Magnotta family currently, directly and indirectly, holds approximately 60.47% of the common shares of the Company. In addition, the Company has been advised that Magnotta Holdings has entered into an agreement with a shareholder holding approximately 15.95% of the outstanding common shares of the Company, pursuant to which such shareholder has committed to support the transaction.

A special meeting of shareholders of the Company will be held on January 18, 2012 to consider the proposed transaction. Completion of the transaction will be subject to the execution of a definitive agreement between Magnotta Holdings and the Company. The transaction will also be subject to the approval of not less than two-thirds of the shareholders of the Company voting at the meeting and a majority of the minority shareholders of the Company voting at the meeting.

Additional details and information are found in the Interim Unaudited Consolidated Financial Statements, the Management Discussion and Analysis for October 31, 2011 as well as on www.sedar.com.

The common shares of Magnotta trade on the TSX under the symbol "MGN".

Readers are cautioned that some of the statements contained in this release may be forward-looking statements, such as expectations, estimates and statements that describe the Company's future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition to exist or occur. Generally, these forward-looking statements can be identified by the use of terminology such as "outlook", "anticipate", "believe", "estimate", "expect", "intend", "should", and similar expressions. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties. Actual results in each case could differ from those currently anticipated in such statements by reason of factors such as, but not limited to, changes in general economic and market conditions. Magnotta disclaims any intention or obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or results, or otherwise.

To view the Financial Statements, please visit the following link: http://file.marketwire.com/release/mgn1214fs.pdf

To view the Management Discussion and Analysis, please visit the following link: http://file.marketwire.com/release/mgn1214mda.pdf

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