Andrew Peller Limited Reports Continued Strong Growth in Second Quarter Fiscal 2017

GRIMSBY, ONTARIO--(Marketwired - Nov. 9, 2016) -

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 strong growth and increased net earnings for the three and six months ended September 30, 2016.

SIX MONTHS FISCAL 2017 HIGHLIGHTS:

• Sales up 4.7% on broad-based solid organic growth and successful launch of new products and categories;
• Gross margin rises on revenue increase and cost savings;
• EBITA increases 10.2% on revenue growth and improved gross margin;
• Net earnings rise 18.2% to $16.2 million or $0.39 per Class A share;
• 9% increase in common share dividends effective June 30, 2016;
• 3-for-1 stock split completed in October 2016; accordingly, all per share amounts have been restated;
• New Dividend Reinvestment Plan (DRIP) effective September 9, 2016; and
• New Wayne Gretzky No. 99 Red Cask Canadian Whisky launched in October 2016.

"We generated another period of strong revenue growth and increased net earnings in the quarter, driven by the quality of our products, our successful cost control initiatives, our proven sales and marketing programs, and continued strength in the Canadian wine market," commented John Peller, President and Chief Executive Officer.

"We were proud to announce our seventh increase in the last ten years in common share dividends in June, and pleased our shareholders approved the three-for-one split for our common shares and our new Dividend Reinvestment Plan in September, all reflecting our commitment to enhancing long-term shareholder value," Mr. Peller concluded.

Sales for the three months ended September 30, 2016 rose 3.7% to $88.4 million from $85.2 million in the second quarter of fiscal 2016. For the six months ended September 30, 2016 sales increased 4.7% to $176.3 million from $168.3 million last year. The increase in revenues in fiscal 2017 was due to strong, broad-based organic growth across the majority of the Company's product lines and distribution channels, as well as the introduction of new products and new product categories.

Gross margin as a percentage of sales for the second quarter of fiscal 2017 was 38.1%, consistent with 38.4% in the prior year's second quarter. For the six months ended September 30, 2016 gross margin strengthened to 38.5% compared to 38.3% in the same prior year period. The Company continues to benefit from the positive impact of cost control initiatives to improve productivity and raw material cost savings, which have largely offset the negative impact of the weak Canadian dollar.

Selling and administrative expenses rose in fiscal 2017 due primarily to increased marketing and sales programs and initiatives related to the development of the new Wayne Gretzky Estate Winery and Craft Distillery. Included in selling and administrative expenses in the second quarter of 2017 is approximately $0.8 million in one-time professional services fees related to a strategic acquisition that was not completed. Selling and administrative expenses improved to 22.9% of revenues through the first six months of fiscal 2017 compared to 23.6% of revenues last year. The Company is focused on ensuring selling and administrative expenses are tightly controlled, however it expects selling expenses will increase for the remainder of fiscal 2017 to support the launch of additional new products and the new Wayne Gretzky Estate Winery and Craft Distillery. In October 2016, the Company launched its new Wayne Gretzky No. 99 Red Cask Canadian Whisky in certain markets across Canada.

Earnings before interest, amortization, net unrealized gains and losses on derivative financial instruments, other income (expenses), and income taxes ("EBITA") were $12.6 million for the three months ended September 30, 2016, up 4.8% from the second quarter of fiscal 2016. For the six months ended September 30, 2016, EBITA rose 10.2% to $27.4 million. The increased EBITA was due primarily to the increase in sales and gross margin in the current year. Interest expense decreased for the three and six months ended September 30, 2016 compared to the prior year due to lower interest rates and debt levels.

The Company recorded net unrealized non-cash gains in fiscal 2017 and fiscal 2016 related to mark-to-market adjustments on interest rate swaps and foreign exchange contracts. The Company has elected not to apply hedge accounting and accordingly the change in fair value of these financial instruments is reflected in the Company's statement of earnings each reporting period. These instruments are considered to be effective economic hedges and have enabled management to mitigate the volatility of changing foreign exchange and interest rates.

Adjusted earnings, defined as net earnings not including net unrealized gains and losses on derivative financial instruments, other income (expenses) and the related income tax effect, were $6.8 million and $15.4 million for the three and six months ended September 30, 2016, respectively, up 6.0% and 15.5% from the same periods in fiscal 2016.

Net earnings the three months ended September 30, 2016 increased 8.6% to $7.6 million or $0.18 per Class A Share from $7.0 million or $0.17 per Class A Share in the second quarter of fiscal 2016. For the first six months of fiscal 2017 net earnings rose 18.2% to $16.2 million or $0.39 per Class A share compared to $13.7 million or $0.33 per Class A share last year.

Strong Financial Position

Working capital at September 30, 2016 increased to $78.2 million from $71.7 million at March 31, 2016. Overall bank debt reduced to $80.2 million as at September 30, 2016 compared to $86.0 million at March 31, 2016 due to the strong earnings in fiscal 2017, the positive impact of working capital management, and regularly scheduled debt repayments. The Company's debt to equity ratio strengthened to 0.47:1 at September 30, 2016 compared to 0.55:1 at March 31, 2016. Shareholders' equity as at September 30, 2016 increased to $169.1 million or $3.97 per common share, up from $157.7 million or $3.70 per common share at March 31, 2016. The increase in shareholders' equity is due to the strong net earnings partially offset by the payment of dividends and net actuarial losses on post-employment benefit plans.

The Company generated cash from operating activities through the first six months of fiscal 2017, after changes in non-cash working capital items, of $20.3 million compared to $20.3 million in the prior year. In fiscal 2017, the Company expects cash from operating activities to decrease when compared to fiscal 2016 due to a projected larger harvest in Ontario and increases in working capital investment relating to the launch of additional new products.

Increase in Common Share Dividends

On June 2, 2016 the Company's Board of Directors approved a 9% increase in common share dividends for shareholders of record on June 30, 2016 payable on July 8, 2016. The annual dividend on Class A Shares was increased to $0.163 per share and the annual dividend on Class B Shares was increased to $0.142 per share. This was the Company's seventh dividend increase in the last ten years. The Company has consistently paid common share dividends since 1979.

3-for-1 Share Split

At the Annual and Special Meeting of Shareholders held on September 9, 2016, the Company's Class B shareholders approved a three-for-one share split for both the Company's Class A and Class B common shares. The additional shares were issued on October 14, 2016 to shareholders of record on September 23, 2016. The Company recorded the effect of the share split retroactively to all disclosures of share capital and per share amounts in accordance with International Financial Reporting Standards ("IFRS").

Dividend Reinvestment Plan

On June 2, 2016 the Company's Board of Directors approved a Dividend Reinvestment Plan (DRIP) for Class A shares effective on September 9, 2016. Under the DRIP, registered Class A shareholders can elect to have 100% of their dividends reinvested to purchase additional Class A common shares. The Board of Directors believes the DRIP provides Class A shareholders with a cost-effective method to increase their investment in the Company.

Investor Conference Call

An investor conference call hosted by John Peller, President and CEO and Brian Athaide, CFO, will be held Thursday, November 10, 2016 at 10:00 a.m. EST. The telephone numbers for the conference call are: Local/International: (416) 340-2216, North American Toll Free: (866) 223-7781. 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 1138293#. The Instant Replay will be available until midnight, November 18, 2016. The call will also be archived on the Company's website at www.andrewpeller.com

Financial Highlights (Unaudited)
(Condensed consolidated unaudited financial statements to follow)
For the three and six months ended September 30,		Three Months				Six Months
(in $000 )		2016		2015		2016		2015
Sales		88,357		85,200		176,263		168,318
Gross margin		33,644		32,716		67,787		64,527
Gross margin (% of sales)		38.1	%	38.4	%	38.5	%	38.3	%
Selling and administrative expenses		21,061		20,705		40,401		39,670
EBITA		12,583		12,011		27,386		24,857
Net unrealized gains on derivative financial instruments		1,128		711		1,175		396
Other (income) expenses		56		(68	)	83		(129	)
Adjusted net earnings		6,837		6,447		15,395		13,324
Net earnings		7,630		7,023		16,203		13,712
Earnings per share - Class A		$0.18		$0.17		$0.39		$0.33
Earnings per share - Class B		$0.16		$0.15		$0.34		$0.29
Dividend per share - Class A (annual)						$0.163		$0.150
Dividend per share - Class B (annual)						$0.142		$0.130
Cash provided by operations						20,256		20,341
	(after changes in non-cash working capital items)
Working capital						78,246		77,052
Shareholders' equity per share						$3.97		$3.69

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, Thirty Bench, Wayne Gretzky, Sandhill, Conviction 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, Black Cellar, XOXO, and skinnygrape. Hochtaler, Domaine D'Or, Schloss Laderheim, Royal, and Sommet are our key value priced brands. The Company produces wine based liqueurs and cocktails under the brand Panama Jack and wine based spritzers under the skinnygrape brand. 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 170 Winexpert authorized retailers 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, Traditional Vintage, and Cellar Craft. The Company owns and operates 100 well-positioned independent retail locations in Ontario under The Wine Shop, Wine Country Vintners, and Wine Country Merchants store names. The Company also owns Andrew Peller Import Agency and The Small Winemaker's Collection Inc.; both of these wine agencies are importers of premium wines from around the world and are marketing agents for these fine wines. 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, net unrealized gains and losses on derivative financial instruments, other (income) expenses, and income taxes) to measure its financial performance. 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 "Risks and Uncertainties" 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
Condensed Consolidated Balance Sheets
Unaudited
These financial statements have not been reviewed by our auditors
(in thousands of Canadian dollars)	September 30 2016 $	March 31 2016 $
Assets
Current Assets
Accounts receivable	30,887	28,223
Inventory	122,826	119,666
Biological assets	2,475	1,196
Prepaid expenses and other assets	1,928	1,782
	158,116	150,867
Property, plant, and equipment	113,589	108,929
Intangibles	10,427	11,040
Goodwill	37,473	37,473
	319,605	308,309
Liabilities
Current Liabilities
Bank indebtedness	29,874	33,701
Accounts payable and accrued liabilities	41,154	36,772
Dividends payable	1,691	1,553
Income taxes payable	2,428	2,425
Current portion of derivative financial instruments (note 7)	617	645
Current portion of long-term debt	4,106	4,106
	79,870	79,202
Long-term debt	46,257	48,202
Long-term derivative financial instruments (note 7)	1,199	1,529
Post-employment benefit obligations	7,556	5,947
Deferred income	-	102
Deferred income taxes	15,627	15,591
	150,509	150,573
Shareholders' Equity
Capital stock (note 8)	6,967	6,967
Retained earnings	167,426	154,605
Accumulated other comprehensive loss	(5,297)	(3,836)
	169,096	157,736
	319,605	308,309

The above statements should be read in conjunction with the entire interim consolidated financial statements and notes.

They will be available on the Investor Relations section of www.andrewpeller.com and at www.sedar.com

ANDREW PELLER LIMITED
Condensed Consolidated Statements of Earnings
Unaudited These financial statements have not been reviewed by our auditors		For the three months ended		For the three months ended	For the six months ended		For the six months ended
(in thousands of Canadian dollars)		September 30, 2016 $		September 30, 2015 $	September 30, 2016 $		September 30, 2015 $
Sales		88,357		85,200	176,263		168,318
Cost of goods sold (note 4)		54,713		52,484	108,476		103,791
Amortization of plant and equipment used in production		1,601		1,453	3,187		3,019
Gross profit		32,043		31,263	64,600		61,508
Selling and administration (note 4)		21,061		20,705	40,401		39,670
Amortization of plant, equipment, and intangibles used in selling and administration		838		926	1,668		1,734
Interest		780		937	1,563		2,018
Net unrealized gains on derivative financial instruments (note 7)		(1,128)		(711)	(1,175)		(396)
Other expenses (income)		56		(68)	83		(129)
Earnings before income taxes		10,436		9,474	22,060		18,611
Provision for (recovery of) income taxes
Current		2,299		2,721	5,308		4,977
Deferred		507		(270)	549		(78)
		2,806		2,451	5,857		4,899
Net earnings for the period		7,630		7,023	16,203		13,712
Net earnings per share (note 8)
Basic and diluted
	Class A shares	0.18		0.17	0.39		0.33
	Class B shares	0.16		0.15	0.34		0.29

The above statements should be read in conjunction with the entire interim consolidated financial statements and notes.

They will be available on the Investor Relations section of www.andrewpeller.com and at www.sedar.com

ANDREW PELLER LIMITED
Condensed Consolidated Statements of Comprehensive Income
Unaudited These financial statements have not been reviewed by our auditors	For the three months ended		For the three months ended	For the six months ended		For the six months ended
(in thousands of Canadian dollars)	September 30, 2016 $		September 30, 2015 $	September 30, 2016 $		September 30, 2015 $
Net earnings for the period	7,630		7,023	16,203		13,712
Items that are never reclassified to net earnings
Net actuarial (losses) gains on post-employment benefit plans	(551)		(576)	(1,974)		696
Deferred income tax recovery (provision)	143		150	513		(181)
Other comprehensive (loss) income for the period	(408)		(426)	(1,461)		515
Net comprehensive income for the period	7,222		6,597	14,742		14,227

The above statements should be read in conjunction with the entire interim consolidated financial statements and notes.

They will be available on the Investor Relations section of www.andrewpeller.com and at www.sedar.com

ANDREW PELLER LIMITED
Condensed Consolidated Statements of Changes in Equity
For the six months ended September 30, 2016 and 2015
Unaudited
These financial statements have not been reviewed by our auditors
(in thousands of Canadian dollars)
	Capital stock $	Retained earnings $	Accumulated other comprehensive loss	Total shareholders' equity $
Balance at April 1, 2015	7,026	143,847	(3,498)	147,375
Net earnings for the period	-	13,712	-	13,712
Net actuarial gains (net of deferred tax provision)	-	-	515	515
Net comprehensive income for the period	-	13,712	515	14,227
Dividends (Class A $0.075 per share, Class B $0.065 per share)	-	(3,128)	-	(3,128)
Balance at September 30, 2015	7,026	154,431	(2,983)	158,474
Balance at April 1, 2016	6,967	154,605	(3,836)	157,736
Net earnings for the period	-	16,203	-	16,203
Net actuarial losses (net of deferred tax recovery)	-	-	(1,461)	(1,461)
Net comprehensive income for the period	-	16,203	(1,461)	14,742
Dividends (Class A $0.082 per share, Class B $0.071 per share)	-	(3,382)	-	(3,382)
Balance at September 30, 2016	6,967	167,426	(5,297)	169,096

The above statements should be read in conjunction with the entire interim consolidated financial statements and notes.

They will be available on the Investor Relations section of www.andrewpeller.com and at www.sedar.com

ANDREW PELLER LIMITED
Condensed Consolidated Statements of Cash Flows
Unaudited
These financial statements have not been reviewed by our auditors
(in thousands of Canadian dollars)		For the six months ended September 30, 2016 $		For the six months ended September 30, 2015 $
Cash provided by (used in)
Operating activities
Net earnings for the period		16,203		13,712
Adjustments for:
	Gain on disposal of property and equipment	(175	)	-
	Amortization of plant, equipment, and intangible assets	4,855		4,753
	Interest expense	1,563		2,018
	Provision for income taxes	5,857		4,899
	Post-employment benefits	(365	)	(434	)
	Deferred income	(102	)	(203	)
	Net unrealized gain on derivative financial instruments	(1,175	)	(396	)
Interest paid		(1,486	)	(1,957	)
Income taxes paid		(5,305	)	(2,656	)
		19,870		19,736
Changes in non-cash working capital items related to operations (note 5)		386		605
		20,256		20,341
Investing activities
Proceeds from disposal of property, plant and equipment		175		-
Purchase of property, plant and equipment		(11,360	)	(4,552	)
		(11,185	)	(4,552	)
Financing activities
Decrease in bank indebtedness		(3,827	)	(10,621	)
Repayment of long-term debt		(2,000	)	(2,048	)
Deferred financing costs		-		(96	)
Dividends paid		(3,244	)	(3,024	)
		(9,071	)	(15,789	)
Increase (decrease) in cash during the period		-		-
Cash, beginning of period		-		-
Cash, end of period		-		-

The above statements should be read in conjunction with the entire interim consolidated financial statements and notes.

They will be available on the Investor Relations section of www.andrewpeller.com and at www.sedar.com