Andrew Peller Limited ~ 2012 Annual Report 1
Andrew Peller Limited ~ 2012 Annual Report 1
FINANCIAL AND OPERATING HIGHLIGHTS
FOR THE YEARS ENDED MARCH 31 (in thousands of Canadian dollars,
except per share amounts)
SALES AND EARNINGS
Net sales
EBITA
Net earnings
FINANCIAL POSITION
Working capital
Total assets
Shareholders’ equity
PER SHARE
Net earnings per Class A Share - basic and diluted
DIVIDENDS
Class A Shares, Non-Voting
Class B Shares, Voting
SHAREHOLDERS’ EQUITY
MARKET VALUE
Class A - HIGH
Class A - LOW
Class B - HIGH
Class B - LOW
ANALYTICAL INFORMATION
Return on average shareholders’ equity
Return on average capital employed
Ratio of current assets to current liabilities
2012
2011
$
276,883
32,651
13,001
34,869
285,552
120,552
$
265,420
31,544
11,223
27,643
267,996
114,297
0.93
0.360
0.314
10.30
8.70
10.70
8.65
10.9%
11.4%
1.3:1
0.78
0.330
0.288
9.25
8.25
11.00
9.55
9.8%
11.6%
1.3:1
10
11
12
10
11
12
10
11
12
1
5
1
3
6
2
,
0
2
4
5
6
2
,
3
8
8
6
7
2
,
Net Sales
8
0
4
8
,
3
8
6
1
1
,
2
6
6
3
1
,
Net Earnings
from continuing operations
before gains (loses) on financial
instruments and other expenses
0
8
6
3
1
1
,
7
9
2
4
1
1
,
2
5
5
0
2
1
,
Shareholders’ Equity
1
FINANCIAL AND OPERATING HIGHLIGHTS
OveRview
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 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 wines. 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. (“GVI”), the recognized leader in personal winemaking products. GVI
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, and Australia.
GVI’s 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 102 well-positioned independent retail locations in Ontario under the Vineyards
Estate Wines, Aisle 43, and WineCountry Vintners store names. The Company also owns Grady Wine Marketing
(“GWM”) based in Vancouver and The Small Winemaker’s Collection Inc. (“SWM”) 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 Estate Winery brands in
Canada. The Company’s products are sold predominantly in Canada with a focus on export sales for its icewine and
personal winemaking products.
Table of Contents
Financial Highlights ............................................................................................................................................1
Report to Shareholders ......................................................................................................................................3
Management’s Discussion and Analysis .............................................................................................................6
Independent Auditors Report ..........................................................................................................................27
Consolidated Financial Statements and Notes ................................................................................................28
Shareholder Information ...................................................................................................................................72
Andrew Peller Limited ~ 2012 Annual Report 2
RePORT TO SHAReHOLDeRS
Over the last year we were very proud to mark our 50th Anniversary, celebrating five
decades of delivering the highest quality products to wine lovers in Canada and
around the world. Fiscal 2012 was also another year of solid growth and strong financial
performance. We are confident in our ability to build on this progress and we look forward
to delivering value to consumers, our customers, and our shareholders for years to come.
Strong Operating Performance
Sales increased 4.3% in fiscal 2012 to $276.9 million as we continue to experience strong demand for our high
quality wines through the majority of our trade channels, including provincial liquor stores, our network of
102 company-owned retailers in Ontario, our award-winning estate wineries, and our export markets. Net earnings
rose an impressive 15.8% to $13.0 million or $0.93 per Class A Share for the year, up from $11.2 million or $0.78
per share in fiscal 2011.
New product introductions, including the launch of our new Crush VQA brand in Ontario, made a solid contribution
to our growth in fiscal 2012 as Crush First White quickly became a top 25 seller in the LCBO VQA listings.
Three additional Crush varietals will be introduced in fiscal 2013 and we expect to experience strong demand for
these new wines as well. We recently launched a new, low calorie wine called skinnygrape with approximately 80
calories per serving. This new listing is also off to a very positive start, delivering quality and taste to consumers
seeking a lower calorie wine.
Our two largest brands, Peller Estates French Cross – Proprietors Reserve and Copper Moon remain the first and
third best-selling brands in the popular-priced segment in English Canada, with Copper Moon volumes more than
doubling in Western Canada during the year to become the region’s largest selling wine brand. In the premium
and super premium segments, our Sandhill and Red Rooster brands continue to perform well in the west, while
our Andrew Peller Signature Series and Thirty Bench VQA wines saw solid growth as a result of key wins at both
domestic and international wine competitions. Our Trius Brut remains the top-selling VQA sparkling wine in
the LCBO.
Acquisitions completed during the year also added to our growth in fiscal 2012. In November 2011 we entered
into a joint venture with Wayne Gretzky to produce and distribute his brand across Canada. The relationship has
been going very well and made a solid contribution to our almost 7% increase in sales during the fourth quarter
of the year. Established in 2007, Wayne Gretzky, an iconic brand name in Canada, well-known for its quality and
value, fits very well with our portfolio. In October 2011 we strengthened our consumer-made wine business with
the purchase of Cellar Craft International. Located in Western Canada, Cellar Craft is a leader in the consumer-
made wine business utilizing grape skins as well as juice to enhance the quality of their products.
Our export programs proved very effective during the year as we significantly expanded our presence in
international duty free and other airport locations around the world. Our export business will benefit from a
number of new relationships established during the year including a new partnership to market and sell
Peller Estates icewines in China, and the listing of our Peller Estates wines on British Airways flights, at the
landmark Burj Al Arab Hotel in Dubai, as well as in the world-class dining rooms on all 11 Celebrity Cruise ships.
Despite strong growth and solid net income, our results in fiscal 2012 were again negatively impacted by the tax
levy imposed in July 2010 by the Ontario government on International and Canadian blended wines sold through
our retail store network. Imported wines sold through the LCBO are not subject to this levy. We continue to
believe this is a discriminatory tax and, along with other Ontario wine makers, we are working hard to encourage
the government to eliminate it. The tax reduced our sales and gross margin by approximately
$2.4 million in fiscal 2012 and $2.0 million in fiscal 2011.
Our balance sheet and financial position remained strong with a debt to equity ratio of 0.87:1 at March 31, 2012,
shareholders’ equity of $120.6 million or $8.43 per common share, and working capital of $34.9 million. Cash flow
from operating activities for the year was approximately $7.0 million, down from the prior year due to higher levels
of inventory resulting from the acquisitions completed during the year, a significantly larger grape crop in vintage
2011, and our decision to support forecasts for increased sales once again in fiscal 2013.
Gains in Market Share
Our strong operating performance in fiscal 2012 was also linked to the continued growth and stability of the
overall Canadian wine market. In our English Canada markets, wine consumption rose 3.0% during the year
following a 3.7% increase in fiscal 2011. More importantly, our share of the total market in English Canada
increased to 13.6% from 13.3% last year, while our share of the domestic market rose to 38.2% in fiscal 2012 from
37.2% in the prior year. Of the top-ten wine suppliers to the Canadian market, we are proud to be one of only
two producers to have increased market share over the last five years. As Canada’s largest Canadian-owned wine
producer, we are proud of our track record of success and look for further market share gains in the years to come.
Prestigious Awards
competitions.
Once again in fiscal 2012 we were very active competing and winning awards in many of the world’s top wine
Our VQA brands in Western Canada received a total of 219 medals last year with a number of key awards for
our Sandhill, Red Rooster, Peller Estates and Calona Vineyards brands. Of particular note were the best-in-class
designations awarded to Red Rooster, including Double Gold for their Riesling 2011 at Riesling du Monde, Double
Gold for the Gewürztraminer 2011 at Gewürztraminer du Monde, and Red Wine of the Year for the Syrah 2009 at the
BC Wine Awards. Our Sandhill 2010 Chardonnay was the only Canadian wine to win gold at Chardonnay du Monde,
while the 2010 Sandhill Sauvignon Blanc won Double Gold Best of Category at the All Canadian Wine Competition.
Our Phantom Creek Vineyard has been designated as one of the top-ten single vineyards in the world, winning
Best of Class Gold at the Los Angeles International Wine and Spirits Competition. Peller Estates Private Reserve
won key awards for its Cabernet Sauvignon 2008 with a Double Gold Best of Class award at the All Canadian Wine
Championships while Pinot Gris 2009 won Best in Class at the Pacific Rim International Wine Competition.
In Eastern Canada, our VQA brands including Peller Estates, Trius, Hillebrand, and Crush won a total of 128
awards last year, with Thirty Bench garnering 28 medals, including the prestigious Lieutenant Governor’s Award for
Excellence in Ontario Wines. Trius Sauvignon Blanc 2009 won Gold at the All Canadian Wine Championships and
the 2010 vintage was awarded best white wine in the LCBO. Trius Red and Trius Brut continued their tradition of
winning gold medals with Trius Red 2008 winning Gold at the Grand Harvest Awards in California and Trius Brut
winning Gold at Cuvée. Two of our Ontario Peller Estates wines won gold medals: Peller Estates Private Reserve
Sauvignon Blanc 2009 at the Grand Harvest Awards in California and Peller Estates Family Series Sauvignon Blanc
2009 at the Tasters Guild International. Hillebrand Showcase Merlot won best Merlot at the Cuvée Ontario Wine
Competition while Hillebrand Artist Series Riesling 2009 won a Gold Medal at the Grand Harvest Awards. Finally,
our Peller Estates Vidal Icewine 2008 won Wine of the Year at the World Association Wine & Spirits Writers and
Journalists Awards as well as Best of Category Double Gold Medal at the All Canadian Wine Championships.
3
RePORT TO SHARe HOLDeRS
Andrew Peller Limited ~ 2012 Annual Report 4
RePORT TO SHAReHOLDeRS
Over the last year we were very proud to mark our 50th Anniversary, celebrating five
decades of delivering the highest quality products to wine lovers in Canada and
around the world. Fiscal 2012 was also another year of solid growth and strong financial
performance. We are confident in our ability to build on this progress and we look forward
to delivering value to consumers, our customers, and our shareholders for years to come.
Strong Operating Performance
Sales increased 4.3% in fiscal 2012 to $276.9 million as we continue to experience strong demand for our high
quality wines through the majority of our trade channels, including provincial liquor stores, our network of
102 company-owned retailers in Ontario, our award-winning estate wineries, and our export markets. Net earnings
rose an impressive 15.8% to $13.0 million or $0.93 per Class A Share for the year, up from $11.2 million or $0.78
per share in fiscal 2011.
New product introductions, including the launch of our new Crush VQA brand in Ontario, made a solid contribution
to our growth in fiscal 2012 as Crush First White quickly became a top 25 seller in the LCBO VQA listings.
Three additional Crush varietals will be introduced in fiscal 2013 and we expect to experience strong demand for
these new wines as well. We recently launched a new, low calorie wine called skinnygrape with approximately 80
calories per serving. This new listing is also off to a very positive start, delivering quality and taste to consumers
seeking a lower calorie wine.
Our two largest brands, Peller Estates French Cross – Proprietors Reserve and Copper Moon remain the first and
third best-selling brands in the popular-priced segment in English Canada, with Copper Moon volumes more than
doubling in Western Canada during the year to become the region’s largest selling wine brand. In the premium
and super premium segments, our Sandhill and Red Rooster brands continue to perform well in the west, while
our Andrew Peller Signature Series and Thirty Bench VQA wines saw solid growth as a result of key wins at both
domestic and international wine competitions. Our Trius Brut remains the top-selling VQA sparkling wine in
the LCBO.
Acquisitions completed during the year also added to our growth in fiscal 2012. In November 2011 we entered
into a joint venture with Wayne Gretzky to produce and distribute his brand across Canada. The relationship has
been going very well and made a solid contribution to our almost 7% increase in sales during the fourth quarter
of the year. Established in 2007, Wayne Gretzky, an iconic brand name in Canada, well-known for its quality and
value, fits very well with our portfolio. In October 2011 we strengthened our consumer-made wine business with
the purchase of Cellar Craft International. Located in Western Canada, Cellar Craft is a leader in the consumer-
made wine business utilizing grape skins as well as juice to enhance the quality of their products.
Our export programs proved very effective during the year as we significantly expanded our presence in
international duty free and other airport locations around the world. Our export business will benefit from a
number of new relationships established during the year including a new partnership to market and sell
Peller Estates icewines in China, and the listing of our Peller Estates wines on British Airways flights, at the
landmark Burj Al Arab Hotel in Dubai, as well as in the world-class dining rooms on all 11 Celebrity Cruise ships.
Despite strong growth and solid net income, our results in fiscal 2012 were again negatively impacted by the tax
levy imposed in July 2010 by the Ontario government on International and Canadian blended wines sold through
our retail store network. Imported wines sold through the LCBO are not subject to this levy. We continue to
believe this is a discriminatory tax and, along with other Ontario wine makers, we are working hard to encourage
the government to eliminate it. The tax reduced our sales and gross margin by approximately
$2.4 million in fiscal 2012 and $2.0 million in fiscal 2011.
Our balance sheet and financial position remained strong with a debt to equity ratio of 0.87:1 at March 31, 2012,
shareholders’ equity of $120.6 million or $8.43 per common share, and working capital of $34.9 million. Cash flow
from operating activities for the year was approximately $7.0 million, down from the prior year due to higher levels
of inventory resulting from the acquisitions completed during the year, a significantly larger grape crop in vintage
2011, and our decision to support forecasts for increased sales once again in fiscal 2013.
Gains in Market Share
Our strong operating performance in fiscal 2012 was also linked to the continued growth and stability of the
overall Canadian wine market. In our English Canada markets, wine consumption rose 3.0% during the year
following a 3.7% increase in fiscal 2011. More importantly, our share of the total market in English Canada
increased to 13.6% from 13.3% last year, while our share of the domestic market rose to 38.2% in fiscal 2012 from
37.2% in the prior year. Of the top-ten wine suppliers to the Canadian market, we are proud to be one of only
two producers to have increased market share over the last five years. As Canada’s largest Canadian-owned wine
producer, we are proud of our track record of success and look for further market share gains in the years to come.
Prestigious Awards
Once again in fiscal 2012 we were very active competing and winning awards in many of the world’s top wine
competitions.
Our VQA brands in Western Canada received a total of 219 medals last year with a number of key awards for
our Sandhill, Red Rooster, Peller Estates and Calona Vineyards brands. Of particular note were the best-in-class
designations awarded to Red Rooster, including Double Gold for their Riesling 2011 at Riesling du Monde, Double
Gold for the Gewürztraminer 2011 at Gewürztraminer du Monde, and Red Wine of the Year for the Syrah 2009 at the
BC Wine Awards. Our Sandhill 2010 Chardonnay was the only Canadian wine to win gold at Chardonnay du Monde,
while the 2010 Sandhill Sauvignon Blanc won Double Gold Best of Category at the All Canadian Wine Competition.
Our Phantom Creek Vineyard has been designated as one of the top-ten single vineyards in the world, winning
Best of Class Gold at the Los Angeles International Wine and Spirits Competition. Peller Estates Private Reserve
won key awards for its Cabernet Sauvignon 2008 with a Double Gold Best of Class award at the All Canadian Wine
Championships while Pinot Gris 2009 won Best in Class at the Pacific Rim International Wine Competition.
In Eastern Canada, our VQA brands including Peller Estates, Trius, Hillebrand, and Crush won a total of 128
awards last year, with Thirty Bench garnering 28 medals, including the prestigious Lieutenant Governor’s Award for
Excellence in Ontario Wines. Trius Sauvignon Blanc 2009 won Gold at the All Canadian Wine Championships and
the 2010 vintage was awarded best white wine in the LCBO. Trius Red and Trius Brut continued their tradition of
winning gold medals with Trius Red 2008 winning Gold at the Grand Harvest Awards in California and Trius Brut
winning Gold at Cuvée. Two of our Ontario Peller Estates wines won gold medals: Peller Estates Private Reserve
Sauvignon Blanc 2009 at the Grand Harvest Awards in California and Peller Estates Family Series Sauvignon Blanc
2009 at the Tasters Guild International. Hillebrand Showcase Merlot won best Merlot at the Cuvée Ontario Wine
Competition while Hillebrand Artist Series Riesling 2009 won a Gold Medal at the Grand Harvest Awards. Finally,
our Peller Estates Vidal Icewine 2008 won Wine of the Year at the World Association Wine & Spirits Writers and
Journalists Awards as well as Best of Category Double Gold Medal at the All Canadian Wine Championships.
3
RePORT TO SHARe HOLDeRS
Andrew Peller Limited ~ 2012 Annual Report 4
innovative Marketing Programs
To support our high quality, award-winning brands, we continue to utilize unique and innovative marketing
programs to build awareness and loyalty among wine connoisseurs. As an example, we were the fi rst Canadian
wine company to introduce light-weight glass for a number of our products, an environmentally-friendly and lower-
cost packaging solution that has proved very popular.
On the social marketing front, our wineries continue to expand their presence with new You Tube and fl ickr video
and photo posts. We also began promoting a Trip Advisor link, allowing consumers to rate their experience at
our estate wineries and to see what others have said about their visit. Fiscal 2012 was also Red Rooster’s fi rst year
utilizing social media, and with its most recent contest, it experienced a signifi cant increase in web visits. XOXO
continues to utilize social marketing for the majority of its promotional activities while our recently-launched Crush
brand also used social media programs to help build awareness in its fi rst year on the market. Going forward, we
will continue to embrace social marketing as a cost-effective and successful method to attract consumers to our
industry-leading brands.
Looking Ahead
The Canadian wine market continues to strengthen, driven by younger consumers who have adopted wine as their
beverage of choice, as well as by an aging population that increasingly favours the more sophisticated experience
that wine offers. Demand is also supported by the widely reported health benefi ts of moderate wine consumption
and an increasing consumer focus on local agricultural products and their sustainability.
To capitalize on these strong industry fundamentals, we will continue to execute the same value-enhancing
strategies that have proved so successful over the last fi fty years. Our proven sales and marketing efforts will
continue to drive growth through all of our trade channels, including licensed establishments, provincial liquor
boards, our network of retail locations in Ontario, and our estate wineries. The launch of new and re-positioned
products will also contribute to our growth across all price points in the Canadian wine business. Efforts to increase
export sales are proving effective and we expect our personal winemaking business will continue to leverage its
strong market presence to build sales in Canada and its export markets.
We will also continue to prudently investigate acquisitions that expand and complement our presence and brand
profi le within the Canadian wine market. The additions to our family of brands completed over the last few years
have made signifi cant contributions to our growth and performance, and we will seek out additional acquisitions
that strengthen our presence and enhance value for our shareholders.
In closing, we want to thank our suppliers and customers for their business and our shareholders for their
continued support. We also extend a sincere thanks to all of our employees, both past and present, who have
contributed to our growth and success over the last fi fty years. There is no doubt that our Company’s greatest
strength is the commitment and dedication of our people and they are why our future has never looked brighter.
Joseph A. Peller
Chairman
John E. Peller
President and CEO
MANAGeMeNT’S DiSCUSSiON & ANALYSiS
For the three months and year ended March 31, 2012
The following management’s discussion and analysis (‘MD&A’) provides a review of corporate developments,
results of operations and fi nancial position for the three months and year ended March 31, 2012 in comparison
with those for the three months and year ended March 31, 2011. This discussion is prepared as of June 20th, 2012
and should be read in conjunction with the audited consolidated fi nancial statements for the years ended March
31, 2012 and 2011 and the accompanying notes contained therein. The fi nancial years ended March 31, 2012,
March 31, 2011, and March 31, 2010 are referred to as “fi scal 2012”, “fi scal 2011”, and “fi scal 2010” respectively.
All dollar amounts are expressed in Canadian dollars unless otherwise indicated.
FORwARD-LOOKiNG iNFORMATiON
Certain statements in this Management’s Discussion & Analysis 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 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 fi nancial performance.
With respect to forward-looking statements contained in this MD&A, 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; fl uctuations 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 of its products; the regulation of liquor distribution and retailing in Ontario;
the application of federal and provincial environmental laws; and the impact of increasing competition.
These forward-looking statements are also subject to the risks and uncertainties discussed in the “Risks and
Uncertanties” section and elsewhere in this MD&A and other risks detailed from time to time in the publicly fi led
disclosure documents of the Company 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 the conclusions, forecasts, or projections anticipated in these forward-looking
statements. Because of these risks, uncertainties, and assumptions, one 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
MD&A, and except as required by applicable law, Andrew Peller Limited undertakes no obligation to update or
revise these forward-looking statements to refl ect new information, future events or circumstances.
5
RePORT TO SHAReHOLDeRS
Andrew Peller Limited ~ 2012 Annual Report 6
innovative Marketing Programs
To support our high quality, award-winning brands, we continue to utilize unique and innovative marketing
programs to build awareness and loyalty among wine connoisseurs. As an example, we were the fi rst Canadian
wine company to introduce light-weight glass for a number of our products, an environmentally-friendly and lower-
cost packaging solution that has proved very popular.
On the social marketing front, our wineries continue to expand their presence with new You Tube and fl ickr video
and photo posts. We also began promoting a Trip Advisor link, allowing consumers to rate their experience at
our estate wineries and to see what others have said about their visit. Fiscal 2012 was also Red Rooster’s fi rst year
utilizing social media, and with its most recent contest, it experienced a signifi cant increase in web visits. XOXO
continues to utilize social marketing for the majority of its promotional activities while our recently-launched Crush
brand also used social media programs to help build awareness in its fi rst year on the market. Going forward, we
will continue to embrace social marketing as a cost-effective and successful method to attract consumers to our
industry-leading brands.
Looking Ahead
The Canadian wine market continues to strengthen, driven by younger consumers who have adopted wine as their
beverage of choice, as well as by an aging population that increasingly favours the more sophisticated experience
that wine offers. Demand is also supported by the widely reported health benefi ts of moderate wine consumption
and an increasing consumer focus on local agricultural products and their sustainability.
To capitalize on these strong industry fundamentals, we will continue to execute the same value-enhancing
strategies that have proved so successful over the last fi fty years. Our proven sales and marketing efforts will
continue to drive growth through all of our trade channels, including licensed establishments, provincial liquor
boards, our network of retail locations in Ontario, and our estate wineries. The launch of new and re-positioned
products will also contribute to our growth across all price points in the Canadian wine business. Efforts to increase
export sales are proving effective and we expect our personal winemaking business will continue to leverage its
strong market presence to build sales in Canada and its export markets.
We will also continue to prudently investigate acquisitions that expand and complement our presence and brand
profi le within the Canadian wine market. The additions to our family of brands completed over the last few years
have made signifi cant contributions to our growth and performance, and we will seek out additional acquisitions
that strengthen our presence and enhance value for our shareholders.
In closing, we want to thank our suppliers and customers for their business and our shareholders for their
continued support. We also extend a sincere thanks to all of our employees, both past and present, who have
contributed to our growth and success over the last fi fty years. There is no doubt that our Company’s greatest
strength is the commitment and dedication of our people and they are why our future has never looked brighter.
Joseph A. Peller
Chairman
John E. Peller
President and CEO
MANAGeMeNT’S DiSCUSSiON & ANALYSiS
For the three months and year ended March 31, 2012
The following management’s discussion and analysis (‘MD&A’) provides a review of corporate developments,
results of operations and fi nancial position for the three months and year ended March 31, 2012 in comparison
with those for the three months and year ended March 31, 2011. This discussion is prepared as of June 20th, 2012
and should be read in conjunction with the audited consolidated fi nancial statements for the years ended March
31, 2012 and 2011 and the accompanying notes contained therein. The fi nancial years ended March 31, 2012,
March 31, 2011, and March 31, 2010 are referred to as “fi scal 2012”, “fi scal 2011”, and “fi scal 2010” respectively.
All dollar amounts are expressed in Canadian dollars unless otherwise indicated.
FORwARD-LOOKiNG iNFORMATiON
Certain statements in this Management’s Discussion & Analysis 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 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 fi nancial performance.
With respect to forward-looking statements contained in this MD&A, 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; fl uctuations 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 of its products; the regulation of liquor distribution and retailing in Ontario;
the application of federal and provincial environmental laws; and the impact of increasing competition.
These forward-looking statements are also subject to the risks and uncertainties discussed in the “Risks and
Uncertanties” section and elsewhere in this MD&A and other risks detailed from time to time in the publicly fi led
disclosure documents of the Company 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 the conclusions, forecasts, or projections anticipated in these forward-looking
statements. Because of these risks, uncertainties, and assumptions, one 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
MD&A, and except as required by applicable law, Andrew Peller Limited undertakes no obligation to update or
revise these forward-looking statements to refl ect new information, future events or circumstances.
5
RePORT TO SHAReHOLDeRS
Andrew Peller Limited ~ 2012 Annual Report 6
Overview
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 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. (“GVI”), the recognized leader in personal winemaking products. GVI 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, and Australia. GVI’s 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 102 well-positioned independent retail locations in Ontario under the Vineyards Estate Wines,
Aisle 43, and WineCountry Vintners store names. The Company also owns Grady Wine Marketing (“GWM”)
based in Vancouver, and The Small Winemaker’s Collection Inc. (“SWM”) 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 Estate Winery brands in
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’s stated mission is to build sales volumes of its blended, premium, and ultra-premium brands by
delivering to its customers and consumers the highest quality wines at the best possible value. To meet this goal,
the Company is investing in improvements in the quality of our grapes and wines, our winemaking capabilities,
sales and marketing initiatives, and our quality management programs. Over the long-term, the Company believes
premium wine sales will continue to grow in Canada and these products generate higher sales and increased
profitability compared to lower-priced table wines.
APL is focused on initiatives to reduce costs and enhance its production efficiencies through a continual review
of the Company’s operations. The Company continually reviews its cost structure with a view to enhancing
profitability. In addition, the Company continues to expand and strengthen its distribution through provincial
liquor boards, the Company’s network of 102 Vineyards Estate Wines, Aisle 43 and WineCountry Vintners retail
locations, estate wineries, restaurants, and other licensed establishments. This distribution network is supported
by enhanced sales, marketing, and promotional programs. From time to time the Company also evaluates the
potential for acquisitions and partnerships, both in Canada and internationally, to further complement our product
portfolio and market presence.
Recent events
Winery Limited.
On November 8, 2011, the Company finalized a ten-year licensing agreement with Wayne Gretzky which gives the
Company the exclusive right to use certain Wayne Gretzky related brand names in the manufacturing and selling
of wine in Canada. Both parties have the option to terminate the agreement after three years upon providing two
years’ notice. On the same date, the Company purchased $2.7 million of inventory from Wayne Gretzky Estate
On October 28, 2011, the Company completed the purchase of the inventory and intangible assets of Cellar Craft
International, a consumer made wine business located in Western Canada for $2.7 million. Cellar Craft was best
known for their grape skin product which allows the consumer to ferment red wine on the skin pulling more of the
natural tannins into the wine.
On June 8, 2011, the Company’s Board of Directors announced a 9% increase in common share dividends for
shareholders of record on June 30, 2011 payable on July 8, 2011. The annual dividend on Class A Shares was
increased to $0.360 per share from $0.330 per share and the Class B Shares increased to $0.314 per share from
$0.288 per share.
On March 10, 2011, the Company announced that it had filed a Notice of Intention to make a normal course
issuer bid to purchase for cancellation up to a maximum of 594,412 of its Class A Non-Voting Shares (“Class A
Shares”) through the facilities of the Toronto Stock Exchange which represents 5% of the Company’s issued and
outstanding Class A Shares. The normal course issuer bid was to remain in effect until the earlier of March 13, 2012
or the date on which the Company had purchased the maximum number of Class A Shares permitted. As of March
31, 2011, the Company had acquired 594,412 Class A Shares for total consideration of approximately $5.2 million
at an average price of $8.75 per Class A Share.
Effective May 1, 2010, the Company completed the sale of its ownership interests in Granville Island Brewing
Company Ltd. (“GIB”) and Mainland Beverage Distribution Ltd. (“MD”) to Creemore Springs Brewery Ltd. Of
the total proceeds from the sale of approximately $26.2 million, $25.0 million was received during fiscal 2010;
$0.2 million was received during the first quarter of fiscal 2011, and $1.0 million in the first quarter of fiscal 2013.
Proceeds were used to reduce long-term debt and bank indebtedness. The Company recorded an after tax gain
on the sale in fiscal 2010 of approximately $11.9 million. The operating results of the beer business were classified
as net earnings from a discontinued operation.
On May 25, 2010, the Company sold approximately 6 acres of vineyard in the Okanagan Valley to Burrowing Owl
Vineyards Ltd. for proceeds of approximately $0.8 million. Proceeds were used to reduce bank indebtedness.
Effective July 1, 2010, the Province of Ontario introduced, as part of the Harmonized Sales Tax (“HST”), a special
wine levy on International and Canadian blended (“ICB”) wines sold through the Company’s retail store network.
ICB is wine that is made through the blending of wine made from domestic grapes with wine purchased on
international markets. Imported and domestic wines sold through the LCBO do not incur any additional taxation.
This discriminatory wine levy has put pressure on the Company’s gross margin, as well as on domestic grape prices
and purchases. The impact of the levy amounted to a reduction in sales of approximately $2.4 million for the year
ending March 31, 2012 resulting in lower net earnings of $1.7 million.
7 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 8
Overview
Recent events
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 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. (“GVI”), the recognized leader in personal winemaking products. GVI 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, and Australia. GVI’s 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 102 well-positioned independent retail locations in Ontario under the Vineyards Estate Wines,
Aisle 43, and WineCountry Vintners store names. The Company also owns Grady Wine Marketing (“GWM”)
based in Vancouver, and The Small Winemaker’s Collection Inc. (“SWM”) 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 Estate Winery brands in
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’s stated mission is to build sales volumes of its blended, premium, and ultra-premium brands by
delivering to its customers and consumers the highest quality wines at the best possible value. To meet this goal,
the Company is investing in improvements in the quality of our grapes and wines, our winemaking capabilities,
sales and marketing initiatives, and our quality management programs. Over the long-term, the Company believes
premium wine sales will continue to grow in Canada and these products generate higher sales and increased
profitability compared to lower-priced table wines.
APL is focused on initiatives to reduce costs and enhance its production efficiencies through a continual review
of the Company’s operations. The Company continually reviews its cost structure with a view to enhancing
profitability. In addition, the Company continues to expand and strengthen its distribution through provincial
liquor boards, the Company’s network of 102 Vineyards Estate Wines, Aisle 43 and WineCountry Vintners retail
locations, estate wineries, restaurants, and other licensed establishments. This distribution network is supported
by enhanced sales, marketing, and promotional programs. From time to time the Company also evaluates the
potential for acquisitions and partnerships, both in Canada and internationally, to further complement our product
portfolio and market presence.
On November 8, 2011, the Company finalized a ten-year licensing agreement with Wayne Gretzky which gives the
Company the exclusive right to use certain Wayne Gretzky related brand names in the manufacturing and selling
of wine in Canada. Both parties have the option to terminate the agreement after three years upon providing two
years’ notice. On the same date, the Company purchased $2.7 million of inventory from Wayne Gretzky Estate
Winery Limited.
On October 28, 2011, the Company completed the purchase of the inventory and intangible assets of Cellar Craft
International, a consumer made wine business located in Western Canada for $2.7 million. Cellar Craft was best
known for their grape skin product which allows the consumer to ferment red wine on the skin pulling more of the
natural tannins into the wine.
On June 8, 2011, the Company’s Board of Directors announced a 9% increase in common share dividends for
shareholders of record on June 30, 2011 payable on July 8, 2011. The annual dividend on Class A Shares was
increased to $0.360 per share from $0.330 per share and the Class B Shares increased to $0.314 per share from
$0.288 per share.
On March 10, 2011, the Company announced that it had filed a Notice of Intention to make a normal course
issuer bid to purchase for cancellation up to a maximum of 594,412 of its Class A Non-Voting Shares (“Class A
Shares”) through the facilities of the Toronto Stock Exchange which represents 5% of the Company’s issued and
outstanding Class A Shares. The normal course issuer bid was to remain in effect until the earlier of March 13, 2012
or the date on which the Company had purchased the maximum number of Class A Shares permitted. As of March
31, 2011, the Company had acquired 594,412 Class A Shares for total consideration of approximately $5.2 million
at an average price of $8.75 per Class A Share.
Effective May 1, 2010, the Company completed the sale of its ownership interests in Granville Island Brewing
Company Ltd. (“GIB”) and Mainland Beverage Distribution Ltd. (“MD”) to Creemore Springs Brewery Ltd. Of
the total proceeds from the sale of approximately $26.2 million, $25.0 million was received during fiscal 2010;
$0.2 million was received during the first quarter of fiscal 2011, and $1.0 million in the first quarter of fiscal 2013.
Proceeds were used to reduce long-term debt and bank indebtedness. The Company recorded an after tax gain
on the sale in fiscal 2010 of approximately $11.9 million. The operating results of the beer business were classified
as net earnings from a discontinued operation.
On May 25, 2010, the Company sold approximately 6 acres of vineyard in the Okanagan Valley to Burrowing Owl
Vineyards Ltd. for proceeds of approximately $0.8 million. Proceeds were used to reduce bank indebtedness.
Effective July 1, 2010, the Province of Ontario introduced, as part of the Harmonized Sales Tax (“HST”), a special
wine levy on International and Canadian blended (“ICB”) wines sold through the Company’s retail store network.
ICB is wine that is made through the blending of wine made from domestic grapes with wine purchased on
international markets. Imported and domestic wines sold through the LCBO do not incur any additional taxation.
This discriminatory wine levy has put pressure on the Company’s gross margin, as well as on domestic grape prices
and purchases. The impact of the levy amounted to a reduction in sales of approximately $2.4 million for the year
ending March 31, 2012 resulting in lower net earnings of $1.7 million.
7 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 8
Effective April 1, 2011, the Company began reporting its current period and comparative period results under
International Financial Reporting Standards (“IFRS”). A discussion of the effects of the transition to IFRS on
the Company’s financial statements is provided under the section titled International Financial Reporting
Standards below.
During fiscal 2012, the Company celebrated its 50th Anniversary. A number of special events and promotions
were held to recognize this important milestone.
The Canadian wine Market
The market for wine in Canada has continued to grow due to a movement toward the consumption of wine made
by young consumers who have more recently adopted wine as their beverage of choice, by an aging population
who favour the more sophisticated experience that wine offers, as well as the widely reported health benefits of
moderate wine consumption. Imports from major wine-producing countries continue to expand their share of the
Canadian market, in many cases supported by extensive government subsidy programs that support lower prices
that are unmatched in Canada. Canada remains one of the world’s largest importers of wine, resulting in significant
growth in foreign wine sales in Canada over the past five years. To ensure that fair and open trade practices exist in
the domestic Canadian wine market, the Company is working closely with other Canadian wine producers and the
Canadian government to address this important issue.
For the year ended March 31, 2012, consumption of wine in Canada (excluding Quebec, where the Company
does not participate, and excluding the refreshment wine category) rose by approximately 3.0% after increasing
by 3.7% in fiscal 2011. Imported wines accounted for 65.7% of total volume in fiscal 2012 up from 64.6 % in fiscal
2011. Canadian-made wines experienced a slight decrease in market share from 35.4% to 34.3% during the year.
The Company’s share of the total Canadian market in fiscal 2012 was 13.6% compared to 13.3% in 2011. The
Company’s share of the Canadian domestic market increased from 37.2% in fiscal 2011 to 38.2% in fiscal 2012
primarily due to strong sales of key brands and solid performance from recent product introductions.
The Vintners Quality Alliance (‘VQA’), established in 1989, has become recognized throughout the world as
the appellation system for Canadian wines that meet strict standards of excellence. The Company’s sales of
VQA designated wines decreased by 0.6% in fiscal 2012 compared to a 1.9% decrease in fiscal 2011 due to
the significant increases in product launches by competitors in the LCBO during the year and to a shortage of
premium grape supply in vintage 2010.
Red table wines continued to grow in popularity, with total Canadian volume sales rising 2.5% in fiscal 2012
compared to 3.4% in 2011. Volume sales of the Company’s red wine portfolio increased 8.3% in fiscal 2012 after
a 15.6% increase in fiscal 2011. Volume sales of white table wines in Canada rose 3.8% in fiscal 2012 and 3.5% in
2011, while the Company’s sales of white table wines were up 4.2% in fiscal 2012 compared to 5.8% in fiscal 2011.
The Company believes that sales for personal winemaking products declined in Canada by approximately 4.0%
in both fiscal 2012 and fiscal 2011. Sales of the Company’s personal winemaking products experienced a slight
decrease during the year as consumers increased their purchases of lower-priced bottled wines and this decrease
was partially offset by an increase in export sales to the United States.
Results of Operations
The following table outlines key highlights for the year ended March 31, 2012, 2011, and 2010. With the
Company’s sale of its ownership of GIB and MD effective October 1, 2009, the results for the Company’s beer
business have been classified as earnings from a discontinued operation. The sale was completed on May 1, 2010.
FOR THE YEARS ENDED MARCH 31,
(in thousands of dollars except per share amounts)
Sales
Gross margin
Gross margin (% of sales)
Selling, general, and administrative expenses
EBITA
Other expenses
Unrealized gain on financial instruments
Net earnings from continuing operations
Net earnings from a discontinued operation
Net earnings
Earnings per share from continuing operations Class A
Earnings per share from continuing operations Class B
Earnings per share – basic and diluted - Class A
Earnings per share – basic and diluted - Class B
Dividend per share – Class A (annual)
Dividend per share – Class B (annual)
2012
2011
2010(1)
276,883
107,257
38.7%
74,606
32,651
(257)
1,163
13,001
-
13,001
$0.93
$0.81
$0.93
$0.81
$0.360
$0.314
265,420
103,262
38.9%
71,718
31,544
(117)
791
11,223
-
11,223
$ 0.78
$ 0.67
$ 0.78
$ 0.67
$ 0.330
$ 0.288
263,151
96,324
36.6%
68,970
27,354
(3,224)
1,627
9,526
12,135
21,661
$ 0.66
$ 0.57
$ 1.49
$ 1.30
$ 0.330
$ 0.288
(1) Amounts for the year ended March 31, 2010 have not been prepared in accordance with IFRS. They have been presented in
accordance with Canadian GAAP and may not be comparable to subsequent periods.
Sales for the year ended March 31, 2012 increased by approximately 4.3% due to increased sales of major premium
and blended varietal brands sold through provincial liquor boards across the country, the positive impact on sales from
recent acquisitions, a solid increase in the Company’s export sales, and new product introductions, but these sales were
partially offset by the negative impact of the special levy introduced on July 1, 2010 by the Province of Ontario on sales
of ICB wines in the Company’s retail stores and to lower sales of the Company’s wine kits.
9 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 10
Effective April 1, 2011, the Company began reporting its current period and comparative period results under
Results of Operations
International Financial Reporting Standards (“IFRS”). A discussion of the effects of the transition to IFRS on
the Company’s financial statements is provided under the section titled International Financial Reporting
Standards below.
During fiscal 2012, the Company celebrated its 50th Anniversary. A number of special events and promotions
were held to recognize this important milestone.
The Canadian wine Market
The market for wine in Canada has continued to grow due to a movement toward the consumption of wine made
by young consumers who have more recently adopted wine as their beverage of choice, by an aging population
who favour the more sophisticated experience that wine offers, as well as the widely reported health benefits of
moderate wine consumption. Imports from major wine-producing countries continue to expand their share of the
Canadian market, in many cases supported by extensive government subsidy programs that support lower prices
that are unmatched in Canada. Canada remains one of the world’s largest importers of wine, resulting in significant
growth in foreign wine sales in Canada over the past five years. To ensure that fair and open trade practices exist in
the domestic Canadian wine market, the Company is working closely with other Canadian wine producers and the
Canadian government to address this important issue.
For the year ended March 31, 2012, consumption of wine in Canada (excluding Quebec, where the Company
does not participate, and excluding the refreshment wine category) rose by approximately 3.0% after increasing
by 3.7% in fiscal 2011. Imported wines accounted for 65.7% of total volume in fiscal 2012 up from 64.6 % in fiscal
2011. Canadian-made wines experienced a slight decrease in market share from 35.4% to 34.3% during the year.
The Company’s share of the total Canadian market in fiscal 2012 was 13.6% compared to 13.3% in 2011. The
Company’s share of the Canadian domestic market increased from 37.2% in fiscal 2011 to 38.2% in fiscal 2012
primarily due to strong sales of key brands and solid performance from recent product introductions.
The Vintners Quality Alliance (‘VQA’), established in 1989, has become recognized throughout the world as
the appellation system for Canadian wines that meet strict standards of excellence. The Company’s sales of
VQA designated wines decreased by 0.6% in fiscal 2012 compared to a 1.9% decrease in fiscal 2011 due to
the significant increases in product launches by competitors in the LCBO during the year and to a shortage of
premium grape supply in vintage 2010.
Red table wines continued to grow in popularity, with total Canadian volume sales rising 2.5% in fiscal 2012
compared to 3.4% in 2011. Volume sales of the Company’s red wine portfolio increased 8.3% in fiscal 2012 after
a 15.6% increase in fiscal 2011. Volume sales of white table wines in Canada rose 3.8% in fiscal 2012 and 3.5% in
2011, while the Company’s sales of white table wines were up 4.2% in fiscal 2012 compared to 5.8% in fiscal 2011.
The Company believes that sales for personal winemaking products declined in Canada by approximately 4.0%
in both fiscal 2012 and fiscal 2011. Sales of the Company’s personal winemaking products experienced a slight
decrease during the year as consumers increased their purchases of lower-priced bottled wines and this decrease
was partially offset by an increase in export sales to the United States.
The following table outlines key highlights for the year ended March 31, 2012, 2011, and 2010. With the
Company’s sale of its ownership of GIB and MD effective October 1, 2009, the results for the Company’s beer
business have been classified as earnings from a discontinued operation. The sale was completed on May 1, 2010.
FOR THE YEARS ENDED MARCH 31,
(in thousands of dollars except per share amounts)
Sales
Gross margin
Gross margin (% of sales)
Selling, general, and administrative expenses
EBITA
Unrealized gain on financial instruments
Other expenses
Net earnings from continuing operations
Net earnings from a discontinued operation
Net earnings
Earnings per share from continuing operations Class A
Earnings per share from continuing operations Class B
Earnings per share – basic and diluted - Class A
Earnings per share – basic and diluted - Class B
Dividend per share – Class A (annual)
Dividend per share – Class B (annual)
2012
2011
2010(1)
276,883
107,257
38.7%
74,606
32,651
(257)
1,163
13,001
-
13,001
$0.93
$0.81
$0.93
$0.81
$0.360
$0.314
265,420
103,262
38.9%
71,718
31,544
(117)
791
11,223
-
11,223
$ 0.78
$ 0.67
$ 0.78
$ 0.67
$ 0.330
$ 0.288
263,151
96,324
36.6%
68,970
27,354
(3,224)
1,627
9,526
12,135
21,661
$ 0.66
$ 0.57
$ 1.49
$ 1.30
$ 0.330
$ 0.288
(1) Amounts for the year ended March 31, 2010 have not been prepared in accordance with IFRS. They have been presented in
accordance with Canadian GAAP and may not be comparable to subsequent periods.
Sales for the year ended March 31, 2012 increased by approximately 4.3% due to increased sales of major premium
and blended varietal brands sold through provincial liquor boards across the country, the positive impact on sales from
recent acquisitions, a solid increase in the Company’s export sales, and new product introductions, but these sales were
partially offset by the negative impact of the special levy introduced on July 1, 2010 by the Province of Ontario on sales
of ICB wines in the Company’s retail stores and to lower sales of the Company’s wine kits.
9 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 10
The Company defines gross margin as gross profit excluding amortization. Gross margin as a percentage of sales
was 38.7% for the year ended March 31, 2012 compared to 38.9% in the prior year. Gross margin percentage was
negatively affected by the impact of the additional taxation levied on ICB wines sold through the Company’s retail
stores, higher costs for wine purchased on international markets, increased distribution costs, as well as increased
price competition in certain markets during the latter half of the fiscal year, but this gross margin percentage was
partially offset by sales of higher margin products, the strengthening of the Canadian dollar on world currency
markets, and successful cost control initiatives to reduce operating and packaging expenses. The special levy
served to reduce sales and gross margin by approximately $2.4 million in fiscal 2012 compared to $2.0 million in
fiscal 2011. Management believes gross margin will decline in fiscal 2013 to approximately 37% to 38% due to
higher costs for wine purchased on international markets and increased price competition from major competitors
across Canada. During fiscal 2011, the Company’s gross margin was negatively impacted by the increased use of
higher-priced domestic grapes used to produce ICB wines and an increase in the cost of domestic grapes and of
wine purchased on international markets. Management is focused on efforts to enhance production efficiency and
productivity to further improve overall profitability.
Selling and administrative expenses rose in fiscal 2012 due to an increase in sales and marketing investments
to grow sales volumes of its products through increased advertising and promotional initiatives across all trade
channels, investments made to increase tourism at its estate wineries, and certain one-time costs related to the
Company’s celebration of its 50th anniversary. As a percentage of sales, selling and administrative expenses for the
year ended March 31, 2012 decreased to 26.9% compared to 27.0% in the prior year. The Company is focused on
ensuring that selling and administrative expenses are tightly controlled.
Earnings before interest, amortization, unrealized derivative gains (losses), other expenses, income taxes, and net
earnings from a discontinued operation (“EBITA”) were $32.7 million for the year ended March 31, 2012 compared
to $31.5 million in the prior fiscal year. The increase is primarily due to the higher sales, partially offset by the lower
gross margin in fiscal 2012 due to the impact of the special levy on winery retail stores in Ontario and to higher
costs for wines purchased on international markets.
Interest expense in fiscal 2012 declined to $5.4 million from $6.7 million last year due to a decrease in short- and
long-term interest rates negotiated through the refinancing of the Company’s credit facilities that occurred on
September 16, 2011, but this decrease was partially offset by higher debt levels.
Amortization expenses were $7.9 million for the year ended March 31, 2012 a 3.4% increase from the $7.6 million
last year due to slightly higher levels of capital spending.
The Company incurred a non-cash gain in fiscal 2012 related to mark-to-market adjustments on an interest rate
swap and foreign exchange contracts aggregating approximately $0.3 million compared to $0.1 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 incurred in fiscal 2012 relate to a $0.4 million fair value adjustment to vines, $0.2 million in
maintenance costs for the Company’s Port Moody facility which was closed effective December 31, 2005, and
a one-time charge of approximately $0.4 million related to a reassessment of employee payroll taxes from prior
periods. In fiscal 2011, other expenses included a net $1.2 million write-down, after proceeds from an insurance
claim, in the value of a BC vineyard where vines were damaged by an early and severe frost in the fall of 2009 and
$0.2 million in ongoing maintenance costs for the Port Moody facility. These costs were partially offset by a $0.3
million gain on the sale of a portion of an Okanagan vineyard.
Net earnings excluding gains (losses) on derivative financial instruments, other expenses, and the related income
tax effect of these items for the year ended March 31, 2012 were $13.7 million compared to $11.7 million in the
prior year.
Net earnings for the year ended March 31, 2012 were $13.0 million or $0.93 per Class A Share compared to
$11.2 million or $0.78 per Class A Share in fiscal 2011.
The Company believes that sales will continue to grow due to the strong positioning of key brands and the reduced
impact of the year-over-year change from the introduction of the special levy. The Company will continue to benefit
to the extent that the higher value of the Canadian dollar relative to the U.S. dollar or the Euro continues but will
experience continued pressure on earnings due to increased costs for raw materials, continued pricing pressure from
major competitors, the impact of the special levy, and by higher levels of spending on advertising and promotion
related to new product launches. The Company uses foreign exchange forward contracts to protect against changes
in foreign currency rates and currently has locked in $15.0 million U.S. in U.S. dollar contracts at rates averaging
$1.01 Canadian and €2.5 million in Euro contracts at rates averaging $1.31 Canadian for fiscal 2013.
Quarterly Performance
The following table outlines key quarterly highlights. With the Company’s sale of its ownership in GIB and MD,
the results for the Company’s beer business have been classified as net earnings from a discontinued operation.
The sale was completed on May 1, 2010.
($000) except per
Q4 12
Q3 12 Q2 12 Q1 12
Q4 11 Q3 11
Q2 11
Q1 11
$
60,891
21,953
36.1%
2,506
$
76,595
30,719
40.1%
11,858
$
69,990
27,272
39.0%
8,805
$
69,407
27,313
39.4%
9,482
$
$
56,940 74,983
22,146 28,588
38.9%
38.1%
3,945 10,173
$
69,031
27,038
39.2%
8,782
$
64,466
25,490
39.5%
8,644
instruments and other expenses
(90)
(73)
605
464
(416)
(285)
2,270
(895)
39
(604)
324
6,309
1,133
3,385
241
3,911
(278)
417
(782)
4,930
964
1,873
715
4,003
$(0.05)
$0.46
$0.24
$0.28
$0.03
$0.34
$0.13
$0.28
$(0.04)
$0.39
$0.22
$0.24
$0.02
$0.30
$0.11
$0.24
share amounts
Sales
Gross margin
Gross margin (% of sales)
EBITA
Unrealized (gain) loss on financial
Other comprehensive
loss (income)
Net earnings
Earnings per share –
Class A basic & diluted
Earnings per share –
Class B basic & diluted
The third quarter of each year is historically the strongest in terms of sales, gross margin, and net earnings due to
increased consumer purchasing of the Company’s products during the holiday season.
11 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 12
The Company defines gross margin as gross profit excluding amortization. Gross margin as a percentage of sales
was 38.7% for the year ended March 31, 2012 compared to 38.9% in the prior year. Gross margin percentage was
negatively affected by the impact of the additional taxation levied on ICB wines sold through the Company’s retail
stores, higher costs for wine purchased on international markets, increased distribution costs, as well as increased
price competition in certain markets during the latter half of the fiscal year, but this gross margin percentage was
partially offset by sales of higher margin products, the strengthening of the Canadian dollar on world currency
markets, and successful cost control initiatives to reduce operating and packaging expenses. The special levy
served to reduce sales and gross margin by approximately $2.4 million in fiscal 2012 compared to $2.0 million in
fiscal 2011. Management believes gross margin will decline in fiscal 2013 to approximately 37% to 38% due to
higher costs for wine purchased on international markets and increased price competition from major competitors
across Canada. During fiscal 2011, the Company’s gross margin was negatively impacted by the increased use of
higher-priced domestic grapes used to produce ICB wines and an increase in the cost of domestic grapes and of
wine purchased on international markets. Management is focused on efforts to enhance production efficiency and
productivity to further improve overall profitability.
Selling and administrative expenses rose in fiscal 2012 due to an increase in sales and marketing investments
to grow sales volumes of its products through increased advertising and promotional initiatives across all trade
channels, investments made to increase tourism at its estate wineries, and certain one-time costs related to the
Company’s celebration of its 50th anniversary. As a percentage of sales, selling and administrative expenses for the
year ended March 31, 2012 decreased to 26.9% compared to 27.0% in the prior year. The Company is focused on
ensuring that selling and administrative expenses are tightly controlled.
Earnings before interest, amortization, unrealized derivative gains (losses), other expenses, income taxes, and net
earnings from a discontinued operation (“EBITA”) were $32.7 million for the year ended March 31, 2012 compared
to $31.5 million in the prior fiscal year. The increase is primarily due to the higher sales, partially offset by the lower
gross margin in fiscal 2012 due to the impact of the special levy on winery retail stores in Ontario and to higher
costs for wines purchased on international markets.
Interest expense in fiscal 2012 declined to $5.4 million from $6.7 million last year due to a decrease in short- and
long-term interest rates negotiated through the refinancing of the Company’s credit facilities that occurred on
September 16, 2011, but this decrease was partially offset by higher debt levels.
Amortization expenses were $7.9 million for the year ended March 31, 2012 a 3.4% increase from the $7.6 million
last year due to slightly higher levels of capital spending.
The Company incurred a non-cash gain in fiscal 2012 related to mark-to-market adjustments on an interest rate
swap and foreign exchange contracts aggregating approximately $0.3 million compared to $0.1 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 incurred in fiscal 2012 relate to a $0.4 million fair value adjustment to vines, $0.2 million in
maintenance costs for the Company’s Port Moody facility which was closed effective December 31, 2005, and
a one-time charge of approximately $0.4 million related to a reassessment of employee payroll taxes from prior
periods. In fiscal 2011, other expenses included a net $1.2 million write-down, after proceeds from an insurance
claim, in the value of a BC vineyard where vines were damaged by an early and severe frost in the fall of 2009 and
$0.2 million in ongoing maintenance costs for the Port Moody facility. These costs were partially offset by a $0.3
million gain on the sale of a portion of an Okanagan vineyard.
Net earnings excluding gains (losses) on derivative financial instruments, other expenses, and the related income
tax effect of these items for the year ended March 31, 2012 were $13.7 million compared to $11.7 million in the
prior year.
Net earnings for the year ended March 31, 2012 were $13.0 million or $0.93 per Class A Share compared to
$11.2 million or $0.78 per Class A Share in fiscal 2011.
The Company believes that sales will continue to grow due to the strong positioning of key brands and the reduced
impact of the year-over-year change from the introduction of the special levy. The Company will continue to benefit
to the extent that the higher value of the Canadian dollar relative to the U.S. dollar or the Euro continues but will
experience continued pressure on earnings due to increased costs for raw materials, continued pricing pressure from
major competitors, the impact of the special levy, and by higher levels of spending on advertising and promotion
related to new product launches. The Company uses foreign exchange forward contracts to protect against changes
in foreign currency rates and currently has locked in $15.0 million U.S. in U.S. dollar contracts at rates averaging
$1.01 Canadian and €2.5 million in Euro contracts at rates averaging $1.31 Canadian for fiscal 2013.
Quarterly Performance
The following table outlines key quarterly highlights. With the Company’s sale of its ownership in GIB and MD,
the results for the Company’s beer business have been classified as net earnings from a discontinued operation.
The sale was completed on May 1, 2010.
($000) except per
share amounts
Sales
Gross margin
Gross margin (% of sales)
EBITA
Unrealized (gain) loss on financial
instruments and other expenses
Other comprehensive
loss (income)
Net earnings
Earnings per share –
Class A basic & diluted
Earnings per share –
Class B basic & diluted
Q4 12
$
60,891
21,953
36.1%
2,506
Q3 12 Q2 12 Q1 12
Q4 11 Q3 11
Q2 11
Q1 11
$
76,595
30,719
40.1%
11,858
$
69,990
27,272
39.0%
8,805
$
69,407
27,313
39.4%
9,482
$
$
56,940 74,983
22,146 28,588
38.9%
38.1%
3,945 10,173
$
69,031
27,038
39.2%
8,782
$
64,466
25,490
39.5%
8,644
(90)
(73)
605
464
(416)
(285)
2,270
(895)
39
(604)
324
6,309
1,133
3,385
241
3,911
(278)
417
(782)
4,930
964
1,873
715
4,003
$(0.05)
$0.46
$0.24
$0.28
$0.03
$0.34
$0.13
$0.28
$(0.04)
$0.39
$0.22
$0.24
$0.02
$0.30
$0.11
$0.24
The third quarter of each year is historically the strongest in terms of sales, gross margin, and net earnings due to
increased consumer purchasing of the Company’s products during the holiday season.
11 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 12
Sales in the fourth quarter of fiscal 2012 increased by 6.9 % compared to the same quarter of fiscal 2011 due
primarily to solid increases in sales through provincial liquor boards and to the positive impact on sales from
recent acquisitions, partially offset by weaker sales of the Company’s wine kits. Gross margin for the three months
ended March 31, 2012 was 36.1% of sales compared to 38.9% during the prior year period. The decrease was
due to higher costs for wine purchased on international markets, increased price competition in certain markets,
the unfavourable absorption of overheads in the fourth quarter of fiscal 2012, and increased distribution costs
compared to the prior year period. Selling and administrative expenses as a percentage of sales improved to
31.9% in the fourth quarters of fiscal 2012 compared to 32.0% in the fourth quarter of fiscal 2011.
Liquidity and Capital Resources
As at
($000)
Current assets
Property, plant, & equipment
Biological assets
Goodwill
Intangibles and other assets
Total assets
Current liabilities
Long-term debt
Long-term derivative financial instruments
Employee future benefits
Deferred income tax
Shareholders’ equity
Total liabilities & shareholders’ equity
March 31,
2012
$
137,412
84,490
12,556
37,473
13,621
285,552
102,543
41,456
1,943
7,151
11,907
120,552
285,552
March 31,
2011
$
119,659
84,744
11,950
37,473
14,170
267,996
92,016
42,720
1,578
5,565
11,820
114,297
267,996
The changes to the Company’s balance sheet at March 31, 2012 compared to March 31, 2011 are due to
increased levels of inventory due to purchases from Wayne Gretzky Estate Winery and Cellar Craft, a larger
vintage in 2011, and higher wine inventory to support forecasts for increased sales in fiscal 2013, offset by higher
bank indebtedness and increases in accounts payable and accrued liabilities. In the third quarter of fiscal 2011,
the Company recorded a net write-down to assets of $1.2 million related to damage to vines at a BC vineyard.
Beginning in fiscal 2012, the Company began disclosing its biological assets at fair value, primarily grapes and
vines, as required under IFRS.
Total bank indebtedness increased during fiscal 2012 due primarily to an increased investment in inventory
partially offset by strong net earnings for the period and higher levels of accounts payable and accrued liabilities.
Inventory at March 31, 2012 was higher compared to March 31, 2011 due to the development of a strategic
alliance with Wayne Gretzky Estate Winery and the purchase of inventory from Cellar Craft International, a larger
VQA grape crop, and the carrying of higher levels of finished goods to meet future sales demand. Inventory is also
dependent on the increased use of domestically grown grapes that are used in the sale of premium and ultra-
premiums wines and are held for a longer period than imported wine. These grapes are typically aged for one
to three years before they are sold. The cost of domestically grown grapes is also significantly higher than wine
purchased on international markets.
Accounts receivable are predominantly with provincial liquor boards and to a lesser extent licensed establishments
and independent retailers of consumer made wine kits. The Company had $13.9 million dollars of accounts
receivable with provincial liquor boards at March 31, 2012, all of which is expected to be collectible. The balance
of $11.0 million represents amounts due from licensees, export customers, and independent retailers of consumer
made wine products. The amount of accounts receivable that is beyond 60 days is $1.0 million at March 31, 2012.
Against these amounts, an allowance for doubtful accounts of $0.3 million has been provided which the Company
has determined to represent a reasonable estimate of amounts that may not be collectible. During fiscal 2013, the
Company received the $1.0 million holdback from Creemore Springs Brewery Ltd. due on May 1, 2012 related to
The following table outlines the Company’s contractual obligations, including long-term debt, operating leases,
and commitments on short-term forward foreign exchange contracts used to hedge the currency risk on U.S.
the sale of GIB and MD.
dollar purchases.
As at March 31, 2012
($000)
Long-term bank loan and
other long-term debt
Swap agreement and loan interest
Operating leases and royalties
Plant and equipment purchases
Pension obligations
Foreign exchange contracts
Long-term grape contracts
Total long-term obligations
Total
$
47,597
7,626
23,317
5,411
4,093
18,409
315,340
421,793
<1 Year
2-3 years
4-5 years
>5 years
$
$
$
$
5,366
2,658
5,157
5,411
560
18,409
24,711
62,272
10,732
4,359
6,816
953
-
-
49,774
72,634
31,401
609
3,013
811
-
-
49,525
85,359
98
8,331
1,769
-
-
-
191,330
201,528
The ratio of debt to equity was 0.87:1 at March 31, 2012 compared to 0.85:1 at March 31, 2011. At March 31,
2012, the Company had unutilized debt capacity in the amount of $24.2 million on its operating loan facility.
On September 16, 2011, the Company completed a refinancing package with its existing bank group and
entered into a new $130.0 million syndicated loan facility maturing on September 16, 2015. The operating loan
facility in the amount of $80.0 million matures on September 16, 2015 and bears interest at the one- to six-month
Canadian Dealer Offered Rate (“CDOR”) plus 1.75%. The term facility in the amount of $50.0 million matures
on September 16, 2015. The Company maintains an interest rate swap on the term facility that effectively fixes
the interest rate at 5.73% until August 31, 2015. This loan is repayable in monthly principal payments of
$0.444 million.
Management expects to generate sufficient cash flow from operations to meet its debt servicing, principal
payment, and working capital requirements over both the short- and the long-term through increased profitability
and strong management of working capital and capital expenditures. The Company continually reviews all of
its assets to ensure appropriate returns on investment are being achieved and fit with the Company’s long-term
strategic objectives.
13 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 14
Sales in the fourth quarter of fiscal 2012 increased by 6.9 % compared to the same quarter of fiscal 2011 due
primarily to solid increases in sales through provincial liquor boards and to the positive impact on sales from
recent acquisitions, partially offset by weaker sales of the Company’s wine kits. Gross margin for the three months
ended March 31, 2012 was 36.1% of sales compared to 38.9% during the prior year period. The decrease was
due to higher costs for wine purchased on international markets, increased price competition in certain markets,
the unfavourable absorption of overheads in the fourth quarter of fiscal 2012, and increased distribution costs
compared to the prior year period. Selling and administrative expenses as a percentage of sales improved to
31.9% in the fourth quarters of fiscal 2012 compared to 32.0% in the fourth quarter of fiscal 2011.
March 31,
March 31,
Liquidity and Capital Resources
As at
($000)
Current assets
Property, plant, & equipment
Intangibles and other assets
Biological assets
Goodwill
Total assets
Current liabilities
Long-term debt
Employee future benefits
Deferred income tax
Shareholders’ equity
Total liabilities & shareholders’ equity
Long-term derivative financial instruments
2012
$
137,412
84,490
12,556
37,473
13,621
285,552
102,543
41,456
1,943
7,151
11,907
120,552
285,552
2011
$
119,659
84,744
11,950
37,473
14,170
267,996
92,016
42,720
1,578
5,565
11,820
114,297
267,996
The changes to the Company’s balance sheet at March 31, 2012 compared to March 31, 2011 are due to
increased levels of inventory due to purchases from Wayne Gretzky Estate Winery and Cellar Craft, a larger
vintage in 2011, and higher wine inventory to support forecasts for increased sales in fiscal 2013, offset by higher
bank indebtedness and increases in accounts payable and accrued liabilities. In the third quarter of fiscal 2011,
the Company recorded a net write-down to assets of $1.2 million related to damage to vines at a BC vineyard.
Beginning in fiscal 2012, the Company began disclosing its biological assets at fair value, primarily grapes and
vines, as required under IFRS.
Total bank indebtedness increased during fiscal 2012 due primarily to an increased investment in inventory
partially offset by strong net earnings for the period and higher levels of accounts payable and accrued liabilities.
Inventory at March 31, 2012 was higher compared to March 31, 2011 due to the development of a strategic
alliance with Wayne Gretzky Estate Winery and the purchase of inventory from Cellar Craft International, a larger
VQA grape crop, and the carrying of higher levels of finished goods to meet future sales demand. Inventory is also
dependent on the increased use of domestically grown grapes that are used in the sale of premium and ultra-
premiums wines and are held for a longer period than imported wine. These grapes are typically aged for one
to three years before they are sold. The cost of domestically grown grapes is also significantly higher than wine
purchased on international markets.
Accounts receivable are predominantly with provincial liquor boards and to a lesser extent licensed establishments
and independent retailers of consumer made wine kits. The Company had $13.9 million dollars of accounts
receivable with provincial liquor boards at March 31, 2012, all of which is expected to be collectible. The balance
of $11.0 million represents amounts due from licensees, export customers, and independent retailers of consumer
made wine products. The amount of accounts receivable that is beyond 60 days is $1.0 million at March 31, 2012.
Against these amounts, an allowance for doubtful accounts of $0.3 million has been provided which the Company
has determined to represent a reasonable estimate of amounts that may not be collectible. During fiscal 2013, the
Company received the $1.0 million holdback from Creemore Springs Brewery Ltd. due on May 1, 2012 related to
the sale of GIB and MD.
The following table outlines the Company’s contractual obligations, including long-term debt, operating leases,
and commitments on short-term forward foreign exchange contracts used to hedge the currency risk on U.S.
dollar purchases.
As at March 31, 2012
($000)
Long-term bank loan and
other long-term debt
Swap agreement and loan interest
Operating leases and royalties
Plant and equipment purchases
Pension obligations
Foreign exchange contracts
Long-term grape contracts
Total long-term obligations
Total
$
<1 Year
$
2-3 years
$
4-5 years
$
>5 years
$
47,597
7,626
23,317
5,411
4,093
18,409
315,340
421,793
5,366
2,658
5,157
5,411
560
18,409
24,711
62,272
10,732
4,359
6,816
-
953
-
49,774
72,634
31,401
609
3,013
-
811
-
49,525
85,359
98
-
8,331
-
1,769
-
191,330
201,528
The ratio of debt to equity was 0.87:1 at March 31, 2012 compared to 0.85:1 at March 31, 2011. At March 31,
2012, the Company had unutilized debt capacity in the amount of $24.2 million on its operating loan facility.
On September 16, 2011, the Company completed a refinancing package with its existing bank group and
entered into a new $130.0 million syndicated loan facility maturing on September 16, 2015. The operating loan
facility in the amount of $80.0 million matures on September 16, 2015 and bears interest at the one- to six-month
Canadian Dealer Offered Rate (“CDOR”) plus 1.75%. The term facility in the amount of $50.0 million matures
on September 16, 2015. The Company maintains an interest rate swap on the term facility that effectively fixes
the interest rate at 5.73% until August 31, 2015. This loan is repayable in monthly principal payments of
$0.444 million.
Management expects to generate sufficient cash flow from operations to meet its debt servicing, principal
payment, and working capital requirements over both the short- and the long-term through increased profitability
and strong management of working capital and capital expenditures. The Company continually reviews all of
its assets to ensure appropriate returns on investment are being achieved and fit with the Company’s long-term
strategic objectives.
13 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 14
In fiscal 2012, the Company generated cash from operating activities, after changes in non-cash working capital
items, of $7.0 million compared to $23.0 million in the prior year period. Cash flow from operating activities
declined in fiscal 2012 due to the higher levels of inventory during the year. This decline was partially offset by
stronger earnings performance and by an increase in accounts payable and accrued liabilities.
Investing activities of approximately $9.2 million were made in fiscal 2012 compared to $7.5 million in the prior
year. The increase is related to the purchase of the brands and customer relationships of Cellar Craft International
and lower proceeds from the sale of assets. The increase was partially offset by lower levels of capital spending
during the period.
Working capital as at March 31, 2012 was $34.9 million compared to $27.6 million at March 31, 2011. The increase,
which related to higher inventory, was partially offset by an increase in bank indebtedness and accounts payable
and accrued liabilities. Shareholders’ equity as at March 31, 2012 was $120.6 million or $8.43 per common share
compared to $114.3 million or $7.99 per common share as at March 31, 2011. The increase in shareholders’ equity
is due to higher net earnings for the year. The increase was partially offset by the payment of dividends.
Common Shares Outstanding
The Company is authorized to issue an unlimited number of Class A and Class B Shares. Class A Shares are non-
voting and are entitled to a dividend in an amount equal to 115% of any dividend paid or declared on Class B
Shares. Class B Shares are voting and convertible into Class A Shares on a one-for-one basis. During the fourth
quarter of fiscal 2011, the Company purchased and cancelled 594,412 Class A Shares under a normal course
issuer bid.
Shares outstanding
June 20, 2012
March 31, 2011
March 31, 2010
From time to time the Company evaluates investment opportunities, including acquisitions, which could support
Class A Shares
Class B Shares
Total
Strategic Outlook and Direction
11,293,829
3,004,041
11,293,829
3,004,041
11,888,241
3,004,041
14,297,870
14,297,870
14,892,282
Andrew Peller Limited is committed to a strategy of growth that focuses on the expansion of its core business as
a producer and marketer of quality wines through the development of leading brands that meet the needs of our
consumers and customers.
The market for wine in Canada continues to grow due to a movement toward the consumption of wine made
by young consumers who have more recently adopted wine as their beverage of choice, an aging population
who favour the more sophisticated experience that wine offers, as well as the widely reported health benefits of
moderate wine consumption. The share of the market held by domestic producers decreased moderately during
fiscal 2012. The Company recorded strong growth in its sales through provincial liquor boards, its estate wineries
and through export sales but continued to experience slight weakness for its personal winemaking products.
Sales increased slightly through the Company’s 102 retail stores in Ontario in spite of the introduction of a special
levy on sales of ICB wines through winery retail stores in the province. The Company has focused its product
development and sales and marketing initiatives aimed at capitalizing on the trend of increased wine consumption
and expects to see continued sales growth. The Company will continue to closely monitor its costs and will react
quickly to any further changes in the marketplace. Management expects gross margin to decline to the 37% to
38% level in fiscal 2013 due to increases in the costs of wine and packaging and continued price pressure from
key competitors. Gross margin dollars are forecasted to grow by approximately 2% over the year. Earnings are
forecasted to increase due to tight controls over spending and investments to improve productivity and efficiency.
The Company will continue to launch new blended varietal and ultra-premium brands in the future and increase its
use of unique package formats. The Company will also make packaging design changes that are consistent with
its continued move to be more environmentally friendly. Increased focus will be made on expanding distribution
through the Company’s direct to home trade channels to provide consumers with more access to its broad brand
portfolio. These product launches and directed spending to support key brands through all of the Company’s
distribution channels will receive increased marketing and sales support in fiscal 2013.
The Company expects to make additional investments in capital expenditures to increase capacity, to support its
ongoing commitment to producing the highest-quality wines, and to improve productivity and efficiencies. Such
investments made over the past few years are expected to continue to result in increased sales and improved
profitability going forward.
its strategic direction.
The sale of the Company’s interest in its ownership of GIB and MD completed on May 1, 2010 allowed the
Company to more effectively focus on its key strengths and long-term strategies to build its leading portfolio of
premium and ultra-premium wines through all its trade channels. The proceeds from the sale were used to reduce
bank indebtedness and long-term debt.
With the emergence from the economic slowdown in Canada experienced over the last two years, the Company
expects it will generate increased sales while gross margin is expected to decrease moderately. Higher pricing for
imported and domestic wine, the Province of Ontario’s introduction of a discriminatory wine levy on ICB wines sold
through the Company’s retail store network and pricing pressure from key competitors will have a negative impact
on gross margin in fiscal 2013.
The Company’s product portfolio covers the complete spectrum of price levels within the Canadian wine market.
While there may be an increase in purchases of ultra-premium wine, this is expected to be offset by a slight
decrease in sales of blended varietal wine. In addition, the Company will be accelerating its efforts to generate
production efficiencies and reduce overhead costs to enhance its overall profitability.
15 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 16
In fiscal 2012, the Company generated cash from operating activities, after changes in non-cash working capital
items, of $7.0 million compared to $23.0 million in the prior year period. Cash flow from operating activities
declined in fiscal 2012 due to the higher levels of inventory during the year. This decline was partially offset by
stronger earnings performance and by an increase in accounts payable and accrued liabilities.
Investing activities of approximately $9.2 million were made in fiscal 2012 compared to $7.5 million in the prior
year. The increase is related to the purchase of the brands and customer relationships of Cellar Craft International
and lower proceeds from the sale of assets. The increase was partially offset by lower levels of capital spending
during the period.
Working capital as at March 31, 2012 was $34.9 million compared to $27.6 million at March 31, 2011. The increase,
which related to higher inventory, was partially offset by an increase in bank indebtedness and accounts payable
and accrued liabilities. Shareholders’ equity as at March 31, 2012 was $120.6 million or $8.43 per common share
compared to $114.3 million or $7.99 per common share as at March 31, 2011. The increase in shareholders’ equity
is due to higher net earnings for the year. The increase was partially offset by the payment of dividends.
Common Shares Outstanding
The Company is authorized to issue an unlimited number of Class A and Class B Shares. Class A Shares are non-
voting and are entitled to a dividend in an amount equal to 115% of any dividend paid or declared on Class B
Shares. Class B Shares are voting and convertible into Class A Shares on a one-for-one basis. During the fourth
quarter of fiscal 2011, the Company purchased and cancelled 594,412 Class A Shares under a normal course
issuer bid.
Class A Shares
Class B Shares
Total
Shares outstanding
June 20, 2012
March 31, 2011
March 31, 2010
11,293,829
3,004,041
11,293,829
3,004,041
11,888,241
3,004,041
14,297,870
14,297,870
14,892,282
Strategic Outlook and Direction
Andrew Peller Limited is committed to a strategy of growth that focuses on the expansion of its core business as
a producer and marketer of quality wines through the development of leading brands that meet the needs of our
consumers and customers.
The market for wine in Canada continues to grow due to a movement toward the consumption of wine made
by young consumers who have more recently adopted wine as their beverage of choice, an aging population
who favour the more sophisticated experience that wine offers, as well as the widely reported health benefits of
moderate wine consumption. The share of the market held by domestic producers decreased moderately during
fiscal 2012. The Company recorded strong growth in its sales through provincial liquor boards, its estate wineries
and through export sales but continued to experience slight weakness for its personal winemaking products.
Sales increased slightly through the Company’s 102 retail stores in Ontario in spite of the introduction of a special
levy on sales of ICB wines through winery retail stores in the province. The Company has focused its product
development and sales and marketing initiatives aimed at capitalizing on the trend of increased wine consumption
and expects to see continued sales growth. The Company will continue to closely monitor its costs and will react
quickly to any further changes in the marketplace. Management expects gross margin to decline to the 37% to
38% level in fiscal 2013 due to increases in the costs of wine and packaging and continued price pressure from
key competitors. Gross margin dollars are forecasted to grow by approximately 2% over the year. Earnings are
forecasted to increase due to tight controls over spending and investments to improve productivity and efficiency.
The Company will continue to launch new blended varietal and ultra-premium brands in the future and increase its
use of unique package formats. The Company will also make packaging design changes that are consistent with
its continued move to be more environmentally friendly. Increased focus will be made on expanding distribution
through the Company’s direct to home trade channels to provide consumers with more access to its broad brand
portfolio. These product launches and directed spending to support key brands through all of the Company’s
distribution channels will receive increased marketing and sales support in fiscal 2013.
The Company expects to make additional investments in capital expenditures to increase capacity, to support its
ongoing commitment to producing the highest-quality wines, and to improve productivity and efficiencies. Such
investments made over the past few years are expected to continue to result in increased sales and improved
profitability going forward.
From time to time the Company evaluates investment opportunities, including acquisitions, which could support
its strategic direction.
The sale of the Company’s interest in its ownership of GIB and MD completed on May 1, 2010 allowed the
Company to more effectively focus on its key strengths and long-term strategies to build its leading portfolio of
premium and ultra-premium wines through all its trade channels. The proceeds from the sale were used to reduce
bank indebtedness and long-term debt.
With the emergence from the economic slowdown in Canada experienced over the last two years, the Company
expects it will generate increased sales while gross margin is expected to decrease moderately. Higher pricing for
imported and domestic wine, the Province of Ontario’s introduction of a discriminatory wine levy on ICB wines sold
through the Company’s retail store network and pricing pressure from key competitors will have a negative impact
on gross margin in fiscal 2013.
The Company’s product portfolio covers the complete spectrum of price levels within the Canadian wine market.
While there may be an increase in purchases of ultra-premium wine, this is expected to be offset by a slight
decrease in sales of blended varietal wine. In addition, the Company will be accelerating its efforts to generate
production efficiencies and reduce overhead costs to enhance its overall profitability.
15 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 16
Risks and Uncertainties
The Company’s sales of wine are affected by general economic conditions such as changes in discretionary
consumer spending and consumer confidence, in future economic conditions, tax laws, and the prices of its
products. A steep and sustained decline in economic growth may cause a lower demand for the Company’s
products. Such general economic conditions could impact the Company’s sales through our estate wineries and
restaurants, direct sales through licensed establishments, and export sales through Duty Free shops. APL believes
that these effects would likely be temporary and would not have a significant impact on financial performance.
The Canadian wine market continues to be the target of low-priced imported wines from regions and countries
that subsidize wine production and grape growing as well as providing sizeable export subsidies. Along with other
members of the Canadian wine industry, the Company is working with the Canadian government to rectify these
unfair trade practices.
The Company operates in a highly competitive industry and the dollar amount and unit volume of sales could be
negatively impacted by its inability to maintain or increase prices, changes in geographic or product mix, a general
decline in beverage alcohol consumption or the decision of retailers, or consumers to purchase competitive
products instead of the Company’s products. Retailer and consumer purchasing decisions are influenced by,
among other things, the perceived absolute or relative overall value of the Company’s products, including their
quality or pricing, compared to competitive products. Unit volume and dollar sales could also be affected by
purchasing, financing, operational, advertising, or promotional decisions made by provincial agencies and retailers
which could affect supply of or consumer demand for, the Company’s products. APL could also experience higher
than expected selling and administrative expenses if it finds it necessary to increase the number of its personnel,
advertising, or promotional expenditures to maintain its competitive position.
APL expects to increase its sales of its premium wines in Canada, principally through the sale of VQA wines,
and as a result is dependent on the quality and supply of domestically grown premium quality grapes. If any of
the Company’s vineyards or the vineyards of our grape suppliers experience certain weather variations, natural
disasters, pestilence, other severe environmental problems, or other occurrences, APL may not be able to secure
a sufficient supply of grapes, which could result in a decrease in production of certain products from those regions
and/or an increase in costs. In the past, where there has been a significant reduction in domestically sourced
grapes, the Government of Ontario, in conjunction with the Ontario Grape Growers Marketing Board, has agreed
to temporarily increase the blending of imported wines that would enable the Company to continue to supply
products to the market. The inability to secure premium quality grapes could impair the ability of the Company to
supply certain wines to its customers. APL has developed programs to ensure it has access to a consistent supply
to premium quality grapes and wine. The price of grapes is determined through negotiations with the Ontario
Grape Growers Marketing Board in Ontario and with independent growers in British Columbia.
Foreign exchange risk exists on the purchases by the Company of bulk wine and concentrate that are primarily
made in United States dollars and Euros. The Company’s strategy is to hedge approximately 50% - 80% of its
foreign exchange requirements prior to the beginning of each fiscal quarter and to regularly review its ongoing
requirements. APL has entered into a series of foreign exchange contracts as a hedge against movements in
U.S. dollar and Euro exchange rates. The Company does not enter into foreign exchange contracts for trading or
speculative purposes. These contracts are reviewed periodically. Each one percent change in the value of the U.S.
dollar has a $0.2 million impact on the Company’s net earnings. Each one percent change in the value of the Euro
has a $0.1 million impact on the Company’s net earnings.
The Company purchases glass, bag-in-the-box, tetra paks, kegs, and other components used in the bottling and
packaging of wine. The largest component in the packaging of wine is glass, of which there are few domestic or
international suppliers. There is currently only one commercial supplier of glass in Canada and any interruption
in supply could have an adverse impact on the Company’s ability to supply its markets. APL has taken steps to
reduce its dependence on domestic suppliers through the development of relationships with several international
producers of glass and through carrying increased inventory of selected bottles.
The Company operates in a highly regulated industry, with requirements regarding the production, distribution,
marketing, advertising, and labelling of wine. These regulatory requirements may inhibit or restrict the Company’s
ability to maintain or increase strong consumer support for and recognition of its brands and may adversely affect
APL’s business strategies and results of operations. The Company is currently reviewing its labelling on ICB wines.
Privatization of liquor distribution and retailing has been implemented in varying degrees across the country.
The possibility of privatization in Ontario remains a risk to APL through its impact on the Company’s retail
operations. The provincial government has stated that, should it consider privatization, it would engage in
a consultation process and would acknowledge the special role of Ontario’s wine industry.
The wine industry and the domestic and international market, in which the Company operates, are consolidating.
This has resulted in fewer, but larger, competitors who increase their resources and scale. The increased
competition from these larger market participants may affect the Company’s pricing strategies and create
margin pressures, resulting in potentially lower revenues. Competition also exerts pressure on existing customer
relationships that may affect APL’s ability to retain existing customers and increase the number of new customers.
The Company has worked to improve production efficiencies, selectively increase pricing to increase gross margin,
and implement a higher level of promotion and advertising activity to combat these initiatives. APL and other wine
industry participants also generally compete with other alcoholic beverages like beer and spirits for consumer
acceptance, loyalty, and shelf space. No assurance can be given that consumer demand for wine and premium
wine products will continue at current levels in the future.
The Company has experienced increases in energy costs and further increases could result in higher transportation,
freight, and other operating costs. The Company’s future operating expenses and margins are dependent on its
ability to manage the impact of cost increases. APL cannot guarantee that it will be able to pass along increased
energy costs to its customers through increased prices.
Federal and provincial governments impose excise and other taxes on beverage alcohol products in varying
amounts which have been subject to change. Significant increases in excise and other taxes on beverage alcohol
products could materially and adversely affect the Company’s financial condition or results of operations.
In addition, federal and provincial governmental agencies extensively regulate the beverage alcohol products
industry concerning such matters as licensing, trade practices, permitted and required labelling, advertising, and
relations with consumers and retailers. Certain federal and provincial regulations also require warning labels and
signage. New or revised regulations, increased licensing fees, or taxes could also have a material adverse effect
on the Company’s financial condition or results of operations.
17 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 18
Risks and Uncertainties
The Company’s sales of wine are affected by general economic conditions such as changes in discretionary
consumer spending and consumer confidence, in future economic conditions, tax laws, and the prices of its
products. A steep and sustained decline in economic growth may cause a lower demand for the Company’s
products. Such general economic conditions could impact the Company’s sales through our estate wineries and
restaurants, direct sales through licensed establishments, and export sales through Duty Free shops. APL believes
that these effects would likely be temporary and would not have a significant impact on financial performance.
The Canadian wine market continues to be the target of low-priced imported wines from regions and countries
that subsidize wine production and grape growing as well as providing sizeable export subsidies. Along with other
members of the Canadian wine industry, the Company is working with the Canadian government to rectify these
unfair trade practices.
The Company operates in a highly competitive industry and the dollar amount and unit volume of sales could be
negatively impacted by its inability to maintain or increase prices, changes in geographic or product mix, a general
decline in beverage alcohol consumption or the decision of retailers, or consumers to purchase competitive
products instead of the Company’s products. Retailer and consumer purchasing decisions are influenced by,
among other things, the perceived absolute or relative overall value of the Company’s products, including their
quality or pricing, compared to competitive products. Unit volume and dollar sales could also be affected by
purchasing, financing, operational, advertising, or promotional decisions made by provincial agencies and retailers
which could affect supply of or consumer demand for, the Company’s products. APL could also experience higher
than expected selling and administrative expenses if it finds it necessary to increase the number of its personnel,
advertising, or promotional expenditures to maintain its competitive position.
APL expects to increase its sales of its premium wines in Canada, principally through the sale of VQA wines,
and as a result is dependent on the quality and supply of domestically grown premium quality grapes. If any of
the Company’s vineyards or the vineyards of our grape suppliers experience certain weather variations, natural
disasters, pestilence, other severe environmental problems, or other occurrences, APL may not be able to secure
a sufficient supply of grapes, which could result in a decrease in production of certain products from those regions
and/or an increase in costs. In the past, where there has been a significant reduction in domestically sourced
grapes, the Government of Ontario, in conjunction with the Ontario Grape Growers Marketing Board, has agreed
to temporarily increase the blending of imported wines that would enable the Company to continue to supply
products to the market. The inability to secure premium quality grapes could impair the ability of the Company to
supply certain wines to its customers. APL has developed programs to ensure it has access to a consistent supply
to premium quality grapes and wine. The price of grapes is determined through negotiations with the Ontario
Grape Growers Marketing Board in Ontario and with independent growers in British Columbia.
Foreign exchange risk exists on the purchases by the Company of bulk wine and concentrate that are primarily
made in United States dollars and Euros. The Company’s strategy is to hedge approximately 50% - 80% of its
foreign exchange requirements prior to the beginning of each fiscal quarter and to regularly review its ongoing
requirements. APL has entered into a series of foreign exchange contracts as a hedge against movements in
U.S. dollar and Euro exchange rates. The Company does not enter into foreign exchange contracts for trading or
speculative purposes. These contracts are reviewed periodically. Each one percent change in the value of the U.S.
dollar has a $0.2 million impact on the Company’s net earnings. Each one percent change in the value of the Euro
has a $0.1 million impact on the Company’s net earnings.
The Company purchases glass, bag-in-the-box, tetra paks, kegs, and other components used in the bottling and
packaging of wine. The largest component in the packaging of wine is glass, of which there are few domestic or
international suppliers. There is currently only one commercial supplier of glass in Canada and any interruption
in supply could have an adverse impact on the Company’s ability to supply its markets. APL has taken steps to
reduce its dependence on domestic suppliers through the development of relationships with several international
producers of glass and through carrying increased inventory of selected bottles.
The Company operates in a highly regulated industry, with requirements regarding the production, distribution,
marketing, advertising, and labelling of wine. These regulatory requirements may inhibit or restrict the Company’s
ability to maintain or increase strong consumer support for and recognition of its brands and may adversely affect
APL’s business strategies and results of operations. The Company is currently reviewing its labelling on ICB wines.
Privatization of liquor distribution and retailing has been implemented in varying degrees across the country.
The possibility of privatization in Ontario remains a risk to APL through its impact on the Company’s retail
operations. The provincial government has stated that, should it consider privatization, it would engage in
a consultation process and would acknowledge the special role of Ontario’s wine industry.
The wine industry and the domestic and international market, in which the Company operates, are consolidating.
This has resulted in fewer, but larger, competitors who increase their resources and scale. The increased
competition from these larger market participants may affect the Company’s pricing strategies and create
margin pressures, resulting in potentially lower revenues. Competition also exerts pressure on existing customer
relationships that may affect APL’s ability to retain existing customers and increase the number of new customers.
The Company has worked to improve production efficiencies, selectively increase pricing to increase gross margin,
and implement a higher level of promotion and advertising activity to combat these initiatives. APL and other wine
industry participants also generally compete with other alcoholic beverages like beer and spirits for consumer
acceptance, loyalty, and shelf space. No assurance can be given that consumer demand for wine and premium
wine products will continue at current levels in the future.
The Company has experienced increases in energy costs and further increases could result in higher transportation,
freight, and other operating costs. The Company’s future operating expenses and margins are dependent on its
ability to manage the impact of cost increases. APL cannot guarantee that it will be able to pass along increased
energy costs to its customers through increased prices.
Federal and provincial governments impose excise and other taxes on beverage alcohol products in varying
amounts which have been subject to change. Significant increases in excise and other taxes on beverage alcohol
products could materially and adversely affect the Company’s financial condition or results of operations.
In addition, federal and provincial governmental agencies extensively regulate the beverage alcohol products
industry concerning such matters as licensing, trade practices, permitted and required labelling, advertising, and
relations with consumers and retailers. Certain federal and provincial regulations also require warning labels and
signage. New or revised regulations, increased licensing fees, or taxes could also have a material adverse effect
on the Company’s financial condition or results of operations.
17 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 18
The Company’s future operating results also depend on the ability of its officers and other key employees to
continue to implement and improve its operating and financial systems and manage APL’s significant relationships
with its suppliers and customers. The Company is also dependent upon the performance of its key senior
management personnel. The Company’s success is linked to its ability to identify, hire, train, motivate, promote,
and retain highly qualified management. Competition for such employees is intense and there can be
no assurances that APL will be able to retain current key employees or attract new key employees.
The Company has defined benefit pension plans. The expense and cash contributions related to these plans
depend on the discount rate used to measure the liability to pay future benefits and the market performance of
the plan assets set aside to pay these benefits. The Pension Committee reviews the performance of plan assets on
a regular basis and has a policy to hold diversified investments. Nevertheless, a decline in long-term interest rates
or in asset values could increase the Company’s costs related to funding the deficit in these plans.
The competitive nature of the wine industry internationally has resulted in the discounting of retail prices of wine
in key markets such as the United States and the United Kingdom, in part due to an international grape surplus.
This international grape surplus could serve to continue the discounting of wine in international markets, including
Canada. The Company has responded by increased promotional and advertising spending to strengthen the
performance of its brands. APL does not believe that significant price discounting will occur in Canada beyond
current levels.
The Company considers its trademarks, particularly certain brand names and product packaging, advertising and
promotion design, and artwork to be of significant importance to its business and ascribes a significant value to
these intangible assets. APL relies on trademark laws and other arrangements to protect its proprietary rights.
There can be no assurance that the steps taken by APL to protect its intellectual property rights will preclude
competitors from developing confusingly similar brand names or promotional materials. The Company believes
that its proprietary rights do not infringe upon the proprietary rights of fourth parties, but there can be no
assurance in this regard.
As an owner and lessor of property, the Company is subject to various federal and provincial laws relating to
environmental matters. Such laws provide that APL could be held liable for the cost of removal and remediation
of hazardous substances on its properties. The failure to remedy any situation that might arise could lead to claims
against the Company. These risks are believed to be limited.
The success of the Company’s brands depends upon the positive image that consumers have of those brands.
Contamination of APL’s products, whether arising accidentally or through deliberate third-party action, or
other events that harm the integrity or consumer support for those brands, could adversely affect their sales.
Contaminants in raw materials purchased from third parties and used in the production of the Company’s products
or defects in the fermentation process could lead to low product quality as well as illness among, or injury to,
consumers of the products and may result in reduced sales of the affected brand or all of the Company’s brands.
international Financial Reporting Standards
In February 2008, the Canadian Accounting Standards Board (“AcSB”) confirmed that the use of International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board will be required
effective for fiscal years beginning on or after January 1, 2011 (or April 1, 2011 for the Company) for publicly
accountable profit oriented enterprises. Accordingly, the Company began preparing its current period and
comparative period information under IFRS beginning in the first quarter of fiscal 2012.
The most significant impact of the resulting changes in accounting policies are summarized in the table below.
Area
Description of the Change
impact on Financial Statements
IAS 41 -
Agriculture
to sell.
• Grape vines are measured at fair value less costs
• Note 23 of the Consolidated Notes to
the Financial Statements illustrates the
impact of this change in accounting
policy for the comparative year.
• Harvested grapes from vineyards controlled
by APL are required to be measured at fair
value less costs to sell at the point of harvest,
which becomes the cost used in measuring the
Company’s inventory of internally grown grapes
after harvest.
• Prior to IFRS adoption, vineyards were measured
at cost less accumulated amortization and
inventory at the lower of cost and net realizable
value.
IAS 19 -
Employee
Benefits
• The Company has chosen to recognize all
• Note 23 of the Consolidated Notes to
cumulative actuarial gains and losses in the
the Financial Statements illustrates the
opening IFRS balance sheet.
impact of this change in accounting
• On an ongoing basis, actuarial gains and
policy.
losses will be recognized immediately in other
• The Company’s comprehensive income
comprehensive income.
• The Company has recognized a liability for its
policy to provide a wine allowance to retirees.
will fluctuate from period to period under
IFRS, as a result of recognizing actuarial
gains and losses immediately in other
comprehensive income.
19 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 20
The Company’s future operating results also depend on the ability of its officers and other key employees to
continue to implement and improve its operating and financial systems and manage APL’s significant relationships
with its suppliers and customers. The Company is also dependent upon the performance of its key senior
management personnel. The Company’s success is linked to its ability to identify, hire, train, motivate, promote,
and retain highly qualified management. Competition for such employees is intense and there can be
no assurances that APL will be able to retain current key employees or attract new key employees.
The Company has defined benefit pension plans. The expense and cash contributions related to these plans
depend on the discount rate used to measure the liability to pay future benefits and the market performance of
the plan assets set aside to pay these benefits. The Pension Committee reviews the performance of plan assets on
a regular basis and has a policy to hold diversified investments. Nevertheless, a decline in long-term interest rates
or in asset values could increase the Company’s costs related to funding the deficit in these plans.
The competitive nature of the wine industry internationally has resulted in the discounting of retail prices of wine
in key markets such as the United States and the United Kingdom, in part due to an international grape surplus.
This international grape surplus could serve to continue the discounting of wine in international markets, including
Canada. The Company has responded by increased promotional and advertising spending to strengthen the
performance of its brands. APL does not believe that significant price discounting will occur in Canada beyond
current levels.
The Company considers its trademarks, particularly certain brand names and product packaging, advertising and
promotion design, and artwork to be of significant importance to its business and ascribes a significant value to
these intangible assets. APL relies on trademark laws and other arrangements to protect its proprietary rights.
There can be no assurance that the steps taken by APL to protect its intellectual property rights will preclude
competitors from developing confusingly similar brand names or promotional materials. The Company believes
that its proprietary rights do not infringe upon the proprietary rights of fourth parties, but there can be no
assurance in this regard.
As an owner and lessor of property, the Company is subject to various federal and provincial laws relating to
environmental matters. Such laws provide that APL could be held liable for the cost of removal and remediation
of hazardous substances on its properties. The failure to remedy any situation that might arise could lead to claims
against the Company. These risks are believed to be limited.
The success of the Company’s brands depends upon the positive image that consumers have of those brands.
Contamination of APL’s products, whether arising accidentally or through deliberate third-party action, or
other events that harm the integrity or consumer support for those brands, could adversely affect their sales.
Contaminants in raw materials purchased from third parties and used in the production of the Company’s products
or defects in the fermentation process could lead to low product quality as well as illness among, or injury to,
consumers of the products and may result in reduced sales of the affected brand or all of the Company’s brands.
international Financial Reporting Standards
In February 2008, the Canadian Accounting Standards Board (“AcSB”) confirmed that the use of International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board will be required
effective for fiscal years beginning on or after January 1, 2011 (or April 1, 2011 for the Company) for publicly
accountable profit oriented enterprises. Accordingly, the Company began preparing its current period and
comparative period information under IFRS beginning in the first quarter of fiscal 2012.
The most significant impact of the resulting changes in accounting policies are summarized in the table below.
Area
Description of the Change
impact on Financial Statements
• Note 23 of the Consolidated Notes to
the Financial Statements illustrates the
impact of this change in accounting
policy for the comparative year.
IAS 41 -
Agriculture
• Grape vines are measured at fair value less costs
to sell.
• Harvested grapes from vineyards controlled
by APL are required to be measured at fair
value less costs to sell at the point of harvest,
which becomes the cost used in measuring the
Company’s inventory of internally grown grapes
after harvest.
• Prior to IFRS adoption, vineyards were measured
at cost less accumulated amortization and
inventory at the lower of cost and net realizable
value.
IAS 19 -
Employee
Benefits
• The Company has chosen to recognize all
cumulative actuarial gains and losses in the
opening IFRS balance sheet.
• On an ongoing basis, actuarial gains and
losses will be recognized immediately in other
comprehensive income.
• The Company has recognized a liability for its
policy to provide a wine allowance to retirees.
• Note 23 of the Consolidated Notes to
the Financial Statements illustrates the
impact of this change in accounting
policy.
• The Company’s comprehensive income
will fluctuate from period to period under
IFRS, as a result of recognizing actuarial
gains and losses immediately in other
comprehensive income.
19 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 20
iFRS Reconciliation of Selected Results of Operations
(in thousands of Canadian dollars, except per share amounts)
Non-i FRS Measures
Year ended March 31, 2011
Adjustment
for IAS 19 -
Employee
Cdn GAAP
benefits
Adjustment
for IAS 41 -
Agriculture
Mandatory or elected
Elected
Mandatory
Sales
Gross margin
Gross margin (% of sales)
Selling and administration
EBITA
Amortization of plant, equipment, and intangibles
Earnings before other items
Other expenses (income)
Earnings before income taxes
Net earnings for the year
Other comprehensive income (loss)
Net comprehensive income
Earnings per share – basic and diluted - Class A
Earnings per share – basic and diluted - Class B
265,420
103,662
39.1%
71,703
31,959
8,202
17,084
921
16,280
10,989
-
10,989
0.76
0.66
-
(26)
0.0%
15
(41)
-
(41)
-
(41)
(52)
(619)
(671)
0.00
0.00
-
(374)
(0.2%)
-
(374)
(610)
236
(130)
366
286
-
286
0.02
0.01
iFRS Reconciliation of earnings before Other e xpenses
(in thousands of Canadian dollars, except per share amounts)
IFRS
265,420
103,262
38.9%
71,718
31,544
7,592
17,279
791
16,605
11,223
(619)
10,604
0.78
0.67
Year ended March 31, 2011
Adjustment
for IAS 19 -
Employee
benefits -
Adjustment
for IAS 41 -
Agriculture
Elected
Mandatory
(52)
-
-
-
286
-
(130)
35
Cdn GAAP
10,989
(117)
921
(249)
IFRS
11,223
(117)
791
(214)
Mandatory or Elected
Net earnings
Unrealized loss (gain) on financial instruments
Other expenses (income)
Income taxes on the above
Net earnings, excluding gains (losses) on
derivative financial instruments, other expenses,
and related income tax effects
11,544
(52)
191
11,683
Financial Statements and Accounting Policies
These interim consolidated financial statements have been prepared in accordance with IFRS including IFRS 1 -
First-Time Adoption, as issued by the International Accounting Standards Board (“IASB”).
The Company utilizes EBITA (defined as earnings before interest, amortization, unrealized derivative gains (losses),
other expenses, and income taxes) to measure its financial performance. EBITA is not a recognized measure under
IFRS; however, management believes that EBITA is a useful supplemental measure to net earnings, as it provides
readers with an indication of earnings available for investment prior to debt service, capital expenditures, and
income taxes.
Net earnings
Add: Interest
For the year ended March 31 (in thousands of Canadian dollars)
Provision for income taxes
Amortization of plant and equipment used in production
Amortization of equipment and intangibles used in
selling and administration
Net unrealized gains on derivatives
Other expenses
EBITA
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 gross profit excluding amortization) as calculated below.
$32,651
$31,544
The Company calculates net earnings excluding gains (losses) on derivative financial instruments, other expenses,
For the year ended March 31 (in thousands Canadian dollars)
Add: Amortization of plant and equipment used in production
Gross profit
Gross margin
Gross margin (% of sales)
and the related income tax effect as follows.
Period ended March 31 (in thousands Canadian dollars)
Net earnings
Unrealized gain on financial instruments
Other expenses
Income tax effect on the above
Net earnings excluding gains (losses) on derivative financial instruments,
other expenses, and related income tax effects
2012
$13,001
5,354
5,538
4,826
3,026
(257)
1,163
2012
$102,431
4,826
$107,257
38.7%
2012
$13,001
(257)
1,163
(245)
$13,662
2011
$11,223
6,673
5,382
4,667
2,925
(117)
791
2011
$98,595
4,667
$103,262
38.9%
2011
$11,223
(117)
791
(214)
$11,683
The Company’s method of calculating EBITA, gross margin, and net earnings excluding 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 the corresponding measures used by other companies.
21 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 22
iFRS Reconciliation of Selected Results of Operations
(in thousands of Canadian dollars, except per share amounts)
Year ended March 31, 2011
Adjustment
for IAS 19 -
Adjustment
Employee
for IAS 41 -
Elected
Mandatory
Cdn GAAP
benefits
Agriculture
IFRS
Mandatory or elected
Sales
Gross margin
Gross margin (% of sales)
Selling and administration
EBITA
Amortization of plant, equipment, and intangibles
Earnings before other items
Other expenses (income)
Earnings before income taxes
Net earnings for the year
Other comprehensive income (loss)
Net comprehensive income
Earnings per share – basic and diluted - Class A
Earnings per share – basic and diluted - Class B
265,420
103,662
39.1%
71,703
31,959
8,202
17,084
921
16,280
10,989
-
10,989
0.76
0.66
-
(26)
0.0%
15
(41)
(41)
-
-
(41)
(52)
(619)
(671)
0.00
0.00
(374)
(0.2%)
-
-
(374)
(610)
236
(130)
366
286
-
286
0.02
0.01
265,420
103,262
38.9%
71,718
31,544
7,592
17,279
791
16,605
11,223
(619)
10,604
0.78
0.67
iFRS Reconciliation of earnings before Other e xpenses
(in thousands of Canadian dollars, except per share amounts)
Cdn GAAP
benefits -
Agriculture
IFRS
Adjustment
for IAS 19 -
Adjustment
Employee
for IAS 41 -
Elected
Mandatory
10,989
(117)
921
(249)
(52)
-
-
-
286
-
(130)
35
11,223
(117)
791
(214)
Mandatory or Elected
Net earnings
Unrealized loss (gain) on financial instruments
Other expenses (income)
Income taxes on the above
Net earnings, excluding gains (losses) on
derivative financial instruments, other expenses,
and related income tax effects
11,544
(52)
191
11,683
Financial Statements and Accounting Policies
These interim consolidated financial statements have been prepared in accordance with IFRS including IFRS 1 -
First-Time Adoption, as issued by the International Accounting Standards Board (“IASB”).
Non-iFRS Measures
The Company utilizes EBITA (defined as earnings before interest, amortization, unrealized derivative gains (losses),
other expenses, and income taxes) to measure its financial performance. EBITA is not a recognized measure under
IFRS; however, management believes that EBITA is a useful supplemental measure to net earnings, as it provides
readers with an indication of earnings available for investment prior to debt service, capital expenditures, and
income taxes.
For the year ended March 31 (in thousands of Canadian dollars)
Net earnings
Add: Interest
Provision for income taxes
Amortization of plant and equipment used in production
Amortization of equipment and intangibles used in
selling and administration
Net unrealized gains on derivatives
Other expenses
EBITA
2012
$13,001
5,354
5,538
4,826
3,026
(257)
1,163
$32,651
2011
$11,223
6,673
5,382
4,667
2,925
(117)
791
$31,544
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 gross profit excluding amortization) as calculated below.
Year ended March 31, 2011
Gross margin
Gross margin (% of sales)
For the year ended March 31 (in thousands Canadian dollars)
Gross profit
Add: Amortization of plant and equipment used in production
2012
$102,431
4,826
$107,257
38.7%
2011
$98,595
4,667
$103,262
38.9%
The Company calculates net earnings excluding gains (losses) on derivative financial instruments, other expenses,
and the related income tax effect as follows.
Period ended March 31 (in thousands Canadian dollars)
Net earnings
Unrealized gain on financial instruments
Other expenses
Income tax effect on the above
Net earnings excluding gains (losses) on derivative financial instruments,
other expenses, and related income tax effects
2012
$13,001
(257)
1,163
(245)
$13,662
2011
$11,223
(117)
791
(214)
$11,683
The Company’s method of calculating EBITA, gross margin, and net earnings excluding 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 the corresponding measures used by other companies.
21 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 22
Critical Accounting estimates
intangible assets
During the year, management is required to make estimates or rely on assumptions that are inherently uncertain.
These estimates can vary with respect to the level of judgment involved and ultimately the impact that these
estimates may have on the Company’s financial statements. Estimates are deemed to be critical when a different
estimate could reasonably be used or where changes are reasonably likely to occur which would materially affect
the Company’s financial position or financial performance. The Company’s significant accounting policies are
discussed in the Consolidated Notes to the March 31, 2012 Financial Statements. Critical estimates inherent in
these accounting policies are set out below.
Accounts Receivable
The Company records an allowance for doubtful accounts to reflect management’s best estimate of losses that
may occur on accounts receivable. This allowance was recorded through a charge to earnings and takes into
consideration the financial condition and recent payment patterns of customers and the general state of the
economy. Management believes that the allowance is sufficient to cover any risk of potential losses. Credit
losses were within management’s expectations.
inventory valuation
Inventory is valued at the lower of cost and net realizable value. Cost is determined on an average cost basis.
The Company utilizes a weighted average cost calculation to determine the value of ending inventory (bulk wine
and finished goods). Average cost is determined separately for import wine and domestic wine and is calculated
by varietal and vintage year.
Grapes produced from vineyards controlled by the Company that are part of inventory are measured at their fair
value less costs to sell at the point of harvest.
The Company includes borrowing costs in the cost of certain wine inventory that require a substantial period of time
to become ready for sale.
loss on derivative financial instruments.
employee Future Benefits
All inventory is counted as close as possible to year end without impacting the operations of the Company.
Management has provided an allowance for slow moving and obsolete inventory which is considered to be
sufficient for potential losses.
Biological Assets
The Company measures biological assets, consisting of grape vines, at fair value less costs to sell. Agricultural
produce, consisting of grapes grown on vineyards controlled by the Company, is measured at fair value less costs
to sell at the point of harvest and becomes the basis for the cost of inventory after harvest.
Gains or losses arising from a change in fair value less costs to sell are included in the consolidated statement of
earnings in the period in which they arise.
Goodwill
Goodwill on the purchase of Hillebrand in 1993, Vineco International Products in 1996, Brew King in 1997, Distrivin
and Winexpert in 2004, Wine Not in 2005 and Cascadia, Thirty Bench and Red Rooster in 2006 and World Vintners
Inc., Rocky Ridge and SWM in 2009 represents the excess of purchase price of acquired businesses over the fair
value of the net assets acquired. The Company determines an impairment of goodwill based on the ability to
recover the balance from expected future discounted operating cash flows or the fair value of certain asset groups
if necessary.
Intangible assets relate to customer contracts, brands, and customer based relationships that have been acquired
through recent acquisitions. Management believes that brands do not have a fixed or determinable life and,
consequently, brands are not amortized but are subject to annual impairment tests based on a comparison of
the carrying amount to the estimated fair market value of the brands. The amortization periods related to those
intangible assets with finite lives are based on the expected duration of the contracts and relationships acquired.
These intangible assets will be tested for impairment when events or circumstances arise that indicate an
impairment may exist.
Fair value of financial instruments
Accounts receivable, accounts payable and accrued liabilities, and bank indebtedness are reflected in the consolidated
financial statements at carrying values, which approximate fair value due to the short-term maturity of these instruments.
Long-term debt has a floating interest rate and its carrying value, as reflected in the consolidated financial statements,
approximates fair value. Interest on long-term debt has been fixed through the use of an interest rate swap.
The Company purchases wine and other inventory items throughout the year. These purchases are made in United States
dollars and Euros. The Company uses foreign exchange contracts as a hedge against changes in currency values.
The Company’s strategy is to hedge approximately 50% - 80% of its foreign exchange requirements prior to the beginning
of each fiscal quarter. The Company does not enter into foreign exchange contracts for trading or speculative purposes.
Contracts are matched against forecasted purchases of inventory and other purchases in U.S. dollars and Euros.
All financial instruments are initially recorded at fair value which includes the Company’s interest rate swap and foreign
exchange contracts. The Company has not designated any of its financial instruments as hedges and, accordingly,
changes to the fair value of these instruments are recorded through earnings each period as a net unrealized gain or
The Company provides defined benefit pension plans and other post-employment benefit plans to certain of its
employees. The assumptions used to measure the accrued benefit obligations and benefit costs are: discount rate
for measuring expenses 5.0%, discount rate for measuring liability 4.5%, expected long-term rate of return on plan
assets 4.8-6.3%, and rate of compensation increase 4.0%. To measure the obligation for post-employment medical
benefits, it was assumed that the health care inflation rate will be 8% in fiscal 2013 reducing by 1% each year for
the next three years. The annual pension expense to provide the above described benefits is approximately $0.5
million. All actuarial gains and losses are recognized immediately in other comprehensive income (“OCI”). The
corresponding change in shareholders’ equity is adjusted to retained earnings for the period. The liability recorded
represents the estimated deficit position of the plans adjusted for unamortized past service credits.
23 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 24
Critical Accounting estimates
intangible assets
During the year, management is required to make estimates or rely on assumptions that are inherently uncertain.
These estimates can vary with respect to the level of judgment involved and ultimately the impact that these
estimates may have on the Company’s financial statements. Estimates are deemed to be critical when a different
estimate could reasonably be used or where changes are reasonably likely to occur which would materially affect
the Company’s financial position or financial performance. The Company’s significant accounting policies are
discussed in the Consolidated Notes to the March 31, 2012 Financial Statements. Critical estimates inherent in
these accounting policies are set out below.
Accounts Receivable
The Company records an allowance for doubtful accounts to reflect management’s best estimate of losses that
may occur on accounts receivable. This allowance was recorded through a charge to earnings and takes into
consideration the financial condition and recent payment patterns of customers and the general state of the
economy. Management believes that the allowance is sufficient to cover any risk of potential losses. Credit
losses were within management’s expectations.
inventory valuation
Inventory is valued at the lower of cost and net realizable value. Cost is determined on an average cost basis.
The Company utilizes a weighted average cost calculation to determine the value of ending inventory (bulk wine
and finished goods). Average cost is determined separately for import wine and domestic wine and is calculated
by varietal and vintage year.
Grapes produced from vineyards controlled by the Company that are part of inventory are measured at their fair
value less costs to sell at the point of harvest.
The Company includes borrowing costs in the cost of certain wine inventory that require a substantial period of time
All inventory is counted as close as possible to year end without impacting the operations of the Company.
Management has provided an allowance for slow moving and obsolete inventory which is considered to be
to become ready for sale.
sufficient for potential losses.
Biological Assets
The Company measures biological assets, consisting of grape vines, at fair value less costs to sell. Agricultural
produce, consisting of grapes grown on vineyards controlled by the Company, is measured at fair value less costs
to sell at the point of harvest and becomes the basis for the cost of inventory after harvest.
Gains or losses arising from a change in fair value less costs to sell are included in the consolidated statement of
earnings in the period in which they arise.
Goodwill
Goodwill on the purchase of Hillebrand in 1993, Vineco International Products in 1996, Brew King in 1997, Distrivin
and Winexpert in 2004, Wine Not in 2005 and Cascadia, Thirty Bench and Red Rooster in 2006 and World Vintners
Inc., Rocky Ridge and SWM in 2009 represents the excess of purchase price of acquired businesses over the fair
value of the net assets acquired. The Company determines an impairment of goodwill based on the ability to
recover the balance from expected future discounted operating cash flows or the fair value of certain asset groups
if necessary.
Intangible assets relate to customer contracts, brands, and customer based relationships that have been acquired
through recent acquisitions. Management believes that brands do not have a fixed or determinable life and,
consequently, brands are not amortized but are subject to annual impairment tests based on a comparison of
the carrying amount to the estimated fair market value of the brands. The amortization periods related to those
intangible assets with finite lives are based on the expected duration of the contracts and relationships acquired.
These intangible assets will be tested for impairment when events or circumstances arise that indicate an
impairment may exist.
Fair value of financial instruments
Accounts receivable, accounts payable and accrued liabilities, and bank indebtedness are reflected in the consolidated
financial statements at carrying values, which approximate fair value due to the short-term maturity of these instruments.
Long-term debt has a floating interest rate and its carrying value, as reflected in the consolidated financial statements,
approximates fair value. Interest on long-term debt has been fixed through the use of an interest rate swap.
The Company purchases wine and other inventory items throughout the year. These purchases are made in United States
dollars and Euros. The Company uses foreign exchange contracts as a hedge against changes in currency values.
The Company’s strategy is to hedge approximately 50% - 80% of its foreign exchange requirements prior to the beginning
of each fiscal quarter. The Company does not enter into foreign exchange contracts for trading or speculative purposes.
Contracts are matched against forecasted purchases of inventory and other purchases in U.S. dollars and Euros.
All financial instruments are initially recorded at fair value which includes the Company’s interest rate swap and foreign
exchange contracts. The Company has not designated any of its financial instruments as hedges and, accordingly,
changes to the fair value of these instruments are recorded through earnings each period as a net unrealized gain or
loss on derivative financial instruments.
employee Future Benefits
The Company provides defined benefit pension plans and other post-employment benefit plans to certain of its
employees. The assumptions used to measure the accrued benefit obligations and benefit costs are: discount rate
for measuring expenses 5.0%, discount rate for measuring liability 4.5%, expected long-term rate of return on plan
assets 4.8-6.3%, and rate of compensation increase 4.0%. To measure the obligation for post-employment medical
benefits, it was assumed that the health care inflation rate will be 8% in fiscal 2013 reducing by 1% each year for
the next three years. The annual pension expense to provide the above described benefits is approximately $0.5
million. All actuarial gains and losses are recognized immediately in other comprehensive income (“OCI”). The
corresponding change in shareholders’ equity is adjusted to retained earnings for the period. The liability recorded
represents the estimated deficit position of the plans adjusted for unamortized past service credits.
23 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 24
Recently issued Accounting Pronouncements
In December 2011, the IASB issued amendments to IFRS 7 – Financial Instruments: Disclosures, which increase the
disclosure requirements related to the offsetting of financial assets and financial liabilities. The new requirements
are effective for annual periods beginning on or after January 1, 2013. The Company is currently evaluating the
potential impact of this standard.
In June 2011, the IASB issued amendments to IAS 1 – Financial Statement Presentation, which require changes
in the presentation of OCI, including grouping together certain items of OCI that may be reclassified to net
earnings. The new requirements are effective for annual periods beginning on or after July 1, 2012. The Company
is currently evaluating the potential impact of this standard.
In June 2011, the IASB issued amendments to IAS 19 – Employee Benefits, which requires changes to the
recognition and disclosure of defined benefit plans, including eliminating the deferral of actuarial gains and losses,
requiring that actuarial gains and losses are included in OCI and increasing disclosures on the characteristics and
risks of defined benefit plans. The new requirements are effective for annual periods beginning on or after
January 1, 2013. The Company is currently evaluating the potential impact of this standard.
In May 2011, the IASB issued IFRS 13 – Fair Value Measurements, which defines fair value, sets out a framework for
measuring fair value and requires disclosures about fair value measurements. The standard applies when another
standard requires or permits a fair value measurement. The new requirements are effective for annual periods
beginning on or after January 1, 2013. The Company is currently evaluating the potential impact of this standard.
In May 2011, the IASB issued IFRS 10 – Consolidated Financial Statements, IFRS 11 – Joint Arrangements and
IFRS 12 – Disclosure of Interests in Other Entities. IFRS 10 provides a single consolidation model that identifies
control as the basis for consolidation for all types of entities. IFRS 10 replaces IAS 27 - Consolidated and Separate
Financial Statements and SIC-12 – Consolidation - Special Purpose Entities. IFRS 11- Joint Arrangements
establishes principles for the financial reporting by parties to a joint arrangement. IFRS 11 supersedes IAS 31 -
Interests in Joint Ventures and SIC-13 - Jointly Controlled Entities - Non-Monetary Contributions by Venturers.
IFRS 12 changes the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated
structured entities. As a consequence of these new standards, the IASB also issued amended and retitled versions
of IAS 27 - Separate Financial Statements and IAS 28 - Investments in Associates and Joint Ventures. The new
requirements are effective for annual periods beginning on or after January 1, 2013, with earlier application
permitted. The Company is currently evaluating the potential impact of these standards.
In October 2010, the IASB issued amendments to IFRS 7 – Financial Instruments: Disclosures, which increases
disclosure requirements in relation to transferred financial assets. The standard is effective for annual periods
beginning on or after July 1, 2011, with earlier adoption permitted. The Company is currently evaluating the
potential impact of this standard.
In November 2009, the IASB issued IFRS 9 – Financial Instruments: Classification and Measurement of Financial
Assets and Financial Liabilities. In October 2010, it added requirements for financial liabilities. IFRS 9 will replace
IAS 39 – Financial Instruments: Recognition and Measurement. The standard uses a single approach to determine
whether a financial asset is measured at amortized cost or fair value. The approach is based on how an entity
manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial
assets. The new standard also requires a single impairment method to be used. For financial liabilities, the
standard requires that for financial liabilities measured at fair value, any changes in an entity’s own credit risk are
generally to be presented in OCI instead of net earnings. IFRS 9 is effective for annual periods beginning on or
after January 1, 2015. The Company is currently evaluating the potential impact of this standard.
evaluation of Disclosure Controls and Procedures and internal Control over Financial Reporting.
Compliance with National Instrument 52-109 (“NI 52-109”) provided the Company with a review and documentation
of the processes and internal controls that were in place within the organization. As a result of the review, the Company
found no material weaknesses and will continue to update the review and documentation of processes and internal
controls on an ongoing basis.
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information
required to be disclosed by the Company in reports filed with or submitted to various securities regulators are
recorded, processed, summarized and reported within the time periods specified. This information is gathered and
reported to the Company’s management, including the President and Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”), on a timely basis so that decisions can be made regarding the Company’s disclosure to
the public.
The Company’s management, under the supervision of, and with the participation of the CEO and CFO, have
designed and maintain the Company’s disclosure controls and procedures as required in Canada by “National
Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings”.
internal Controls over Financial Reporting
Internal controls over financial reporting are procedures designed to provide reasonable assurance that
transactions are properly authorized, assets are safeguarded against unauthorized or improper use, and
transactions are properly recorded and reported. A control system, no matter how well designed and operated,
can provide only reasonable, not absolute, assurance with respect to reliability of financial reporting and financial
statement preparation.
Designing, establishing and maintaining adequate internal controls over financial reporting is the responsibility of
management. Internal controls over financial reporting is a process designed by, or under the supervision of senior
management and effected by the Board of Directors to provide reasonable assurance regarding the reliability of
financial reporting and preparation of the Company’s financial statements in accordance with IFRS.
The Company has made changes to its internal control systems related to the ongoing preparation and review of
agriculture and post-employment benefits adjustments resulting from its transition to IFRS. For the year ended
March 31, 2012, there have been no other material changes in the Company’s internal controls over financial
reporting or changes to disclosure controls and procedures that materially affected or were likely to affect, the
Company’s internal control systems.
As at June 20, 2012, the CEO and CFO of the Company have evaluated the effectiveness of the Company’s
internal controls over financial reporting. Based on these evaluations, the CEO and CFO have concluded that the
controls and procedures were operating effectively.
25 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 26
Recently issued Accounting Pronouncements
In December 2011, the IASB issued amendments to IFRS 7 – Financial Instruments: Disclosures, which increase the
disclosure requirements related to the offsetting of financial assets and financial liabilities. The new requirements
are effective for annual periods beginning on or after January 1, 2013. The Company is currently evaluating the
potential impact of this standard.
In June 2011, the IASB issued amendments to IAS 1 – Financial Statement Presentation, which require changes
in the presentation of OCI, including grouping together certain items of OCI that may be reclassified to net
earnings. The new requirements are effective for annual periods beginning on or after July 1, 2012. The Company
is currently evaluating the potential impact of this standard.
In June 2011, the IASB issued amendments to IAS 19 – Employee Benefits, which requires changes to the
recognition and disclosure of defined benefit plans, including eliminating the deferral of actuarial gains and losses,
requiring that actuarial gains and losses are included in OCI and increasing disclosures on the characteristics and
risks of defined benefit plans. The new requirements are effective for annual periods beginning on or after
January 1, 2013. The Company is currently evaluating the potential impact of this standard.
In May 2011, the IASB issued IFRS 13 – Fair Value Measurements, which defines fair value, sets out a framework for
measuring fair value and requires disclosures about fair value measurements. The standard applies when another
standard requires or permits a fair value measurement. The new requirements are effective for annual periods
beginning on or after January 1, 2013. The Company is currently evaluating the potential impact of this standard.
In May 2011, the IASB issued IFRS 10 – Consolidated Financial Statements, IFRS 11 – Joint Arrangements and
IFRS 12 – Disclosure of Interests in Other Entities. IFRS 10 provides a single consolidation model that identifies
control as the basis for consolidation for all types of entities. IFRS 10 replaces IAS 27 - Consolidated and Separate
Financial Statements and SIC-12 – Consolidation - Special Purpose Entities. IFRS 11- Joint Arrangements
establishes principles for the financial reporting by parties to a joint arrangement. IFRS 11 supersedes IAS 31 -
Interests in Joint Ventures and SIC-13 - Jointly Controlled Entities - Non-Monetary Contributions by Venturers.
IFRS 12 changes the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated
structured entities. As a consequence of these new standards, the IASB also issued amended and retitled versions
of IAS 27 - Separate Financial Statements and IAS 28 - Investments in Associates and Joint Ventures. The new
requirements are effective for annual periods beginning on or after January 1, 2013, with earlier application
permitted. The Company is currently evaluating the potential impact of these standards.
In October 2010, the IASB issued amendments to IFRS 7 – Financial Instruments: Disclosures, which increases
disclosure requirements in relation to transferred financial assets. The standard is effective for annual periods
beginning on or after July 1, 2011, with earlier adoption permitted. The Company is currently evaluating the
potential impact of this standard.
In November 2009, the IASB issued IFRS 9 – Financial Instruments: Classification and Measurement of Financial
Assets and Financial Liabilities. In October 2010, it added requirements for financial liabilities. IFRS 9 will replace
IAS 39 – Financial Instruments: Recognition and Measurement. The standard uses a single approach to determine
whether a financial asset is measured at amortized cost or fair value. The approach is based on how an entity
manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial
assets. The new standard also requires a single impairment method to be used. For financial liabilities, the
standard requires that for financial liabilities measured at fair value, any changes in an entity’s own credit risk are
generally to be presented in OCI instead of net earnings. IFRS 9 is effective for annual periods beginning on or
after January 1, 2015. The Company is currently evaluating the potential impact of this standard.
evaluation of Disclosure Controls and Procedures and internal Control over Financial Reporting.
Compliance with National Instrument 52-109 (“NI 52-109”) provided the Company with a review and documentation
of the processes and internal controls that were in place within the organization. As a result of the review, the Company
found no material weaknesses and will continue to update the review and documentation of processes and internal
controls on an ongoing basis.
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information
required to be disclosed by the Company in reports filed with or submitted to various securities regulators are
recorded, processed, summarized and reported within the time periods specified. This information is gathered and
reported to the Company’s management, including the President and Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”), on a timely basis so that decisions can be made regarding the Company’s disclosure to
the public.
The Company’s management, under the supervision of, and with the participation of the CEO and CFO, have
designed and maintain the Company’s disclosure controls and procedures as required in Canada by “National
Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings”.
internal Controls over Financial Reporting
Internal controls over financial reporting are procedures designed to provide reasonable assurance that
transactions are properly authorized, assets are safeguarded against unauthorized or improper use, and
transactions are properly recorded and reported. A control system, no matter how well designed and operated,
can provide only reasonable, not absolute, assurance with respect to reliability of financial reporting and financial
statement preparation.
Designing, establishing and maintaining adequate internal controls over financial reporting is the responsibility of
management. Internal controls over financial reporting is a process designed by, or under the supervision of senior
management and effected by the Board of Directors to provide reasonable assurance regarding the reliability of
financial reporting and preparation of the Company’s financial statements in accordance with IFRS.
The Company has made changes to its internal control systems related to the ongoing preparation and review of
agriculture and post-employment benefits adjustments resulting from its transition to IFRS. For the year ended
March 31, 2012, there have been no other material changes in the Company’s internal controls over financial
reporting or changes to disclosure controls and procedures that materially affected or were likely to affect, the
Company’s internal control systems.
As at June 20, 2012, the CEO and CFO of the Company have evaluated the effectiveness of the Company’s
internal controls over financial reporting. Based on these evaluations, the CEO and CFO have concluded that the
controls and procedures were operating effectively.
25 MANAGeMeNT’S DiSCUSSiON & ANALYSiS
Andrew Peller Limited ~ 2012 Annual Report 26
iNDePeNDeNT AUDiTOR’S RePORT
To the Shareholders of Andrew Peller Limited
CONSOLiDATeD BALANCe SHeeTS
(in thousands of Canadian dollars)
We have audited the accompanying consolidated financial statements of Andrew Peller Limited, which comprise
the consolidated balance sheets as at March 31, 2012, March 31, 2011 and April 1, 2010 and the consolidated
statements of earnings, comprehensive income, changes in equity and cash flows for the years ended March 31,
2012 and March 31, 2011, and the related notes, which comprise a summary of significant accounting policies.
ASSETS
Current assets
March 31, 2012
March 31, 2011
April 1, 2010
Accounts receivable (note 19)
Inventory (note 4)
$
24,937
110,256
$
$
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements
in accordance with International Financial Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards.Those standards
require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the consolidated financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
Andrew Peller Limited as at March 31, 2012, March 31, 2011 and April 1, 2010 and their financial performance and
their cash flows for the years ended March 31, 2012 and March 31, 2011 in accordance with International Financial
Reporting Standards.
Chartered Accountants, Licensed Public Accountants
Toronto, Ontario, Canada
June 20, 2012
$
285,552
$
267,996
$
57,495
$
48,758
$
$
Current portion of biological assets (note 6)
Prepaid expenses and other assets
Income taxes recoverable (note 13)
Property, plant and equipment (note 5)
Biological assets (note 6)
Intangibles (note 7)
Goodwill (note 8)
LIABILITIES
Current liabilities
Bank indebtedness (note 10)
Accounts payable and accrued
liabilities (note 9)
Dividends payable
Income taxes payable (note 13)
Current portion of derivative financial
instruments (note 19)
Current portion of long-term debt (note 11)
Long-term debt (note 11)
Long-term derivative financial
instruments (note 19)
Post-employment benefit obligations (note 12)
Other long-term liabilities
Deferred income taxes (note 13)
ShAREhOLDERS’ EQuITY
Capital stock (note 14)
Retained earnings
Commitments (note 17)
881
1,338
-
137,412
84,490
12,556
13,621
37,473
37,118
1,252
40
1,272
5,366
102,543
41,456
1,943
7,151
-
11,907
165,000
7,026
113,526
120,552
23,390
94,692
759
818
-
119,659
84,744
11,950
14,170
37,473
33,883
1,148
1,000
1,894
5,333
92,016
42,720
1,578
5,565
-
11,820
153,699
7,026
107,271
114,297
22,902
88,818
615
1,818
1,327
115,480
85,133
12,395
14,775
37,473
265,256
48,877
28,229
1,197
-
1,922
6,158
86,383
47,633
1,667
5,414
600
9,879
151,576
7,375
106,305
113,680
265,256
$
285,552
$
267,996
$
John E. Peller, Director
Brian J. Short, Director
The accompanying notes are an integral part of these consolidated financial statements.
27
iNDePeNDeNT AUDiTOR’S RePORT
Andrew Peller Limited ~ 2012 Annual Report 28
iNDePeNDeNT AUDiTOR’S RePORT
To the Shareholders of Andrew Peller Limited
We have audited the accompanying consolidated financial statements of Andrew Peller Limited, which comprise
the consolidated balance sheets as at March 31, 2012, March 31, 2011 and April 1, 2010 and the consolidated
statements of earnings, comprehensive income, changes in equity and cash flows for the years ended March 31,
2012 and March 31, 2011, and the related notes, which comprise a summary of significant accounting policies.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements
in accordance with International Financial Reporting Standards, and for such internal control as management
misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards.Those standards
require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the consolidated financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
Reporting Standards.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
Andrew Peller Limited as at March 31, 2012, March 31, 2011 and April 1, 2010 and their financial performance and
their cash flows for the years ended March 31, 2012 and March 31, 2011 in accordance with International Financial
Chartered Accountants, Licensed Public Accountants
Toronto, Ontario, Canada
June 20, 2012
CONSOLiDATeD BALANCe SHeeTS
(in thousands of Canadian dollars)
March 31, 2012
March 31, 2011
April 1, 2010
determines is necessary to enable the preparation of consolidated financial statements that are free from material
Property, plant and equipment (note 5)
ASSETS
Current assets
Accounts receivable (note 19)
Inventory (note 4)
Current portion of biological assets (note 6)
Prepaid expenses and other assets
Income taxes recoverable (note 13)
$
$
$
$
24,937
110,256
881
1,338
-
137,412
84,490
12,556
13,621
37,473
$
23,390
94,692
759
818
-
119,659
84,744
11,950
14,170
37,473
$
285,552
$
267,996
$
57,495
$
48,758
37,118
1,252
40
1,272
5,366
102,543
41,456
1,943
7,151
-
11,907
165,000
7,026
113,526
120,552
33,883
1,148
1,000
1,894
5,333
92,016
42,720
1,578
5,565
-
11,820
153,699
7,026
107,271
114,297
$
285,552
$
267,996
$
22,902
88,818
615
1,818
1,327
115,480
85,133
12,395
14,775
37,473
265,256
48,877
28,229
1,197
-
1,922
6,158
86,383
47,633
1,667
5,414
600
9,879
151,576
7,375
106,305
113,680
265,256
Biological assets (note 6)
Intangibles (note 7)
Goodwill (note 8)
LIABILITIES
Current liabilities
Bank indebtedness (note 10)
Accounts payable and accrued
liabilities (note 9)
Dividends payable
Income taxes payable (note 13)
Current portion of derivative financial
instruments (note 19)
Current portion of long-term debt (note 11)
Long-term debt (note 11)
Long-term derivative financial
instruments (note 19)
Post-employment benefit obligations (note 12)
Other long-term liabilities
Deferred income taxes (note 13)
ShAREhOLDERS’ EQuITY
Capital stock (note 14)
Retained earnings
Commitments (note 17)
27
iNDePeNDeNT AUDiTOR’S RePORT
Andrew Peller Limited ~ 2012 Annual Report 28
John E. Peller, Director
Brian J. Short, Director
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLiDATeD STATeMeNTS OF e ARNiNGS
for the years ended March 31
CONSOLiDATeD STATeMeNTS OF CHANGeS iN eQUiTY
for the years ended March 31, 2012 and 2011
(in thousands of Canadian dollars, except per share amounts)
(in thousands of Canadian dollars)
2012
2011
Sales
Cost of goods sold (note 15)
Amortization of plant and equipment used in production
$ 276,883
169,626
4,826
$
Gross profit
Selling and administration (note 15)
Amortization of equipment and intangibles used in selling and administration
Interest
Operating earnings
Net unrealized gains on derivative financial instruments (note 19)
Other expenses (note 15)
Earnings before income taxes
Provision for income taxes (note 13)
Current
Deferred
Net earnings for the year
Net earnings per share (notes 2 and 16)
Basic and diluted
Class A Shares
Class B Shares
102,431
74,606
3,026
5,354
19,445
(257)
1,163
18,539
4,841
697
5,538
$
13,001
$
11,223
$
$
0.93
0.81
$
$
0.78
0.67
265,420
162,158
4,667
98,595
71,718
2,925
6,673
17,279
(117)
791
16,605
3,223
2,159
5,382
Issue price of repurchased shares
(349)
Balance at April 1, 2010
Net earnings for the year
Net actuarial losses (net of $218
deferred tax recovery) (note 12)
Net comprehensive income for the year
Excess of repurchase price over average
per share issue price
Dividends (Class A $0.330 per share,
Class B $0.288 per share)
Balance at March 31, 2011
Balance at April 1, 2011
Net earnings for the year
Net actuarial losses (net of $610 deferred
tax recovery) (note 12)
Net comprehensive income for the year
Dividends (Class A $0.360 per share,
Class B $0.314 per share)
Balance at March 31, 2012
Capital stock
$
7,375
Retained
earnings
$
106,305
$
Total
shareholders’
-
-
-
-
-
-
-
-
-
11,223
(619)
10,604
-
(4,900)
(4,738)
107,271
107,271
13,001
(1,737)
11,264
(5,009)
$
$
7,026
7,026
$
$
$
$
$
7,026
$
113,526
$
equity
113,680
11,223
(619)
10,604
(349)
(4,900)
(4,738)
114,297
114,297
13,001
(1,737)
11,264
(5,009)
120,552
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLiDATeD STATeMeNTS OF COMPReNHeNSive iNCOMe
for the years ended March 31
(in thousands of Canadian dollars)
Net earnings for the year
Net actuarial losses on post-employment benefit plans (note 12)
Deferred income taxes (note 13)
Other comprehensive loss for the year
Net comprehensive income for the year
2012
2011
$
13,001
$
11,223
(2,347)
610
(1,737)
(837)
218
(619)
$
11,264
$
10,604
The accompanying notes are an integral part of these consolidated financial statements.
29 CONSOLiDATeD STATeMeNTS OF eARNiNGS
Andrew Peller Limited ~ 2012 Annual Report 30
CONSOLiDATeD STATeMeNTS OF e ARNiNGS
for the years ended March 31
CONSOLiDATeD STATeMeNTS OF CHANGeS iN eQUiTY
for the years ended March 31, 2012 and 2011
(in thousands of Canadian dollars, except per share amounts)
(in thousands of Canadian dollars)
Sales
Cost of goods sold (note 15)
Amortization of plant and equipment used in production
Gross profit
Selling and administration (note 15)
Amortization of equipment and intangibles used in selling and administration
Net unrealized gains on derivative financial instruments (note 19)
Interest
Operating earnings
Other expenses (note 15)
Earnings before income taxes
Provision for income taxes (note 13)
Current
Deferred
Net earnings for the year
Net earnings per share (notes 2 and 16)
Basic and diluted
Class A Shares
Class B Shares
2012
2011
$ 276,883
$
169,626
4,826
102,431
74,606
3,026
5,354
19,445
(257)
1,163
18,539
4,841
697
5,538
265,420
162,158
4,667
98,595
71,718
2,925
6,673
17,279
(117)
791
16,605
3,223
2,159
5,382
$
13,001
$
11,223
$
$
0.93
0.81
$
$
0.78
0.67
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLiDATeD STATeMeNTS OF COMPReNHeNSive iNCOMe
for the years ended March 31
(in thousands of Canadian dollars)
Net earnings for the year
$
13,001
$
11,223
Net actuarial losses on post-employment benefit plans (note 12)
Deferred income taxes (note 13)
Other comprehensive loss for the year
Net comprehensive income for the year
The accompanying notes are an integral part of these consolidated financial statements.
2012
(2,347)
610
(1,737)
2011
(837)
218
(619)
$
11,264
$
10,604
Balance at April 1, 2010
Net earnings for the year
Net actuarial losses (net of $218
deferred tax recovery) (note 12)
Net comprehensive income for the year
Issue price of repurchased shares
Excess of repurchase price over average
per share issue price
Dividends (Class A $0.330 per share,
Class B $0.288 per share)
Balance at March 31, 2011
Balance at April 1, 2011
Net earnings for the year
Net actuarial losses (net of $610 deferred
tax recovery) (note 12)
Net comprehensive income for the year
Dividends (Class A $0.360 per share,
Class B $0.314 per share)
Retained
earnings
Total
shareholders’
equity
$
106,305
$
Capital stock
$
7,375
-
-
-
(349)
-
-
$
$
7,026
7,026
$
$
-
-
-
-
11,223
(619)
10,604
-
(4,900)
(4,738)
107,271
107,271
13,001
(1,737)
11,264
(5,009)
$
$
113,680
11,223
(619)
10,604
(349)
(4,900)
(4,738)
114,297
114,297
13,001
(1,737)
11,264
(5,009)
120,552
Balance at March 31, 2012
$
7,026
$
113,526
$
The accompanying notes are an integral part of these consolidated financial statements.
29 CONSOLiDATeD STATeMeNTS OF eARNiNGS
Andrew Peller Limited ~ 2012 Annual Report 30
CONSOLiDATeD STATeMeNTS OF CASH FLOwS
for the years ended March 31
(in thousands of Canadian dollars)
CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
March 31, 2012 and 2011
Cash provided by (used in)
Operating activities
Net earnings for the year
Adjustments for
Loss (gain) on disposal of property and equipment
Amortization of plant, equipment, and intangible assets
Impairment of intangibles (note 15)
Interest expense
Provision for income taxes (note 13)
Revaluation of biological assets – net of insurance recovery
Post-employment benefits
Net unrealized loss on derivative financial instruments (note 19)
Interest paid
Income taxes paid
Change in non-cash working capital items related to operations (note 18)
Investing activities
Proceeds from disposal of property, plant, and equipment and vine
biological assets
Purchase of property and equipment and vine biological assets
Purchase of intangibles
Acquisition of businesses
Financing activities
Increase (decrease) in bank indebtedness
Issuance of long-term debt
Repayment of long-term debt
Deferred financing costs
Dividends paid
Repurchase of Class A Shares
Increase in cash during the year
Cash - beginning of year
Cash - end of year
2012
2011
(in thousands of Canadian dollars, except per share amounts)
$
13,001
$
11,223
1 Nature of operations
203
7,852
200
5,354
5,538
412
(761)
(257)
(5,520)
(5,801)
20,221
(13,228)
6,993
27
(7,272)
(1,395)
(600)
(9,240)
8,737
50,263
(50,944)
(904)
(4,905)
-
2,247
-
-
-
$
(96)
7,592
-
6,673
5,382
831
(686)
(117)
(6,601)
(896)
23,305
(286)
23,019
1,488
(8,093)
(101)
(825)
(7,531)
(119)
-
(5,333)
-
(4,787)
(5,249)
(15,488)
-
-
-
$
The accompanying notes are an integral part of these consolidated financial statements.
31 CONSOLiDATeD STATeMeNTS OF CASH FLOw S
Andrew Peller Limited ~ 2012 Annual Report 32
Andrew Peller Limited (the “Company”) produces and markets wine and wine related products. The Company’s
products are produced and sold predominantly in Canada. The Company is incorporated under the Canada
Business Corporations Act and is domiciled in Canada. The address of its head office is 697 South Service Road,
Grimsby, Ontario L3M 4E8.
2 Significant accounting policies
(A) Basis of presentation and adoption of i FRS
The Company prepares its consolidated financial statements in accordance with Canadian generally accepted
accounting principles as defined in the Handbook of the Canadian Institute of Chartered Accountants (“CICA
Handbook”). In 2010, the CICA Handbook was revised to incorporate International Financial Reporting
Standards as issued by the International Accounting Standards Board (“IFRS”) and to require publicly
accountable enterprises to apply these standards effective for years beginning on or after January 1, 2011.
Accordingly, these are the Company’s first annual consolidated financial statements prepared in accordance
with IFRS. In these consolidated financial statements, the term “Canadian GAAP” refers to Canadian GAAP
before the adoption of IFRS.
The consolidated financial statements have been prepared in compliance with IFRS. Subject to certain
transition elections and exceptions disclosed in note 23, the Company has consistently applied the accounting
policies used in the preparation of its opening IFRS balance sheet at April 1, 2010 throughout all periods
presented, as if these policies had always been in effect. Note 23 discloses the impact of the transition to IFRS
on the Company’s reported financial position, financial performance and cash flows, including the nature and
effect of significant changes in accounting policies from those used in the Company’s consolidated financial
statements for the year ended March 31, 2011 prepared under Canadian GAAP.
These financial statements were approved by the Board of Directors for issue on June 20, 2012.
The consolidated financial statements have been prepared under the historical cost convention, except for
derivatives, which are measured at fair value and biological assets, which are measured at fair value less costs
(B) Basis of measurement
to sell.
(C) Basis of consolidation
These consolidated financial statements include the accounts of the Company and all subsidiary companies.
Subsidiaries are those entities which the Company controls by having the power to govern the financial and
operating policies. Subsidiaries are fully consolidated from the date on which control is obtained by the
Company and are de-consolidated from the date that control ceases. Intercompany transactions, balances,
income and expenses, and profits and losses are eliminated.
CONSOLiDATeD STATeMeNTS OF CASH FLOwS
for the years ended March 31
(in thousands of Canadian dollars)
CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
March 31, 2012 and 2011
2012
2011
(in thousands of Canadian dollars, except per share amounts)
$
13,001
$
11,223
Cash provided by (used in)
Operating activities
Net earnings for the year
Adjustments for
Loss (gain) on disposal of property and equipment
Amortization of plant, equipment, and intangible assets
Impairment of intangibles (note 15)
Interest expense
Provision for income taxes (note 13)
Revaluation of biological assets – net of insurance recovery
Post-employment benefits
Net unrealized loss on derivative financial instruments (note 19)
Interest paid
Income taxes paid
Change in non-cash working capital items related to operations (note 18)
Investing activities
Proceeds from disposal of property, plant, and equipment and vine
Purchase of property and equipment and vine biological assets
biological assets
Purchase of intangibles
Acquisition of businesses
Financing activities
Increase (decrease) in bank indebtedness
Issuance of long-term debt
Repayment of long-term debt
Deferred financing costs
Dividends paid
Repurchase of Class A Shares
Increase in cash during the year
Cash - beginning of year
Cash - end of year
203
7,852
200
5,354
5,538
412
(761)
(257)
(5,520)
(5,801)
20,221
(13,228)
6,993
27
(7,272)
(1,395)
(600)
(9,240)
8,737
50,263
(50,944)
(904)
(4,905)
2,247
-
-
-
-
The accompanying notes are an integral part of these consolidated financial statements.
$
$
(96)
7,592
-
6,673
5,382
831
(686)
(117)
(6,601)
(896)
23,305
(286)
23,019
1,488
(8,093)
(101)
(825)
(7,531)
(119)
(5,333)
(4,787)
(5,249)
(15,488)
-
-
-
-
-
1 Nature of operations
Andrew Peller Limited (the “Company”) produces and markets wine and wine related products. The Company’s
products are produced and sold predominantly in Canada. The Company is incorporated under the Canada
Business Corporations Act and is domiciled in Canada. The address of its head office is 697 South Service Road,
Grimsby, Ontario L3M 4E8.
2 Significant accounting policies
(A) Basis of presentation and adoption of i FRS
The Company prepares its consolidated financial statements in accordance with Canadian generally accepted
accounting principles as defined in the Handbook of the Canadian Institute of Chartered Accountants (“CICA
Handbook”). In 2010, the CICA Handbook was revised to incorporate International Financial Reporting
Standards as issued by the International Accounting Standards Board (“IFRS”) and to require publicly
accountable enterprises to apply these standards effective for years beginning on or after January 1, 2011.
Accordingly, these are the Company’s first annual consolidated financial statements prepared in accordance
with IFRS. In these consolidated financial statements, the term “Canadian GAAP” refers to Canadian GAAP
before the adoption of IFRS.
The consolidated financial statements have been prepared in compliance with IFRS. Subject to certain
transition elections and exceptions disclosed in note 23, the Company has consistently applied the accounting
policies used in the preparation of its opening IFRS balance sheet at April 1, 2010 throughout all periods
presented, as if these policies had always been in effect. Note 23 discloses the impact of the transition to IFRS
on the Company’s reported financial position, financial performance and cash flows, including the nature and
effect of significant changes in accounting policies from those used in the Company’s consolidated financial
statements for the year ended March 31, 2011 prepared under Canadian GAAP.
These financial statements were approved by the Board of Directors for issue on June 20, 2012.
(B) Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention, except for
derivatives, which are measured at fair value and biological assets, which are measured at fair value less costs
to sell.
(C) Basis of consolidation
These consolidated financial statements include the accounts of the Company and all subsidiary companies.
Subsidiaries are those entities which the Company controls by having the power to govern the financial and
operating policies. Subsidiaries are fully consolidated from the date on which control is obtained by the
Company and are de-consolidated from the date that control ceases. Intercompany transactions, balances,
income and expenses, and profits and losses are eliminated.
31 CONSOLiDATeD STATeMeNTS OF CASH FLOwS
Andrew Peller Limited ~ 2012 Annual Report 32
(D) Revenue
(H) Biological assets
The Company records a sale when it has transferred the risks and rewards of ownership of the goods to
the buyer; the Company has no continuing managerial involvement over the goods; it is probable that
the consideration will be received by the Company; and the amount of revenue and costs related to the
transaction can be measured reliably. For transactions with provincial liquor boards, licensee retail stores and
wine kit retailers, the Company’s terms are “FOB shipping point”. Accordingly, sales are recorded when the
product is shipped from the Company’s production facility. Sales to consumers through retail stores, winery
restaurants and estate wineries are recorded when the product is purchased.
Excise taxes collected on behalf of the federal government, licensing fees and levies paid on wine sold
through the Company’s independent retail stores in Ontario, product returns, breakage and discounts
provided to customers are deducted from gross revenue to arrive at sales.
(e) Cost of goods sold, excluding amortization
Cost of goods sold, excluding amortization, includes the cost of finished goods inventory sold during the
year, inventory writedowns and revaluations of agricultural produce to fair value less costs to sell at the point
of harvest.
(F) inventory
Inventory is valued at the lower of cost and net realizable value. Cost is determined on an average cost basis.
The Company utilizes a weighted average cost calculation to determine the value of ending inventory (bulk
wine and finished goods). Average cost is determined separately for import wine and domestic wine and is
calculated by varietal and vintage year.
Grapes produced from vineyards controlled by the Company that are part of inventory are measured at their
fair value less costs to sell at the point of harvest.
The Company includes borrowing costs in the cost of certain wine inventory that requires a substantial period
of time to become ready for sale.
(G) Property, plant, and equipment
Property, plant, and equipment are carried at cost less accumulated amortization. Cost includes borrowing
costs for assets that require a substantial period of time to become ready for use. Amortization of buildings,
vineyard infrastructure, and machinery and equipment is calculated on the straight-line basis in amounts
sufficient to amortize the cost of buildings, vineyard infrastructure, and machinery and equipment over their
estimated useful lives as follows:
Buildings
Vineyard infrastructure
Machinery and equipment
2.5% per year
5% per year
2.5% to 20% per year
Vineyard infrastructure amortization commences in the year the vineyard yields a crop that approximates 50%
of expected annual production.
The Company measures biological assets, consisting of grape vines, at fair value less costs to sell. Agricultural
produce, consisting of grapes grown on vineyards controlled by the Company, is measured at fair value less
cost to sell at the point of harvest and becomes the basis for the cost of inventory after harvest.
Gains or losses arising from a change in fair value less costs to sell are included in the consolidated statement
of earnings in the period in which they arise.
(i) intangibles
Intangible assets include brands, customer contracts, contract co-packaging arrangements and
customer-based relationships. These intangible assets are recorded at their estimated fair value on the
date of acquisition.
Brands
Customer-based
Contract packaging
asset might be impaired.
(J) Goodwill
Amortization
method
N/A
Straight-line
Straight-line
useful life
Indefinite
10-20 years
10 years
Remaining
useful life
Indefinite
11-18 years
7 years
Brands have been assessed as having an indefinite life because the expected usage, period of control, and
other factors do not limit the life of these assets. Intangible assets with an indefinite life are not amortized
but are tested for impairment at least annually, or more frequently if events or circumstances indicate that the
Goodwill represents the cost of a business combination in excess of the fair values of the net tangible and
identifiable intangible assets acquired. Goodwill is not amortized but is tested for impairment on an annual
basis, or more frequently if circumstances indicate that goodwill may be impaired. The Company assigns
goodwill combined with other assets to a cash generating unit (“CGU”) based on certain regions and product
lines, which is the lowest level at which the combined assets generate independent cash inflows. To test for
impairment the Company primarily compares a CGU’s value in use, determined based on expected future
discounted cash flows, to its carrying value. If necessary, a CGU’s fair value is also considered. An impairment
charge is recorded to the extent that the carrying value of a CGU exceeds the greater of the CGU’s fair value
and its value in use. An impairment loss in respect of goodwill is not reversed. Management has determined
that there is no impairment in goodwill for the years ended March 31, 2012 and 2011.
The Company has elected not to restate business combinations that occurred prior to its transition to IFRS.
As a result, goodwill in respect of acquisitions prior to April 1, 2010 is measured at the amount recorded under
previous Canadian GAAP other than as described in note 23.
33 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 34
(D) Revenue
(H) Biological assets
The Company measures biological assets, consisting of grape vines, at fair value less costs to sell. Agricultural
produce, consisting of grapes grown on vineyards controlled by the Company, is measured at fair value less
cost to sell at the point of harvest and becomes the basis for the cost of inventory after harvest.
Gains or losses arising from a change in fair value less costs to sell are included in the consolidated statement
of earnings in the period in which they arise.
(i) intangibles
Intangible assets include brands, customer contracts, contract co-packaging arrangements and
customer-based relationships. These intangible assets are recorded at their estimated fair value on the
date of acquisition.
Brands
Customer-based
Contract packaging
Amortization
method
N/A
Straight-line
Straight-line
useful life
Indefinite
10-20 years
10 years
Remaining
useful life
Indefinite
11-18 years
7 years
Brands have been assessed as having an indefinite life because the expected usage, period of control, and
other factors do not limit the life of these assets. Intangible assets with an indefinite life are not amortized
but are tested for impairment at least annually, or more frequently if events or circumstances indicate that the
asset might be impaired.
Grapes produced from vineyards controlled by the Company that are part of inventory are measured at their
(J) Goodwill
Goodwill represents the cost of a business combination in excess of the fair values of the net tangible and
identifiable intangible assets acquired. Goodwill is not amortized but is tested for impairment on an annual
basis, or more frequently if circumstances indicate that goodwill may be impaired. The Company assigns
goodwill combined with other assets to a cash generating unit (“CGU”) based on certain regions and product
lines, which is the lowest level at which the combined assets generate independent cash inflows. To test for
impairment the Company primarily compares a CGU’s value in use, determined based on expected future
discounted cash flows, to its carrying value. If necessary, a CGU’s fair value is also considered. An impairment
charge is recorded to the extent that the carrying value of a CGU exceeds the greater of the CGU’s fair value
and its value in use. An impairment loss in respect of goodwill is not reversed. Management has determined
that there is no impairment in goodwill for the years ended March 31, 2012 and 2011.
The Company has elected not to restate business combinations that occurred prior to its transition to IFRS.
As a result, goodwill in respect of acquisitions prior to April 1, 2010 is measured at the amount recorded under
previous Canadian GAAP other than as described in note 23.
The Company records a sale when it has transferred the risks and rewards of ownership of the goods to
the buyer; the Company has no continuing managerial involvement over the goods; it is probable that
the consideration will be received by the Company; and the amount of revenue and costs related to the
transaction can be measured reliably. For transactions with provincial liquor boards, licensee retail stores and
wine kit retailers, the Company’s terms are “FOB shipping point”. Accordingly, sales are recorded when the
product is shipped from the Company’s production facility. Sales to consumers through retail stores, winery
restaurants and estate wineries are recorded when the product is purchased.
Excise taxes collected on behalf of the federal government, licensing fees and levies paid on wine sold
through the Company’s independent retail stores in Ontario, product returns, breakage and discounts
provided to customers are deducted from gross revenue to arrive at sales.
(e) Cost of goods sold, excluding amortization
Cost of goods sold, excluding amortization, includes the cost of finished goods inventory sold during the
year, inventory writedowns and revaluations of agricultural produce to fair value less costs to sell at the point
of harvest.
(F) inventory
Inventory is valued at the lower of cost and net realizable value. Cost is determined on an average cost basis.
The Company utilizes a weighted average cost calculation to determine the value of ending inventory (bulk
wine and finished goods). Average cost is determined separately for import wine and domestic wine and is
calculated by varietal and vintage year.
The Company includes borrowing costs in the cost of certain wine inventory that requires a substantial period
fair value less costs to sell at the point of harvest.
of time to become ready for sale.
(G) Property, plant, and equipment
Property, plant, and equipment are carried at cost less accumulated amortization. Cost includes borrowing
costs for assets that require a substantial period of time to become ready for use. Amortization of buildings,
vineyard infrastructure, and machinery and equipment is calculated on the straight-line basis in amounts
sufficient to amortize the cost of buildings, vineyard infrastructure, and machinery and equipment over their
estimated useful lives as follows:
Buildings
Vineyard infrastructure
Machinery and equipment
of expected annual production.
2.5% per year
5% per year
2.5% to 20% per year
Vineyard infrastructure amortization commences in the year the vineyard yields a crop that approximates 50%
33 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 34
(K) Post-employment benefits
(M) Leases
The Company sponsors defined contribution pension plans, defined benefit pension plans, post-employment
medical benefits plans, and other post-employment benefit plans for certain employees. Contributions to the
defined contribution pension plans are recognized as an expense as services are rendered by employees.
The costs of the defined benefit plans, the post-employment medical benefit plans and other post-employment
benefit plans are actuarially determined and include management’s best estimate of expected plan investment
performance, the interest rate on the plan obligation, salary escalation, expected retirement ages, and medical
cost escalation. The liability recognized in the balance sheet in respect of these plans is the present value of
the defined benefit obligation at the end of the reporting period as determined by the Company’s actuary less
the fair value of plan assets adjusted for the unamortized portion of negative past service credits. The current
service cost, amortization of past service credits, and the interest cost net of the expected return on plan assets
are recognized in earnings in the period they arise. Adjustments arising from actuarially determined gains or
losses are recognized in other comprehensive income in the period in which they arise. The corresponding
change in shareholders’ equity is adjusted to retained earnings for the period.
(L) Financial instruments and hedge accounting
The Company classifies its financial instruments into the following categories: loans and receivables, liabilities
at amortized cost, available-for-sale investments, and financial assets and liabilities at fair value through profit
or loss.
The Company has chosen not to apply hedge accounting to any of its derivative financial instruments. As a
result of this optional policy, these hedging instruments are recorded initially and subsequently at fair value
and the change in the fair value is recorded directly in earnings.
The Company classifies accounts payable and accrued liabilities, dividends payable, bank indebtedness, and
long-term debt as liabilities at amortized cost. Accounts payable and accrued liabilities and dividends payable
are initially measured at the amount to be paid, which approximates fair value because of the short-term
nature of these liabilities. Subsequently, they are measured at amortized cost. Bank indebtedness and
long-term debt are measured initially at fair value, net of transaction costs incurred, and subsequently at
amortized costs using the effective interest method.
Accounts receivable are classified as loans and receivables. Accounts receivable are primarily amounts due
from customers from the sale of goods or the rendering of services. The Company maintains an allowance for
doubtful accounts to record an estimate of credit losses. When no recovery of an amount owing is possible,
the account receivable is reduced directly.
Transaction costs related to long-term debt are netted against the carrying value of the liability and are
then amortized over the expected life of the instrument using the effective interest method. The Company
recognizes financial instruments when it becomes a party to the terms of the instrument and has elected to
use “trade date” accounting for regular way purchases and sales of financial assets.
Embedded derivatives (elements of contracts whose cash flows move independently from the host contract
similar to a stand-alone derivative) are required to be separated and measured at fair values if certain criteria
are met. Management reviewed its contracts and determined that the Company does not currently have any
embedded derivatives in these contracts that require separate accounting and disclosure.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are
classified as operating leases. Payments made under operating leases are charged to the statement of
earnings on a straight-line basis over the period the asset is used under the lease. Leases under which the
Company has substantially all the risks and rewards of ownership are classified as finance leases. Finance
leases are capitalized at the inception of the lease at the lower of the fair value of the leased property and the
present value of the minimum lease payments. Payments on finance leases are allocated to the liability and
expense so as to recognize a constant rate of interest on the remaining balance of the liability. Assets acquired
under finance leases are depreciated over the shorter of their useful life and the lease term.
(N) impairment of non-financial assets
The Company reviews long-lived assets and definite life intangible assets for impairment when events or
circumstances indicate that an asset may be impaired. Assets are assigned to a CGU based on the lowest level
at which they generate independent cash inflows. When there is an indication of impairment, an impairment
charge is recorded to the extent that the carrying value of a CGU exceeds the greater of the CGU’s fair value
less costs to sell and its value in use determined by discounting expected cash flows (“recoverable amount”).
An impairment loss is reversed if a CGU’s recoverable amount increases to the extent that the related assets’
carrying amounts are no larger than the amount that would have been determined, net of amortization, had
no impairment loss been recorded.
(O) Net earnings per share
Basic net earnings per share has been calculated using the weighted average number of Class A and
Class B Shares outstanding during the year. Diluted net earnings (loss) per share has been calculated by
considering the impact of any potential ordinary shares that are dilutive on the two classes of shares when
considered together.
(P) Dividends
the Board of Directors.
(Q) Segmented information
Dividends on Class A and Class B Shares are recognized in the period in which they are formally declared by
The Company produces and markets wine products and other beverages in Canada. A significant portion of
the Company’s sales are made to the liquor control boards in each province in which the Company transacts
business. Management has concluded that based on the type of products sold and the fact that its customers
are similar in nature, the Company operates in a single operating segment. In addition, a substantial portion of
the Company’s sales are made in Canada. As a result, management has concluded that the Company operates
in one geographic segment.
35 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 36
(K) Post-employment benefits
(M) Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are
classified as operating leases. Payments made under operating leases are charged to the statement of
earnings on a straight-line basis over the period the asset is used under the lease. Leases under which the
Company has substantially all the risks and rewards of ownership are classified as finance leases. Finance
leases are capitalized at the inception of the lease at the lower of the fair value of the leased property and the
present value of the minimum lease payments. Payments on finance leases are allocated to the liability and
expense so as to recognize a constant rate of interest on the remaining balance of the liability. Assets acquired
under finance leases are depreciated over the shorter of their useful life and the lease term.
(N) impairment of non-financial assets
The Company reviews long-lived assets and definite life intangible assets for impairment when events or
circumstances indicate that an asset may be impaired. Assets are assigned to a CGU based on the lowest level
at which they generate independent cash inflows. When there is an indication of impairment, an impairment
charge is recorded to the extent that the carrying value of a CGU exceeds the greater of the CGU’s fair value
less costs to sell and its value in use determined by discounting expected cash flows (“recoverable amount”).
An impairment loss is reversed if a CGU’s recoverable amount increases to the extent that the related assets’
carrying amounts are no larger than the amount that would have been determined, net of amortization, had
no impairment loss been recorded.
(O) Net earnings per share
Basic net earnings per share has been calculated using the weighted average number of Class A and
Class B Shares outstanding during the year. Diluted net earnings (loss) per share has been calculated by
considering the impact of any potential ordinary shares that are dilutive on the two classes of shares when
considered together.
are initially measured at the amount to be paid, which approximates fair value because of the short-term
(P) Dividends
Dividends on Class A and Class B Shares are recognized in the period in which they are formally declared by
the Board of Directors.
(Q) Segmented information
The Company produces and markets wine products and other beverages in Canada. A significant portion of
the Company’s sales are made to the liquor control boards in each province in which the Company transacts
business. Management has concluded that based on the type of products sold and the fact that its customers
are similar in nature, the Company operates in a single operating segment. In addition, a substantial portion of
the Company’s sales are made in Canada. As a result, management has concluded that the Company operates
in one geographic segment.
The Company sponsors defined contribution pension plans, defined benefit pension plans, post-employment
medical benefits plans, and other post-employment benefit plans for certain employees. Contributions to the
defined contribution pension plans are recognized as an expense as services are rendered by employees.
The costs of the defined benefit plans, the post-employment medical benefit plans and other post-employment
benefit plans are actuarially determined and include management’s best estimate of expected plan investment
performance, the interest rate on the plan obligation, salary escalation, expected retirement ages, and medical
cost escalation. The liability recognized in the balance sheet in respect of these plans is the present value of
the defined benefit obligation at the end of the reporting period as determined by the Company’s actuary less
the fair value of plan assets adjusted for the unamortized portion of negative past service credits. The current
service cost, amortization of past service credits, and the interest cost net of the expected return on plan assets
are recognized in earnings in the period they arise. Adjustments arising from actuarially determined gains or
losses are recognized in other comprehensive income in the period in which they arise. The corresponding
change in shareholders’ equity is adjusted to retained earnings for the period.
(L) Financial instruments and hedge accounting
The Company classifies its financial instruments into the following categories: loans and receivables, liabilities
at amortized cost, available-for-sale investments, and financial assets and liabilities at fair value through profit
or loss.
The Company has chosen not to apply hedge accounting to any of its derivative financial instruments. As a
result of this optional policy, these hedging instruments are recorded initially and subsequently at fair value
and the change in the fair value is recorded directly in earnings.
The Company classifies accounts payable and accrued liabilities, dividends payable, bank indebtedness, and
long-term debt as liabilities at amortized cost. Accounts payable and accrued liabilities and dividends payable
nature of these liabilities. Subsequently, they are measured at amortized cost. Bank indebtedness and
long-term debt are measured initially at fair value, net of transaction costs incurred, and subsequently at
amortized costs using the effective interest method.
Accounts receivable are classified as loans and receivables. Accounts receivable are primarily amounts due
from customers from the sale of goods or the rendering of services. The Company maintains an allowance for
doubtful accounts to record an estimate of credit losses. When no recovery of an amount owing is possible,
the account receivable is reduced directly.
Transaction costs related to long-term debt are netted against the carrying value of the liability and are
then amortized over the expected life of the instrument using the effective interest method. The Company
recognizes financial instruments when it becomes a party to the terms of the instrument and has elected to
use “trade date” accounting for regular way purchases and sales of financial assets.
Embedded derivatives (elements of contracts whose cash flows move independently from the host contract
similar to a stand-alone derivative) are required to be separated and measured at fair values if certain criteria
are met. Management reviewed its contracts and determined that the Company does not currently have any
embedded derivatives in these contracts that require separate accounting and disclosure.
35 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 36
(R) income taxes
Current income tax is the expected amount of tax payable or recoverable on taxable income or loss during
the period. Current income tax may also include adjustments to taxes payable or recoverable in respect of
previous periods.
The Company accounts for deferred income taxes based on temporary differences, which are the differences
between the carrying amount of an asset or liability and its tax base. Deferred income taxes are provided for
all temporary differences between the carrying amount and tax bases of assets and liabilities except for those
arising from the initial recognition of goodwill or for those arising from the initial recognition of an asset or
liability in a transaction that is not a business combination and has no impact on earnings or taxable income
or loss. Deferred income tax assets and liabilities are measured using the enacted or substantially enacted
tax rates expected to apply to taxable income in the years in which temporary differences are expected to
be recovered or settled. The deferred income tax provision (recovery) recorded in net earnings and other
comprehensive income represents the change during the year in deferred income tax assets and deferred
income tax liabilities.
(S) Contingencies
In the ordinary course of business activities, the Company may be contingently liable for litigation and
claims. Management believes that adequate provisions have been recorded in the accounts where required.
Although it is not possible to accurately estimate the extent of potential claims, if any, management believes
that the ultimate resolution of such contingencies would not have a material adverse effect on the financial
position of the Company.
(T) Comprehensive income (loss)
Comprehensive income (loss) is comprised of net earnings and other comprehensive income (loss) (“OCI”).
OCI represents the change in equity for a period that arises from transactions that are required to be
or are elected to be recognized outside of net earnings. The Company has chosen to record actuarial
gains and losses on defined benefit pension plans and other post-employment benefit plans in OCI in
the period incurred.
(U) equity
The Company separately presents changes in equity related to capital stock, retained earnings, and
accumulated OCI in the consolidated statements of changes in equity.
(v) Recently issued accounting pronouncements
In December 2011, the IASB issued amendments to IFRS 7 – Financial Instruments: Disclosures, which increase
the disclosure requirements related to the offsetting of financial assets and financial liabilities. The new
requirements are effective for annual periods beginning on or after January 1, 2013. The Company is currently
evaluating the potential impact of this standard.
In June 2011, the IASB issued amendments to IAS 1 – Financial Statement Presentation, which requires
changes in the presentation of other comprehensive income (“OCI”) including grouping together certain
items of OCI that may be reclassified to net earnings. The new requirements are effective for annual periods
beginning on or after July 1, 2012. The Company is currently evaluating the potential impact of this standard.
In June 2011, the IASB issued amendments to IAS 19 – Employee Benefits, which require changes to the
recognition and disclosure of defined benefit plans, including eliminating the deferral of actuarial gains
and losses, requiring that actuarial gains and losses are included in OCI and increasing disclosures on the
characteristics and risks of defined benefit plans. The new requirements are effective for annual periods
beginning on or after January 1, 2013. The Company is currently evaluating the potential impact of
this standard.
In May 2011, the IASB issued IFRS 13 – Fair Value Measurements, which defines fair value, sets out a
framework for measuring fair value and requires disclosures about fair value measurements. The standard
applies when another standard requires or permits a fair value measurement. The new requirements are
effective for annual periods beginning on or after January 1, 2013. The Company is currently evaluating
the potential impact of this standard.
In May 2011, the IASB issued IFRS 10 – Consolidated Financial Statements, IFRS 11 – Joint Arrangements
and IFRS 12 – Disclosure of Interests in Other Entities. IFRS 10 provides a single consolidation model that
identifies control as the basis for consolidation for all types of entities. IFRS 10 replaces IAS 27 - Consolidated
and Separate Financial Statements and SIC-12 – Consolidation - Special Purpose Entities. IFRS 11- Joint
Arrangements establishes principles for the financial reporting by parties to a joint arrangement. IFRS 11
supersedes IAS 31 - Interests in Joint Ventures and SIC-13 - Jointly Controlled Entities - Non-Monetary
Contributions by Venturers. IFRS 12 changes the disclosure requirements for subsidiaries, joint arrangements,
associates and unconsolidated structured entities. As a consequence of these new standards, the IASB also
issued amended and retitled versions of IAS 27 - Separate Financial Statements and IAS 28 - Investments in
Associates and Joint Ventures. The new requirements are effective for annual periods beginning on or after
January 1, 2013, with earlier application permitted. The Company is currently evaluating the potential impact
of these standards.
In December 2010, the IASB issued an amendment to IAS 12 – Income Taxes, which introduces an exception
to the requirement to measure the deferred tax assets or liabilities arising on an investment property
measured at fair value based on its expected manner of recovery. The new requirements are effective for
annual periods beginning on or after January 1, 2012. The Company is currently evaluating the potential
impact of this standard.
In October 2010, the IASB issued amendments to IFRS 7 – Financial Instruments: Disclosures, which increases
disclosure requirements in relation to transferred financial assets. The standard is effective for annual periods
beginning on or after July 1, 2011, with earlier adoption permitted. The Company is currently evaluating the
potential impact of this standard.
In November 2009, the IASB issued IFRS 9 – Financial Instruments: Classification and Measurement of
Financial Assets and Financial Liabilities. In October 2010, it added requirements for financial liabilities.
IFRS 9 will replace IAS 39 – Financial Instruments: Recognition and Measurement. The standard uses a single
approach to determine whether a financial asset is measured at amortized cost or fair value. The approach is
based on how an entity manages its financial instruments (its business model) and the contractual cash flow
characteristics of the financial assets. The new standard also requires a single impairment method to be used.
For financial liabilities, the standard requires that for financial liabilities measured at fair value, any changes
in an entity’s own credit risk are generally to be presented in OCI instead of net earnings. IFRS 9 is effective
for annual periods beginning on or after January 1, 2015. The Company is currently evaluating the potential
impact of this standard.
37 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 38
(R) income taxes
previous periods.
Current income tax is the expected amount of tax payable or recoverable on taxable income or loss during
the period. Current income tax may also include adjustments to taxes payable or recoverable in respect of
The Company accounts for deferred income taxes based on temporary differences, which are the differences
between the carrying amount of an asset or liability and its tax base. Deferred income taxes are provided for
all temporary differences between the carrying amount and tax bases of assets and liabilities except for those
arising from the initial recognition of goodwill or for those arising from the initial recognition of an asset or
liability in a transaction that is not a business combination and has no impact on earnings or taxable income
or loss. Deferred income tax assets and liabilities are measured using the enacted or substantially enacted
tax rates expected to apply to taxable income in the years in which temporary differences are expected to
be recovered or settled. The deferred income tax provision (recovery) recorded in net earnings and other
comprehensive income represents the change during the year in deferred income tax assets and deferred
income tax liabilities.
(S) Contingencies
In the ordinary course of business activities, the Company may be contingently liable for litigation and
claims. Management believes that adequate provisions have been recorded in the accounts where required.
Although it is not possible to accurately estimate the extent of potential claims, if any, management believes
that the ultimate resolution of such contingencies would not have a material adverse effect on the financial
position of the Company.
(T) Comprehensive income (loss)
Comprehensive income (loss) is comprised of net earnings and other comprehensive income (loss) (“OCI”).
OCI represents the change in equity for a period that arises from transactions that are required to be
or are elected to be recognized outside of net earnings. The Company has chosen to record actuarial
gains and losses on defined benefit pension plans and other post-employment benefit plans in OCI in
the period incurred.
(U) equity
The Company separately presents changes in equity related to capital stock, retained earnings, and
accumulated OCI in the consolidated statements of changes in equity.
(v) Recently issued accounting pronouncements
In December 2011, the IASB issued amendments to IFRS 7 – Financial Instruments: Disclosures, which increase
the disclosure requirements related to the offsetting of financial assets and financial liabilities. The new
requirements are effective for annual periods beginning on or after January 1, 2013. The Company is currently
evaluating the potential impact of this standard.
In June 2011, the IASB issued amendments to IAS 1 – Financial Statement Presentation, which requires
changes in the presentation of other comprehensive income (“OCI”) including grouping together certain
items of OCI that may be reclassified to net earnings. The new requirements are effective for annual periods
beginning on or after July 1, 2012. The Company is currently evaluating the potential impact of this standard.
In June 2011, the IASB issued amendments to IAS 19 – Employee Benefits, which require changes to the
recognition and disclosure of defined benefit plans, including eliminating the deferral of actuarial gains
and losses, requiring that actuarial gains and losses are included in OCI and increasing disclosures on the
characteristics and risks of defined benefit plans. The new requirements are effective for annual periods
beginning on or after January 1, 2013. The Company is currently evaluating the potential impact of
this standard.
In May 2011, the IASB issued IFRS 13 – Fair Value Measurements, which defines fair value, sets out a
framework for measuring fair value and requires disclosures about fair value measurements. The standard
applies when another standard requires or permits a fair value measurement. The new requirements are
effective for annual periods beginning on or after January 1, 2013. The Company is currently evaluating
the potential impact of this standard.
In May 2011, the IASB issued IFRS 10 – Consolidated Financial Statements, IFRS 11 – Joint Arrangements
and IFRS 12 – Disclosure of Interests in Other Entities. IFRS 10 provides a single consolidation model that
identifies control as the basis for consolidation for all types of entities. IFRS 10 replaces IAS 27 - Consolidated
and Separate Financial Statements and SIC-12 – Consolidation - Special Purpose Entities. IFRS 11- Joint
Arrangements establishes principles for the financial reporting by parties to a joint arrangement. IFRS 11
supersedes IAS 31 - Interests in Joint Ventures and SIC-13 - Jointly Controlled Entities - Non-Monetary
Contributions by Venturers. IFRS 12 changes the disclosure requirements for subsidiaries, joint arrangements,
associates and unconsolidated structured entities. As a consequence of these new standards, the IASB also
issued amended and retitled versions of IAS 27 - Separate Financial Statements and IAS 28 - Investments in
Associates and Joint Ventures. The new requirements are effective for annual periods beginning on or after
January 1, 2013, with earlier application permitted. The Company is currently evaluating the potential impact
of these standards.
In December 2010, the IASB issued an amendment to IAS 12 – Income Taxes, which introduces an exception
to the requirement to measure the deferred tax assets or liabilities arising on an investment property
measured at fair value based on its expected manner of recovery. The new requirements are effective for
annual periods beginning on or after January 1, 2012. The Company is currently evaluating the potential
impact of this standard.
In October 2010, the IASB issued amendments to IFRS 7 – Financial Instruments: Disclosures, which increases
disclosure requirements in relation to transferred financial assets. The standard is effective for annual periods
beginning on or after July 1, 2011, with earlier adoption permitted. The Company is currently evaluating the
potential impact of this standard.
In November 2009, the IASB issued IFRS 9 – Financial Instruments: Classification and Measurement of
Financial Assets and Financial Liabilities. In October 2010, it added requirements for financial liabilities.
IFRS 9 will replace IAS 39 – Financial Instruments: Recognition and Measurement. The standard uses a single
approach to determine whether a financial asset is measured at amortized cost or fair value. The approach is
based on how an entity manages its financial instruments (its business model) and the contractual cash flow
characteristics of the financial assets. The new standard also requires a single impairment method to be used.
For financial liabilities, the standard requires that for financial liabilities measured at fair value, any changes
in an entity’s own credit risk are generally to be presented in OCI instead of net earnings. IFRS 9 is effective
for annual periods beginning on or after January 1, 2015. The Company is currently evaluating the potential
impact of this standard.
37 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 38
3 Critical accounting estimates and judgments
4
inventory
The preparation of consolidated financial statements in accordance with IFRS requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the
consolidated financial statements, the reported amounts of revenues and expenses during the reporting
period, and the extent of and the reported amounts in disclosures. Actual results may vary from current
estimates. These estimates are reviewed periodically and, as adjustments become necessary, are recorded
in the period in which they change. Specific areas of uncertainty include but are not limited to:
impairment of goodwill
Testing goodwill for impairment at least annually involves estimating the recoverable amount of the CGUs to
which goodwill is allocated. This requires making assumptions about future cash flows, growth rates, market
conditions, and discount rates which are inherently uncertain.
Post-employment benefits
Measuring the liability for post-employment benefits uses assumptions for the discount rates, increases in
compensation, increases in medical costs, and timing of the payment of benefits. Actual amounts could vary
significantly from these assumptions.
Fair value of biological assets
Determining the fair value of grape vines involves making assumptions about how market participants assign
the value of a vineyard between vines, land, and other assets. The fair value of vineyards at April 1, 2010 was
determined by an accredited appraiser and a portion of this fair value was in respect of vines. Changes in the
fair value of vines may occur as a result of changes in numerous factors, including, vine health and expected
future yields.
To estimate the fair value of controlled vines planted on leased land, discounted cash flows over the estimated
remaining life of vines or the remaining lease term, whichever is shorter, were used. The fair value of vines on
leased land reduces to $nil as the lease nears its expiration date. Assumptions used include the discount rate,
expected yields, grape price trends, and annual growing cost trends.
To estimate the fair value of vines in the middle and later stages of development, the estimated fair value
of mature vines was reduced by the net discounted cash outflows necessary to bring the vines to a fully
developed state.
Fair value of grapes at the point of harvest
Where possible, the fair value of grapes at the point of harvest is determined by reference to local market
prices for grapes of a similar quality and the same varietal. For grapes for which local market prices are not
readily available, the average price of similar grapes is used.
Packaging materials and supplies
Bulk wine
Finished goods
Interest included in the cost of inventory
March 31,
March 31,
2012
10,624
61,389
38,243
110,256
986
$
$
$
2011
8,213
50,709
35,770
94,692
800
$
$
$
$
$
$
April 1,
2010
8,957
49,912
29,949
88,818
941
Inventory write-downs recognized as an expense amounted to $1,663 (2011 - $1,357).
The cost of inventory recognized as an expense and included in cost of goods sold, excluding amortization
was $167,963 (2011 - $160,801).
5 Property, plant, and equipment
Vineyard
land and
Machinery
Land
infrastructure
Buildings and equipment
Total
At April 1, 2010
Cost
Accumulated amortization
(3,257)
(11,326)
(46,058)
(60,641)
Net carrying amount
$
4,807
$
22,485
$
27,867
$
29,974
$
85,133
$
4,807
$
25,742
$
39,193
$
76,032
$ 145,774
Year ended March 31, 2011
Additions
Disposals
Amortization
$
$
$
$
6,258
$
127
(458)
(531)
680
-
(1,166)
(110)
(5,189)
7,065
(568)
(6,886)
Closing net carrying amount $
4,807
$
21,623
$
27,381
$
30,933
$
84,744
$
4,807
$
25,390
$
39,872
$
81,634
$ 151,703
(3,767)
(12,491)
(50,701)
(66,959)
Net carrying amount
$
4,807
$
21,623
$
27,381
$
30,933
$
84,744
At March 31, 2011
Cost
Accumulated amortization
Year ended March 31, 2012
Additions
Disposals
Amortization
$
$
$
$
6,458
$
26
(42)
(574)
600
-
(1,131)
(188)
(5,403)
7,084
(230)
(7,108)
Closing net carrying amount $
4,807
$
21,033
$
26,850
$
31,800
$
84,490
At March 31, 2012
Cost
Accumulated amortization
$
4,807
$
25,361
$
40,472
$
87,261
$ 157,901
(4,328)
(13,622)
(55,461)
(73,411)
Net carrying amount
$
4,807
$
21,033
$
26,850
$
31,800
$
84,490
-
-
-
-
-
-
-
-
-
Included in vineyard infrastructure are assets amounting to $nil (2011 - $nil; April 1, 2010 - $5,661) that are
under development and are not being amortized.
Contractual commitments to purchase property, plant, and equipment were $5,411 at March 31, 2012.
39 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 40
3 Critical accounting estimates and judgments
4
inventory
The preparation of consolidated financial statements in accordance with IFRS requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the
consolidated financial statements, the reported amounts of revenues and expenses during the reporting
period, and the extent of and the reported amounts in disclosures. Actual results may vary from current
estimates. These estimates are reviewed periodically and, as adjustments become necessary, are recorded
in the period in which they change. Specific areas of uncertainty include but are not limited to:
impairment of goodwill
Testing goodwill for impairment at least annually involves estimating the recoverable amount of the CGUs to
which goodwill is allocated. This requires making assumptions about future cash flows, growth rates, market
conditions, and discount rates which are inherently uncertain.
Post-employment benefits
Measuring the liability for post-employment benefits uses assumptions for the discount rates, increases in
compensation, increases in medical costs, and timing of the payment of benefits. Actual amounts could vary
significantly from these assumptions.
Fair value of biological assets
Determining the fair value of grape vines involves making assumptions about how market participants assign
the value of a vineyard between vines, land, and other assets. The fair value of vineyards at April 1, 2010 was
determined by an accredited appraiser and a portion of this fair value was in respect of vines. Changes in the
fair value of vines may occur as a result of changes in numerous factors, including, vine health and expected
future yields.
To estimate the fair value of controlled vines planted on leased land, discounted cash flows over the estimated
remaining life of vines or the remaining lease term, whichever is shorter, were used. The fair value of vines on
leased land reduces to $nil as the lease nears its expiration date. Assumptions used include the discount rate,
expected yields, grape price trends, and annual growing cost trends.
To estimate the fair value of vines in the middle and later stages of development, the estimated fair value
of mature vines was reduced by the net discounted cash outflows necessary to bring the vines to a fully
developed state.
Fair value of grapes at the point of harvest
Where possible, the fair value of grapes at the point of harvest is determined by reference to local market
prices for grapes of a similar quality and the same varietal. For grapes for which local market prices are not
readily available, the average price of similar grapes is used.
Packaging materials and supplies
Bulk wine
Finished goods
Interest included in the cost of inventory
March 31,
March 31,
2012
10,624
61,389
38,243
110,256
986
$
$
$
2011
8,213
50,709
35,770
94,692
800
$
$
$
$
$
$
April 1,
2010
8,957
49,912
29,949
88,818
941
Inventory write-downs recognized as an expense amounted to $1,663 (2011 - $1,357).
The cost of inventory recognized as an expense and included in cost of goods sold, excluding amortization
was $167,963 (2011 - $160,801).
5 Property, plant, and equipment
Vineyard
land and
infrastructure
Land
Machinery
Buildings and equipment
Total
At April 1, 2010
Cost
Accumulated amortization
$
4,807
-
$
25,742
(3,257)
$
39,193
(11,326)
$
76,032
(46,058)
$ 145,774
(60,641)
Net carrying amount
$
4,807
$
22,485
$
27,867
$
29,974
$
85,133
Year ended March 31, 2011
Additions
Disposals
Amortization
$
$
-
-
-
127
(458)
(531)
$
680
-
(1,166)
$
6,258
(110)
(5,189)
$
7,065
(568)
(6,886)
Closing net carrying amount $
4,807
$
21,623
$
27,381
$
30,933
$
84,744
At March 31, 2011
Cost
Accumulated amortization
$
4,807
-
$
25,390
(3,767)
$
39,872
(12,491)
$
81,634
(50,701)
$ 151,703
(66,959)
Net carrying amount
$
4,807
$
21,623
$
27,381
$
30,933
$
84,744
Year ended March 31, 2012
Additions
Disposals
Amortization
$
$
-
-
-
26
(42)
(574)
$
600
-
(1,131)
$
6,458
(188)
(5,403)
$
7,084
(230)
(7,108)
Closing net carrying amount $
4,807
$
21,033
$
26,850
$
31,800
$
84,490
At March 31, 2012
Cost
Accumulated amortization
$
4,807
-
$
25,361
(4,328)
$
40,472
(13,622)
$
87,261
(55,461)
$ 157,901
(73,411)
Net carrying amount
$
4,807
$
21,033
$
26,850
$
31,800
$
84,490
Included in vineyard infrastructure are assets amounting to $nil (2011 - $nil; April 1, 2010 - $5,661) that are
under development and are not being amortized.
Contractual commitments to purchase property, plant, and equipment were $5,411 at March 31, 2012.
39 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 40
Customer-
Brands –
based
indefinite
intangible
Contract
life
assets
packaging
Other
Total
$
3,800
$
10,259
$
1,100
$
2,665
$
17,824
Net carrying amount
$
3,800
$
8,375
$
$
1,692
$
14,775
(1,884)
(973)
(3,049)
At April 1, 2010
Cost
Accumulated amortization
and impairment
-
-
-
-
-
-
Year ended March 31, 2011
Additions
Amortization
$
Closing net carrying amount $
3,800
$
$
-
(582)
7,793
Net carrying amount
$
3,800
$
7,793
Year ended March 31, 2012
(2,466)
-
-
(634)
$
375
$
888
(200)
At March 31, 2011
Cost
Accumulated amortization
and impairment
Additions
Transfer
Impairment
Amortization
At March 31, 2012
Cost
Accumulated amortization
$
$
$
$
(192)
908
-
(124)
784
(316)
784
-
-
-
(110)
674
$
$
101
-
$
101
(706)
1,793
$
14,170
(973)
(3,755)
$
1,793
$
14,170
$
132
(1,000)
$
-
-
1,395
(1,000)
(200)
(744)
$
4,175
$
11,147
$
1,100
$
1,898
$
18,320
and impairment
(200)
Net carrying amount
$
3,975
$
(3,100)
8,047
$
(426)
674
(973)
925
(4,699)
$
13,621
$
$
3,800
$
10,259
$
1,100
$
2,766
$
17,925
6 Biological assets
7. intangibles
Biological assets consist of grape vines and grapes prior to harvest that are controlled by the Company.
The Company owns and leases land in Ontario and British Columbia to grow grapes in order to secure
a supply of quality grapes for the making of wine.
At March 31, 2012, the Company held grape vines planted on 762 acres of land (2011 – 762; April 1, 2010 –
768). During the year ended March 31, 2012, the Company harvested 1,990 tonnes of grapes (2011 – 1,029)
valued at $4,521 (2011 - $3,098).
The changes in the carrying amount of biological assets are as follows:
Carrying amount – beginning of year
$
12,709
$
13,010
2012
$
2011
$
Net increase in fair value less costs to sell due to biological
transformation, prices, and other changes
Decrease in fair value less costs to sell of vines on leased land
Transferred to inventory upon harvest
Net gains (losses) from changes in fair value less costs to sell
Purchases of vines
Disposal of vines
Carrying amount – end of year
Current portion of biological assets
Biological assets
4,258
(27)
(4,521)
(290)
12,419
1,018
-
13,437
(881)
$
12,556
$
1,723
(26)
(3,098)
(1,401)
11,609
1,210
(110)
12,709
(759)
11,950
The significant assumptions used to determine the fair value of vines planted on leased land are as follows:
Closing net carrying amount $
3,975
$
8,047
$
$
925
$
13,621
March 31,
2012
March 31,
2011
April 1,
2010
Yield
Discount rate
Inflation rate
Annual vineyard operating costs
3-5 tonnes per acre
10 - 12%
2.0%
$5 to $7 per acre
3-5 tonnes per acre
10 - 12%
2.0%
$5 to $7 per acre
3-5 tonnes per acre
10 - 12%
2.0%
$5 to $7 per acre
The Company is exposed to financial risk because of the long period of time between the cash outflow
required to plant grape vines, cultivate vineyards, and harvest grapes and the cash inflow from selling wine and
related products from the harvested grapes. To ensure the Company has access to sufficient cash to meet its
obligations, the Company has negotiated sufficient credit facilities to meet its needs. In addition, the Company
regularly monitors working capital requirements and cash budgets.
Substantially all of the grapes from owned and leased vineyards are used in the Company’s winemaking
processes. Owned and leased vineyards, in combination with supply contracts with grape growers, are used
to secure a supply of domestically grown premium quality grapes. These strategies reduce the financial risks
associated with changes in grape prices.
41 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 42
Brands –
indefinite
life
Customer-
based
intangible
assets
Contract
packaging
Other
Total
$
3,800
$
10,259
$
1,100
$
2,665
$
17,824
-
(1,884)
Net carrying amount
$
3,800
$
8,375
$
Year ended March 31, 2011
Additions
Amortization
$
-
-
Closing net carrying amount $
3,800
$
$
-
(582)
7,793
$
$
(192)
908
-
(124)
784
(973)
(3,049)
$
1,692
$
14,775
$
$
101
-
$
101
(706)
1,793
$
14,170
6 Biological assets
7. intangibles
At April 1, 2010
Cost
Accumulated amortization
and impairment
Biological assets consist of grape vines and grapes prior to harvest that are controlled by the Company.
The Company owns and leases land in Ontario and British Columbia to grow grapes in order to secure
a supply of quality grapes for the making of wine.
At March 31, 2012, the Company held grape vines planted on 762 acres of land (2011 – 762; April 1, 2010 –
768). During the year ended March 31, 2012, the Company harvested 1,990 tonnes of grapes (2011 – 1,029)
valued at $4,521 (2011 - $3,098).
The changes in the carrying amount of biological assets are as follows:
Carrying amount – beginning of year
$
12,709
$
13,010
2012
$
4,258
(27)
(4,521)
(290)
12,419
1,018
-
13,437
(881)
2011
$
1,723
(26)
(3,098)
(1,401)
11,609
1,210
(110)
12,709
(759)
April 1,
2010
10 - 12%
2.0%
Net increase in fair value less costs to sell due to biological
transformation, prices, and other changes
Decrease in fair value less costs to sell of vines on leased land
Transferred to inventory upon harvest
Net gains (losses) from changes in fair value less costs to sell
Purchases of vines
Disposal of vines
Carrying amount – end of year
Current portion of biological assets
Biological assets
The significant assumptions used to determine the fair value of vines planted on leased land are as follows:
$
12,556
$
11,950
Yield
Discount rate
Inflation rate
3-5 tonnes per acre
3-5 tonnes per acre
3-5 tonnes per acre
March 31,
March 31,
2012
2011
10 - 12%
2.0%
10 - 12%
2.0%
Annual vineyard operating costs
$5 to $7 per acre
$5 to $7 per acre
$5 to $7 per acre
The Company is exposed to financial risk because of the long period of time between the cash outflow
required to plant grape vines, cultivate vineyards, and harvest grapes and the cash inflow from selling wine and
related products from the harvested grapes. To ensure the Company has access to sufficient cash to meet its
obligations, the Company has negotiated sufficient credit facilities to meet its needs. In addition, the Company
regularly monitors working capital requirements and cash budgets.
Substantially all of the grapes from owned and leased vineyards are used in the Company’s winemaking
processes. Owned and leased vineyards, in combination with supply contracts with grape growers, are used
to secure a supply of domestically grown premium quality grapes. These strategies reduce the financial risks
associated with changes in grape prices.
At March 31, 2011
Cost
Accumulated amortization
and impairment
$
3,800
$
10,259
$
1,100
$
2,766
$
17,925
-
(2,466)
Net carrying amount
$
3,800
$
7,793
Year ended March 31, 2012
Additions
Transfer
Impairment
Amortization
$
$
375
-
(200)
-
888
-
-
(634)
$
$
Closing net carrying amount $
3,975
$
8,047
$
(316)
784
-
-
-
(110)
674
(973)
(3,755)
$
1,793
$
14,170
$
132
(1,000)
-
-
$
1,395
(1,000)
(200)
(744)
$
925
$
13,621
At March 31, 2012
Cost
Accumulated amortization
$
4,175
$
11,147
$
1,100
$
1,898
$
18,320
and impairment
Net carrying amount
(200)
3,975
$
(3,100)
8,047
$
$
(426)
674
(973)
925
(4,699)
13,621
$
$
41 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 42
8 Goodwill
10 Bank indebtedness
Gross amount
Accumulated impairment losses
March 31,
March 31,
2012
37,473
-
37,473
$
$
2011
37,473
-
37,473
$
$
$
$
April 1,
2010
37,608
135
37,473
The change in goodwill during the year ended March 31, 2011 is as a result of the disposal of a subsidiary
with goodwill that was fully impaired.
In order to test goodwill for impairment, the Company allocates the carrying value of goodwill to CGUs based
on the lowest level that goodwill is monitored for internal management purposes. The aggregate carrying
amount of goodwill allocated to each unit is as follows:
Ontario and Eastern Canadian wine
Western Canadian wine
Personal winemaking products
March 31,
2012
$
$
3,134
10,530
23,809
37,473
March 31,
2011
$
$
3,134
10,530
23,809
37,473
$
April 1,
2010
3,134
10,530
23,809
37,473
The Company determined the recoverable amount of the related CGUs by estimating their value in use.
Key assumptions used are:
March 31,
2012
March 31,
2011
Pre-tax discount rate
Period of projected cash flows
Growth rate beyond period of projected
cash flows
10%
5 years
4%
11%
5 years
4%
April 1,
2010
11%
5 years
4%
The Company uses past experience and current expectations about future performance in projecting cash
flows, which are based on financial budgets for five years. For the period after five years, the Company
projects cash flows using an assumed growth rate, which is based on expectations about long-term economic
growth in Canada and any known industry specific factors that may influence long-term growth in the
Canadian wine industry. The discount rate is estimated by referring to external sources of information about the
cost of capital and leverage of companies that operate in a similar industry to the Company and that are of
similar size. The rate determined is then adjusted to a pre-tax basis.
9 Accounts payable and accrued liabilities
Trade payables
Accrued liabilities
March 31,
2012
$
$
28,464
8,654
37,118
March 31,
2011
$
$
23,284
10,599
33,883
$
$
April 1,
2010
19,110
9,119
28,229
On September 16, 2011, the Company entered into a new operating loan facility. Significant terms of this facility
and the previous short-term loan facility are summarized below. The floating rates are stated in relation to the
one to six month Canadian Dealer Offered Rate (“CDOR”) and the Bank of Montreal prime rate (“Prime”).
Bank indebtedness
Significant terms
Committed until
Borrowing limit
Interest rate
Unused amount
11 Long-term debt
Other
Note payable
Term loan, maturing April 30, 2015
Less: Financing costs
Less: Current portion
September 16, 2015
August 26, 2011
November 9, 2010
$80,000
CDOR + 1.75%
$24,162
Prime + 2.00%
Prime + 2.75%
March 31,
March 31,
2012
2011
$
57,495
$
48,758
$
$75,000
$20,143
2011
-
-
-
48,278
48,278
225
48,053
5,333
42,720
$
$
March 31,
March 31,
2012
264
-
-
47,597
775
46,822
5,366
41,456
$
$
April 1,
2010
48,887
$75,000
$19,409
April 1,
2010
-
-
53,611
825
54,436
645
53,791
6,158
47,633
Term loan, maturing September 16, 2015
$
47,333
$
On September 16, 2011, the Company entered into a new long-term debt facility. The loan matures on
September 16, 2015 and is repayable in monthly principal payments of $444 plus interest prior to maturity.
On November 1, 2011, the Company modified its interest rate swap, which effectively fixes the interest rate
until August 31, 2015 at 3.98% plus a premium of 1.75%, based on leverage, or 5.73%. The Company and its
subsidiaries have provided their assets as security for this loan.
43 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 44
8 Goodwill
10 Bank indebtedness
On September 16, 2011, the Company entered into a new operating loan facility. Significant terms of this facility
and the previous short-term loan facility are summarized below. The floating rates are stated in relation to the
one to six month Canadian Dealer Offered Rate (“CDOR”) and the Bank of Montreal prime rate (“Prime”).
Bank indebtedness
Significant terms
Committed until
Borrowing limit
Interest rate
Unused amount
March 31,
2012
$
57,495
March 31,
2011
$
48,758
$
April 1,
2010
48,887
September 16, 2015
August 26, 2011
November 9, 2010
$80,000
CDOR + 1.75%
$24,162
$75,000
Prime + 2.00%
$20,143
$75,000
Prime + 2.75%
$19,409
March 31,
March 31,
11 Long-term debt
Term loan, maturing September 16, 2015
Other
Term loan, maturing April 30, 2015
Note payable
Less: Financing costs
Less: Current portion
March 31,
March 31,
2012
47,333
264
-
-
47,597
775
46,822
5,366
41,456
$
$
2011
-
-
48,278
-
48,278
225
48,053
5,333
42,720
$
$
$
$
April 1,
2010
-
-
53,611
825
54,436
645
53,791
6,158
47,633
On September 16, 2011, the Company entered into a new long-term debt facility. The loan matures on
September 16, 2015 and is repayable in monthly principal payments of $444 plus interest prior to maturity.
On November 1, 2011, the Company modified its interest rate swap, which effectively fixes the interest rate
until August 31, 2015 at 3.98% plus a premium of 1.75%, based on leverage, or 5.73%. The Company and its
subsidiaries have provided their assets as security for this loan.
March 31,
March 31,
Gross amount
Accumulated impairment losses
The change in goodwill during the year ended March 31, 2011 is as a result of the disposal of a subsidiary
with goodwill that was fully impaired.
In order to test goodwill for impairment, the Company allocates the carrying value of goodwill to CGUs based
on the lowest level that goodwill is monitored for internal management purposes. The aggregate carrying
amount of goodwill allocated to each unit is as follows:
$
$
$
$
2012
37,473
-
37,473
2012
3,134
10,530
23,809
37,473
2012
10%
5 years
4%
$
$
$
$
$
$
$
2011
37,473
-
37,473
2011
3,134
10,530
23,809
37,473
2011
11%
5 years
4%
April 1,
2010
37,608
135
37,473
April 1,
2010
3,134
10,530
23,809
37,473
April 1,
2010
11%
5 years
4%
Ontario and Eastern Canadian wine
Western Canadian wine
Personal winemaking products
Pre-tax discount rate
Period of projected cash flows
Growth rate beyond period of projected
cash flows
The Company determined the recoverable amount of the related CGUs by estimating their value in use.
Key assumptions used are:
March 31,
March 31,
The Company uses past experience and current expectations about future performance in projecting cash
flows, which are based on financial budgets for five years. For the period after five years, the Company
projects cash flows using an assumed growth rate, which is based on expectations about long-term economic
growth in Canada and any known industry specific factors that may influence long-term growth in the
Canadian wine industry. The discount rate is estimated by referring to external sources of information about the
cost of capital and leverage of companies that operate in a similar industry to the Company and that are of
similar size. The rate determined is then adjusted to a pre-tax basis.
9 Accounts payable and accrued liabilities
Trade payables
Accrued liabilities
March 31,
March 31,
2012
28,464
8,654
37,118
$
$
2011
23,284
10,599
33,883
$
$
$
$
April 1,
2010
19,110
9,119
28,229
43 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 44
The above described loan replaced the Company’s previous term loan, which was to mature on April 30, 2015
and was also repayable in monthly principal payments of $444 plus interest prior to maturity. Under its previous
term loan and interest rate swap, the Company effectively paid a fixed interest rate of 5.64% plus additional
interest of 0.70% based on leverage and a funding premium of 0.80%.
Interest expense on long-term debt during the year was $3,302 (2011 - $4,124).
Annual principal repayments for the years ending March 31 are as follows:
2013
2014
2015
2016
2017
Thereafter
$
5,366
5,366
5,366
31,368
33
98
$
47,597
12 Post-employment benefits
The Company has defined benefit pension plans and defined contribution savings plans for its employees.
The total expenses for the defined contribution savings plans were $1,220 (2011 - $1,230). The Company also
has a post-retirement medical benefits plan for certain employees and provides a monthly wine allowance to
retired employees, which are collectively referred to as other post-employment benefits.
Information about the funded defined benefit pension plans and the unfunded other post-employment
benefits plans is as follows:
Other post-
employment
benefits
$
16,178
$
Pension
benefits
977
(1,353)
1,222
3
(951)
$
19,366
Fair value - end of year
$
16,076
Accrued benefit obligations - end of year
20,675
Plan assets
Fair value - beginning of year
Expected return on plan assets
Actuarial gains (losses)
Company’s contributions
Employees’ contributions
Benefits paid
Plan obligations
Accrued benefit obligations -
beginning of year
Employees’ contributions
Total current service cost
Interest cost
Benefits paid
Actuarial losses (gains)
Funded Status
Plan deficits
Unamortized past service credits from
amendment to post-employment
medical benefits plan
Accrued benefit liability
Benefit plan expense
Current service cost
Interest cost
Expected return on plan assets
Employees’ contributions
Amortization of past service credits
Net benefit plan expense
Amount recognized in other comprehensive
income
Net actuarial loss (gain)
Actual return (loss) on plan assets
Experience adjustments
Plan assets
Plan liabilities
$
$
$
$
$
$
$
3
476
969
(951)
812
4,599
-
4,599
476
969
(977)
(3)
-
465
2,165
(376)
(1,353)
(812)
(2,165)
-
-
-
-
-
75
(75)
1,810
-
58
91
(75)
182
2,066
2,066
486
2,552
58
91
-
-
(81)
68
182
-
-
(182)
(182)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2012
Total
16,178
977
(1,353)
1,297
3
(1,026)
16,076
21,176
3
534
1,060
(1,026)
994
22,741
6,665
486
7,151
534
1,060
(977)
(3)
(81)
533
2,347
(376)
(1,353)
(994)
(2,347)
45 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 46
The above described loan replaced the Company’s previous term loan, which was to mature on April 30, 2015
and was also repayable in monthly principal payments of $444 plus interest prior to maturity. Under its previous
term loan and interest rate swap, the Company effectively paid a fixed interest rate of 5.64% plus additional
interest of 0.70% based on leverage and a funding premium of 0.80%.
Interest expense on long-term debt during the year was $3,302 (2011 - $4,124).
Annual principal repayments for the years ending March 31 are as follows:
2013
2014
2015
2016
2017
Thereafter
$
5,366
5,366
5,366
31,368
33
98
$
47,597
12 Post-employment benefits
The Company has defined benefit pension plans and defined contribution savings plans for its employees.
The total expenses for the defined contribution savings plans were $1,220 (2011 - $1,230). The Company also
has a post-retirement medical benefits plan for certain employees and provides a monthly wine allowance to
retired employees, which are collectively referred to as other post-employment benefits.
Information about the funded defined benefit pension plans and the unfunded other post-employment
benefits plans is as follows:
Pension
benefits
Other post-
employment
benefits
Plan assets
Fair value - beginning of year
Expected return on plan assets
Actuarial gains (losses)
Company’s contributions
Employees’ contributions
Benefits paid
Fair value - end of year
Plan obligations
Accrued benefit obligations -
beginning of year
Employees’ contributions
Total current service cost
Interest cost
Benefits paid
Actuarial losses (gains)
Accrued benefit obligations - end of year
Funded Status
Plan deficits
Unamortized past service credits from
amendment to post-employment
medical benefits plan
Accrued benefit liability
Benefit plan expense
Current service cost
Interest cost
Expected return on plan assets
Employees’ contributions
Amortization of past service credits
Net benefit plan expense
Amount recognized in other comprehensive
income
Net actuarial loss (gain)
Actual return (loss) on plan assets
Experience adjustments
Plan assets
Plan liabilities
$
$
$
$
$
$
$
$
$
$
16,178
977
(1,353)
1,222
3
(951)
16,076
19,366
3
476
969
(951)
812
20,675
4,599
-
4,599
476
969
(977)
(3)
-
465
2,165
(376)
(1,353)
(812)
(2,165)
$
$
$
$
$
$
$
$
$
$
-
-
-
75
-
(75)
-
1,810
-
58
91
(75)
182
2,066
2,066
486
2,552
58
91
-
-
(81)
68
182
-
-
(182)
(182)
$
$
$
$
$
$
$
$
$
$
2012
Total
16,178
977
(1,353)
1,297
3
(1,026)
16,076
21,176
3
534
1,060
(1,026)
994
22,741
6,665
486
7,151
534
1,060
(977)
(3)
(81)
533
2,347
(376)
(1,353)
(994)
(2,347)
45 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 46
Plan assets
Fair value - beginning of year
Expected return on plan assets
$
Actuarial gains (losses)
Company’s contributions
Employees’ contributions
Benefits paid
Pension
benefits
14,983
1,050
119
1,072
3
(1,049)
Fair value - end of year
$
16,178
Plan obligations
Accrued benefit obligations -
beginning of year
Employees’ contributions
Total current service cost
Interest cost
Benefits paid
Actuarial losses (gains)
$
18,001
3
448
986
(1,049)
977
Accrued benefit obligations - end of year $
19,366
Funded status
Plan deficits
Unamortized past service credits from
amendment to post-employment
medical benefits plan
Accrued benefit liability
Benefit plan expense
Current service cost
Interest cost
Expected return on plan assets
Employee contributions
Amortization of past service credits
Net benefit plan expense
Amount recognized in other comprehensive
income
Net actuarial loss (gain)
Actual return on plan assets
Experience adjustments
Plan assets
Plan liabilities
$
3,188
-
3,188
452
986
(1,050)
(3)
-
385
858
1,169
119
(977)
(858)
$
$
$
$
$
$
$
Other post-
employment
benefits
$
$
$
$
$
$
$
$
$
$
$
$
-
-
-
72
-
(72)
-
1,748
-
57
97
(71)
(21)
1,810
1,810
567
2,377
57
97
-
-
(81)
73
(21)
-
-
21
21
$
$
$
$
$
$
$
$
$
$
$
$
2011
Total
14,983
1,050
119
1,144
3
(1,121)
16,178
19,749
3
505
1,083
(1,120)
956
21,176
4,998
567
5,565
509
1,083
(1,050)
(3)
(81)
458
837
1,169
119
(956)
(837)
The significant actuarial assumptions adopted in measuring the Company’s accrued benefit obligations and
March 31,
March 31,
Accrued benefit obligations
Plan assets at fair value
Unamortized past service credits
Accrued benefit liability
benefits costs are as follows:
Discount rate for expenses
Discount rate for obligations
Expected long-term rate of return
on plan assets
Rate of compensation increase
Rate of medical cost increases
Retirement age
Pension
benefits
18,001
14,983
-
3,018
$
$
2012
5.0%
4.5%
4.8 – 6.3%
4%
8% decreasing
to 5% after
3 years
60 – 65 years
April 1, 2010
Other post-
employment
benefits
$
$
1,748
-
648
2,396
$
$
2011
5.5%
5.0%
7.0%
4 – 5%
9% decreasing
10% decreasing
to 5% after
4 years
60 – 65 years
to 5% after
5 years
60 – 65 years
Total
19,749
14,983
648
5,414
April 1,
2011
N/A
5.5%
N/A
4 – 5%
To determine the expected long-term rate of return on plan assets, a weighted average of the expected
returns of each asset category is used. The calculation is weighted based on the proportion of assets expected
to be held by the plans in each asset category.
An increase of one percent in the assumed rate of medical cost increases would lead to an increase in the
aggregate of the current service cost and interest cost component of the benefit plan expense of $3
(2011 - $3) and an increase in the accrued benefit obligation of $62 (2011 - $56). A decrease of one percent in
the assumed rate of medical cost increases would lead to a decrease in the aggregate of the current service
cost and interest cost component of the benefit plan expense of $3 (2011 - $3) and a decrease in the accrued
At March 31, 2012, the accumulated actuarial losses recognized in OCI were $3,184 (2011 - $837).
benefit obligation of $55 (2011 - $50).
Plan assets
The plan assets consist of the following:
Mutual funds
Fixed income
Equity
Balanced
March 31,
March 31,
2012
%
55
20
25
100
2011
%
-
-
100
100
April 1,
2010
%
-
-
100
100
47 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 48
Other post-
employment
benefits
$
14,983
$
18,001
1,748
Fair value - end of year
$
16,178
Plan assets
Fair value - beginning of year
Expected return on plan assets
$
Actuarial gains (losses)
Company’s contributions
Employees’ contributions
Benefits paid
Plan obligations
Accrued benefit obligations -
beginning of year
Employees’ contributions
Total current service cost
Interest cost
Benefits paid
Actuarial losses (gains)
Accrued benefit obligations - end of year $
19,366
Funded status
Plan deficits
Unamortized past service credits from
amendment to post-employment
$
3,188
medical benefits plan
Accrued benefit liability
Benefit plan expense
Current service cost
Interest cost
Expected return on plan assets
Employee contributions
Amortization of past service credits
Net benefit plan expense
Amount recognized in other comprehensive
income
Net actuarial loss (gain)
Actual return on plan assets
Experience adjustments
Plan assets
Plan liabilities
$
$
$
$
$
$
$
Pension
benefits
14,983
1,050
119
1,072
3
(1,049)
3
448
986
(1,049)
977
-
3,188
452
986
(1,050)
(3)
-
385
858
1,169
119
(977)
(858)
$
$
$
$
$
$
$
$
$
$
$
$
-
-
-
-
-
72
(72)
-
57
97
(71)
(21)
1,810
1,810
567
2,377
57
97
-
-
(81)
73
(21)
-
-
21
21
$
$
$
$
$
$
$
$
$
$
$
2011
Total
1,050
119
1,144
3
(1,121)
16,178
19,749
3
505
1,083
(1,120)
956
21,176
4,998
567
5,565
509
1,083
(1,050)
(3)
(81)
458
837
1,169
119
(956)
(837)
Accrued benefit obligations
Plan assets at fair value
Unamortized past service credits
Accrued benefit liability
Pension
benefits
18,001
14,983
-
3,018
$
$
Other post-
employment
benefits
$
$
1,748
-
648
2,396
April 1, 2010
Total
19,749
14,983
648
5,414
$
$
The significant actuarial assumptions adopted in measuring the Company’s accrued benefit obligations and
benefits costs are as follows:
Discount rate for expenses
Discount rate for obligations
Expected long-term rate of return
on plan assets
Rate of compensation increase
Rate of medical cost increases
Retirement age
March 31,
2012
March 31,
2011
5.0%
4.5%
4.8 – 6.3%
4%
8% decreasing
to 5% after
3 years
60 – 65 years
5.5%
5.0%
7.0%
4 – 5%
9% decreasing
to 5% after
4 years
60 – 65 years
April 1,
2011
N/A
5.5%
N/A
4 – 5%
10% decreasing
to 5% after
5 years
60 – 65 years
To determine the expected long-term rate of return on plan assets, a weighted average of the expected
returns of each asset category is used. The calculation is weighted based on the proportion of assets expected
to be held by the plans in each asset category.
An increase of one percent in the assumed rate of medical cost increases would lead to an increase in the
aggregate of the current service cost and interest cost component of the benefit plan expense of $3
(2011 - $3) and an increase in the accrued benefit obligation of $62 (2011 - $56). A decrease of one percent in
the assumed rate of medical cost increases would lead to a decrease in the aggregate of the current service
cost and interest cost component of the benefit plan expense of $3 (2011 - $3) and a decrease in the accrued
benefit obligation of $55 (2011 - $50).
At March 31, 2012, the accumulated actuarial losses recognized in OCI were $3,184 (2011 - $837).
Plan assets
The plan assets consist of the following:
Mutual funds
Fixed income
Equity
Balanced
March 31,
2012
%
March 31,
2011
%
55
20
25
100
-
-
100
100
April 1,
2010
%
-
-
100
100
47 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 48
Estimated Contributions
The significant temporary differences giving rise to the deferred income tax liability are comprised of the
The Company expects to make contributions of $1,663 to its defined benefit plans in the year ending
March 31, 2013.
following:
Deferred income tax liability
13 income taxes
Current tax on earnings for the year
Adjustments in respect of prior years
Provision for current income taxes
Change in temporary differences
Impact of change in tax rate
Provision for deferred income taxes
Total provision for income taxes
The Company’s income tax expense consists of the following:
Provision for income taxes at blended statutory
rate of 26.79% (2011 – 28.82%)
Permanent differences and non-deductible items
Future income tax rate changes
Other
$
2012
4,504
337
4,841
828
(131)
697
$
5,538
$
2012
4,967
307
(131)
395
$
5,538
2011
4,138
(915)
3,223
2,152
7
2,159
5,382
2011
4,786
269
7
320
5,382
$
$
$
$
The decrease in the blended statutory rate applicable to the Company is primarily a result of an income tax
rate decrease in Canada and in the province of Ontario during the year.
The movement of the deferred income tax account is as follows:
At beginning of year
Provision for deferred income taxes in net earnings
Recovery of deferred income taxes in other comprehensive earnings
At end of year
$
2012
11,820
697
(610)
$
2011
9,879
2,159
(218)
$
11,907
$
11,820
March 31, 2012
$
6,720
$
2,790
$
2,584
$
2,799
$
14,893
Accelerated
depreciation
tax
and
deductions
on property,
plant, and
equipment
Accelerated
tax
deductions
Biological
on
deductions
assets
intangibles
on goodwill
Total
$
6,585
$
2,688
$
2,975
$
2,443
$
14,691
177
6,762
(251)
2,437
(174)
2,801
(42)
353
(217)
(78)
14,613
280
Tax
170
2,613
186
Fair value
Post-
Loss carry
change on employment
forwards
derivatives
benefits
Other
Total
$
(2,308)
$
(949)
$
(1,381)
$
(174)
$
(4,812)
2,165
-
(143)
(8)
-
(889)
(1,425)
60
-
77
-
174
(218)
229
(610)
(162)
2,237
(336)
119
-
-
(218)
(2,793)
417
(610)
April 1, 2010
Provision (recovery) in
net earnings
March 31, 2011
Provision (recovery) in
net earnings
Deferred income tax asset
April 1, 2010
Provision (recovery) in
net earnings
Recovery in other
comprehensive income
March 31, 2011
Provision (recovery) in
net earnings
Recovery in other
comprehensive income
March 31, 2012
$
(151)
$
(812)
$
(1,806)
$
(217)
$
(2,986)
Changes to statutory income tax rates have been announced in British Columbia and Ontario. The Company
estimates that these changes will increase the deferred income tax liability by approximately $600 when the
related legislation is introduced.
49 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 50
The Company expects to make contributions of $1,663 to its defined benefit plans in the year ending
Estimated Contributions
March 31, 2013.
13 income taxes
Current tax on earnings for the year
Adjustments in respect of prior years
Provision for current income taxes
Change in temporary differences
Impact of change in tax rate
Provision for deferred income taxes
Total provision for income taxes
The Company’s income tax expense consists of the following:
Provision for income taxes at blended statutory
rate of 26.79% (2011 – 28.82%)
Permanent differences and non-deductible items
Future income tax rate changes
Other
$
$
$
5,538
$
$
4,967
$
4,786
2012
4,504
337
4,841
828
(131)
697
2012
307
(131)
395
2012
697
(610)
2011
4,138
(915)
3,223
2,152
7
2,159
5,382
2011
269
7
320
2011
9,879
2,159
(218)
The significant temporary differences giving rise to the deferred income tax liability are comprised of the
following:
Deferred income tax liability
Accelerated
tax
depreciation
and
deductions
on property,
plant, and
equipment
Accelerated
tax
Biological
assets
deductions
on
intangibles
Tax
deductions
on goodwill
Total
April 1, 2010
Provision (recovery) in
net earnings
March 31, 2011
Provision (recovery) in
net earnings
$
6,585
$
2,688
$
2,975
$
2,443
$
14,691
177
6,762
(251)
2,437
(174)
2,801
(42)
353
(217)
170
2,613
186
(78)
14,613
280
March 31, 2012
$
6,720
$
2,790
$
2,584
$
2,799
$
14,893
$
5,538
$
5,382
Deferred income tax asset
The decrease in the blended statutory rate applicable to the Company is primarily a result of an income tax
rate decrease in Canada and in the province of Ontario during the year.
The movement of the deferred income tax account is as follows:
At beginning of year
$
11,820
$
Provision for deferred income taxes in net earnings
Recovery of deferred income taxes in other comprehensive earnings
At end of year
$
11,907
$
11,820
April 1, 2010
Provision (recovery) in
net earnings
Recovery in other
comprehensive income
March 31, 2011
Provision (recovery) in
net earnings
Recovery in other
comprehensive income
Loss carry
forwards
(2,308)
$
Fair value
Post-
change on employment
benefits
derivatives
(1,381)
$
(949)
$
Other
(174)
$
Total
(4,812)
$
2,165
-
(143)
(8)
-
60
-
174
(218)
(889)
(1,425)
77
-
229
(610)
(162)
-
(336)
119
-
2,237
(218)
(2,793)
417
(610)
March 31, 2012
$
(151)
$
(812)
$
(1,806)
$
(217)
$
(2,986)
Changes to statutory income tax rates have been announced in British Columbia and Ontario. The Company
estimates that these changes will increase the deferred income tax liability by approximately $600 when the
related legislation is introduced.
49 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 50
14 Capital stock
Authorized
March 31, 2012
Issued
Shares Amount
March 31, 2011
Issued
Amount
Shares
April 1, 2010
Issued
Amount
Shares
Class A Shares,
non-voting
Class B Shares,
voting
Unlimited 11,293,829
$ 6,626 11,293,829
$ 6,626 11,888,241
$ 6,975
Unlimited
3,004,041
400
3,004,041
400
3,004,041
400
14,297,870
$ 7,026 14,297,870
$ 7,026 14,892,282
$ 7,375
During 2011, the Company repurchased 594,412 Class A Non-Voting Shares through a normal course issuer
bid. The repurchase price was first allocated to capital stock based on the average per share carrying amount
of Class A Shares. The remaining amount was allocated to retained earnings. A summary of the transaction in
Class A Shares is as follows:
Shares outstanding at the
beginning of year
Repurchase
Excess of repurchase price
over average per share issue price
Shares
11,293,829
-
-
11,293,829
2012
Amount
$ 6,626
-
-
$ 6,626
Shares
2011
Amount
11,888,241
(594,412)
$
6,975
(5,249)
-
11,293,829
4,900
6,626
$
All of the issued Class A and Class B Shares are fully paid and have no par value.
Class A Shares are non-voting and are entitled to a dividend in an amount equal to 115% of any dividend
paid or declared on Class B Shares. Class B Shares are voting and convertible into Class A Shares on a
one-for-one basis.
Quarterly dividends of $0.0900 (previously $0.0825) per Class A Share and $0.0785 (previously $0.0720) per
Class B Share were approved by the Board of Directors on June 8, 2011 and are formally declared in each
quarter. Dividend payments are reviewed at least annually by the Board of Directors.
The authorized share capital of the Company also consists of an unlimited number of Preference Shares,
issuable in one or more series, of which 33,315 are designated as Preference Shares, Series A. As at
March 31, 2012 and 2011 and April 1, 2010, there were no Preference Shares issued or outstanding.
Stock purchase plan
The Company’s full-time salaried, certain hourly employees, and directors participate in a Company-sponsored
stock purchase plan. Under the terms of the plan, employees can purchase a certain number of Class A
Shares on an annual basis. Employees are required to pay 67% of an established market price per Class A
Share. Directors can purchase 750 Class A Shares and are required to pay 50% of the cost. The Company
is responsible for the remainder of the cost and, during 2012, expensed $219 (2011 - $215) related to this
program. Officers of the Company also participate in an Equity Incentive Program, where Class A Shares of
the Company are purchased on their behalf from the open market.
The nature of the expenses included in selling and administration and cost of goods sold, excluding
15 Nature of expenses
amortization are as follows:
Raw materials and consumables
Employee compensation and benefits
Advertising, promotion, and distribution
Occupancy
Repairs and maintenance
Other external charges
Other expenses (income) are as follows:
$ 134,213
$
128,495
$ 244,232
$
233,876
2012
53,104
27,652
9,550
5,960
13,753
2012
411
185
200
367
-
-
2011
51,222
26,581
9,214
5,762
12,602
2011
1,171
189
-
(260)
(309)
791
Revaluation of vines (a)
$
$
Ongoing maintenance costs related to Port Moody winery facility (b)
Impairment on intangibles (c)
Change in estimated payroll taxes and benefits (d)
Change in estimated disposal costs to complete the
sale of Granville Island Brewing Company Ltd. and
Mainland Beverage Distribution Ltd. (e)
Gain on sale of vineyard (f)
$
1,163
$
a)
Changes in the fair value less costs to sell of vines included in biological assets are included in
the revaluation of vine biological assets shown above. During fiscal 2011, it became evident that
approximately 98 acres of vines developed by the Company on leased land in Oliver, British Columbia
were damaged. Included in this amount for fiscal 2011 is a loss of $1,062 from this damage.
b)
During fiscal 2006, the Company closed its Port Moody winery facility and transferred production to its
winery operations in Kelowna, British Columbia. The cost of maintaining this idle facility amounted to
c)
The Company recorded a $200 impairment charge for certain personal winemaking product brand names
$185 in 2012 (2011 - $189).
that will be discontinued.
d)
During 2012, the Company recorded an increase in personnel costs for additional estimated payroll taxes
and benefits. These additional costs were calculated based on the amount of gratuities that were earned
by employees during the years ended March 31, 2007 to March 31, 2011. The additional estimated cost
for these periods amounted to $367 and was recorded in other expenses during the year.
e)
During 2011, the Company recorded a $260 reduction in its estimate of costs to complete the disposition
of Granville Island Brewing Company Ltd. and Mainland Beverage Distribution Ltd.
f)
A pre-tax gain in the amount of $309 was recorded related to the sale of a portion of a vineyard on
May 25, 2010. The proceeds from the sale were $833.
51 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 52
14 Capital stock
15 Nature of expenses
The nature of the expenses included in selling and administration and cost of goods sold, excluding
amortization are as follows:
Raw materials and consumables
Employee compensation and benefits
Advertising, promotion, and distribution
Occupancy
Repairs and maintenance
Other external charges
2012
$ 134,213
53,104
27,652
9,550
5,960
13,753
$ 244,232
$
2011
128,495
51,222
26,581
9,214
5,762
12,602
$
233,876
of Class A Shares. The remaining amount was allocated to retained earnings. A summary of the transaction in
Other expenses (income) are as follows:
over average per share issue price
11,293,829
$ 6,626
11,293,829
$
-
4,900
6,626
Mainland Beverage Distribution Ltd. (e)
Gain on sale of vineyard (f)
Revaluation of vines (a)
Ongoing maintenance costs related to Port Moody winery facility (b)
Impairment on intangibles (c)
Change in estimated payroll taxes and benefits (d)
Change in estimated disposal costs to complete the
sale of Granville Island Brewing Company Ltd. and
$
$
2012
411
185
200
367
-
-
$
1,163
$
2011
1,171
189
-
(260)
(309)
791
a)
b)
c)
d)
e)
f)
Changes in the fair value less costs to sell of vines included in biological assets are included in
the revaluation of vine biological assets shown above. During fiscal 2011, it became evident that
approximately 98 acres of vines developed by the Company on leased land in Oliver, British Columbia
were damaged. Included in this amount for fiscal 2011 is a loss of $1,062 from this damage.
During fiscal 2006, the Company closed its Port Moody winery facility and transferred production to its
winery operations in Kelowna, British Columbia. The cost of maintaining this idle facility amounted to
$185 in 2012 (2011 - $189).
The Company recorded a $200 impairment charge for certain personal winemaking product brand names
that will be discontinued.
During 2012, the Company recorded an increase in personnel costs for additional estimated payroll taxes
and benefits. These additional costs were calculated based on the amount of gratuities that were earned
by employees during the years ended March 31, 2007 to March 31, 2011. The additional estimated cost
for these periods amounted to $367 and was recorded in other expenses during the year.
During 2011, the Company recorded a $260 reduction in its estimate of costs to complete the disposition
of Granville Island Brewing Company Ltd. and Mainland Beverage Distribution Ltd.
A pre-tax gain in the amount of $309 was recorded related to the sale of a portion of a vineyard on
May 25, 2010. The proceeds from the sale were $833.
March 31, 2012
March 31, 2011
April 1, 2010
Authorized
Issued
Issued
Shares Amount
Shares
Amount
Shares
Issued
Amount
Class A Shares,
Class B Shares,
non-voting
Unlimited 11,293,829
$ 6,626 11,293,829
$ 6,626 11,888,241
$ 6,975
voting
Unlimited
3,004,041
400
3,004,041
400
3,004,041
400
14,297,870
$ 7,026 14,297,870
$ 7,026 14,892,282
$ 7,375
During 2011, the Company repurchased 594,412 Class A Non-Voting Shares through a normal course issuer
bid. The repurchase price was first allocated to capital stock based on the average per share carrying amount
Class A Shares is as follows:
Shares outstanding at the
beginning of year
Repurchase
Excess of repurchase price
2012
2011
Shares
Amount
Shares
Amount
11,293,829
$ 6,626
11,888,241
(594,412)
$
6,975
(5,249)
-
-
-
-
All of the issued Class A and Class B Shares are fully paid and have no par value.
Class A Shares are non-voting and are entitled to a dividend in an amount equal to 115% of any dividend
paid or declared on Class B Shares. Class B Shares are voting and convertible into Class A Shares on a
one-for-one basis.
Quarterly dividends of $0.0900 (previously $0.0825) per Class A Share and $0.0785 (previously $0.0720) per
Class B Share were approved by the Board of Directors on June 8, 2011 and are formally declared in each
quarter. Dividend payments are reviewed at least annually by the Board of Directors.
The authorized share capital of the Company also consists of an unlimited number of Preference Shares,
issuable in one or more series, of which 33,315 are designated as Preference Shares, Series A. As at
March 31, 2012 and 2011 and April 1, 2010, there were no Preference Shares issued or outstanding.
Stock purchase plan
The Company’s full-time salaried, certain hourly employees, and directors participate in a Company-sponsored
stock purchase plan. Under the terms of the plan, employees can purchase a certain number of Class A
Shares on an annual basis. Employees are required to pay 67% of an established market price per Class A
Share. Directors can purchase 750 Class A Shares and are required to pay 50% of the cost. The Company
is responsible for the remainder of the cost and, during 2012, expensed $219 (2011 - $215) related to this
program. Officers of the Company also participate in an Equity Incentive Program, where Class A Shares of
the Company are purchased on their behalf from the open market.
51 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 52
16 Net earnings per share
Class A
Class B
2012
Total
Net earnings attributed for the year –
basic and diluted
$
10,559
$
2,442
$
13,001
Weighted average number of shares
outstanding – basic and diluted
Net earnings per share – basic and diluted
11,293,829
$
0.93
3,004,041
$
0.81
Class A
Class B
2011
Total
following items:
Net earnings attributed for the year –
basic and diluted
$
9,197
Weighted average number of shares
outstanding – basic and diluted
11,860,556
Net earnings per share – basic and diluted
$
0.78
$
$
2,026
$
11,223
Accounts receivable
3,004,041
0.67
Inventory and current portion of biological assets
Prepaid expenses and other assets
Accounts payable and accrued liabilities
$
2012
(547)
(15,686)
(520)
3,525
$
(13,228)
2011
(488)
(6,018)
1,000
5,220
(286)
$
$
b)
As at March 31, 2012, the Company held $15,000 in U.S. dollar-denominated foreign exchange forward
contracts at rates averaging between $0.99 and $1.03 expiring at various dates to October 2012.
The Company also held €2,500 in Euro-denominated foreign exchange contracts at a rate of $1.31
expiring at various dates until June 2012. Management has not elected to designate these contracts
as hedges and as a result have recorded the change in fair value of $469 in the statement of earnings
(see note 19).
18 Non-cash working capital items
The change in non-cash working capital items related to operations is comprised of the change in the
The dilutive effect of outstanding stock options on net earnings per share is based on the application of
the treasury stock method. Under this method, the Company assumes that the proceeds from the potential
exercise of such stock options are used to purchase Class A Non-Voting Shares. As at March 31, 2012 and
2011, there were no stock options outstanding.
17 Commitments
a)
In certain instances, the Company leases land for the purpose of operating vineyards. The terms of the
land leases are 30 and 32 years, which expire in 2036 and 2029 respectively. Under the terms of one
land lease, the Company has the option to agree in advance to purchase any grapes grown on the
property at market value for five or more years after the termination of the lease. The Company also has
a right of first refusal to purchase the land under both land leases, which gives the Company the option
to buy the land only if the lessor is planning to sell the land. The terms of such a purchase would be
negotiated based on market conditions existing at the time of the purchase.
The Company leases various storage facilities, offices, and retail locations. The remaining terms of these
leases range between one and six years. The Company also leases various equipment and vehicles with
remaining lease terms between one and six years. In many cases, the Company has renewal options for
fair market rental prices at the time of renewal.
Future minimum lease payments as at March 31, 2012 under long-term non-cancellable leases are as
follows:
No later than 1 year
Later than 1 year and no later than 5 years
Later than 5 years
$
5,157
9,829
8,331
$
23,317
In 2012, minimum lease payments of $3,176 (2011 - $3,878) were recognized as expense.
53 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 54
b)
As at March 31, 2012, the Company held $15,000 in U.S. dollar-denominated foreign exchange forward
contracts at rates averaging between $0.99 and $1.03 expiring at various dates to October 2012.
The Company also held €2,500 in Euro-denominated foreign exchange contracts at a rate of $1.31
expiring at various dates until June 2012. Management has not elected to designate these contracts
as hedges and as a result have recorded the change in fair value of $469 in the statement of earnings
(see note 19).
18 Non-cash working capital items
The change in non-cash working capital items related to operations is comprised of the change in the
following items:
Accounts receivable
Inventory and current portion of biological assets
Prepaid expenses and other assets
Accounts payable and accrued liabilities
$
2012
(547)
(15,686)
(520)
3,525
$
(13,228)
2011
(488)
(6,018)
1,000
5,220
(286)
$
$
16 Net earnings per share
2012
Total
2011
Total
Net earnings attributed for the year –
basic and diluted
$
10,559
$
2,442
$
13,001
Class A
Class B
Weighted average number of shares
outstanding – basic and diluted
Net earnings per share – basic and diluted
11,293,829
$
0.93
3,004,041
$
0.81
Class A
Class B
Net earnings attributed for the year –
Weighted average number of shares
basic and diluted
$
9,197
2,026
$
11,223
outstanding – basic and diluted
11,860,556
Net earnings per share – basic and diluted
$
0.78
3,004,041
0.67
$
$
The dilutive effect of outstanding stock options on net earnings per share is based on the application of
the treasury stock method. Under this method, the Company assumes that the proceeds from the potential
exercise of such stock options are used to purchase Class A Non-Voting Shares. As at March 31, 2012 and
2011, there were no stock options outstanding.
17 Commitments
a)
In certain instances, the Company leases land for the purpose of operating vineyards. The terms of the
land leases are 30 and 32 years, which expire in 2036 and 2029 respectively. Under the terms of one
land lease, the Company has the option to agree in advance to purchase any grapes grown on the
property at market value for five or more years after the termination of the lease. The Company also has
a right of first refusal to purchase the land under both land leases, which gives the Company the option
to buy the land only if the lessor is planning to sell the land. The terms of such a purchase would be
negotiated based on market conditions existing at the time of the purchase.
The Company leases various storage facilities, offices, and retail locations. The remaining terms of these
leases range between one and six years. The Company also leases various equipment and vehicles with
remaining lease terms between one and six years. In many cases, the Company has renewal options for
fair market rental prices at the time of renewal.
Future minimum lease payments as at March 31, 2012 under long-term non-cancellable leases are as
follows:
No later than 1 year
Later than 5 years
Later than 1 year and no later than 5 years
$
5,157
9,829
8,331
$
23,317
In 2012, minimum lease payments of $3,176 (2011 - $3,878) were recognized as expense.
53 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 54
The Company’s interest rate swap and foreign exchange contracts are derivatives and are recorded at fair
value. As a result, unrealized gains and losses are included each period through earnings which reflect
changes in fair value.
Fair value
The fair value of accounts receivable, accounts payable and accrued liabilities and dividends payable
approximates their carrying value because of the short-term maturity of these instruments.
The fair value of long-term debt is equivalent to its carrying value because the variable interest rate is
comparable to market rates. The fair value of the interest rate swap used to fix this interest rate is included
in the current and long-term derivative financial instruments in the balance sheet.
The fair value of the derivative financial instruments generally reflects the estimates of the amounts the
Company would receive by way of settlement of favourable contracts or that the Company would pay to
terminate unfavourable contracts at the consolidated balance sheet date. The fair value of the interest rate
swap and foreign exchange contracts are calculated using the quotes obtained from major financial institutions
with adjustment to reflect any changes in the Company’s or the counterparty’s credit risk. Unrealized gains
or losses on derivative financial instruments are recorded in the net unrealized gains on derivative financial
Fair value estimates are made at a specific point in time, using available information about the instrument.
These estimates are subjective in nature and often cannot be determined with precision.
The net unrealized gains on derivative financial instruments are comprised of:
Unrealized gains (losses) on foreign exchange forward contracts
Unrealized gains (losses) on the interest rate swap
2012
469
(212)
257
$
$
2011
(102)
219
117
$
$
19 Financial instruments
Classification of financial instruments
The classification and measurement of the financial assets and liabilities, as well as their carrying amounts
and fair values are as follows:
Assets/liability
Accounts receivable
Bank indebtedness
Accounts payable and
accrued liabilities
Dividends payable
Long-term debt – term loan
Interest rate swap liability
Foreign exchange forward
contracts liability
Assets/liability
Accounts receivable
Bank indebtedness
Accounts payable and
accrued liabilities
Dividends payable
Long-term debt – term loan
Interest rate swap liability
Foreign exchange forward
contracts liability
Assets/liability
Accounts receivable
Bank indebtedness
Accounts payable and
accrued liabilities
Dividends payable
Long-term debt – term loan
Interest rate swap liability
Foreign exchange forward
contracts liability
Category
Measurement
Loans and receivables
Other liabilities
Amortized cost
Amortized cost
Other liabilities
Other liabilities
Other liabilities
Derivatives
Amortized cost
Amortized cost
Amortized cost
Fair value
March 31, 2012
Carrying
amount
$
24,937
57,495
37,118
1,252
46,822
3,138
Fair
value
$
24,937
57,495
37,118
1,252
46,822
3,138
Derivatives
Fair value
77
77
instruments in the consolidated statement of earnings.
Category
Measurement
Loans and receivables
Other liabilities
Amortized cost
Amortized cost
Other liabilities
Other liabilities
Other liabilities
Derivatives
Amortized cost
Amortized cost
Amortized cost
Fair value
March 31, 2011
Carrying
amount
$
23,390
48,758
33,883
1,148
48,053
2,926
Fair
value
$
23,390
48,758
33,883
1,148
48,053
2,926
Derivatives
Fair value
546
546
Category
Measurement
Loans and receivables
Other liabilities
Amortized cost
Amortized cost
Other liabilities
Other liabilities
Other liabilities
Derivatives
Amortized cost
Amortized cost
Amortized cost
Fair value
Carrying
amount
$
22,902
48,877
28,229
1,197
53,791
3,145
April 1, 2010
Fair
value
$
22,902
48,877
28,229
1,197
53,791
3,145
Derivatives
Fair value
444
444
55 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 56
19 Financial instruments
Classification of financial instruments
The Company’s interest rate swap and foreign exchange contracts are derivatives and are recorded at fair
value. As a result, unrealized gains and losses are included each period through earnings which reflect
changes in fair value.
The classification and measurement of the financial assets and liabilities, as well as their carrying amounts
Fair value
and fair values are as follows:
March 31, 2012
The fair value of accounts receivable, accounts payable and accrued liabilities and dividends payable
approximates their carrying value because of the short-term maturity of these instruments.
The fair value of long-term debt is equivalent to its carrying value because the variable interest rate is
comparable to market rates. The fair value of the interest rate swap used to fix this interest rate is included
in the current and long-term derivative financial instruments in the balance sheet.
The fair value of the derivative financial instruments generally reflects the estimates of the amounts the
Company would receive by way of settlement of favourable contracts or that the Company would pay to
terminate unfavourable contracts at the consolidated balance sheet date. The fair value of the interest rate
swap and foreign exchange contracts are calculated using the quotes obtained from major financial institutions
with adjustment to reflect any changes in the Company’s or the counterparty’s credit risk. Unrealized gains
or losses on derivative financial instruments are recorded in the net unrealized gains on derivative financial
instruments in the consolidated statement of earnings.
March 31, 2011
Fair value estimates are made at a specific point in time, using available information about the instrument.
These estimates are subjective in nature and often cannot be determined with precision.
The net unrealized gains on derivative financial instruments are comprised of:
Unrealized gains (losses) on foreign exchange forward contracts
Unrealized gains (losses) on the interest rate swap
2012
469
(212)
257
$
$
2011
(102)
219
117
$
$
Derivatives
Fair value
77
77
Assets/liability
Accounts receivable
Bank indebtedness
Accounts payable and
accrued liabilities
Dividends payable
Long-term debt – term loan
Interest rate swap liability
Foreign exchange forward
contracts liability
Assets/liability
Accounts receivable
Bank indebtedness
Accounts payable and
accrued liabilities
Dividends payable
Long-term debt – term loan
Interest rate swap liability
Foreign exchange forward
contracts liability
Assets/liability
Accounts receivable
Bank indebtedness
Accounts payable and
accrued liabilities
Dividends payable
Long-term debt – term loan
Interest rate swap liability
Foreign exchange forward
contracts liability
Category
Measurement
Loans and receivables
Other liabilities
Amortized cost
Amortized cost
Other liabilities
Other liabilities
Other liabilities
Derivatives
Amortized cost
Amortized cost
Amortized cost
Fair value
Category
Measurement
Loans and receivables
Other liabilities
Amortized cost
Amortized cost
Other liabilities
Other liabilities
Other liabilities
Derivatives
Amortized cost
Amortized cost
Amortized cost
Fair value
Category
Measurement
Loans and receivables
Other liabilities
Amortized cost
Amortized cost
Other liabilities
Other liabilities
Other liabilities
Derivatives
Amortized cost
Amortized cost
Amortized cost
Fair value
Carrying
amount
$
24,937
57,495
37,118
1,252
46,822
3,138
Carrying
amount
$
23,390
48,758
33,883
1,148
48,053
2,926
Carrying
amount
$
22,902
48,877
28,229
1,197
53,791
3,145
Fair
value
$
24,937
57,495
37,118
1,252
46,822
3,138
Fair
value
$
23,390
48,758
33,883
1,148
48,053
2,926
Fair
value
$
22,902
48,877
28,229
1,197
53,791
3,145
Derivatives
Fair value
546
546
April 1, 2010
Derivatives
Fair value
444
444
55 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 56
The fair value measurements of the Company’s financial instruments are classified in the hierarchy below according
to the significance of the inputs used in making the fair value measurements.
Objectives and policy relating to financial risk management
Interest rate risk
Quoted prices
in active
markets for
identical assets
(Level 1)
$
Significant
observable
inputs other
than quoted
prices
(Level 2)
$
Liability
Interest rate swap liability
Foreign exchange forward contracts liability
-
-
3,138
77
Liability
Interest rate swap liability
Foreign exchange forward contracts liability
Quoted prices
in active
markets for
identical assets
(Level 1)
$
Significant
observable
inputs other
than quoted
prices
(Level 2)
$
-
-
2,926
546
Quoted prices
in active
markets for
identical assets
(Level 1)
$
Significant
observable
inputs other
than quoted
prices
(Level 2)
$
March 31, 2012
Significant
unobservable
inputs
(Level 3)
$
-
-
March 31, 2011
Significant
unobservable
inputs
(Level 3)
$
-
-
April 1, 2010
Significant
unobservable
inputs
(Level 3)
$
Liability
Interest rate swap liability
Foreign exchange forward contracts liability
-
-
3,145
444
-
-
The Company is exposed to interest rate risk as a result of cash balances, floating rate debt, and an interest
rate swap. Of these risks, the Company’s principal exposure is that increases in the floating interest rates on its
debt, if unmitigated, could lead to decreases in cash flow and earnings. The Company’s objective in managing
interest rate risk is to achieve a balance between minimizing borrowing costs over the long-term, ensuring that
it meets borrowing covenants, and ensuring that it meets other expectations and requirements of investors.
To meet these objectives, the Company’s policy is to effectively fix the rates on long-term debt to match the
duration of investments in long-lived assets and to use floating rate funding for short-term borrowing.
The Company has effectively fixed its interest rate on long-term debt until August 2015 by entering into an
interest rate swap. The interest rate swap is measured at fair value because the Company has elected not to
use hedge accounting. An unrealized loss of $212 (2011 - $219 gain) was recognized on the interest rate swap,
which is classified as net unrealized gains on derivative financial instruments in the statements of earnings.
As at March 31, 2012, there is one interest rate swap outstanding with a notional amount of $47,333 with
a fixed rate of 3.98%. The fair value of the interest rate swap at March 31, 2012 was $3,138.
The Company’s short-term borrowings are funded using a floating interest rate and as such are sensitive to
interest rate movements. As at March 31, 2012, with other variables unchanged, a 1% change in interest rates
would impact the Company’s net earnings by approximately $420 (2011 - $354), exclusive of the mark-to-
market adjustments on the interest rate swap.
Credit risk
Credit risk arises from cash and cash equivalents, derivative financial instruments, and accounts receivable.
The Company places its cash and cash equivalents with major Canadian financial institutions of high
creditworthiness. Counterparties to derivative contracts are also major Canadian financial institutions of high
creditworthiness.
Credit risk for trade receivables is monitored through established credit monitoring activities. Over 55%
of the Company’s accounts receivable balance relates to amounts owing from Canadian provincial liquor
boards. Excluding accounts receivable from Canadian provincial liquor boards, the Company does not have a
significant concentration of credit risk with any single counterparty or group of counterparties. Amounts owing
from Canadian provincial liquor boards represents $13,948 of the $24,937 in total accounts receivables for
which no allowance has been provided. Of the remaining non-provincial liquor board balances, $771 (2011 -
$353) were over thirty days past due as of March 31, 2012. An allowance for doubtful accounts of $269 (2011
- $192) has been provided against these accounts receivable amounts, which the Company has determined to
represent a reasonable estimate of amounts that may be uncollectible.
Sales to the Liquor Control Board of Ontario were $45,389 (2011 - $42,576) during the year ended March 31,
2012. Sales to the British Columbia Liquor Distribution Branch were $30,125 (2011 - $29,893) during the year.
57 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 58
The fair value measurements of the Company’s financial instruments are classified in the hierarchy below according
Objectives and policy relating to financial risk management
to the significance of the inputs used in making the fair value measurements.
Interest rate risk
Quoted prices
in active
markets for
identical assets
(Level 1)
Quoted prices
in active
markets for
identical assets
(Level 1)
Quoted prices
in active
markets for
identical assets
(Level 1)
$
-
-
$
-
-
$
-
-
than quoted
unobservable
than quoted
unobservable
Significant
observable
inputs other
prices
(Level 2)
$
3,138
77
Significant
observable
inputs other
prices
(Level 2)
$
2,926
546
Significant
observable
inputs other
prices
(Level 2)
$
3,145
444
March 31, 2012
Significant
inputs
(Level 3)
March 31, 2011
Significant
inputs
(Level 3)
April 1, 2010
Significant
inputs
(Level 3)
$
-
-
$
-
-
$
-
-
than quoted
unobservable
Liability
Interest rate swap liability
Foreign exchange forward contracts liability
Liability
Interest rate swap liability
Foreign exchange forward contracts liability
Liability
Interest rate swap liability
Foreign exchange forward contracts liability
The Company is exposed to interest rate risk as a result of cash balances, floating rate debt, and an interest
rate swap. Of these risks, the Company’s principal exposure is that increases in the floating interest rates on its
debt, if unmitigated, could lead to decreases in cash flow and earnings. The Company’s objective in managing
interest rate risk is to achieve a balance between minimizing borrowing costs over the long-term, ensuring that
it meets borrowing covenants, and ensuring that it meets other expectations and requirements of investors.
To meet these objectives, the Company’s policy is to effectively fix the rates on long-term debt to match the
duration of investments in long-lived assets and to use floating rate funding for short-term borrowing.
The Company has effectively fixed its interest rate on long-term debt until August 2015 by entering into an
interest rate swap. The interest rate swap is measured at fair value because the Company has elected not to
use hedge accounting. An unrealized loss of $212 (2011 - $219 gain) was recognized on the interest rate swap,
which is classified as net unrealized gains on derivative financial instruments in the statements of earnings.
As at March 31, 2012, there is one interest rate swap outstanding with a notional amount of $47,333 with
a fixed rate of 3.98%. The fair value of the interest rate swap at March 31, 2012 was $3,138.
The Company’s short-term borrowings are funded using a floating interest rate and as such are sensitive to
interest rate movements. As at March 31, 2012, with other variables unchanged, a 1% change in interest rates
would impact the Company’s net earnings by approximately $420 (2011 - $354), exclusive of the mark-to-
market adjustments on the interest rate swap.
Credit risk
Credit risk arises from cash and cash equivalents, derivative financial instruments, and accounts receivable.
The Company places its cash and cash equivalents with major Canadian financial institutions of high
creditworthiness. Counterparties to derivative contracts are also major Canadian financial institutions of high
creditworthiness.
Credit risk for trade receivables is monitored through established credit monitoring activities. Over 55%
of the Company’s accounts receivable balance relates to amounts owing from Canadian provincial liquor
boards. Excluding accounts receivable from Canadian provincial liquor boards, the Company does not have a
significant concentration of credit risk with any single counterparty or group of counterparties. Amounts owing
from Canadian provincial liquor boards represents $13,948 of the $24,937 in total accounts receivables for
which no allowance has been provided. Of the remaining non-provincial liquor board balances, $771 (2011 -
$353) were over thirty days past due as of March 31, 2012. An allowance for doubtful accounts of $269 (2011
- $192) has been provided against these accounts receivable amounts, which the Company has determined to
represent a reasonable estimate of amounts that may be uncollectible.
Sales to the Liquor Control Board of Ontario were $45,389 (2011 - $42,576) during the year ended March 31,
2012. Sales to the British Columbia Liquor Distribution Branch were $30,125 (2011 - $29,893) during the year.
57 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 58
Long-term debt
$ 47,597
$
$
10,732
$
31,401
$
Operating leases and royalties
23,317
Plant and equipment purchases
Pension obligations
Long-term grape purchase
contracts
Total
5,411
4,093
315,340
395,758
7,626
Interest rate swap
Foreign exchange forward
< 1
year
5,366
5,157
5,411
560
24,711
41,205
2,658
2 – 3
years
6,816
-
953
49,774
68,275
4,359
4 – 5
years
3,013
-
811
49,525
84,750
609
> 5
year
98
8,331
-
1,769
191,330
201,528
-
-
contracts
18,409
18,409
-
-
Total contractual obligations $ 421,793
$
62,272
$
72,634
$
85,359
$ 201,528
The Company’s obligations under its interest rate swap and foreign exchange forward contracts are stated
above on a gross basis rather than net of the corresponding contractual benefits.
Foreign exchange risk
Certain of the Company’s purchases are denominated in U.S. dollars or Euros. Any increases or decreases to
the foreign exchange rates could increase or decrease the Company’s earnings. To mitigate the exposure to
foreign exchange risk, the Company has entered into forward foreign currency contracts.
The Company’s foreign exchange risk arises on the purchase of bulk wine and concentrate, which are
made in U.S. dollars and Euros. The Company’s strategy is to hedge approximately 50% - 80% of its
annual foreign exchange requirements prior to the beginning of each fiscal quarter. As at March 31, 2012,
the Company has forward foreign currency contracts to buy U.S. $15,000 at rates ranging between $0.99
and $1.03. The Company also held €2,500 in Euro-denominated foreign exchange contracts at a rate of $1.31.
These contracts mature at various dates to October 2012. Including the impact of these contracts, a one
percent increase or decrease to the exchange rate of the U.S. dollar or the Euro would impact the Company’s
net earnings by approximately $123 (2011 - $62) or $93 (2011 - $95), respectively. The Company has elected
not to use hedge accounting and as a result, has recognized $469 of unrealized foreign exchange gains (2011
– unrealized losses $102) in the consolidated statement of earnings as a component of net unrealized gains on
derivative financial instruments and has recorded the fair value of $77 in current portion of derivative financial
instruments in the consolidated balance sheet.
An analysis of accounts receivable is as follows:
March 31,
2012
$
13,948
March 31,
2011
$
13,653
$
Liquor boards
Non-liquor boards
Current
Past due 0 – 30 days, due on
delivery accounts
Past due 0 – 30 days
Past due 31 – 60 days
Past due > 60 days
Allowance for doubtful accounts
7,867
427
1,924
461
579
(269)
24,937
$
The change in the allowance for doubtful accounts was as follows:
Balance – Beginning of year
Provision for current year
Bad debt
Balance – End of year
Liquidity risk
7,036
389
1,959
319
226
(192)
23,390
2012
192
147
(70)
$
$
$
269
$
$
$
April 1,
2010
12,629
7,255
593
1,478
482
753
(288)
22,902
2011
288
131
(227)
192
The Company incurs obligations to deliver cash or other financial assets on future dates. Liquidity risk
inherently arises from these obligations, which include requirements to repay debt, purchase grape inventory,
and make operating lease payments.
The Company manages liquidity risk by maintaining adequate cash and cash equivalent balances and by
appropriately utilizing its line of credit. Company management continuously monitors and reviews both actual
and forecasted cash flows and matches the maturity profile of financial assets and financial liabilities. Accounts
payable are generally due within 30 days.
The following table outlines the Company’s contractual undiscounted obligations. The Company analyzes
contractual obligations for financial liabilities in conjunction with other commitments in managing liquidity risk.
Contractual obligations include long-term debt, the expected payments under a swap agreement that fixes
the Company’s interest rate on long-term debt, operating leases, and commitments on short-term forward
foreign exchange contracts used to mitigate the currency risk on U.S. dollar purchases as at March 31, 2012:
59 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 60
315,340
395,758
7,626
18,409
18,409
-
-
-
contracts
Interest rate swap
Foreign exchange forward
contracts
< 1
year
5,366
5,157
5,411
560
24,711
41,205
2,658
$
2 – 3
years
10,732
6,816
-
953
49,774
68,275
4,359
$
4 – 5
years
31,401
3,013
-
811
49,525
84,750
609
$
> 5
year
98
8,331
-
1,769
191,330
201,528
-
An analysis of accounts receivable is as follows:
March 31,
March 31,
2012
2011
$
13,948
$
13,653
$
Total
Long-term debt
Operating leases and royalties
Plant and equipment purchases
Pension obligations
Long-term grape purchase
$ 47,597
23,317
5,411
4,093
$
Liquor boards
Non-liquor boards
Current
Past due 0 – 30 days, due on
delivery accounts
Past due 0 – 30 days
Past due 31 – 60 days
Past due > 60 days
Allowance for doubtful accounts
Balance – Beginning of year
Provision for current year
Bad debt
Balance – End of year
Liquidity risk
The change in the allowance for doubtful accounts was as follows:
7,867
427
1,924
461
579
(269)
April 1,
2010
12,629
7,255
593
1,478
482
753
(288)
7,036
389
1,959
319
226
(192)
2012
192
147
(70)
269
$
$
2011
288
131
(227)
192
$
$
The Company incurs obligations to deliver cash or other financial assets on future dates. Liquidity risk
inherently arises from these obligations, which include requirements to repay debt, purchase grape inventory,
and make operating lease payments.
The Company manages liquidity risk by maintaining adequate cash and cash equivalent balances and by
appropriately utilizing its line of credit. Company management continuously monitors and reviews both actual
and forecasted cash flows and matches the maturity profile of financial assets and financial liabilities. Accounts
payable are generally due within 30 days.
The following table outlines the Company’s contractual undiscounted obligations. The Company analyzes
contractual obligations for financial liabilities in conjunction with other commitments in managing liquidity risk.
Contractual obligations include long-term debt, the expected payments under a swap agreement that fixes
the Company’s interest rate on long-term debt, operating leases, and commitments on short-term forward
foreign exchange contracts used to mitigate the currency risk on U.S. dollar purchases as at March 31, 2012:
$
24,937
$
23,390
$
22,902
Total contractual obligations $ 421,793
$
62,272
$
72,634
$
85,359
$ 201,528
The Company’s obligations under its interest rate swap and foreign exchange forward contracts are stated
above on a gross basis rather than net of the corresponding contractual benefits.
Foreign exchange risk
Certain of the Company’s purchases are denominated in U.S. dollars or Euros. Any increases or decreases to
the foreign exchange rates could increase or decrease the Company’s earnings. To mitigate the exposure to
foreign exchange risk, the Company has entered into forward foreign currency contracts.
The Company’s foreign exchange risk arises on the purchase of bulk wine and concentrate, which are
made in U.S. dollars and Euros. The Company’s strategy is to hedge approximately 50% - 80% of its
annual foreign exchange requirements prior to the beginning of each fiscal quarter. As at March 31, 2012,
the Company has forward foreign currency contracts to buy U.S. $15,000 at rates ranging between $0.99
and $1.03. The Company also held €2,500 in Euro-denominated foreign exchange contracts at a rate of $1.31.
These contracts mature at various dates to October 2012. Including the impact of these contracts, a one
percent increase or decrease to the exchange rate of the U.S. dollar or the Euro would impact the Company’s
net earnings by approximately $123 (2011 - $62) or $93 (2011 - $95), respectively. The Company has elected
not to use hedge accounting and as a result, has recognized $469 of unrealized foreign exchange gains (2011
– unrealized losses $102) in the consolidated statement of earnings as a component of net unrealized gains on
derivative financial instruments and has recorded the fair value of $77 in current portion of derivative financial
instruments in the consolidated balance sheet.
59 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 60
20 Capital disclosures
22 Segmented information
The Company’s objective when managing capital is to safeguard the Company’s ability as a going concern,
to provide an adequate return to shareholders and to meet external capital requirements on debt and
credit facilities.
The Company’s capital consists of cash, bank indebtedness, long-term debt, and shareholders’ equity.
The primary uses of capital are to make increases to non-cash working capital, fund maintenance and
growth related capital expenditures, pay dividends, and finance acquisitions. In order to meet the
Company’s objectives in managing capital, the Company prepares annual budgets of cash, earnings,
and capital expenditures that are updated during the year as necessary. The annual budget is approved
by the Board of Directors.
As part of the existing debt agreement, the Company is subject to externally imposed financial covenants
which consist of the following:
•
•
•
Funded debt to a rolling twelve-month EBITDA, which is defined as consolidated earnings before
interest, amortization, and taxes excluding unusual and non-recurring items that are agreed to by the
Company and the lender
Working capital ratio
Fixed charge coverage ratio
Unfunded capital expenditures are limited to $10,000 on an annual basis. Any unspent portion may be carried
over to the next fiscal year.
Compliance with these covenants and the capital expenditure limit is monitored by management on a
quarterly basis. During the year ended March 31, 2012, and as at March 31, 2012, the Company has remained
in compliance with all external lending covenants.
21 Related parties and management compensation
The Company is controlled by Jalger Limited, which owns 66.6% of the Company’s Class B Voting Shares.
The ultimate controlling party of the Company is Dr. Joseph A. Peller.
Compensation of directors and executives
The compensation expense recorded for directors and members of the Executive Management Team of the
Company is shown below:
Compensation and benefits
Payments to a share purchase plan
2012
4,274
218
4,492
$
$
2011
4,290
235
4,525
$
$
The compensation and benefits expense consists of amounts that will primarily be settled within twelve months.
During the year, export sales were $11,222 (2011 - $10,040), primarily in the United States. The remainder of
sales occurred in Canada. All of the Company’s assets are located in Canada.
23 Transition to i FRS
Transition Date”).
The Company has adopted IFRS for the first time in accordance with IFRS 1 – First-time adoption of IFRS.
The first date at which the Company applied IFRS was April 1, 2010 (“its Transition Date” or “the Company’s
IFRS 1 provides certain exemptions and exceptions from the general requirement to retrospectively apply
IFRS. The Company has elected to use the following applicable IFRS 1 exemptions at its Transition Date:
Business combinations – The Company has elected not to apply IFRS 3 retrospectively to business
combinations prior to its Transition Date.
Share-based payment transactions – The Company has elected to forego the retrospective application of
IFRS 2 to its share-based payment transactions that occurred before certain dates. As a result, the Company
has maintained its previous accounting policies for equity instruments that vested before the Company’s
Transition Date or that were granted on or before November 7, 2002. The Company also maintained its
previous accounting policies for liabilities arising from share-based payment transactions that were settled
before its Transition Date.
Leases – The Company has elected to apply the transitional provisions in IFRIC 4 – Determining whether an
arrangement contains a lease, which allows the Company to consider whether an arrangement existing at its
Transition Date contained a lease based on the circumstances existing at that date.
Employee benefits – The Company has elected to recognize all cumulative actuarial gains and losses in
opening retained earnings at its Transition Date for all of its defined benefit pensions and other post-
employment benefit plans.
Borrowing costs – The Company has elected to apply IAS 23 – Borrowing costs effective the Company’s
Transition Date. Prior to transition, the Company had a policy of capitalizing interest on inventory taking a
substantial period of time to become ready to sell. As a result of this election, the Company will be required
to capitalize certain borrowing costs on all qualifying assets beginning on its Transition Date.
Cumulative translation differences – The Company has elected to deem cumulative translation differences to
be zero at its Transition Date. Also, the Company will only include translation differences that arose after its
Transition Date in the gain or loss on a disposal of a foreign operation occurring after its Transition Date.
In the reconciliations below, Canadian GAAP information refers to Canadian GAAP prior to the Company’s
transition to IFRS and is not prepared in accordance with IFRS. A summary of how the transition from
Canadian GAAP to IFRS has impacted the Company’s balance sheets, statements of earnings, statements of
comprehensive income, and statements of cash flows is included below.
Certain comparative figures previously reported under Canadian GAAP have been reclassified to conform with
the presentation under IFRS.
61 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 62
The Company’s objective when managing capital is to safeguard the Company’s ability as a going concern,
to provide an adequate return to shareholders and to meet external capital requirements on debt and
During the year, export sales were $11,222 (2011 - $10,040), primarily in the United States. The remainder of
sales occurred in Canada. All of the Company’s assets are located in Canada.
22 Segmented information
20 Capital disclosures
credit facilities.
The Company’s capital consists of cash, bank indebtedness, long-term debt, and shareholders’ equity.
The primary uses of capital are to make increases to non-cash working capital, fund maintenance and
growth related capital expenditures, pay dividends, and finance acquisitions. In order to meet the
Company’s objectives in managing capital, the Company prepares annual budgets of cash, earnings,
and capital expenditures that are updated during the year as necessary. The annual budget is approved
As part of the existing debt agreement, the Company is subject to externally imposed financial covenants
•
Funded debt to a rolling twelve-month EBITDA, which is defined as consolidated earnings before
interest, amortization, and taxes excluding unusual and non-recurring items that are agreed to by the
by the Board of Directors.
which consist of the following:
Company and the lender
Working capital ratio
Fixed charge coverage ratio
•
•
over to the next fiscal year.
Unfunded capital expenditures are limited to $10,000 on an annual basis. Any unspent portion may be carried
Compliance with these covenants and the capital expenditure limit is monitored by management on a
quarterly basis. During the year ended March 31, 2012, and as at March 31, 2012, the Company has remained
in compliance with all external lending covenants.
21 Related parties and management compensation
The Company is controlled by Jalger Limited, which owns 66.6% of the Company’s Class B Voting Shares.
The ultimate controlling party of the Company is Dr. Joseph A. Peller.
The compensation expense recorded for directors and members of the Executive Management Team of the
Compensation of directors and executives
Company is shown below:
Compensation and benefits
Payments to a share purchase plan
2012
4,274
218
4,492
$
$
2011
4,290
235
4,525
$
$
The compensation and benefits expense consists of amounts that will primarily be settled within twelve months.
23 Transition to i FRS
The Company has adopted IFRS for the first time in accordance with IFRS 1 – First-time adoption of IFRS.
The first date at which the Company applied IFRS was April 1, 2010 (“its Transition Date” or “the Company’s
Transition Date”).
IFRS 1 provides certain exemptions and exceptions from the general requirement to retrospectively apply
IFRS. The Company has elected to use the following applicable IFRS 1 exemptions at its Transition Date:
Business combinations – The Company has elected not to apply IFRS 3 retrospectively to business
combinations prior to its Transition Date.
Share-based payment transactions – The Company has elected to forego the retrospective application of
IFRS 2 to its share-based payment transactions that occurred before certain dates. As a result, the Company
has maintained its previous accounting policies for equity instruments that vested before the Company’s
Transition Date or that were granted on or before November 7, 2002. The Company also maintained its
previous accounting policies for liabilities arising from share-based payment transactions that were settled
before its Transition Date.
Leases – The Company has elected to apply the transitional provisions in IFRIC 4 – Determining whether an
arrangement contains a lease, which allows the Company to consider whether an arrangement existing at its
Transition Date contained a lease based on the circumstances existing at that date.
Employee benefits – The Company has elected to recognize all cumulative actuarial gains and losses in
opening retained earnings at its Transition Date for all of its defined benefit pensions and other post-
employment benefit plans.
Borrowing costs – The Company has elected to apply IAS 23 – Borrowing costs effective the Company’s
Transition Date. Prior to transition, the Company had a policy of capitalizing interest on inventory taking a
substantial period of time to become ready to sell. As a result of this election, the Company will be required
to capitalize certain borrowing costs on all qualifying assets beginning on its Transition Date.
Cumulative translation differences – The Company has elected to deem cumulative translation differences to
be zero at its Transition Date. Also, the Company will only include translation differences that arose after its
Transition Date in the gain or loss on a disposal of a foreign operation occurring after its Transition Date.
In the reconciliations below, Canadian GAAP information refers to Canadian GAAP prior to the Company’s
transition to IFRS and is not prepared in accordance with IFRS. A summary of how the transition from
Canadian GAAP to IFRS has impacted the Company’s balance sheets, statements of earnings, statements of
comprehensive income, and statements of cash flows is included below.
Certain comparative figures previously reported under Canadian GAAP have been reclassified to conform with
the presentation under IFRS.
61 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 62
Reconciliations of shareholders’ equity
Reconciliations of balance sheets
Shareholders’ equity as reported under Canadian GAAP
Increase (decrease) as a result of an IFRS adjustment
Change in measurement of internally supplied grapes (a, b)
Change in measurement of vines (b, c)
Goodwill – recognition of contingent consideration (d)
Post-employment benefits – recognition of
post-employment obligation (e)
Post-employment benefits – elected to record
actuarial gains and losses immediately (e)
Deferred income taxes on the above items (f)
March 31,
2011
$ 114,667
$
(634)
2,540
(600)
(781)
(981)
86
$
$
April 1,
2010
113,665
(260)
1,800
(600)
(717)
(167)
(41)
Shareholders’ equity as reported under IFRS
$ 114,297
$
113,680
Reconciliation of net comprehensive income
Net comprehensive income as reported under Canadian GAAP
Increase (decrease) in net earnings as a result of an
IFRS adjustment
Year ended
March 31,
2011
$
10,989
Cost of goods sold – fair value adjustments to grape inventory (a, b)
Cost of goods sold – increase in post-employment pension and benefit expenses (e)
Selling and administration – increase in post-employment pension and benefit expenses (e)
Amortization – vines are biological assets and are not amortized under IFRS (b, c)
Other expenses – fair value adjustments to vines (b, c)
Deferred income tax impact of the above (f)
$
Increase (decrease) in other comprehensive income as a result of an IFRS adjustment
Post-employment benefits – actuarial gains and losses (e)
Deferred income tax impact (f)
(374)
(26)
(15)
610
130
(91)
234
(837)
218
(619)
Net comprehensive income as reported under IFRS
$
10,604
Assets
Current assets
Accounts receivable
Inventory (a)
Current portion of biological assets (a, b)
Prepaid expenses and other assets
Property, plant, and equipment (b, c)
Biological assets (b, c)
Intangibles and other assets
Goodwill (d)
Liabilities
Current liabilities
Bank indebtedness
Accounts payable and accrued liabilities (d)
Dividends payable
Income taxes payable
Current portion of derivative
financial instruments
Current portion of long-term debt
Long-term debt
Long-term derivative financial instruments
Post-employment benefits (e)
Deferred income taxes (f)
Shareholders’ equity
Capital stock
Retained earnings (g)
23,390
96,085
-
818
120,293
94,154
-
14,170
38,073
48,758
33,883
1,148
1,000
1,894
5,333
92,016
42,720
1,578
3,803
11,906
152,023
7,026
107,641
114,667
Canadian
GAAP
Adjustment
IFRS
March 31, 2011
$
$
$
$
266,690
$
$
$
$
$
(1,393)
759
(634)
(9,410)
11,950
(600)
1,306
-
-
-
-
-
-
-
-
-
-
-
-
1,762
(86)
1,676
-
(370)
(370)
23,390
94,692
759
818
119,659
84,744
11,950
14,170
37,473
267,996
48,758
33,883
1,148
1,000
1,894
5,333
92,016
42,720
1,578
5,565
11,820
153,699
7,026
107,271
114,297
267,996
$
266,690
$
1,306
$
63 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 64
Reconciliations of shareholders’ equity
Reconciliations of balance sheets
Shareholders’ equity as reported under Canadian GAAP
Increase (decrease) as a result of an IFRS adjustment
Change in measurement of internally supplied grapes (a, b)
$
Change in measurement of vines (b, c)
Goodwill – recognition of contingent consideration (d)
Post-employment benefits – recognition of
post-employment obligation (e)
Post-employment benefits – elected to record
actuarial gains and losses immediately (e)
Deferred income taxes on the above items (f)
Shareholders’ equity as reported under IFRS
Reconciliation of net comprehensive income
March 31,
2011
$ 114,667
(634)
2,540
(600)
(781)
(981)
86
$ 114,297
$
113,680
Net comprehensive income as reported under Canadian GAAP
Increase (decrease) in net earnings as a result of an
IFRS adjustment
Cost of goods sold – fair value adjustments to grape inventory (a, b)
$
Cost of goods sold – increase in post-employment pension and benefit expenses (e)
Selling and administration – increase in post-employment pension and benefit expenses (e)
Amortization – vines are biological assets and are not amortized under IFRS (b, c)
Other expenses – fair value adjustments to vines (b, c)
Deferred income tax impact of the above (f)
Increase (decrease) in other comprehensive income as a result of an IFRS adjustment
Post-employment benefits – actuarial gains and losses (e)
Deferred income tax impact (f)
Net comprehensive income as reported under IFRS
$
10,604
$
$
April 1,
2010
113,665
(260)
1,800
(600)
(717)
(167)
(41)
Year ended
March 31,
2011
$
10,989
(374)
(26)
(15)
610
130
(91)
234
(837)
218
(619)
Assets
Current assets
Accounts receivable
Inventory (a)
Current portion of biological assets (a, b)
Prepaid expenses and other assets
$
Property, plant, and equipment (b, c)
Biological assets (b, c)
Intangibles and other assets
Goodwill (d)
Canadian
GAAP
23,390
96,085
-
818
120,293
94,154
-
14,170
38,073
$
266,690
Liabilities
Current liabilities
Bank indebtedness
Accounts payable and accrued liabilities (d)
Dividends payable
Income taxes payable
Current portion of derivative
financial instruments
Current portion of long-term debt
$
Long-term debt
Long-term derivative financial instruments
Post-employment benefits (e)
Deferred income taxes (f)
Shareholders’ equity
Capital stock
Retained earnings (g)
48,758
33,883
1,148
1,000
1,894
5,333
92,016
42,720
1,578
3,803
11,906
152,023
7,026
107,641
114,667
March 31, 2011
Adjustment
IFRS
$
$
$
$
$
$
-
(1,393)
759
-
(634)
(9,410)
11,950
-
(600)
1,306
-
-
-
-
-
-
-
-
-
1,762
(86)
1,676
-
(370)
(370)
23,390
94,692
759
818
119,659
84,744
11,950
14,170
37,473
267,996
48,758
33,883
1,148
1,000
1,894
5,333
92,016
42,720
1,578
5,565
11,820
153,699
7,026
107,271
114,297
267,996
$
266,690
$
1,306
$
63 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 64
Assets
Current assets
Accounts receivable
Inventory (a)
Current portion of biological assets (a, b)
Prepaid expenses and other assets
Income taxes recoverable
$
Property, plant, and equipment (b, c)
Biological assets (b, c)
Intangibles and other assets
Goodwill (d)
Canadian
GAAP
22,902
89,693
-
1,818
1,327
115,740
95,728
-
14,775
37,473
$
263,716
Liabilities
Current liabilities
Bank indebtedness
Accounts payable and accrued liabilities (d)
Dividends payable
Current portion of derivative financial
instruments
Current portion of long-term debt
$
Long-term debt
Long-term derivative financial instruments
Post-employment benefits (e)
Other long-term (d)
Deferred tax liabilities (f)
Shareholders’ equity
Capital stock
Retained earnings (g)
48,877
28,229
1,197
1,922
6,158
86,383
47,633
1,667
4,530
-
9,838
150,051
7,375
106,290
113,665
$
263,716
$
April 1, 2010
Reconciliation of statements of earnings and
statements of comprehensive income
Adjustment
IFRS
Year ended March 31, 2011
$
$
$
-
(875)
615
-
-
(260)
(10,595)
12,395
-
-
1,540
-
-
-
-
-
-
-
-
884
600
41
1,525
-
15
15
1,540
$
$
$
$
22,902
88,818
615
1,818
1,327
115,480
85,133
12,395
14,775
37,473
265,256
48,877
28,229
1,197
1,922
6,158
86,383
47,633
1,667
5,414
600
9,879
151,576
7,375
106,305
113,680
265,256
Canadian
GAAP
265,420
161,758
$
Adjustment
$
$
Sales
Cost of goods sold (a, e)
Amortization of plant and equipment
used in production (b, c)
Gross profit
Selling and administration (e)
Amortization of equipment and intangibles
used in selling and administration
Interest
Operating earnings
Net unrealized gains on derivative
financial instruments
Other expenses (b, c)
Earnings before income taxes
Provision for income taxes
Current
Deferred (f)
5,277
98,385
71,703
2,925
6,673
17,084
(117)
921
16,280
3,223
2,068
5,291
-
400
(610)
210
15
-
-
-
195
(130)
325
-
91
91
234
(837)
218
(619)
(385)
IFRS
265,420
162,158
4,667
98,595
71,718
2,925
6,673
17,279
(117)
791
16,605
3,223
2,159
5,382
11,223
(837)
218
(619)
10,604
Net earnings for the period
$
10,989
Other comprehensive income (loss)
Net actuarial losses on post-employment
benefits) (e)
Deferred income taxes (f)
$
-
-
-
Net comprehensive income
$
10,989
$
$
$
$
$
$
a)
Grapes sourced from vineyards controlled by the Company are measured at fair value less costs to sell
at the point of harvest under IFRS. These grapes are transferred to inventory from biological assets when
they are harvested. Under Canadian GAAP, such grape inventory was recorded at the lower of cost and
net realizable value and was included in inventory at an earlier date, that is when costs to produce the
grapes began.
Resulting increase (decrease) in
Inventory
Current portion of biological assets
Net decrease in shareholders’ equity
Resulting increase in cost of goods sold
March 31,
2011
$
$
$
(1,393)
759
(634)
374
April 1,
2010
(875)
615
(260)
$
$
65 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 66
Assets
Current assets
Accounts receivable
Inventory (a)
Current portion of biological assets (a, b)
Prepaid expenses and other assets
Income taxes recoverable
Property, plant, and equipment (b, c)
Biological assets (b, c)
Intangibles and other assets
Goodwill (d)
Liabilities
Current liabilities
Bank indebtedness
Accounts payable and accrued liabilities (d)
Dividends payable
Current portion of derivative financial
instruments
Current portion of long-term debt
Long-term debt
Long-term derivative financial instruments
Post-employment benefits (e)
Other long-term (d)
Deferred tax liabilities (f)
Shareholders’ equity
Capital stock
Retained earnings (g)
22,902
89,693
-
1,818
1,327
115,740
95,728
-
14,775
37,473
48,877
28,229
1,197
1,922
6,158
86,383
47,633
1,667
4,530
-
9,838
150,051
7,375
106,290
113,665
Canadian
GAAP
Adjustment
IFRS
April 1, 2010
$
$
$
$
263,716
1,540
$
$
$
$
$
(875)
615
(260)
(10,595)
12,395
-
-
-
-
-
-
-
-
-
-
-
-
-
884
600
41
1,525
-
15
15
1,540
22,902
88,818
615
1,818
1,327
115,480
85,133
12,395
14,775
37,473
265,256
48,877
28,229
1,197
1,922
6,158
86,383
47,633
1,667
5,414
600
9,879
151,576
7,375
106,305
113,680
265,256
$
263,716
$
$
Reconciliation of statements of earnings and
statements of comprehensive income
Canadian
GAAP
265,420
161,758
$
Year ended March 31, 2011
Adjustment
-
$
400
$
IFRS
265,420
162,158
Sales
Cost of goods sold (a, e)
Amortization of plant and equipment
used in production (b, c)
Gross profit
Selling and administration (e)
Amortization of equipment and intangibles
used in selling and administration
Interest
Operating earnings
Net unrealized gains on derivative
financial instruments
Other expenses (b, c)
Earnings before income taxes
Provision for income taxes
Current
Deferred (f)
5,277
98,385
71,703
2,925
6,673
17,084
(117)
921
16,280
3,223
2,068
5,291
Net earnings for the period
$
10,989
Other comprehensive income (loss)
Net actuarial losses on post-employment
benefits) (e)
Deferred income taxes (f)
$
-
-
-
Net comprehensive income
$
10,989
$
$
$
(610)
210
15
-
-
195
-
(130)
325
-
91
91
234
(837)
218
(619)
(385)
$
$
$
4,667
98,595
71,718
2,925
6,673
17,279
(117)
791
16,605
3,223
2,159
5,382
11,223
(837)
218
(619)
10,604
a)
Grapes sourced from vineyards controlled by the Company are measured at fair value less costs to sell
at the point of harvest under IFRS. These grapes are transferred to inventory from biological assets when
they are harvested. Under Canadian GAAP, such grape inventory was recorded at the lower of cost and
net realizable value and was included in inventory at an earlier date, that is when costs to produce the
grapes began.
Resulting increase (decrease) in
Inventory
Current portion of biological assets
Net decrease in shareholders’ equity
Resulting increase in cost of goods sold
March 31,
2011
$
$
$
(1,393)
759
(634)
374
April 1,
2010
(875)
615
(260)
$
$
65 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 66
b)
Biological assets include the Company’s grape vines and grapes while growing on a vine. They are
measured at fair value less costs to sell. The current portion of biological assets includes the value of
grapes that are to be harvested in the current vintage year. Under Canadian GAAP, vines controlled by
the Company were included in property, plant, and equipment and were recorded at historical cost less
accumulated amortization.
Resulting increase (decrease) in
Property, plant, and equipment
Biological assets
Net increase in shareholders’ equity
Resulting decrease in
Amortization
Other expenses
April 1,
2010
$
$
(10,595)
12,395
1,800
March 31,
2011
$
$
$
$
(9,410)
11,950
2,540
(610)
(130)
c)
d)
Costs related to purchasing and developing grape vines have been reclassified to biological assets on the
balance sheet and in turn recorded at fair value less costs to sell. Tangible vineyard infrastructure assets,
such as land, irrigation, and wind machines remain in the balance of property, plant, and equipment.
The Company recorded a liability of $600 for contingent consideration that was a liability under IFRS
at April 1, 2010 related to the acquisition of Small Winemakers Collection Inc. The consideration was
paid in June 2011. Under the Company’s previous accounting policy for this business combination
in accordance with Canadian GAAP, contingent consideration that was dependent upon future
performance was not recognized until it was issuable if there was reasonable doubt as to the outcome
of the contingency. This was the case at April 1, 2010 and the liability was not recognized under Canadian
GAAP until during the year ended March 31, 2011.
The Company elected under IFRS 1 not to restate its previous business combinations. As a result, the
liability was recorded as an adjustment to retained earnings at April 1, 2010. Under Canadian GAAP, the
contingent consideration was recorded as an increase to goodwill during the year ended March 31, 2011.
This leads to a $600 decrease in goodwill at March 31, 2011 under IFRS compared to Canadian GAAP.
e)
The Company has elected under IFRS 1 to recognize its cumulative actuarial gains and losses at
April 1, 2010. In addition, beyond April 1, 2010, the Company has adopted a policy to record actuarial
gains and losses immediately in other comprehensive income under IFRS. Previously, experience gains
and losses were deferred and amortized, generally over the remaining service life of employees.
The amortization of actuarial gains and losses was included in earnings as part of cost of goods sold
and selling and administration expenses. In addition, the Company considers its retiree wine allowance
a liability under IFRS. The cost of this policy will now be accrued during an employee’s service period
rather than expensed during retirement as the wine allowance is provided.
Post-employment benefits liability under Canadian GAAP
Change in timing of recording actuarial gains and losses
Recognition of retiree wine allowance
Post-employment benefits liability under IFRS
Resulting increase (decrease) in
Cost of goods sold
Selling and administration
Increase (decrease) in deferred income taxes payable
resulting from adjustments to
Inventory
Property, plant, and equipment and biological assets
Post-employment benefits
$
April 1,
2010
4,530
167
717
$
5,414
March 31,
2011
3,803
981
781
5,565
26
15
$
$
$
$
March 31,
2011
April 1,
2010
$
(171)
543
(458)
(86)
$
512
(245)
(226)
41
$
$
f)
The change in the deferred tax liabilities is primarily a result of the IFRS transition adjustments previously
described. The adjustments have changed the carrying amounts used to calculate the temporary
difference associated with these balances and the corresponding deferred tax balances, as follows:
g)
The adjustments to retained earnings are the residual of all of the adjustments previously described.
Changes to the consolidated statements of cash flows
Certain items within operating activities have been classified differently under IFRS when compared to
Canadian GAAP. The change in presentation results from the changes in net earnings, as described in the
reconciliations of the consolidated statements of earnings, which has a corresponding change in items not
affecting cash and changes in non-cash working capital items related to operations. Other than presentation,
there was no impact on the cash flow statements as a result of the transition to IFRS.
67 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 68
b)
Biological assets include the Company’s grape vines and grapes while growing on a vine. They are
measured at fair value less costs to sell. The current portion of biological assets includes the value of
grapes that are to be harvested in the current vintage year. Under Canadian GAAP, vines controlled by
the Company were included in property, plant, and equipment and were recorded at historical cost less
accumulated amortization.
Resulting increase (decrease) in
Property, plant, and equipment
Biological assets
Net increase in shareholders’ equity
Resulting decrease in
Amortization
Other expenses
April 1,
2010
$
$
(10,595)
12,395
1,800
March 31,
2011
$
$
$
$
(9,410)
11,950
2,540
(610)
(130)
c)
Costs related to purchasing and developing grape vines have been reclassified to biological assets on the
balance sheet and in turn recorded at fair value less costs to sell. Tangible vineyard infrastructure assets,
such as land, irrigation, and wind machines remain in the balance of property, plant, and equipment.
d)
The Company recorded a liability of $600 for contingent consideration that was a liability under IFRS
at April 1, 2010 related to the acquisition of Small Winemakers Collection Inc. The consideration was
paid in June 2011. Under the Company’s previous accounting policy for this business combination
in accordance with Canadian GAAP, contingent consideration that was dependent upon future
performance was not recognized until it was issuable if there was reasonable doubt as to the outcome
of the contingency. This was the case at April 1, 2010 and the liability was not recognized under Canadian
GAAP until during the year ended March 31, 2011.
The Company elected under IFRS 1 not to restate its previous business combinations. As a result, the
liability was recorded as an adjustment to retained earnings at April 1, 2010. Under Canadian GAAP, the
contingent consideration was recorded as an increase to goodwill during the year ended March 31, 2011.
This leads to a $600 decrease in goodwill at March 31, 2011 under IFRS compared to Canadian GAAP.
e)
The Company has elected under IFRS 1 to recognize its cumulative actuarial gains and losses at
April 1, 2010. In addition, beyond April 1, 2010, the Company has adopted a policy to record actuarial
gains and losses immediately in other comprehensive income under IFRS. Previously, experience gains
and losses were deferred and amortized, generally over the remaining service life of employees.
The amortization of actuarial gains and losses was included in earnings as part of cost of goods sold
and selling and administration expenses. In addition, the Company considers its retiree wine allowance
a liability under IFRS. The cost of this policy will now be accrued during an employee’s service period
rather than expensed during retirement as the wine allowance is provided.
Post-employment benefits liability under Canadian GAAP
Change in timing of recording actuarial gains and losses
Recognition of retiree wine allowance
Post-employment benefits liability under IFRS
Resulting increase (decrease) in
Cost of goods sold
Selling and administration
April 1,
2010
4,530
167
717
5,414
$
$
March 31,
2011
$
$
$
$
3,803
981
781
5,565
26
15
f)
The change in the deferred tax liabilities is primarily a result of the IFRS transition adjustments previously
described. The adjustments have changed the carrying amounts used to calculate the temporary
difference associated with these balances and the corresponding deferred tax balances, as follows:
Increase (decrease) in deferred income taxes payable
resulting from adjustments to
Inventory
Property, plant, and equipment and biological assets
Post-employment benefits
March 31,
2011
April 1,
2010
$
(171)
543
(458)
$
(86)
(245)
$
512
(226)
$
41
g)
The adjustments to retained earnings are the residual of all of the adjustments previously described.
Changes to the consolidated statements of cash flows
Certain items within operating activities have been classified differently under IFRS when compared to
Canadian GAAP. The change in presentation results from the changes in net earnings, as described in the
reconciliations of the consolidated statements of earnings, which has a corresponding change in items not
affecting cash and changes in non-cash working capital items related to operations. Other than presentation,
there was no impact on the cash flow statements as a result of the transition to IFRS.
67 CONSOLiDATeD NOTeS TO FiNANCiAL STATeMeNTS
Andrew Peller Limited ~ 2012 Annual Report 68
TeN-YeAR S UMMARY
(in thousands of Canadian dollars,
except per share amounts)
Sales and earnings
Net sales
EBITA
Net earnings (loss)
Financial position
Working capital
Total assets
Shareholders’ equity
Per share
Net earnings (loss) (4)
Basic & diluted Class A
Basic & diluted Class B
Dividends (4)
Class A Shares, Non-Voting
Class B Shares, Voting
Number of shares outstanding
(in thousands of shares) (4)
Class A Shares, Non-Voting
Class B Shares, Voting
Other information
Return on average
shareholders’ equity
Return on average
capital employed
2012
2011
Restated (8)
2010
2009
Restated (6)
2008
2007
2006
2005
2004
2003
Restated (6)
Restated (2)
Restated (2)
$
265,420
$
263,151(6)
$
251,136 (6)
$ 228,056 (6)
$
228,192
$
211,775
$
167,634
$ 155,910
$ 147,856
$ 276,883
32,651
13,001
34,869
285,552
120,552
31,544 (8)
11,223 (8)
27,643 (8)
267,996 (8)
114,297 (8)
27,354 (6)
21,661 (7)
29,357
263,716
113,665
$
$
$
$
0.93
0.81
0.360
0.314
$
$
$
$
0.78 (8)
0.67 (8)
0.330
0.288
$
$
$
$
11,294
3,004
14,298
11,294
3,004
14,298
$
$
$
$
1.49 (7)
1.30 (7)
0.330
0.288
11,888
3,004
14,892
23,359 (6)
($125)
29,203
293,507
96,791
(0.01)
(0.01)
0.330
0.288
11,888
3,004
14,892
28,109 (6)
11,381
25,413
259,744
102,680
27,665
9,472
25,316
238,956
95,522
22,902
6,054 (3)
26,756
222,087
89,580
21,787
20,661
8,467 (2)
8,977 (1) (2)
18,590
6,929
29,410 (2)
162,155 (2)
86,504 (2)
29,288 (2)
146,163 (2)
80,715 (2)
27,369
132,006
72,521
$
$
$
$
0.78
0.68
0.300
0.261
$
$
$
$
0.65
0.57
0.0253
0.0220
$
$
$
$
0.42 (3)
0.36 (3)
0.215
0.187
$
$
$
$
0.59 (2)
0.51 (2)
0.215
0.187
$
$
$
$
0.63 (1) (2) $
0.55 (1) (2) $
0.50
0.43
0.215
0.187
$
$
0.215
0.187
11,888
3,004
14,892
11,888
3,004
14,892
11,863
3,005
14,868
11,763
3,006
14,769
11,223
3,009
14,232
10.9% (5)
9.8% (5) (8)
7.2% (5)
6.0% (5)
12.1% (5)
10.2%
10.1%
10.2%
9.8%
11.4% (5)
11.6% (5) (8)
9.1% (5)
7.8% (5)
10.6% (5)
10.3%
12.4%
12.3%
12.5%
11,888
3,004
14,892
6.9%
9.7%
(1) Includes an after-tax gain of $1.699 million from the sale of the Alberta winery.
(7) Includes an after-tax gain of $11.9 million for the sale of Granville Island Brewing Company Ltd.
(2) Includes a pre-tax loss of $1.2 million due to a misappropriation of funds by a former employee.
(3) Includes costs related to the integration of Cascadia Brands Inc. and other items of $2.0 million.
(4) After giving effect to a 3:1 split of Class A and Class B shares that occurred on October 31, 2006.
(5) Excludes the after-tax impact of mark-to-market adjustments on an interest rate swap.
(6) Excludes the net impact of discontinued operations.
and Mainland Beverage Distribution Ltd.
(8) March 31, 2012 amounts have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) and as such certain amounts for March 31, 2011 have been restated. Amounts for March 31, 2010 and prior
have not been prepared in accordance with IFRS. They have been presented in accordance with Canadian GAAP
and may not be comparable to subsequent periods.
69 TeN-YeAR SUMMARY
Andrew Peller Limited ~ 2012 Annual Report 70
TeN-YeAR S UMMARY
(in thousands of Canadian dollars,
except per share amounts)
Sales and earnings
Net sales
EBITA
Net earnings (loss)
Financial position
Working capital
Total assets
Shareholders’ equity
Per share
Net earnings (loss) (4)
Basic & diluted Class A
Basic & diluted Class B
Dividends (4)
Class A Shares, Non-Voting
Class B Shares, Voting
Number of shares outstanding
(in thousands of shares) (4)
Class A Shares, Non-Voting
Class B Shares, Voting
Other information
Return on average
shareholders’ equity
Return on average
capital employed
32,651
13,001
34,869
285,552
120,552
31,544 (8)
11,223 (8)
27,643 (8)
267,996 (8)
114,297 (8)
27,354 (6)
21,661 (7)
29,357
263,716
113,665
$
$
$
$
0.93
0.81
0.360
0.314
$
$
$
$
0.78 (8)
0.67 (8)
0.330
0.288
$
$
$
$
11,294
3,004
14,298
11,294
3,004
14,298
$
$
$
$
1.49 (7)
1.30 (7)
0.330
0.288
11,888
3,004
14,892
23,359 (6)
($125)
29,203
293,507
96,791
(0.01)
(0.01)
0.330
0.288
11,888
3,004
14,892
2012
2010
2011
Restated (8)
2009
Restated (6)
2008
2007
2006
2005
2004
2003
Restated (6)
Restated (2)
Restated (2)
$ 276,883
$
265,420
$
263,151(6)
$
251,136 (6)
$ 228,056 (6)
$
228,192
$
211,775
$
167,634
$ 155,910
$ 147,856
28,109 (6)
11,381
25,413
259,744
102,680
27,665
9,472
25,316
238,956
95,522
22,902
6,054 (3)
26,756
222,087
89,580
21,787
20,661
8,467 (2)
8,977 (1) (2)
18,590
6,929
29,410 (2)
162,155 (2)
86,504 (2)
29,288 (2)
146,163 (2)
80,715 (2)
27,369
132,006
72,521
$
$
$
$
0.78
0.68
0.300
0.261
$
$
$
$
0.65
0.57
0.0253
0.0220
$
$
$
$
0.42 (3)
0.36 (3)
0.215
0.187
$
$
$
$
0.59 (2)
0.51 (2)
0.215
0.187
$
$
$
$
0.63 (1) (2) $
0.55 (1) (2) $
0.50
0.43
0.215
0.187
$
$
0.215
0.187
11,888
3,004
14,892
11,888
3,004
14,892
10.9% (5)
9.8% (5) (8)
7.2% (5)
6.0% (5)
12.1% (5)
10.2%
11.4% (5)
11.6% (5) (8)
9.1% (5)
7.8% (5)
10.6% (5)
10.3%
11,888
3,004
14,892
6.9%
9.7%
11,863
3,005
14,868
11,763
3,006
14,769
11,223
3,009
14,232
10.1%
10.2%
9.8%
12.4%
12.3%
12.5%
(1) Includes an after-tax gain of $1.699 million from the sale of the Alberta winery.
(7) Includes an after-tax gain of $11.9 million for the sale of Granville Island Brewing Company Ltd.
(2) Includes a pre-tax loss of $1.2 million due to a misappropriation of funds by a former employee.
(3) Includes costs related to the integration of Cascadia Brands Inc. and other items of $2.0 million.
(4) After giving effect to a 3:1 split of Class A and Class B shares that occurred on October 31, 2006.
(5) Excludes the after-tax impact of mark-to-market adjustments on an interest rate swap.
(6) Excludes the net impact of discontinued operations.
and Mainland Beverage Distribution Ltd.
(8) March 31, 2012 amounts have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) and as such certain amounts for March 31, 2011 have been restated. Amounts for March 31, 2010 and prior
have not been prepared in accordance with IFRS. They have been presented in accordance with Canadian GAAP
and may not be comparable to subsequent periods.
69 TeN-YeAR SUMMARY
Andrew Peller Limited ~ 2012 Annual Report 70
DiReCTORS & OFFi CeRS
SHAReHOLDeR iNFORMATiON
RANDY A. POWELL
Vancouver, British Columbia
President & CEO
Armstrong Group
Officers
JOHN E. PELLER
President and Chief
Executive Officer
JOHN F. PETCH, Q.C.
Toronto, Ontario
Barrister & Solicitor
Vice Chairman
Andrew Peller Limited
BRIAN J. SHORT
Ancaster, Ontario
Corporate Director
Honorary Directors
C. WILLIAM DANIEL, O.C.
Toronto, Ontario
RALPH M. LOGAN
Halifax, Nova Scotia
WILLIAM J. WALSH, M.D.
Hamilton, Ontario
GREGORY J. BERTI
Vice-President, Estate Wines
and Export
ANTHONY M. BRISTOW
Chief Operating Officer
JAMES H. COLE
Vice-President, Retail Division
SHARI A. NILES
Executive Vice-President, Marketing
PETER B. PATCHET
Chief Financial Officer and
Executive Vice-President,
Human Resources
ROBERT P. VAN WELY
President, Global Vintners Inc.
BRENDAN P. WALL
Executive Vice-President,
Operations
J. CHRISTOPHER ZARAFONITIS
Executive Vice-President, Sales
Directors
MARK W. COSENS
Burlington, Ontario
Managing Director
Kilbride Capital Partners
LORI C. COVERT
Halifax, Nova Scotia
Corporate Director
RICHARD D. HOSSACK, PhD
Toronto, Ontario
President
Hossack and Associates Limited
PERRY J. MIELE
Burlington, Ontario
Chairman and Managing Partner
Beringer Capital
A. ANGUS PELLER, M.D.
Toronto, Ontario
Senior Medical Consultant
Medcan Health Management Inc.
JOHN E. PELLER
Burlington, Ontario
President and
Chief Executive Officer
Andrew Peller Limited
JOSEPH A. PELLER, M.D.
Rockwood, Ontario
Chairman of the Board
Andrew Peller Limited
Head Office
ANDREW PELLER LIMITED
697 South Service Road
Grimsby, Ontario L3M 4E8
Tel: (905) 643-4131
Fax: (905) 643-4944
Stock exchange
TORONTO
Symbols: ADW.A/ADW.B
PRICEWATERHOUSECOOPERS LLP
Auditors
Bankers
BANK OF MONTREAL
ROYAL BANK OF CANADA
TORONTO DOMINION BANK
RABOBANK
Shareholder inquiries
Computershare Investor Services Inc. operates
services for inquiries regarding changes of address,
stock transfers, registered shareholdings, dividends
and lost certificates, which can be reached:
Phone:
1-800-564-6253 toll free North America
(International 514-982-7555)
Fax:
1-866-249-7775 toll free North America
(International 416-263-9524)
Email: service@computershare.com
section offers enrolment for self-service
account management for registered
shareholders through Investor Centre.
Mail: Computershare Investor Services
100 University Avenue, 9th Floor
Toronto, Ontario
M5J 2Y1
investor Relations
activities, please contact:
PETER B. PATCHET
For additional information regarding the Company’s
Chief Financial Officer and Executive Vice-President,
Human Resources at the Head Office address or by
email at: peter.patchet@andrewpeller.com
2012 Annual Shareholders’ Meeting
The 2012 Annual Meeting of Shareholders will be
held at:
Trius Winery at Hillebrand
Niagara-on-the-Lake, Ontario
on Wednesday, September 12, 2012 at 3:00 p.m.
Registrar and Transfer Agent
Internet: www.computershare.com – the Investors
COMPUTERSHARE INVESTOR SERVICES INC.
71 DiReCTORS & OFFiCeRS
Andrew Peller Limited ~ 2012 Annual Report 72
DiReCTORS & OFFiCeRS
SHAReHOLDe R iNFORMATiON
Directors
MARK W. COSENS
Burlington, Ontario
Managing Director
Kilbride Capital Partners
LORI C. COVERT
Halifax, Nova Scotia
Corporate Director
RICHARD D. HOSSACK, PhD
Toronto, Ontario
President
Hossack and Associates Limited
PERRY J. MIELE
Burlington, Ontario
Chairman and Managing Partner
Beringer Capital
A. ANGUS PELLER, M.D.
Toronto, Ontario
Senior Medical Consultant
RANDY A. POWELL
Vancouver, British Columbia
President & CEO
Armstrong Group
JOHN F. PETCH, Q.C.
Toronto, Ontario
Barrister & Solicitor
Vice Chairman
Andrew Peller Limited
BRIAN J. SHORT
Ancaster, Ontario
Corporate Director
Honorary Directors
C. WILLIAM DANIEL, O.C.
Toronto, Ontario
RALPH M. LOGAN
Halifax, Nova Scotia
WILLIAM J. WALSH, M.D.
Medcan Health Management Inc.
Hamilton, Ontario
JOHN E. PELLER
Burlington, Ontario
President and
Chief Executive Officer
Andrew Peller Limited
JOSEPH A. PELLER, M.D.
Rockwood, Ontario
Chairman of the Board
Andrew Peller Limited
Officers
JOHN E. PELLER
President and Chief
Executive Officer
GREGORY J. BERTI
Vice-President, Estate Wines
and Export
ANTHONY M. BRISTOW
Chief Operating Officer
JAMES H. COLE
Vice-President, Retail Division
SHARI A. NILES
Executive Vice-President, Marketing
PETER B. PATCHET
Chief Financial Officer and
Executive Vice-President,
Human Resources
ROBERT P. VAN WELY
President, Global Vintners Inc.
BRENDAN P. WALL
Executive Vice-President,
Operations
J. CHRISTOPHER ZARAFONITIS
Executive Vice-President, Sales
Head Office
ANDREW PELLER LIMITED
697 South Service Road
Grimsby, Ontario L3M 4E8
Tel: (905) 643-4131
Fax: (905) 643-4944
Stock exchange
TORONTO
Symbols: ADW.A/ADW.B
Shareholder inquiries
Computershare Investor Services Inc. operates
services for inquiries regarding changes of address,
stock transfers, registered shareholdings, dividends
and lost certificates, which can be reached:
Phone:
1-800-564-6253 toll free North America
(International 514-982-7555)
Fax:
1-866-249-7775 toll free North America
(International 416-263-9524)
Email: service@computershare.com
Registrar and Transfer Agent
Internet: www.computershare.com – the Investors
COMPUTERSHARE INVESTOR SERVICES INC.
Auditors
PRICEWATERHOUSECOOPERS LLP
Bankers
BANK OF MONTREAL
ROYAL BANK OF CANADA
TORONTO DOMINION BANK
RABOBANK
section offers enrolment for self-service
account management for registered
shareholders through Investor Centre.
Mail: Computershare Investor Services
100 University Avenue, 9th Floor
Toronto, Ontario
M5J 2Y1
investor Relations
For additional information regarding the Company’s
activities, please contact:
PETER B. PATCHET
Chief Financial Officer and Executive Vice-President,
Human Resources at the Head Office address or by
email at: peter.patchet@andrewpeller.com
2012 Annual Shareholders’ Meeting
The 2012 Annual Meeting of Shareholders will be
held at:
Trius Winery at Hillebrand
Niagara-on-the-Lake, Ontario
on Wednesday, September 12, 2012 at 3:00 p.m.
71 DiReCTORS & OFFiCeRS
Andrew Peller Limited ~ 2012 Annual Report 72
viNeYARDS eSTATe wiNeS STORe LOCATiONS
london
1244 Commissioners Road
(519) 657-7517
1030 Adelaide Street North
(519) 679-3717
395 Wellington South
(519) 649-7180
mississAugA
4099 Erin Mills Parkway
(905) 607-6246
5602 – 10th Line West
(905) 858-0123
2150 Burnhamthorpe Road W
(905) 820-9958
newmArket
1111 Davis Drive
(905) 853-0401
18120 Yonge Street North
(905) 895-2412
17725 Yonge Street North
(905) 953-1269
16640 Yonge Street
(905) 830-3448
north York
3501 Yonge Street
(416) 481-7699
oAkville
511 Maple Grove Drive
(905) 338-3042
1500 Upper Middle Road West
(905) 847-2944
AjAx
955 Westney Road South
(905) 683-1705
260 Kingston Road East
(905) 428-6500
AncAster
977 Golf Links Road
(905) 648-1465
BArrie
201 Cundles Road East
(705) 739-1553
11 Bryne Drive
(705) 725-8121
Bolton
487 Queen Street South
(905) 857-4166
BrAmAleA
25 Peel Centre Drive
(905) 793-4246
BrAmpton
227 Vodden Street
(905) 459-2386
930 North Park Drive
(905) 793-9071
Brockville
1972 Parkedale Avenue
(613) 342-8477
Burlington
2025 Guelph Line
(905) 336-3849
4025 New Street
(905) 632-8580
1250 Brant Street
(905) 319-8670
3505 Upper Middle Road
(905) 336-9101
5353 Lakeshore Road
(905) 681-8282
cAmBridge
180 Holiday Inn Drive
(519) 651-1145
400 Conestoga Blvd.
(519) 624-1103
980 Franklin Blvd.
(519) 622-1187
collingwood
12 Hurontario Street
(705) 446-2237
640 First Street Extension
(705) 444-1730
eAst York
1015 Broadview Avenue
(416) 467-7760
11 Redway Road
(416) 696-9584
etoBicoke
380 The East Mall
(416) 695-9567
Fergus
800 Tower Street South
(519) 787-7721
georgetown
171 Guelph Street
(905) 877-1815
grimsBY
361 South Service Road
(905) 945-9982
guelph
297 Eramosa Road
(519) 824-7922
160 Kortright Road West
(519) 837-9293
hAmilton
50 Dundurn Street South
(905) 528-4003
75 Centennial Parkway North
(905) 561-4504
1579 Main Street West
(905) 522-8882
keswick
24018 Woodbine Avenue
(905) 476-8544
kingston
1048 Midland Avenue
(613) 389-6139
kitchener
750 Ottawa Street South
(519) 745-2183
39 – 875 Highland Road West
(519) 742-5844
73 viN eYARDS eSTATe wiNeS STORe LOCATiONS
Orangeville
50 – 4th Avenue
(519) 942-8752
Oshawa
285 Taunton Road East
(905) 571-6167
1385 Harmony Road North
(905) 438-1800
1300 King Street East
Unit # 32
(905) 438-0478
Ottawa
2515 Bank Street
(613) 523-5837
Ottawa (glOucester)
671 River Road
(613) 822-3080
Ottawa (nepean)
59 Robertson Road
(613) 820-7219
Ottawa (stittsville)
1251 Main Street
(613) 831-3837
Ottawa (vanier)
100 McArthur Road
(613) 749-9618
Owen sOund
1150 Sixteenth Street East
(519) 371-8664
richMOnd hill
11700 Yonge Street
(905) 770-2314
scarbOrOugh
3221 Eglinton Avenue East
(416) 267-2795
siMcOe
470 Norfolk Street South
(519) 426-1033
st. catharines
318 Ontario Street
(905) 685-8898
285 Geneva Street
(905) 646-7363
600 Ontario Street
(905) 934-7430
st. thOMas
1063 Talbot Street
(519) 633-6343
stOney creek
102 Highway #8
(905) 664-3188
tOrOntO
656 Eglinton Avenue East
(416) 485-0093
3671 Dundas Street West
(416) 762-8635
228 Queens Quay
(416) 598-8880
125 The Queensway
(416) 201-8221
87 Avenue Road
(416) 923-6336
2273 Bloor Street West
(416) 766-8654
uxbridge
323 Toronto Street South
(905) 852-5008
vaughan
9200 Bathurst Street
(905) 707-6118
waterlOO
450 Erb Street West
(519) 747-5897
315 Lincoln Road
(519) 746-7226
welland
821 Niagara Street
(905) 714-9521
whitby
1615 Dundas Street East
(905) 728-4118
200 Taunton Road
(905) 668-7568
617 Victoria Street West
(905) 430-5314
aisle 43
30 Kingston Road West
Ajax, Ontario
(905) 428-7829
1935 Ravenscroft Rd.
Ajax, Ontario
(905) 427-0270
10970 Airport Road
Brampton, Ontario
(905) 793-9531
167 Silver Creek Parkway
Guelph, Ontario
(519) 837-0540
3040 Wonderland South
London, Ontario
(519) 668-2224
500 Copper Creek Blvd.
Milton, Ontario
(905) 693-8850
1079 Maple Ave.
Markham, Ontario
(905) 471-3602
250 Lakeshore Road West
Mississauga, Ontario
(905) 274-2280
1460 Merivale Road
Nepean, Ontario
(613) 723-5507
3090 Bathurst Street
North York, Ontario
(416) 256-0462
1300 King Street East
Oshawa, Ontario
(905) 728-3767
769 Borden Avenue
Peterborough, Ontario
(705) 740-2513
221 Glendale Avenue
St. Catharines, Ontario
(905) 688-4767
411 Louth Street
St. Catharines, Ontario
(905) 685-9779
50 Musgrave Street
Toronto, Ontario
(416) 693-6336
15 York St.
Toronto, Ontario
(416) 304-0358
22 Fort York Blvd.
Toronto, Ontario
(416) 623-0793
st. lawrence
wine cOuntry Merchant
93 Front Street East
Toronto Ontario
(416) 364-1811
wine cOuntry vintners
27 Queen Street
Niagara-on-the-Lake, Ontario
(905) 468-1881
Andrew Peller Limited ~ 2012 Annual Report 74
4
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FINANCIAL AND OPERATING HIGHLIGHTS
FINANCIAL AND OPERATING HIGHLIGHTS