A N N U A L
R E P O R T
OPERATIONAL HIGHLIGHTS
FOR THE YEARS ENDED MARCH 31
(in thousands of Canadian dollars, except per share amounts)
2024
2023
Net sales
385,856
382,140
EBITA
50,309
38,012
FINANCIAL POSITION
Working capital
171,666
186,318
Total assets
553,199
567,867
Shareholders' equity
241,437
253,638
PER SHARE
Net loss per Class A Share - basic and diluted
(0.07)
(0.08)
Net loss per Class B Share - basic and diluted
(0.06)
(0.07)
DIVIDENDS
Class A Common Shares, non-voting
Class B Common Shares, voting
0.246
0.246
0.214
0.214
MARKET VALUE
Class A - HIGH
4.95
7.30
Class A - LOW
3.66
4.36
Class B - HIGH
6.64
9.75
Class B - LOW
4.12
5.90
ANALYTICAL INFORMATION
Return on average shareholders' equity
(1.2%)
(1.3%)
Return on average capital employed
5.9%
3.2%
Ratio of current assets to current liabilities
3.92:1
4.11:1
1
| ANDREW PELLER LIMITED 2024
Report to Shareholders
I am pleased to update shareholders after posting strong results in fiscal 2024 with our company well positioned for long-
term growth and continued market leadership. As I assume the role of Chief Executive Officer, I would like to extend our
gratitude to John for his leadership and dedication as he transitions to a strategic consulting role.
It’s been an extraordinary several years for the company and our industry. In navigating the pandemic, including the supply
chain disruption and the interest rate and inflationary pressures that followed, I’m proud to say that our company has been
resilient and faced these challenges admirably. As a result, we are now seeing business performance return to historical
levels, and we are moving forward as a stronger company with a stronger operating platform. It wasn’t easy; this took a
great deal of work and effort across the company, and I want to thank the entire team for their commitment and execution.
With our fiscal 2024 results, we started to see the fruits of this labour as we work toward a return to historical levels of
revenue, margins and EBITA. Revenue increased $3.7 million or 1% to $385.9 million. This represented top-quartile
performance in the wine industry and a solid result considering the softness in consumer discretionary spending. The
increase in revenue for the year was driven by growth across our key channels, including provincial liquor boards,
restaurants and hospitality and our export channel. Revenue growth for 2024 was also supported by the Ontario VQA
Support program.
These gains were partially offset by softness in our estate wineries, which reflects general consumer caution and, for our
B.C. properties, the impact of a bad wildfire season. As previously disclosed, year-over-year revenue growth was also
impacted by the repeal of the excise exemption.
Overall, these results underscore the value of our diversification in distribution channels, breadth of brands and products,
and our ability to meet consumers at different price points. We have seen continued strength in our healthier-for-you Honest
Lot brand, a zero-sugar offering across several varietals. Our entry into the owned imports market under the Neon Coast,
Vivo and Avenue brands has been very successful, and our domestic VQA sparkling offerings across our Gretzky, Peller and
Trius brands have seen double-digit growth year over year.
From a margin perspective, we reported gross margin of $150.6 million, up 6.1% from the prior year. Gross margin as a
percentage of revenue was 39.0%, up from 37.1% in the prior year. Over the course of the past two years, we have talked
about inflationary cost pressures in imported wine, glass bottles, packaging materials and international freight and shipping
charges. In response to these margin pressures, we implemented price increases and numerous production efficiency and
cost savings programs. During fiscal 2024, these programs resulted in $9.3 million in cost savings. Overall, inflationary cost
pressures have now stabilized, and we continue to sell through inventory that was built up at higher cost levels. As we look
ahead, we are confident these cost savings measures and production efficiency programs will positively impact our margins
in the long-term.
Our 2024 results were also highlighted by meaningful growth in EBITA, which reached $50.3 million in 2024, compared to
$38.0 million last year. We’re confident that our cost savings and productivity work will continue to deliver strong EBITA
results as we move forward.
We continue to navigate other changes and challenges in our operating environment. Over the past year, there have been
several important changes in Ontario with the government’s plans to expand the alcohol beverage marketplace and
implement a suite of economic changes for local producers in the wine sector. These changes had a positive impact on our
fiscal 2024 results, and we believe will provide a net economic benefit over time, supporting further growth in the Ontario
market. We continue to work closely with the government and other industry participants to help grow the wine industry and
investment in the Niagara region.
We have also been working closely with the B.C. government to manage through extensive crop damage that occurred
across the Okanagan region because of record cold temperatures in January 2024. With government support programs and
policies to allow us to bring in replacement products with the same access to market as locally grown products, we are
expecting to navigate this without any significant financial disruption.
ANDREW PELLER LIMITED 2024 |
2
Looking ahead, we enter fiscal 2025 with confidence. While we’re continuing to navigate some near-term challenges and
softness in the broader market environment, we believe the business is well positioned to deliver above-category revenue
performance, combined with further margin expansion and strong EBITA.
Over 64 years, we have been through many periods of economic softness and always emerged a stronger, more capable
company. As global markets stabilize and inflationary pressures ease, we believe the business is well positioned to build on
several core strengths, including award-winning brands across multiple categories, broad distribution, and a high-value,
integrated asset base.
In closing, on behalf of the Board of Directors and all shareholders, I want to thank everyone at the Company for their
extraordinary efforts and hard work. We also thank our customers and consumers for their loyalty and our shareholders for
their continued support.
Paul Dubkowski
Chief Executive Officer
#1 ON VQA Brand at the LCBO†
#7 National Cider Brand
& steady growth*
#2 BC VQA Brand*
#1 Wine Brand at the
LCBO & #2 Nationally*
All in the top 10 wineries
in Ontario‡
Owned Imports portfolio: 50% Net
Revenue growth YTD vs F23
CANADA’S
LARGEST
PUBLICLY TRADED
WINE PRODUCER
(TSX:ADW)
59
award-winning brands across wine, spirits, cider categories
$385M
TTM sales
44 yrs
of dividends
Sources: *ACD data. †LCBO data. ‡WineAlign National Wine Awards of Canada
~$500M
high value assets
10
channels
5,000+
distribution points
World’s best Cabernet Franc
in prestigious Decanter
World Wine Awards in 2018
Nota Bene - #1 Ultra
Premium VQA red wine
Estate
wineries
in Ontario
Estate
wineries
in BC
#1 visited winery in North
America with over 350,000
visitors annually
#1 BC Pinot Gris in Canada
#2 visited winery in
North America
BC’s Only Urban Winery
Canada’s Most Highly
Awarded red wine
Leading Super
Premium Brand
Niagara’s finest
boutique hotel
Lieutenant Governor’s
Award 2015
10 LEADING ESTATE WINERIES
5
| ANDREW PELLER LIMITED 2024
MANAGEMENT’S DISCUSSION & ANALYSIS
FOR THE THREE MONTHS AND YEAR ENDED MARCH 31, 2024
The following management’s discussion and analysis (“MD&A”) provides a review of corporate developments, results of
operations, and financial position for the three months and year ended March 31, 2024, in comparison with those for the
three months and year ended March 31, 2023, for Andrew Peller Limited (the “Company” or “APL”). This discussion is
prepared as of June 18, 2024 and should be read in conjunction with the audited consolidated financial statements and
accompanying notes contained therein for the period ended March 31, 2024 and 2023. Additional information relating to the
Company, including the audited annual consolidated financial statements and Annual Information Form for the years ended
March 31, 2024, and March 31, 2023, is available on www.sedarplus.ca. The financial years ending March 31, 2024 and
March 31, 2023 are referred to as “fiscal 2024 and “fiscal 2023” respectively. All dollar amounts are expressed in Canadian
dollars unless otherwise indicated.
Forward-Looking Information
Certain statements in this MD&A 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 APL and its subsidiaries. Such
statements include, but are not limited to, statements about the growth of the business; its launch of new premium wines and
craft beverage alcohol products; 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”, “could”, and similar verbs often identify forward-looking statements. We have based these forward-looking
statements on our current views with respect to future events and financial performance. With respect to forward-looking
statements contained in this MD&A, the Company has made assumptions and applied certain factors regarding, among other
things: future grape, glass bottle, and wine and spirit prices; its ability to obtain grapes, imported wine, glass, and other raw
materials; fluctuations in foreign currency exchange rates; its ability to market products successfully to its anticipated
customers; the trade balance within the domestic Canadian and international wine markets; market trends; reliance on key
personnel; protection of its intellectual property rights; the economic environment; the regulatory requirements regarding
producing, marketing, advertising, and labelling 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 Uncertainties”
section and elsewhere in this MD&A and other risks detailed from time to time in the publicly filed disclosure documents of
the Company which are available at www.sedarplus.ca. 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, you should not place undue reliance on these forward-looking statements. The Company’s forward-
looking statements are made only as of the date of this MD&A, and except as required by applicable law, Andrew Peller
Limited undertakes no obligation to update or revise these forward-looking statements to reflect new information, future
events, or circumstances.
Overview
The Company is a leading producer and marketer of quality wines and craft beverage alcohol products 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 Vintners’ Quality Alliance (“VQA”) brands include Peller
Estates, Trius, Thirty Bench, Wayne Gretzky, Sandhill, Red Rooster, Black Hills Estate Winery, Tinhorn Creek Vineyards,
Gray Monk Estate Winery, Raven Conspiracy and Conviction. Complementing these premium brands are a number of
popularly priced varietal brands including Peller Family Vineyards, Copper Moon, Black Cellar and XOXO. Hochtaler,
Domaine D’Or, Schloss Laderheim, Royal, and Sommet are the Company’s key value priced brands. The Company imports
wines from major wine regions around the world to blend with domestic wine to craft these products. The Company also
produces craft beverage alcohol products, including No Boats on Sunday ciders and seltzers, and various spirits and cream
whisky products under the Wayne Gretzky No. 99 brand. 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 200
authorized retailers and more than 400 independent retailers across Canada, with additional distributors in the United States,
ANDREW PELLER LIMITED 2024 |
6
the United Kingdom, New Zealand and Australia. GVI’s award winning premium and ultra-premium winemaking brands
include Winexpert, Vine Co., Apres, Limited Edition, Passport Series, On the House, Wild Grapes, Island Mist and Niagara
Mist. The Company owns and operates 101 well positioned independent retail locations in Ontario under The Wine Shop,
Wine Country Vintners, and Wine Country Merchants store names. The Company also operates Andrew Peller Import
Agency and The Small Winemaker’s Collection Inc., importers and marketing agents for premium wines from around the
world.
The Company’s vision is to Pour Extraordinary into Everyday Life. The Company achieves this objective by delivering to
its customers and consumers the highest quality branded wines, spirits, refreshments, and experiences. To meet this goal, the
Company invests in improvements in the quality of grapes, wines, and other raw materials, its winemaking and distillation
capabilities, sales and marketing initiatives, tourism and hospitality experiences, and its quality management programs.
The Company is focused on initiatives to drive production efficiencies and realize cost savings through a continual review of
its operations and cost structure with a view to improving profitability. The Company continues to expand and strengthen its
distribution to all customers and consumers through its extensive distribution network, which 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 its product portfolio and market presence.
Recent Events
On June 18, 2024, the Company’s Board of Directors approved a common share dividend of $0.0615 per Class A Share and
$0.0535 per Class B Share, to be paid on July 12, 2024. The Company has consistently paid common share dividends since
1979. APL currently designates all dividends paid as “eligible dividends” for purposes of the Income Tax Act (Canada)
unless indicated otherwise.
On May 24, 2024, the Province of Ontario provided an update to its December 2023 announcement regarding the transition
to a new retail marketplace for beverage alcohol in Ontario that focuses on improving the convenience and choice offered to
Ontario consumers. The comprehensive set of policies includes initiatives around competitive pricing, transitional and time-
limited support for local beverage alcohol producers and expanded distribution. The Company is continuing to work with the
provincial government and industry partners on licensing, wholesale pricing and taxes, mark-ups and fees with the goal of
promoting a more competitive marketplace for Ontario-based producers and consumers. The announcement includes
programs designed to support and grow the Ontario wine industry and as a result, the Company recorded $5.8 million within
revenue in the fourth quarter of fiscal 2024 to reflect amounts receivable under the revised Ontario VQA Support Program
for the fiscal 2024 year.
On February 9, 2024, the Company entered into agreements with Peller Family Enterprises Inc., the Company’s controlling
shareholder, and others to formalize the retirement and transition of John E. Peller as President and CEO as announced on
November 9, 2023. As part of the agreements, John E. Peller resigned as Chair of the Board of Directors and the following
independent directors were appointed: Brian J. Bidulka, Daniel J. Cicerchi, Bruce McDonald, Chris Tsiofas and W. James
Westlake. Bruce McDonald was appointed as Chair of the Board of Directors. The newly reconstituted Board of Directors
has also formed a CEO Selection Committee to continue the process with the Company’s outside organizational consultants
and a leading executive search firm to find a suitable successor for the CEO position.
On November 9, 2023, John Peller, President and Chief Executive Officer, announced his intention to retire within the next
twelve months. In addition, the Company’s independent directors, Perry Miele, Shauneen Bruder, François Vimard and
David Mongeau, announced that they will be retiring effective immediately, to support a proactive refreshment of the Board.
On July 25, 2023, the City Council of Port Moody, B.C. gave 4th reading and approval for the Company’s five-acre
development site, which will pave the way for a comprehensive mixed-use development project for the community. This site
was the location of the Company’s first winery, which was closed in 2006. The Company is evaluating its plans for the
property and intends to monetize its investment in due course.
7
| ANDREW PELLER LIMITED 2024
Results of Operations
For the three months and years ended March 31,
(in $000, except per share amounts)
Three months
Year
2024
2023
2024
2023
Revenue
$ 85,008
$ 77,712
$ 385,856
$ 382,140
Gross margin (1)
35,565
22,059
150,602
141,892
Gross margin (% of sales)
41.8%
28.4%
39.0%
37.1%
Selling and administrative expenses (2)
35,794
23,306
109,773
103,880
EBITA (1)
9,251
(1,247)
50,309
38,012
Interest
3,992
2,663
16,964
16,565
Net unrealized loss (gain) on derivative financial instruments
(1,003)
-
641
(380)
Loss on debt extinguishment and financing fees
-
-
2,172
-
Other expenses (income), net
(16)
3,030
1,130
3,547
Net loss
(6,943)
(10,009)
(2,852)
(3,352)
Loss per share – Class A basic
$(0.17)
$(0.24)
$(0.07)
$(0.08)
Earnings (loss) per share –Class B basic
$(0.14)
$(0.21)
$(0.06)
$(0.07)
Dividend per share – Class A (annual)
$0.246
$0.246
Dividend per share – Class B (annual)
$0.214
$0.214
(1)
See “Non-IFRS Measures” section of this MD&A
(2)
Selling and administrative expenses include $9.5 million relating to the CEO retirement and transition costs. These amounts are added back to calculate
the Company’s EBITA.
Revenue for the three months ended March 31, 2024 increased 9.4% compared to the prior year’s fourth quarter due
primarily to the $5.8 million recognized as other revenue relating to the revised Ontario VQA Support Program as discussed
above.
Revenue for the year ended March 31, 2024 increased 1.0% over the prior year. The majority of the Company’s well
established trade channels performed well during the year, particularly provincial liquor stores, restaurants and hospitality
locations, as well as sales in the export channel due to the improvement in international travel. This strong performance is
offset by softness in sales from the estate wineries due to lower guest traffic and forest fires in the west. In fiscal 2024 there
was a $6.3 million reduction in sales resulting from the repeal of the federal excise duty. The Company has implemented
price increases to partially offset the excise exemption repeal.
Gross margin as a percentage of sales increased to 41.8% and 39.0% for the three months and year ended March 31, 2024
respectively from 28.4% and 37.1% in the prior year. Gross margin in the fourth quarter and the fiscal year benefited from
the inclusion of the Ontario VQA Support program as described above while continuing to be impacted by inflationary cost
pressures in imported wine, glass bottles, packaging materials, and international freight and shipping charges. Management
believes these inflationary cost pressures have stabilized. In response to these margin pressures, the Company has
implemented price increases and is executing numerous production efficiency and cost savings programs aimed at enhancing
operating margins, such as renegotiating freight rates for raw materials and evaluating alternate sourcing for glass bottles
and other components. During the 2024 fiscal year, these programs have resulted in $9.3 million of cost savings.
As a percentage of sales, selling and administrative expenses rose to 42.1% and 28.4% for the three months and year ended
March 31, 2024, respectively, compared to 30.0% and 27.2% in the prior year. Selling and administrative expenses in the
fourth quarter included $6.5 million relating to the retirement allowance and consulting agreements entered into as part of
John Peller’s retirement and transition and $3.0 million in legal and advisory fees incurred by certain shareholders in
connection with these agreements.
Earnings before interest, amortization, loss on debt extinguishment and financing fees, CEO retirement and transition costs,
net unrealized gains and losses on derivative financial instruments, other (income) expenses, and income taxes (“EBITA”)
(see “Non-IFRS Measures” section of this MD&A) was $9.3 million in the fourth quarter of fiscal 2024, up from a loss of
$1.2 million in the fourth quarter of fiscal 2023. EBITA increased to $50.3 million for the year ended March 31, 2024
compared to $38.0 million in prior year period.
ANDREW PELLER LIMITED 2024 |
8
Interest expense for the three months and year ended March 31, 2024 has increased compared to prior year due to higher
average debt levels in fiscal 2024 when compared to prior year. Management believes the new credit facility entered on June
13, 2023 and corresponding interest rate swap will continue to contribute to reductions in the cost of borrowing going
forward.
The Company recorded a net unrealized non-cash loss in fiscal 2024 of $0.6 million related to mark-to-market adjustments
on interest rate swaps and foreign exchange contracts compared to a gain of $0.4 million in the prior year. The Company has
elected not to apply hedge accounting and accordingly the change in fair value of these financial instruments is reflected in
the Company’s consolidated statement of earnings each reporting period. These instruments are considered to be effective
economic hedges and are expected to mitigate the short-term volatility of changing foreign exchange and interest rates.
The amendments to the Company’s credit facility were determined to constitute an extinguishment of long-term debt and as
a result, the company recorded a loss on extinguishment of $1.0 million and financing fees of $1.2 million in the first quarter
of fiscal 2024 and were expensed immediately.
Other expenses decreased in fiscal 2024 compared to the prior year due primarily to a one-time $2.8 million overhead
restructuring initiative completed in the fourth quarter of the prior year.
The Company incurred a net loss of $6.9 million (loss of $0.17 per Class A share) for the fourth quarter of fiscal 2024
compared to a net loss of $10.0 million (loss of $0.24 per Class A share) in the prior year and a net loss of $2.9 million
($0.07 per Class A share) for the year ended March 31, 2024 compared to a net loss of $3.4 million ($0.08 per Class A
Share) in the prior year.
Quarterly Performance
The following table outlines key quarterly highlights.
(in $000, except per share amounts)
Q4 24
Q3 24
Q2 24
Q1 24
Q4 23
Q3 23
Q2 23
Q1 23
Revenue
85,008
100,192
100,175
100,481
77,712
104,913
101,816
97,699
Gross margin (1)
35,565
34,742
41,267
39,028
22,059
42,290
39,480
38,063
Gross margin (% of sales)
41.8%
34.7%
41.2%
38.8%
28.4%
40.3%
38.8%
39.0%
EBITA (1)
9,251
13,248
15,110
12,700
(1,247)
15,630
11,658
11,971
Interest
3,992
4,802
3,886
4,284
2,663
5,273
6,016
2,613
Net unrealized loss (gain) loss on
financial instruments
(1,003)
2,840
(1,827)
631
-
-
112
(492)
Loss on debt extinguishment and
financing fees
-
-
-
2,172
-
-
-
-
Other expense (income), net
(16)
31
(102)
1,217
3,030
(93)
213
397
Net (loss) earnings
(6,943)
(369)
5,391
(931)
(10,009)
3,892
(98)
2,863
E.P.S. – Class A basic
$(0.17)
$(0.01)
$0.13
$(0.02)
$(0.24)
$0.09
$(0.00)
$0.07
E.P.S. – Class B basic
$(0.14)
$(0.01)
$0.11
$(0.02)
$(0.21)
$0.08
$(0.00)
$0.06
(1) See “Non-IFRS Measures” section of this MD&A
The second and third quarters of the Company’s fiscal year are historically the largest due to increased activity at the
Company's estate properties and increased consumer purchasing of the Company’s products during the holiday season.
9
| ANDREW PELLER LIMITED 2024
Liquidity and Capital Resources
As at
(in $000)
March 31,
2024
March 31,
2023
Current assets
$ 230,380
$ 246,168
Property, plant, and equipment
210,132
210,265
Right-of-use assets
16,993
13,612
Intangible assets
40,459
43,065
Pension asset
1,597
1,119
Goodwill
53,638
53,638
Total assets
$ 553,199
$ 567,867
Current liabilities
$ 58,714
$ 59,850
Long-term debt
208,294
208,089
Long-term derivative financial instruments
998
-
Lease obligations
12,649
10,205
Post-employment benefit obligations
2,041
2,390
Deferred income taxes
29,066
33,695
Shareholders’ equity
241,437
253,638
Total liabilities and shareholders’ equity
$ 553,199
$ 567,867
The decrease in current assets as at March 31, 2024 compared to March 31, 2023 is primarily due to a decrease in inventory.
As at March 31, 2024, the unamortized portion of the WSSP grants recognized in inventory was $9.1 million compared to
$7.8 million as at March 31, 2023. Inventory has further decreased due to the timing of sales and production. Inventory is
dependent on domestically grown grapes that are used in the sale of premium and ultra-premium wines that are held for a
longer period than imported wine. These wines are typically aged for one to three years before they are sold. The cost of
producing wine from domestically grown grapes is also 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 personal winemaking products. The Company had $14.3 million of accounts receivable with
provincial liquor boards at March 31, 2024. The remaining receivable balance represents amounts due from licensees, export
customers, and independent retailers of personal winemaking products. Against these amounts, an expected credit loss of
$0.3 million has been provided which the Company has determined based on a reasonable estimate of lifetime expected
credit losses for trade receivables. The amount of accounts receivable that was 30 days past due was $1.9 million at March
31, 2024.
Long-lived assets at March 31, 2024, which includes property, plant and equipment and right-of-use assets, increased
compared to March 31, 2023 due to additions in excess of amortization in fiscal 2024. Additions to property, plant and
equipment related to investments made in the Company’s production facilities and vineyard management programs and
additions to right-of-use assets related to extensions of the Company’s warehouse facilities.
Current liabilities were $58.7 million at March 31, 2024 compared to $59.9 million at March 31, 2023. The decrease is
primarily due to reduced bank indebtedness offset by an increase in the current portion of lease obligations due to the lease
extensions as explained above. Included in accounts payable and accrued liabilities is $6.5 million relating to the retirement
allowance and consulting agreements entered into as part of John Peller’s retirement and transition.
Long-term debt increased to $208.3 million at March 31, 2024 from $208.1 million at March 31, 2023. The Company’s debt
to equity ratio was 0.86:1 at March 31, 2024 compared to 0.82:1 at March 31, 2023. At March 31, 2024, the Company had
unutilized debt capacity in the amount of $66.7 million on its credit facility and the applicable margin was 2.50%.
Management expects to generate sufficient cash flow from operations to meet its debt servicing and working capital
requirements over the short-term through strong management of working capital and prioritization of capital expenditures.
ANDREW PELLER LIMITED 2024 |
10
The Company regularly reviews all of its assets to ensure appropriate returns on investment are being achieved and that they
fit with the Company’s long-term strategic objectives.
For the year ended March 31, 2024, the Company generated cash from operating activities, after changes in non-cash
working capital items, of $38.1 million compared to $13.8 million in the prior year. The increase in cash from operating
activities is due to an increase in changes in non-cash working capital items related to operations.
Cash used in investing activities for the year ended March 31, 2024 was $14.8 million compared to $20.3 million in the prior
fiscal year due to decreased investment in property plant and equipment and intangibles.
Cash used in financing activities for the year ended March 31, 2024 of $23.3 million compared to $5.3 million provided in
the prior fiscal year. This decrease is mainly due to a decrease in bank indebtedness and lower drawings on long-term debt.
Working capital at March 31, 2024 was $171.7 million compared to $186.3 million at March 31, 2023. Shareholders’ equity
at March 31, 2024 was $241.4 million or $5.56 per share compared to $253.6 million or $5.87 per share at March 31, 2023.
The following table outlines the Company’s contractual obligations as at March 31, 2024:
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.
Shares outstanding
March 31,
2024
March 31,
2023
Class A Common Shares
35,243,647
35,040,656
Class B Common Shares
8,144,183
8,144,183
Total
43,387,830
43,184,839
Strategic Outlook and Direction
APL is committed to a strategy of growth that focuses on the expansion of its core business as a producer and marketer of
quality wines and wine related products through concentrating on and developing leading brands that meet the needs of
consumers and customers. Over the long term, the Company believes higher-priced premium wine and spirits sales will
continue to grow in Canada, generating higher margins and increased profitability compared to its lower-priced products.
The Company has focused its product development and sales and marketing initiatives by capitalizing on alcohol
consumption trends. The Company entered the spirits and craft beverage alcohol categories, through its strategic alliance
with Wayne Gretzky, and has introduced ciders and seltzers through its own brand labels.
The Company will continue to expand product offerings outside the traditional table wine segment into other alcoholic
beverages where it is able to leverage its detailed knowledge of growth opportunities and operational advantages in the
Canadian market. The Company will also make packaging design changes that are more appealing to its target markets and
are consistent with its initiative to be more environmentally friendly. Increased focus will be given across all trade channels
to enhance customer awareness of the Company’s broad product portfolio. New product launches and key brands through all
(in $000)
< 1
Year
2 - 3
Years
4 - 5
Years
> 5
Years
Total
Long-term debt
-
-
208,294
-
208,294
Leases
6,045
8,511
3,279
5,775
23,610
Service and royalty agreements
2,810
3,230
1,100
11,550
18,690
Pension
274
480
-
-
754
Grape, bulk wine and whisky purchase contracts
77,033
94,852
90,078
251,479
513,442
Packaging purchase contracts
16,730
35,403
-
-
52,133
Interest rate swap
2,896
5,792
611
-
9,299
Foreign exchange forwards
8,859
-
-
-
8,859
Total contractual obligations
114,647
148,268
303,362
268,804
835,081
11
| ANDREW PELLER LIMITED 2024
of the Company’s distribution channels will continue to receive increased marketing and sales support.
The Company has been acquisitive historically and, from time to time, the Company evaluates investment opportunities,
including acquisitions, which support its strategic direction.
The Company believes that sales will grow over the long term due to strong positioning of key brands, the continued launch
of new and innovative products in both its core wine business and in new product categories, potential strategic acquisitions,
as well as overall growth in the Canadian beverage alcohol market. The Company expects to continue to invest in capital
expenditures to improve efficiencies, increase capacity, support its ongoing commitment to producing the highest-quality
wines and spirits, and improve productivity.
Risks and Uncertainties
The Company’s sales of wine and craft beverage alcohol products are affected by general economic conditions and social
trends such as changes in discretionary consumer spending and consumer confidence, future economic conditions, changes
to inter-provincial trade laws, tax laws, the prices of its products and health trends. The Company is experiencing
uncertainty with respect to raw materials and import wine costs due to inflation, and freight surcharges and shipment delays
associated with international conflicts. The Company is also monitoring the impact of communications regarding alcohol
consumption and the associated health risks. The impact on the financial results of the Company will depend on
management’s continued ability to successfully mitigate against these risks.
The Government of Ontario has announced its intention to modernize the rules for selling beverage alcohol in Ontario by
expanding retail distribution in the province. This could represent a significant change to the retail landscape in Ontario with
the goal of providing more convenience and choice to consumers. The Company is working closely with its industry
partners to manage any potential risks that this transition may have on its financial results.
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 incentives on subsidies. Many of these countries
and regions prohibit or restrict the sale of imported wine in their own domestic markets. The Company, along with other
members of the Canadian wine industry, are working with the Canadian government to improve support for the domestic
industry.
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 competitor’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.
VQA wines are a key driver of APL’s growth strategy, and as a result, the Company 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 adverse weather variations, natural disasters, pestilence, or other severe environmental problems, APL may not
be able to secure a sufficient supply of grapes, a situation which could result in a decrease in production of certain products
from those regions and/or result in an increase in costs. The inability to secure premium quality grapes could impair the
ability of the Company to supply certain wines to its customers. When environmental risks such as wildfires or extreme cold
weather events occur, the Company’s viticultural teams have internal processes to ensure the Company’s vineyards are
protected. This may include the use of technology and fire suppression activities. APL has also developed programs to
maintain access to a consistent supply of 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.
The Company is exposed to interest rate risk as a result of cash balances and floating rate debt. 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 it meets borrowing covenants, and ensuring it meets other
ANDREW PELLER LIMITED 2024 |
12
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. On June 30, 2023, the Company entered into an interest rate swap agreement with a notional amount of $65
million. Until June 13, 2027, the interest rate is fixed at 4.46%. For the year ended March 31, 2024, the Company recorded a
net unrealized non-cash loss of $0.7 million related to mark-to-market adjustments on interest rate swaps. A 1% increase or
decrease to the variable interest rate would result in a $1.1 million change in net loss.
Foreign exchange risk exists on the purchases of bulk wine and concentrate that are primarily made in United States dollars,
Euros, and Australian dollars. Fluctuating foreign currencies may have a positive or negative impact on gross margins (see
“Non-IFRS Measures” section of this MD&A), however, the Company believes the impact on gross margin will be largely
offset by its continued ability to leverage scale and successful cost control initiatives to reduce other cost of goods sold. The
Company’s strategy is to hedge approximately 50% - 80% of its foreign exchange requirements throughout the fiscal year
and to regularly review its on-going requirements. The Company does not enter into foreign exchange contracts for trading
or speculative purposes and contracts are reviewed periodically. As at March 31, 2024, the Company had forward currency
contracts to buy $6.0 million US at rates averaging $1.34 and $1.2 million AUD at rates averaging $0.89. The Company has
no Euro forward currency contracts as at March 31, 2024. A 1% increase or decrease to the exchange rate of the US dollar
would impact the Company’s net loss by $0.4 million. A 1% increase or decrease to the exchange rate of the Australian
dollar or Euro would not have a material impact on the Company’s net loss.
The Company purchases glass, bag in box, tetra paks, and other components used for bottling and packaging. The largest
component of packaging is glass, of which there are few domestic or international suppliers. There is currently only one
commercial supplier of glass in Canada that is able to supply glass to APL’s specifications. 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 and spirits. 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. Privatization of liquor distribution and retailing has been implemented in varying
degrees across the country. The recent regulatory changes relating to privatization in Ontario and sales through grocery
outlets remains a risk to the Company through its impact on the Company’s retail operations.
The wine industry and the domestic and international markets in which the Company operates are consolidating. This has
resulted in fewer, but larger, competitors who have increased their resources and scale. The increased competition from
these larger market participants may affect the Company’s pricing strategies and create margin pressures. Competition also
exerts pressure on existing customer relationships which 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 (see “Non-IFRS Measures” section of this MD&A) and implement a higher level of promotion and
advertising activity to remain competitive. APL and other wine industry participants also generally compete with other
alcoholic beverages 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.
Federal and provincial governments impose excise, other taxes, and mark-ups on beverage alcohol products 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. 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, requirements, taxes, or mark-
ups could also have a material adverse effect on the Company’s financial condition or results of operations.
The Company uses information technology and the internet, including online banking, to streamline business operations and
to improve customer experience. The Company’s information systems, and those of its third-party service providers,
creditors, and vendors, are vulnerable to an increasing threat of continually evolving cybersecurity risks. These risks may
take the form of malware, computer viruses, cyber threats, extortion, employee error, malfeasance, system errors or other
types of risks, and may occur from inside or outside of the organization. Cybersecurity risk is increasingly difficult to
identify and quantify and cannot be fully mitigated because of the rapidly evolving nature of the threats, targets, and
13
| ANDREW PELLER LIMITED 2024
consequences. Additionally, unauthorized parties may attempt to gain access to these systems or the Company’s information
through fraud or other means of deceiving the Company’s third-party service providers, employees, creditors or vendors. As
the threat landscape is ever-changing, the Company must make continuous mitigation efforts. The Company employs third-
party information technology services and continually monitors and improves its internal controls to protect against known
and emerging threats. However, there can be no assurance that the Company’s ability to monitor for or mitigate
cybersecurity risks will be fully effective, and it may fail to identify cybersecurity breaches or discover them in a timely
manner.
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 the Company’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 the Company will be able to
retain current key employees or attract new key employees.
The Company has certain 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 Company’s 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. Although significant price discounting may occur in Canada
beyond current levels, the Company believes that its product quality, advertising, and promotional support along with its
competitive pricing strategies will effectively mitigate the impact on the Company.
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 third parties, but there can be no assurance in this regard.
As an owner and lessee of property the Company is subject to various federal and provincial laws relating to environmental
matters. Such laws provide that the Company 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.
A perceived failure to maintain high ethical, social, and environmental standards could have an adverse effect on the
Company’s reputation.
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 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.
Non-IFRS Measures
The Company utilizes EBITA (defined as earnings before interest, amortization, loss on debt extinguishment and financing
fees, CEO retirement and transition costs, net unrealized gains and losses on derivative financial instruments, other (income)
expenses, and income taxes) to measure its financial performance. EBITA is not a recognized measure under IFRS;
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, as well as
providing an indication of recurring earnings compared to prior periods.
ANDREW PELLER LIMITED 2024 |
14
The Company calculates EBITA as follows.
For the three months and year ended March 31,
Three Months
Year
(in $000)
2024
2023
2024
2023
Net loss
$ (6,943)
$ (10,009)
$ (2,852)
$ (3,352)
Add: Interest
3,992
2,663
16,964
16,565
Income taxes
(2,154)
(2,614)
(34)
(888)
Amortization of plant and equipment used in production
2,629
2,509
10,332
9,790
Amortization of equipment and intangibles used in selling
and administration
3,266
3,174
12,476
12,730
Net unrealized loss (gain) on derivative financial
instruments
(1,003)
-
641
(380)
Loss on debt extinguishment and financing fees
-
-
2,172
-
CEO retirement and transition costs
9,480
-
9,480
-
Other expenses (income), net
(16)
3,030
1,130
3,547
EBITA
$ 9,251
$ (1,247)
$ 50,309
$ 38,012
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 utilizes gross margin (defined as sales less cost of goods sold, excluding amortization) as calculated below.
For the three months and year ended March 31,
Three Months
Year
(in $000)
2024
2023
2024
2023
Sales
$ 85,008
$ 77,712
$ 385,856
$ 382,140
Less: Cost of goods sold, excluding amortization
49,443
55,653
235,254
240,248
Gross margin
$ 35,565
$ 22,059
$ 150,602
$ 141,892
Gross margin (% of sales)
41.8%
28.4%
39.0%
37.1%
The Company’s method of calculating EBITA and gross margin may differ from the methods used by other companies and
accordingly, may not be comparable to the corresponding measures used by other companies.
Transactions with Related Parties
During fiscal 2024, the Company entered into agreements with its controlling shareholder, and others to formalize the
retirement and transition of the President and CEO. The Company has also entered into a transition agreement with Peller
Family Enterprises Inc. and the Peller family, which includes provisions relating to the composition of the Board of
Directors for a 24-month period.
The transition agreement also requires Peller Family Enterprises Inc. and John E. Peller to vote in alignment for a period of
24 months. As such, the Company is jointly controlled by Peller Family Enterprises Inc., which owns 48.6% of the
Company’s Class B voting shares and John E. Peller, who beneficially owns 24.5% of the Company’s Class B voting shares.
No individual has sole voting power or control in respect of the shares of the Company owned by Peller Family Enterprises
Inc.
The Company paid $3.0 million in legal and advisory fees incurred by certain shareholders in connection with these
agreements.
The Company has agreed to pay $4.5 million in a retirement allowance to the President and CEO, and $2.0 million in
consulting services to the President and CEO. These payments will begin once the successor is appointed and will be fully
settled within a 24-month period.
15
| ANDREW PELLER LIMITED 2024
The compensation expense recorded for directors and members of the Executive Management Team of the Company is
shown below:
For the years ended March 31
(in $000)
2024
2023
Compensation and short-term benefits
$ 4,172
$ 4,266
Termination benefits (1)
4,480
1,032
Post-employment benefits
263
339
Stock based compensation expense
390
1,081
$ 9,305
$ 6,718
(1)
Includes $4.5 million in retirement allowance payable to the President and CEO
The compensation and short-term benefits expense, excluding the retirement allowance payable to the President and CEO,
consist of amounts that will primarily be settled within twelve months.
Financial Statements and Accounting Policies
The Company’s consolidated financial statements have been prepared in accordance with IFRS, as issued by the
International Accounting Standards Board (“IFRS Accounting Standards”).
Critical Accounting Estimates
The preparation of consolidated financial statements in accordance with IFRS Accounting Standards requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the consolidated
financial statements, the reported amounts of revenue and expenses during the reporting periods 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, they are recorded in the period in which they change. Specific areas of uncertainty
include but are not limited to:
Impairment of goodwill and indefinite life intangible assets
Testing goodwill for impairment at least annually involves judgment in estimating the recoverable amount of the CGUs to
which goodwill is allocated. This requires making assumptions about future cash flows, growth rates and discount rates.
Testing indefinite life intangible assets for impairment at least annually involves estimating the fair value using the relief of
royalty method. This requires making assumptions about royalty rates, growth rates and discount rates. These assumptions
are inherently uncertain and as such, actual amounts may vary from these assumptions and cause significant adjustments.
Post-employment benefits
Measuring the liability for post-employment benefits requires assumptions for the discount rates, increases in compensation,
increases in medical costs and the timing of the payment of benefits. Actual amounts may vary from these assumptions and
cause significant adjustments.
Leases
Critical accounting estimates were made in determining the lease term and incremental borrowing rate. In determining the
lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension
option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the
lease term if the lease is reasonably certain to be extended (or not terminated). The assessment is reviewed if a significant
event or a significant change in circumstances occurs, which affects this assessment and that is within the control of the
lessee.
In determining the carrying amount of right-of-use assets and lease liabilities, the Company is required to estimate the
incremental borrowing rate specific to each leased asset or portfolio of leased assets if the interest rate implicit in the lease is
not readily determined. Management determines the incremental borrowing rate of each leased asset or portfolio of leased
assets by using the Company’s specific risk portfolio, the security, term and value of the underlying leased asset and the
economic environment in which the leased asset operates. The incremental borrowing rates are subject to change mainly due
to macroeconomic changes in the environment.
ANDREW PELLER LIMITED 2024 |
16
Recently adopted accounting pronouncements
IAS 1, Material Accounting Policies
This standard has been amended to require companies to disclose their material accounting policy information, instead of
significant accounting policies. The amendments are effective for annual reporting periods beginning on or after January 1,
2023, with early application permitted. The adoption of the amendment did not have a significant impact on the consolidated
financial statements.
IAS 8, Changes in Estimates
This standard has been amended to help entities distinguish changes in accounting estimates from changes in accounting
policies. The amendments are effective for annual periods beginning on or after January 1, 2023, and changes in accounting
policies and changes in accounting estimates that occur on or after the start of that period. Earlier application is permitted.
The adoption of the amendment did not have a significant impact on the consolidated financial statements.
IAS 12, Income Taxes
This standard has been amended to require companies to recognize deferred tax on transactions that, on initial recognition,
give rise to equal amounts of taxable and deductible temporary differences. The amendments are effective for annual
reporting periods beginning on or after January 1, 2023. The adoption of the amendment did not have a significant impact on
the consolidated financial statements.
Recently issued accounting pronouncements
IAS 1, Presentation of Financial Statements
This standard has been amended to clarify the classification of liabilities as current or non-current depending on the rights
that exist at the end of the reporting period. Classification is unaffected by the expectations of the entity or events after the
reporting date. The amendment also clarifies the meaning of settlement of a liability. The standard has also been amended to
specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or non-
current at the reporting date. Instead, the amendments require a company to disclose information about these covenants in
the notes to the financial statements. These amendments are effective for annual reporting periods beginning on or after
January 1, 2024, with early adoption permitted. The Company has not yet assessed the impact of the amendment on the
consolidated financial statements.
IFRS 18, Presentation and Disclosure in Financial Statements
In April 2024, IFRS 18 was issued to achieve comparability of the financial performance of similar entities. The standard,
which replaces IAS 1, impacts the presentation of primary financial statements and notes, including the statement of
earnings where companies will be required to present separate categories of income and expense for operating, investing,
and financing activities with prescribed subtotals for each new category. The standard will also require management-defined
performance measures to be explained and included in a separate note within the consolidated financial statements. The
standard is effective for annual reporting periods beginning on or after January 1, 2027, including interim financial
statements, and requires retrospective application. The Company has not yet assessed the impact of the new standard on the
consolidated financial statements.
Evaluation of Disclosure Controls and Procedures and Internal Control over Financial Reporting
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 Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) on a timely basis so that
decisions can be made regarding the Company’s disclosures to the public.
The Company’s management, under the supervision of, and with the participation of, the CEO and CFO, have designed and
maintained 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”. As at June 18, 2024, the CEO and CFO of the Company
have evaluated the effectiveness of the disclosure controls and procedures. Based on these evaluations, the CEO and CFO
have concluded that the controls and procedures were operating effectively.
17
| ANDREW PELLER LIMITED 2024
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. For the year ended March 31, 2024, there have been no 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 18, 2024, 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.
FINANCIAL
STATEMENTS
AND NOTES
19
| ANDREW PELLER LIMITED 2024
Independent auditor’s report
To the Shareholders of Andrew Peller Limited
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial
position of Andrew Peller Limited and its subsidiaries (together, the Company) as at March 31, 2024 and 2023, and its
financial performance and its cash flows for the years then ended in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board (IFRS Accounting Standards).
What we have audited
The Company’s consolidated financial statements comprise:
•
the consolidated balance sheets as at March 31, 2024 and 2023;
•
the consolidated statements of loss for the years then ended;
•
the consolidated statements of comprehensive loss for the years then ended;
•
the consolidated statements of changes in equity for the years then ended;
•
the consolidated statements of cash flows for the years then ended; and
•
the notes to the consolidated financial statements, comprising material accounting policy information and other
explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section
of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the
consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these
requirements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements for the year ended March 31, 2024. These matters were addressed in the context of our
audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
ANDREW PELLER LIMITED 2024 |
20
Key audit matter
How our audit addressed the key audit matter
Costing of bulk wine and spirits inventories
Refer to note 2 – Summary of material accounting policies
and note 4 – Inventories to the consolidated financial
statements.
The total value of bulk wine and spirits inventories
amounted to $86.9 million as at March 31, 2024. The
Company carries bulk wine and spirits inventories on an
average cost basis. The weighted average costs are
determined separately for import bulk wine, domestic bulk
wine and spirits for each varietal and vintage year.
We considered this a key audit matter due to the magnitude
of the bulk wine and spirits inventories balance and the high
degree of audit effort in performing procedures related to
evaluating management’s calculation of average costs.
Our approach to addressing the matter involved the
following procedures, amongst others:
•
Tested the operating effectiveness of controls relating to
management’s bulk wine and spirits inventories costing
process, including controls over the review of the inputs
in the calculation of average costing and approval of
bulk wine and spirit inventories costs.
•
On a sample basis of bulk wine and spirits inventory
items, tested the underlying inputs in the calculation of
weighted average cost against supporting third party
support, evidence of payment and the allocation of
internal overhead costs.
•
Performed a reconciliation of total domestic bulk wine
purchases made during the year to the carrying value of
domestic bulk wine inventory and performed testing
over any significant reconciling items.
•
On a sample basis of inventory items, tested the
mathematical accuracy of the weighted average cost
calculation.
•
Attended and performed inventory test counts for a
sample of locations or obtained third party confirmations
at certain locations to test the existence and accuracy of
the quantity of bulk wine and spirits inventories as an
input to the weighted average costs calculations.
Goodwill impairment assessment for the Western
Canadian wine and Personal winemaking products cash
generating units (CGUs)
Refer to note 2 – Summary of material accounting policies,
note 3 – Critical accounting estimates and note 8 – Goodwill
to the consolidated financial statements.
The Company had goodwill of $53.6 million as at March 31,
2024, of which $26.7 million and $23.8 million related to the
Western Canadian wine and personal winemaking products
CGUs, respectively. Management performs an impairment
test on an annual basis, or more frequently if events or
circumstances indicate that the carrying value may be
impaired. An impairment loss is recognized if the carrying
amount of a CGU to which the goodwill relates exceeds its
recoverable amount. The recoverable amounts of the
Western Canadian wine and personal winemaking products
CGUs were based on a value in use method using discounted
cash flow models. Key assumptions used by management in
the discounted cash flow model for the Western Canadian
wine CGU included the average revenue growth rate during
the period of projected cash flows, gross profit percentage,
selling and administration margin, terminal growth rate,
continuation of government assistance, capital expenditures
and the discount rate. Key assumptions used by management
in the discounted cash flow model for the personal
Our approach to addressing the matter included the
following procedures, among others:
•
Tested how management determined the recoverable
amounts of the Western Canadian wine and personal
winemaking products CGUs, which included the
following:
−
Tested the appropriateness of the method used and
the mathematical accuracy of the discounted cash
flow models.
−
Tested the underlying data used in the discounted
cash flow models.
−
Evaluated the reasonableness of the average revenue
growth rates during the period of projected cash
flows,
gross
profit
percentages,
selling
and
administration margins, capital expenditures and
continuation of government assistance, applied by
management in the discounted cash flow models by
considering the budget, management’s strategic plans
approved by the Board of Directors, current and past
performance of the CGUs, or available third party
published industry and economic data, as applicable.
−
Professionals with specialized skill and knowledge in
the field of valuation assisted in testing the
appropriateness of the method and reasonableness of
21
| ANDREW PELLER LIMITED 2024
winemaking products CGU included the average revenue
growth rate during the period of projected cash flows, gross
profit percentage, selling and administration margin,
terminal growth rate and the discount rate. No impairment
was recognized as a result of the 2024 impairment test.
We considered this a key audit matter due to the judgment
by management in determining the recoverable amounts of
the Western Canadian wine and personal winemaking
products CGUs, including key assumptions. This has
resulted in a high degree of subjectivity and audit effort in
performing procedures to test the key assumptions.
Professionals with specialized skill and knowledge in the
field of valuation assisted in performing our procedures.
the discount rates and terminal growth rates.
•
Tested the disclosures made in the consolidated financial
statements, including the sensitivity of the key
assumptions used by management.
Other information
Management is responsible for the other information. The other information comprises the Management’s Discussion and
Analysis, which we obtained prior to the date of this auditor’s report and the information, other than the consolidated
financial statements and our auditor’s report thereon, included in the annual report, which is expected to be made available
to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report,
we conclude that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard. When we read the information, other than the consolidated financial statements and our
auditor’s report thereon, included in the annual report, if we conclude that there is a material misstatement therein, we are
required to communicate the matter to those charged with governance.
Responsibilities of management and those charged with governance for the consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance
with IFRS Accounting 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.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative
but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment
ANDREW PELLER LIMITED 2024 |
22
and maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
•
Obtain an understanding of internal control relevant to the audit 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
Company’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
•
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Company to cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
•
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Company to express an opinion on the consolidated financial statements. We are responsible for the
direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
The engagement partner on the audit resulting in this independent auditor’s report is Peter Dalziel.
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Ontario
June 18, 2024
23
| ANDREW PELLER LIMITED 2024
Consolidated Balance Sheets
As at March 31, 2024 and 2023
(in thousands of Canadian dollars)
2024
$
2023
$
Assets
Current assets
Accounts receivable (note 21)
33,382
25,297
Inventories (notes 4 and 17)
192,469
209,154
Biological assets (note 6)
522
2,920
Prepaid expenses and other assets
3,650
4,493
Income taxes receivable
-
4,304
Current portion of derivative financial instruments (note 21)
357
-
230,380
246,168
Property, plant and equipment (note 5)
210,132
210,265
Right-of-use assets (note 10)
16,993
13,612
Intangible assets (note 7)
40,459
43,065
Pension asset (note 12)
1,597
1,119
Goodwill (note 8)
53,638
53,638
553,199
567,867
Liabilities
Current liabilities
Bank indebtedness (note 11)
199
4,942
Accounts payable and accrued liabilities (note 9)
48,306
47,794
Dividends payable
2,603
2,591
Lease obligations (note 10)
5,370
4,523
Income taxes payable
2,236
-
58,714
59,850
Long-term debt (note 11)
208,294
208,089
Long-term derivative financial instruments (note 21)
998
-
Lease obligations (note 10)
12,649
10,205
Post-employment benefit obligations (note 12)
2,041
2,390
Deferred income taxes (note 13)
29,066
33,695
311,762
314,229
Shareholders’ Equity
Capital stock (note 14)
28,835
28,033
Contributed surplus (note 15)
6,567
6,627
Retained earnings
206,753
219,999
Accumulated other comprehensive loss
(718)
(1,021)
241,437
253,638
553,199
567,867
Contingent liabilities and unrecognized contractual commitments (note 19)
Events after the reporting period (note 25)
R. Bruce McDonald
Chris Tsiofas
Director
Director
The accompanying notes are an integral part of these consolidated financial statements.
ANDREW PELLER LIMITED 2024 |
24
Consolidated Statements of Loss
For the years ended March 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
2024
$
2023
$
Revenue (note 17)
385,856
382,140
Cost of goods sold, excluding amortization (notes 16 and 17)
235,254
240,248
Amortization of plant and equipment used in production
10,332
9,790
Gross profit
140,270
132,102
Selling and administration (notes 16 and 23)
109,773
103,880
Amortization of equipment, right-of-use and intangible assets used in selling
and administration
12,476
12,730
Interest
16,964
16,565
Net unrealized loss (gain) on derivative financial instruments (note 21)
641
(380)
Loss on debt extinguishment and financing fees (note 11)
2,172
-
Other expense, net (note 16)
1,130
3,547
143,156
136,342
Loss before income tax
(2,886)
(4,240)
Income tax expense (recovery) (note 13)
Current
4,703
(2,037)
Deferred
(4,737)
1,149
(34)
(888)
Net loss for the year
(2,852)
(3,352)
Net loss per share (note 18)
Basic and diluted
Class A Common Shares
(0.07)
(0.08)
Class B Common Shares
(0.06)
(0.07)
The accompanying notes are an integral part of these consolidated financial statements.
25
| ANDREW PELLER LIMITED 2024
Consolidated Statements of Comprehensive Loss
For the years ended March 31, 2024 and 2023
(in thousands of Canadian dollars)
2024
$
2023
$
Net loss for the year
(2,852)
(3,352)
Items that are never reclassified to net loss
Net actuarial gains on post-employment benefit plans (note 12)
411
454
Deferred income taxes (note 13)
(108)
(120)
Other comprehensive income for the year
303
334
Net comprehensive loss for the year
(2,549)
(3,018)
The accompanying notes are an integral part of these consolidated financial statements.
ANDREW PELLER LIMITED 2024 |
26
Consolidated Statements of Changes in Equity
For the years ended March 31, 2024 and 2023
(in thousands of Canadian dollars)
Capital
stock
$
Contributed
surplus
$
Retained
earnings
$
Accumulated
other
comprehensive
loss
$
Total
shareholders’
equity
$
Balance at March 31, 2022
27,290
5,756
233,710
(1,355)
265,401
Net comprehensive (loss) income for
the year
-
-
(3,352)
334
(3,018)
Exercise of share awards and issuance
of Class A non-voting Common
Shares (notes 14 and 15)
743
(743)
-
-
-
Share-based compensation (note 15)
-
1,614
-
-
1,614
Dividends (Class A Common Shares
$0.246 per share, Class B
Common Shares $0.214 per
share)
-
-
(10,359)
-
(10,359)
Balance at March 31, 2023
28,033
6,627
219,999
(1,021)
253,638
Net comprehensive (loss) income for
the year
-
-
(2,852)
303
(2,549)
Exercise of share awards and issuance
of Class A non-voting Common
Shares (notes 14 and 15)
802
(802)
-
-
-
Share-based compensation (note 15)
-
742
-
-
742
Dividends (Class A Common Shares
$0.246 per share, Class B
Common Shares $0.214 per
share)
-
-
(10,394)
-
(10,394)
Balance at March 31, 2024
28,835
6,567
206,753
(718)
241,437
The accompanying notes are an integral part of these consolidated financial statements.
27
| ANDREW PELLER LIMITED 2024
Consolidated Statements of Cash Flows
For the years ended March 31, 2024 and 2023
(in thousands of Canadian dollars)
2024
$
2023
$
Cash provided by (used in)
Operating activities
Net loss for the year
(2,852)
(3,352)
Adjustments for non-cash items
Gain on disposal of property, plant and equipment and intangible assets
(473)
(1)
Amortization of plant, equipment, right-of-use assets and intangible assets
22,808
22,520
Amortization of deferred financing fees
4
27
Interest expense
16,960
16,538
Income taxes
(34)
(888)
Loss on debt extinguishment and financing fees
2,172
-
Net unrealized loss (gain) on derivative financial instruments
641
(380)
Share-based compensation expense
554
1,483
Post-employment benefits
(209)
120
Curtailment gain on terminated other post-employment benefit plan
(207)
-
Interest paid
(14,927)
(15,873)
Wine Sector Support Program grant, net (note 17)
1,306
7,755
Income tax received
1,837
293
27,580
28,242
Change in non-cash working capital items related to operations (note 20)
10,535
(14,488)
38,115
13,754
Investing activities
Proceeds from sale of property, plant and equipment
938
-
Purchase of property, plant and equipment
(14,421)
(17,301)
Purchase of intangible assets
(1,352)
(3,033)
(14,835)
(20,334)
Financing activities
Net (decrease) increase in bank indebtedness
(4,743)
4,942
Repayment of lease obligations
(4,935)
(4,304)
Drawings on long-term debt
21,000
54,000
Repayment of long-term debt
(23,043)
(39,000)
Financing fees paid
(1,177)
-
Dividends paid
(10,382)
(10,355)
(23,280)
5,283
Decrease in cash during the year
-
(1,297)
Cash – Beginning of year
-
1,297
Cash – End of year
-
-
Supplementary information
Property, plant and equipment and intangibles acquired that were unpaid in cash and
included in accounts payable and accrued liabilities
142
226
The accompanying notes are an integral part of these consolidated financial statements.
ANDREW PELLER LIMITED 2024 |
28
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024 and 2023
(in thousands of Canadian dollars, except per share amounts)
1
Nature of operations
Andrew Peller Limited (the Company) produces and markets wine, spirits 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
Summary of material accounting policies
Basis of presentation
These consolidated financial statements have been prepared in compliance with International Financial Reporting
Standards as issued by the International Accounting Standards Board (IFRS Accounting Standards).
These consolidated financial statements were approved by the Board of Directors for issuance on June 18, 2024.
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.
Basis of consolidation
These consolidated financial statements include the accounts of the Company and all subsidiary companies, including
Canrim Packaging Limited, Global Vintners Inc., Riverbend Inn & Winery Inc., Sandhill Vineyards Ltd. and Small
Winemakers Collections Inc., all of which are wholly owned by Andrew Peller Limited. Subsidiaries are those entities
the Company controls by having the power to govern their 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 control
ceases. Intercompany transactions, balances, income and expenses and profits and losses are eliminated.
Business combinations
Business combinations are accounted for using the acquisition method. The consideration transferred by the Company
is measured as the fair value of assets transferred and equity instruments issued at the date of completion of the
acquisition. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at fair
value at the acquisition date. The excess of the consideration transferred over the fair value of the net assets acquired is
recorded as goodwill. If the consideration transferred is less than the net assets acquired, the difference is recognized
directly in the consolidated statements of loss as a gain on acquisition. Results of operations of a business acquired are
included in the Company’s consolidated financial statements from the date of the business acquisition. Acquisition
costs incurred are expensed and included in selling and administrative expenses.
Foreign currency translation
The consolidated financial statements are presented in Canadian dollars, which is the Company’s functional currency.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions
and from the translation at year-end exchange rates of monetary assets and liabilities denominated in currencies other
than the Company’s functional currency are recognized in the consolidated statements of loss.
29
| ANDREW PELLER LIMITED 2024
Revenue
Revenue is derived from the sale of goods and is recognized at a point in time when the performance obligation is
fulfilled. For sales to consumers through retail stores, winery restaurants and estate wineries, the performance
obligation is deemed fulfilled when the product is purchased. For sales transactions with provincial liquor boards,
licensee retail stores and wine kit retailers, the Company’s performance obligation is fulfilled when the product is
shipped from the Company’s distribution facilities.
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, promotional and advertising allowances and
discounts provided to customers are deducted from the selling price to determine the transaction price at which revenue
is recognized. Expected product returns and breakage are estimated based on historical actuals as a percentage of sales.
Deferred revenue represents amounts paid by customers in advance of the purchase of products, which typically takes
the form of pre-loaded gift cards. The amounts received are recorded as deferred revenue within accounts payable and
accrued liabilities on the consolidated balance sheets. Once a gift card is redeemed to make a purchase, the liability is
relieved and revenue is recognized.
The Company also enters into arrangements with third parties for the sale of products to customers. When the terms of
the arrangement are such that the Company is acting as an agent of the third party, revenue is recognized in the amount
of the commission to which the Company is entitled in exchange for arranging for the third party to provide its goods to
customers.
Cost of goods sold
Cost of goods sold includes the cost of finished goods inventories sold during the year, inventory writedowns and
revaluations of agricultural produce to fair value less costs to sell at the point of harvest.
Inventories
Inventories are 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 spirits,
packaging materials and supplies, and finished goods). Average cost is determined separately for import wine, domestic
wine and spirits and is calculated by varietal and vintage year.
Grapes produced from vineyards controlled by the Company that are part of inventories 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 and spirit inventories that require a substantial
period of time to become ready for sale.
Government grants
Grants from the government are recognized at the amount of cash received or to be received when there is reasonable
assurance that the grant will be received and the Company will comply with all conditions. Government grants are
recognized in the consolidated statements of loss as a reduction of the expense that the grant is intended to compensate
or as other revenue if the grant is intended to compensate for lost revenue or meets the broader definition of revenue
and arises in the course of ordinary business.
ANDREW PELLER LIMITED 2024 |
30
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, vines and vineyard
infrastructure and machinery and equipment is calculated on the straight-line basis in amounts sufficient to amortize the
cost of buildings, vines and vineyard infrastructure and machinery and equipment over their estimated useful lives as
follows:
Buildings
40 years
Vines and vineyard infrastructure
20 years
Machinery and equipment
5 to 20 years
Land and vineyard land is carried at cost and is not amortized.
Vines and vineyard infrastructure amortization commences in the year the vineyard yields a crop that approximates
50% of expected annual production.
Biological assets
The Company measures biological assets, consisting of grapes grown on vineyards controlled by the Company, at fair
value, which approximates cost as there has been minimal biological transformation since the initial costs incurred. The
initial costs incurred are comprised of direct expenditures required to enable the biological transformation of
agricultural produce.
At the point of harvest, the fair value of biological assets is determined by reference to local market prices for grapes of
a similar quality and the same varietal. At this point, agricultural produce is measured at fair value less cost to sell,
which becomes the basis for the cost of inventories after harvest.
Gains or losses arising from a change in fair value less costs to sell are included in the consolidated statements of loss
in the period in which they arise.
Intangible assets
Intangible assets include brands, customer contracts and lists, software and customer-based relationships. These
intangible assets are recorded at their estimated fair value on the date of acquisition or at cost for regular way
purchases.
Amortization
method
Useful life
Remaining
useful life
Brands
n/a
indefinite
indefinite
Customer contracts and lists
straight-line
10 – 20 years
1 – 13 years
Software
straight-line
5 – 15 years
1 – 13 years
Certain of the Company’s 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 the asset might be
impaired. To test for impairment, the Company primarily compares the amount of royalty the Company would have
had to pay in an arm’s length licensing arrangement to secure access to the same rights to its carrying value. If
necessary, the fair value is also considered. An impairment charge is recorded to the extent the carrying value exceeds
the fair value.
Where the Company incurs costs to configure and customize cloud computing software, the costs incurred are
capitalized and amortized over the useful life only if the expenditures meet the recognition criteria of International
Accounting Standard (IAS) 38, Intangible Assets.
31
| ANDREW PELLER LIMITED 2024
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 events or circumstances indicate that the carrying value 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. An impairment loss is recognized if the
carrying amount of a CGU to which the goodwill relates exceeds its recoverable amount. The recoverable amount of a
CGU is based on a value in use method using a discounted cash flow model. If necessary, a CGU’s fair value is also
considered. An impairment loss in respect of goodwill cannot be reversed.
Post-employment benefits
The Company sponsors defined contribution pension plans, defined benefit pension plans, post-employment medical
benefit 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 asset or liability recognized in
the consolidated balance sheets 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 and the interest cost net of the expected
return on plan assets are recognized in loss 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 year.
Financial instruments and hedge accounting
Financial assets and liabilities are initially recorded at fair value including, where permitted by IFRS 9, Financial
Instruments (IFRS 9), any directly attributable transaction costs. For those financial assets that are not subsequently
held at fair value, the Company assesses whether there is evidence of impairment at each consolidated balance sheet
date.
The Company classifies its financial assets and liabilities into the following categories: financial assets and liabilities at
amortized cost and financial assets and liabilities at fair value through profit or loss.
Expected credit losses on financial assets carried at amortized cost are assessed on a forward-looking basis. The
impairment methodology applied depends on whether there has been a significant increase in credit risk. The loss
allowances for financial assets are based on assumptions about risk of default and expected loss rates. The Company
uses judgment in making these assumptions and selecting the inputs to the impairment calculation, based on past
history, existing market conditions as well as forward-looking estimates at the end of each reporting period.
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 value if certain criteria are met. Management
reviewed its contracts and determined the Company does not currently have any embedded derivatives in these
contracts that require separate accounting and disclosure.
Leases
Leases are recognized as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is
available for use by the Company. Each lease payment is allocated between the repayment of the principal portion of
lease liability and the interest portion. The interest expense is charged to the consolidated statements of loss over the
ANDREW PELLER LIMITED 2024 |
32
lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each
period.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net
present value of the following lease payments:
•
Fixed payments, including in-substance fixed payments, less any lease incentives receivable;
•
Variable lease payments that are based on an index or a rate;
•
Amounts expected to be payable by the lessee under residual value guarantees;
•
The exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
•
Payment of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the
lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds
necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
Payments associated with variable lease payments not based on an index or a rate, short-term leases and leases of low
value assets are recognized on a straight-line basis as an expense in the consolidated statements of loss.
Right-of-use assets are included in the consolidated balance sheets and are measured at cost comprising the following:
•
The amount of the initial measurement of the lease liability;
•
Any lease payments made at or before the commencement date, less any lease incentives received;
•
Any initial direct costs; and
•
Restoration costs.
The right-of-use assets are depreciated over the shorter of the asset’s useful life and the lease term on a straight-line
basis. Right-of-use assets are subject to impairment. Amortization of right-of-use vineyard land, buildings and
machinery and equipment is as follows:
Vineyard land
2 – 29 years
Buildings
3 – 10 years
Machinery and equipment
2 – 6 years
Impairment of non-financial assets
The Company reviews long-lived assets and definite life intangible assets for impairment when events or circumstances
indicate 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
the carrying value of a CGU exceeds the recoverable amount. The recoverable amount is the greater of the CGU’s fair
value less costs to dispose and its value in use, determined by discounting expected cash flows. An impairment loss is
reversed if there is a reversal in circumstances that led to the impairment and 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.
Net loss per share
Basic net loss per share has been calculated using the weighted average number of Class A and Class B Common
Shares outstanding during the year. Diluted net 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.
33
| ANDREW PELLER LIMITED 2024
Segmented information
The Company produces and markets wine, spirits and wine related products 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 the chief operating decision maker allocates resources and assesses performance of the
Company on a consolidated basis. Furthermore, 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, substantially all of the Company’s
sales are made in Canada. As a result, management has concluded the Company operates in one geographic segment.
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 loss or taxable income or loss. Deferred income tax assets and liabilities
are measured using the enacted or substantively enacted tax rates expected to apply to taxable income or loss in the
years in which temporary differences are expected to be recovered or settled. The deferred income tax provision
recorded in net loss and other comprehensive income represents the change during the year in deferred income tax
assets and deferred income tax liabilities.
Equity
The Company separately presents changes in equity related to capital stock, contributed surplus, retained earnings and
accumulated other comprehensive loss in the consolidated statements of changes in equity.
Share-based compensation
The Company grants stock options, performance share units (PSUs), restricted share units (RSUs) and deferred share
units (DSUs) to employees and directors under its share-based compensation plan. All share-based compensation
arrangements are equity-settled in Class A non-voting Common Shares.
Equity-settled share-based payments to employees are measured at the fair value of the equity instrument granted. An
option valuation model (Black-Scholes) is used to fair value stock options issued on the date of grant.
The grant date fair value of equity-settled share-based awards is recognized as compensation expense with a
corresponding increase in equity reserves over the related service period provided to the Company. The total amount of
expense recognized in profit or loss is determined by reference to the fair value of the options granted or share awards,
which factors in the number of options expected to vest. Equity-settled share-based payment transactions are not
remeasured once the grant date fair value has been determined, except in cases where the share-based payment is linked
to non-market performance conditions. Stock options vest in tranches (graded vesting) and, accordingly, the expense is
recognized in vesting tranches. PSUs vest in full at the end of the third fiscal year after the date of grant and,
accordingly, the expense is recognized evenly over the vesting period. RSUs vest ratably over the restriction period and
accordingly, the expense is recognized over the restriction period. DSUs vest immediately and, accordingly, the
expense is recognized in full at the date of grant.
Compensation expense is recognized over the applicable vesting period by increasing contributed surplus based on the
number of awards expected to vest. At the end of each reporting period, the Company revises its estimates of the
number of awards that are expected to vest based on the non-market performance vesting conditions. The Company
recognizes the impact of the revision to original estimates, if any, in the consolidated statements of loss, with a
corresponding adjustment to contributed surplus.
ANDREW PELLER LIMITED 2024 |
34
Recently adopted accounting pronouncements
IAS 1, Material Accounting Policies
This standard has been amended to require companies to disclose their material accounting policy information, instead
of significant accounting policies. The amendments are effective for annual reporting periods beginning on or after
January 1, 2023, with early application permitted. The adoption of the amendment did not have a significant impact on
the consolidated financial statements.
IAS 8, Changes in Estimates
This standard has been amended to help entities distinguish changes in accounting estimates from changes in
accounting policies. The amendments are effective for annual periods beginning on or after January 1, 2023 and
changes in accounting policies and changes in accounting estimates that occur on or after the start of that period. The
adoption of the amendment did not have a significant impact on the consolidated financial statements.
IAS 12, Income Taxes
This standard has been amended to require companies to recognize deferred tax on transactions that, on initial
recognition, give rise to equal amounts of taxable and deductible temporary differences. The amendments are effective
for annual reporting periods beginning on or after January 1, 2023. The adoption of the amendment did not have a
significant impact on the consolidated financial statements.
Recently issued accounting pronouncements
IAS 1, Presentation of Financial Statements
This standard has been amended to clarify the classification of liabilities as current or non-current depending on the
rights that exist at the end of the reporting period. Classification is unaffected by the expectations of the entity or events
after the reporting date. The amendment also clarifies the meaning of settlement of a liability. The standard has also
been amended to specify that covenants to be complied with after the reporting date do not affect the classification of
debt as current or non-current at the reporting date. Instead, the amendments require a company to disclose information
about these covenants in the notes to the financial statements. These amendments are effective for annual reporting
periods beginning on or after January 1, 2024, with early adoption permitted. The Company has not yet assessed the
impact of the amendment on the consolidated financial statements.
IFRS 18, Presentation and Disclosure in Financial Statements
In April 2024, IFRS 18 was issued to achieve comparability of the financial performance of similar entities. The
standard, which replaces IAS 1, impacts the presentation of primary financial statements and notes, including the
statement of earnings where companies will be required to present separate categories of income and expense for
operating, investing, and financing activities with prescribed subtotals for each new category. The standard will also
require management-defined performance measures to be explained and included in a separate note within the
consolidated financial statements. The standard is effective for annual reporting periods beginning on or after January
1, 2027, including interim financial statements, and requires retrospective application. The Company has not yet
assessed the impact of the new standard on the consolidated financial statements.
35
| ANDREW PELLER LIMITED 2024
3
Critical accounting estimates
The preparation of consolidated financial statements in accordance with IFRS Accounting Standards requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities as at the dates
of the consolidated financial statements, the reported amounts of revenue and expenses during the reporting periods 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, they are recorded in the period in which they change.
Specific areas of uncertainty include but are not limited to:
Impairment of goodwill and indefinite life intangible assets
Testing goodwill for impairment at least annually involves judgment in estimating the recoverable amount of the CGUs
to which goodwill is allocated. This requires making assumptions about future cash flows, growth rates and discount
rates. Testing indefinite life intangible assets for impairment at least annually involves estimating the fair value using
the relief of royalty method. This requires making assumptions about royalty rates, growth rates and discount rates.
These assumptions are inherently uncertain and as such, actual amounts may vary from these assumptions and cause
significant adjustments. Refer to note 8 for further information.
Post-employment benefits
Measuring the liability for post-employment benefits requires assumptions for the discount rates, increases in
compensation, increases in medical costs and the timing of the payment of benefits. Actual amounts may vary from
these assumptions and cause significant adjustments.
Leases
Critical accounting estimates were made in determining the lease term and incremental borrowing rate. In determining
the lease term, management considers all facts and circumstances that create an economic incentive to exercise an
extension option, or not exercise a termination option. Extension options (or periods after termination options) are only
included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment is
reviewed if a significant event or a significant change in circumstances occurs, which affects this assessment and that is
within the control of the lessee.
In determining the carrying amount of right-of-use assets and lease liabilities, the Company is required to estimate the
incremental borrowing rate specific to each leased asset or portfolio of leased assets if the interest rate implicit in the
lease is not readily determined. Management determines the incremental borrowing rate of each leased asset or
portfolio of leased assets by using the Company’s specific risk portfolio, the security, term and value of the underlying
leased asset and the economic environment in which the leased asset operates. The incremental borrowing rates are
subject to change mainly due to macroeconomic changes in the environment.
ANDREW PELLER LIMITED 2024 |
36
4
Inventories
2024
$
2023
$
Packaging materials and supplies
23,713
27,360
Bulk wine and spirits, net of government grant (note 17)
86,867
84,783
Finished goods
81,889
97,011
192,469
209,154
Interest included in the cost of inventories (2024 – 8.02%, 2023 – 7.11%)
5,083
4,820
Inventory write-downs recognized as an expense amounted to $6,270 (2023 – $6,892).
The cost of inventories recognized as an expense and included in cost of goods sold, excluding amortization, was
$228,984 (2023 – $233,356).
5
Property, plant and equipment
Land
$
Vines, vineyard
land and
infrastructure
$
Buildings
$
Machinery
and
equipment
$
Total
$
At March 2022
Cost
39,956
50,546
100,719
174,385
365,606
Accumulated amortization
-
(20,381)
(30,105)
(106,105)
(156,591)
Net carrying amount
39,956
30,165
70,614
68,280
209,015
Year ended March 2023
Additions
-
2,503
1,592
11,329
15,424
Amortization
-
(1,577)
(2,832)
(9,765)
(14,174)
Closing net carrying amount
39,956
31,091
69,374
69,844
210,265
At March 2023
Cost
39,956
53,049
102,311
185,714
381,030
Accumulated amortization
-
(21,958)
(32,937)
(115,870)
(170,765)
Net carrying amount
39,956
31,091
69,374
69,844
210,265
Year ended March 2024
Additions
1,885
4,808
1,413
6,231
14,337
Disposals
-
(722)
-
(21)
(743)
Amortization
-
(1,768)
(2,778)
(9,181)
(13,727)
Closing net carrying amount
41,841
33,409
68,009
66,873
210,132
At March 2024
Cost
41,841
56,833
103,724
191,793
394,191
Accumulated amortization
-
(23,424)
(35,715)
(124,920)
(184,059)
Net carrying amount
41,841
33,409
68,009
66,873
210,132
Contractual commitments to purchase property, plant and equipment were $599 as at March 31, 2024 (2023 – $1,405).
37
| ANDREW PELLER LIMITED 2024
6
Biological assets
Biological assets consist of 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.
During the year ended March 31, 2024, the Company harvested grapes valued at $6,129 (2023 – $7,082).
The changes in the carrying amount of biological assets are as follows:
2024
$
2023
$
Carrying amount – Beginning of year
2,920
2,045
Net increase in fair value less costs to sell due to biological
transformation
3,731
7,957
Transferred to inventory on harvest
(6,129)
(7,082)
Biological assets
522
2,920
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.
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
domestic grapes. These strategies reduce the financial risks associated with changes in grape prices.
7
Intangible assets
Brands
$
Customer
contracts
and lists
$
Software
$
Other
$
Total
$
At March 31, 2022
Cost
10,239
12,827
36,611
1,917
61,594
Accumulated amortization and
impairment
(200)
(10,041)
(5,547)
(1,816)
(17,604)
Net carrying amount
10,039
2,786
31,064
101
43,990
Year ended March 31, 2023
Additions
-
-
3,048
-
3,048
Amortization
-
(523)
(3,450)
-
(3,973)
Closing net carrying amount
10,039
2,263
30,662
101
43,065
At March 31, 2023
Cost
10,239
12,827
39,659
1,917
64,642
Accumulated amortization and
impairment
(200)
(10,564)
(8,997)
(1,816)
(21,577)
Net carrying amount
10,039
2,263
30,662
101
43,065
ANDREW PELLER LIMITED 2024 |
38
Year ended March 31, 2024
Additions
-
-
1,352
-
1,352
Amortization
-
(493)
(3,465)
-
(3,958)
Closing net carrying amount
10,039
1,770
28,549
101
40,459
At March 31, 2024
Cost
10,239
12,827
41,011
1,917
65,994
Accumulated amortization and
impairment
(200)
(11,057)
(12,462)
(1,816)
(25,535)
Net carrying amount
10,039
1,770
28,549
101
40,459
Contractual commitments to purchase software were $2,189 as at March 31, 2024 (2023 – $456).
Management has determined there was no impairment in intangible assets for the years ended March 31, 2024 and
2023.
8
Goodwill
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:
2024
$
2023
$
Ontario and Eastern Canadian wine
3,134
3,134
Western Canadian wine
26,695
26,695
Personal winemaking products
23,809
23,809
53,638
53,638
The Company determined the recoverable amount of the related CGUs by estimating their value in use. The weighted
average key assumptions based on the carrying value of goodwill in each CGU used are:
2024
2023
Discount rate
10.1%
11.2%
Average revenue growth rate during the period of projected cash
flows
2.1%
2.7%
Gross profit percentage
41.1%
41.5%
Selling and administration margin
25.3%
26.7%
Terminal growth rate
3.0%
3.5%
Average annual capital expenditures
$14,000-$16,000
$14,000-$16,000
As at March 31, 2024, the Company’s book value of net assets exceeded its market capitalization, which was an
indication of impairment and triggered an overall impairment assessment. The Company uses past experience and
current expectations about future performance in projecting cash flows, which are based on financial budgets projected
over a period of five to ten years. For the period after the initial projection, 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 the leverage of companies that
operate in a similar industry to the Company and that are of similar size. No impairment in goodwill for the years ended
March 31, 2024 and 2023 was recognized as a result of the impairment test.
39
| ANDREW PELLER LIMITED 2024
The recoverable amount of each CGU is sensitive to changes in market conditions and could result in changes in the
carrying value of goodwill in the future. Sensitivity analysis was performed for each CGU by changing the following
key assumptions: discount rate, gross profit percentage, selling and administration margin, average revenue growth rate
during the period of projected cash flows, the terminal growth rate and capital expenditures.
In relation to the Ontario and Eastern Canadian wine CGU, the Company determined the impact of what a reasonable
change in each key assumption would be to the discounted cash flows. Each key assumption was changed
independently while holding all other assumptions constant and does not contemplate management’s ability to mitigate
against any adverse effects that may arise in the future. No reasonable changes in key assumptions would result in an
impairment of the Ontario and Eastern Canadian wine CGU.
In relation to the Western Canadian wine CGU, the Company determined that the recoverable amount exceeds the
carrying amount by $19,061, however, the recoverable amount is sensitive to changes to the key assumptions.
Changing each assumption independently, an increase in the discount rate of 6.5% (a 68 basis point increase), a
decrease in the gross profit percentage or an increase in the selling and administration margin of 4.5% (a 165 basis
point decrease), a decrease in the average revenue growth rate of 14.5% (a 26 basis point decrease) or a decrease in the
terminal growth rate of 56.4% (a 141 basis point decrease) would result in the recoverable amount being equal to the
carrying amount. If capital expenditures required to maintain the cash flows included in the projections were required
to increase by 40%, it would have a significant impact on the discounted cash flows of the Company. In addition, the
Company has estimated that the Wine Sector Support Program (note 17) will continue to be received by the Company
at the same level of funding received in the current year throughout the period of the cash flow projection. If the Wine
Sector Support Program is discontinued or the funding were to significantly change it would have a material impact on
the discounted cash flows of the Company and could result in an impairment of the Western Canadian wine CGU. As
each key assumption was changed independently, the results of the sensitivity analyses do not contemplate
management’s ability to mitigate against any adverse effects that may arise in the future.
In relation to the personal winemaking products CGU, the Company determined that the recoverable amount exceeds
the carrying amount by $7,831, however, the recoverable amount is sensitive to changes to the key assumptions.
Changing each assumption independently, an increase in the discount rate of 7.9% (a 77 basis point increase), a
decrease in the gross profit percentage or an increase in the selling and administration margin of 6.3% (a 150 basis
point decrease), a decrease in the average revenue growth rate of 11.1% (a 27 basis point decrease) or a decrease in the
terminal growth rate of 31.2% (101 basis points) would result in the recoverable amount being equal to the carrying
amount. As each key assumption was changed independently, the results of the sensitivity analyses do not contemplate
management’s ability to mitigate against any adverse effects that may arise in the future.
9
Accounts payable and accrued liabilities
2024
$
2023
$
Trade payables
22,615
26,964
Accrued liabilities
23,967
19,214
Deferred revenue
1,724
1,616
48,306
47,794
ANDREW PELLER LIMITED 2024 |
40
10 Right-of-use assets and lease obligations
Vineyard
land
$
Buildings
$
Machinery
and
equipment
$
Total
$
Closing net carrying amount as at
March 31, 2022
6,085
6,395
2,735
15,215
Year ended March 31, 2023
Additions
395
1,231
1,205
2,831
Terminations
-
(11)
(50)
(61)
Amortization
(466)
(2,702)
(1,205)
(4,373)
Closing net carrying amount as at
March 31, 2023
6,014
4,913
2,685
13,612
Year ended March 31, 2024
Additions
691
8,272
2,066
11,029
Terminations
(556)
(1,597)
(372)
(2,525)
Amortization
(487)
(3,601)
(1,035)
(5,123)
Closing net carrying amount as at
March 31, 2024
5,662
7,987
3,344
16,993
The lease obligations transactions during the year were as follows:
Lease obligations
2024
$
2023
$
Balance – Beginning of year
14,728
16,263
Additions
11,029
2,831
Terminations
(2,803)
(62)
Repayments
(5,812)
(4,991)
Interest
877
687
Balance – End of year
18,019
14,728
Less: Current portion of lease obligations
5,370
4,523
Lease obligations
12,649
10,205
Expenses related to leases with variable consideration amounting to $995 (2023 – $1,015) and short-term leases and
low value leases amounting to $1,508 (2023 – $1,651) were recorded within selling and administration expenses. The
total cash outflows relating to leases during the year were $8,315 (2023 – $7,657).
Some property leases contain variable payment terms that are linked to sales generated from a store. For individual
stores, up to 100% of lease payments are on the basis of variable payment terms. Variable lease payments are
recognized in the consolidated statements of loss in the period in which the condition that triggers those payments
occurs. A 5% increase in sales across all stores with such variable lease contracts would not result in a material change
to the total lease payments.
41
| ANDREW PELLER LIMITED 2024
11 Bank indebtedness and Long-term debt
2024
$
2023
$
Bank indebtedness
199
4,942
Revolving, amortizing loan – investment facility
208,294
208,129
Less: Financing costs
-
40
Long-term debt
208,294
208,089
On June 13, 2023, the Company amended and restated its credit facility, which is now comprised of an asset backed
revolving facility maturing on June 13, 2027. The overall facility size was reduced from $350,000 to $275,000, and the
borrowing limit is based on certain percentages of the fair value of accounts receivable, inventory and real property.
The facility is an interest-only facility with principal repayment due upon maturity, unless the borrowing limit is
reduced below the amount borrowed, at which time, the excess amount borrowed must be repaid immediately. The
facility is to be used to fund day-to-day operations, distributions, capital expenditures and acquisitions.
The amended credit facility is subject to a minimum fixed charge coverage ratio covenant when excess availability as a
percentage of the facility limit is below a certain level.
On June 30, 2023, the Company entered into an interest rate swap agreement with a notional amount of $65,000. Until
June 13, 2027, the interest rate on this portion of the facility is fixed at 4.46%, plus the applicable margin. The interest
rate on the balance of the facility has a variable interest rate of CDOR, plus the applicable margin. As at March 31,
2024, the applicable margin was 2.50%.
Management performed an assessment, which included reviewing qualitative factors, and determined that these
amendments constitute an extinguishment of long-term debt, which resulted in the derecognition of the carrying
amount of the original credit facility and the recognition of the restated facility and fair market value. As a result, the
Company recorded a loss on extinguishment of $995 and financing fees of $1,177 were expensed immediately.
The Company and its subsidiaries have provided their assets as security for these loans.
The following table summarizes the change in the Company’s long-term debt arising from financing activities for the
year ended March 31, 2024:
$
Balance – Beginning of year
208,089
Drawings
21,000
Repayments
(23,043)
Loss on debt extinguishment and financing fees
995
Amortization of deferred financing fees
4
Interest expense
15,299
Interest paid
(14,050)
Balance – End of year
208,294
ANDREW PELLER LIMITED 2024 |
42
12 Post-employment benefits
Defined contribution plans
The total expenses for the defined contribution savings plans were $2,739 (2023 – $2,669).
Defined benefit plans
The Company has funded defined benefit pension plans. The Company also has an unfunded 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. In June 2023, as part of the new collective bargaining agreement, the
Company’s other post-employment benefit plan for retiring bonuses was terminated and there are no future funding
requirements for the Company under this plan. In connection with this transaction, the Company recognized a
curtailment gain of $207, which was recorded as part of the net benefit plan expense in the consolidated statements of
loss.
Nature
The Company’s defined benefit pension plans pay benefits based on a percentage of final average salary. There is one
defined benefit pension plan in British Columbia with members who continue to accrue benefits. New employees are
no longer entitled to accrue benefits under these defined benefit pension plans. There is one defined benefit pension
plan in Ontario and no further benefits accrue to the members of this plan. All members of the defined benefit pension
plan in Ontario have retired. The Company is responsible for administering these pension plans and determining
investment policies. A committee of the Company’s Board of Directors is responsible for overseeing the Company’s
defined benefit pension plans.
Regulatory information
The defined benefit pension plans are governed by the Pension Benefits Standards Act in British Columbia and the
Pension Benefits Act in Ontario. An appointed actuary prepares a valuation at least every three years for each of the
plans. These valuations determine the Company’s minimum contributions. The minimum contributions are primarily
based on the normal going concern cost, the funding deficit amortized over 15 years, and the solvency deficit amortized
over five years. The solvency deficit is calculated assuming the plan is wound up on the effective date of the valuation.
Contributions could be reduced in certain instances via a funding holiday if requirements of the relevant regulations are
met, which normally require the plan to have a surplus above certain threshold levels.
Risks
The defined benefit plan’s assets are invested in mutual funds. The investment mix for each plan is chosen with the
objective that sufficient assets will be available to pay benefits as they come due and to achieve a reasonable return at
an acceptable level of risk to stakeholders. The defined benefit plans subject the Company to market, interest rate,
currency, price, credit, liquidity and longevity risks, which are typical of such plans. The most significant of these risks
is that 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’s assets set aside to pay these benefits. 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.
43
| ANDREW PELLER LIMITED 2024
Amounts pertaining to defined benefit plans are as follows:
2024
Pension
benefits
$
Other post-
employment
benefits
$
Total
$
Plan assets
Fair value – Beginning of year
20,611
-
20,611
Return on plan assets excluding amounts in
interest income
96
-
96
Interest income
973
-
973
Company’s contributions
515
88
603
Benefits paid
(1,189)
(88)
(1,277)
Fair value – End of year
21,006
-
21,006
Plan obligations
Accrued benefit obligations – Beginning of
year
19,732
2,150
21,882
Total current service cost
210
56
266
Interest cost
928
98
1,026
Benefits paid
(1,189)
(88)
(1,277)
Curtailment gain
-
(207)
(207)
Remeasurements
Experience (gain) loss
94
(409)
(315)
Past service cost
-
75
75
Accrued benefit obligations – End of year
19,775
1,675
21,450
Post-employment benefit (asset) obligation
(1,231)
1,675
444
Benefit plan expense
Current service cost
210
56
266
Net interest (income) cost on defined benefit
liability
(45)
98
53
Curtailment gain
-
(207)
(207)
Past service cost
-
75
75
Net benefit plan expense
165
22
187
Amount recognized in other comprehensive
income
Net actuarial gain
2
409
411
Expected contributions for the year ending
March 31, 2025
522
90
612
Weighted average duration of the defined benefit
obligations in years
9.6
10.2
9.7
ANDREW PELLER LIMITED 2024 |
44
2023
Pension
benefits
$
Other post-
employment
benefits
$
Total
$
Plan assets
Fair value – Beginning of year
22,733
-
22,733
Return on plan assets excluding amounts in
interest income
(1,965)
-
(1,965)
Interest income
888
-
888
Company’s contributions
193
86
279
Benefits paid
(1,238)
(86)
(1,324)
Fair value – End of year
20,611
-
20,611
Plan obligations
Accrued benefit obligations – Beginning of
year
22,064
2,274
24,338
Total current service cost
261
66
327
Interest cost
868
92
960
Benefits paid
(1,238)
(86)
(1,324)
Remeasurements
Experience gain
(517)
(84)
(601)
Gain from change in financial
assumptions
(1,706)
(112)
(1,818)
Accrued benefit obligations – End of year
19,732
2,150
21,882
Post-employment benefit (asset) obligation
(879)
2,150
1,271
Benefit plan expense
Current service cost
261
66
327
Net interest (income) cost on defined benefit
liability
(20)
92
72
Net benefit plan expense
241
158
399
Amount recognized in other comprehensive
income
Net actuarial gain
258
196
454
Expected contributions for the year ending
March 31, 2024
193
88
281
Weighted average duration of the defined benefit
obligations in years
10.0
9.7
10.0
The significant actuarial assumptions adopted in measuring the Company’s accrued benefit obligations and benefits
costs are as follows:
2024
%
2023
%
Discount rate for expenses
4.8
4.0
Discount rate for obligations
4.8
4.8
Rate of compensation increase
2.5
2.5
Rate of medical cost increases
5.0
5.0
Retirement age
60 – 65 years
60 – 65 years
Inflation rate
2.0
2.0
Mortality tables
MI-2017
MI-2017
45
| ANDREW PELLER LIMITED 2024
The following table outlines the impact of a reasonable change in significant assumptions assuming all other
assumptions are held constant. Changes in numerous assumptions may occur at the same time, which could increase or
decrease the impact. With respect to a 1% increase or decrease in the inflation rate, the analysis excludes any impact
this would have on the discount rate, medical cost trend rates and the rate of compensation increase.
2024
2023
Pension
benefits
$
Other post-
employment
benefits
$
Pension
benefits
$
Other post-
employment
benefits
$
Increase (decrease) in the post-employment
benefit obligations
1% increase in the discount rate
(1,714)
(149)
(1,772)
(189)
1% decrease in the discount rate
2,101
195
2,167
230
1% increase in the rate of compensation
increase
173
-
158
-
1% decrease in the rate of compensation
increase
(133)
-
(95)
-
1% increase in the inflation rate
224
-
13
-
1% decrease in the inflation rate
(207)
-
(12)
-
As at March 31, 2024, the accumulated actuarial losses, net of deferred taxes, recognized in other comprehensive
income were $718 (2023 – $1,021).
Plan assets
The plan assets consist of the following:
2024
2023
$
%
$
%
Mutual funds
Fixed income
14,952
71
14,581
71
Equity
6,054
29
6,030
29
21,006
100
20,611
100
ANDREW PELLER LIMITED 2024 |
46
13 Income taxes
2024
$
2023
$
Current income tax expense (recovery)
2,636
(2,037)
Prior period current tax adjustment
2,067
-
Current income tax expense (recovery)
4,703
(2,037)
Change in temporary differences
(2,605)
1,192
Prior period deferred tax adjustment
(2,131)
-
Impact of change in tax rate
(1)
(43)
Deferred income tax (recovery) expense
(4,737)
1,149
Total income tax recovery
(34)
(888)
The Company’s income tax (recovery) expense consists of the following:
2024
$
2023
$
Income taxes at blended statutory rate of
26.41% (2023 – 26.40%)
(762)
(1,119)
Permanent differences and non-deductible items
212
504
Future income tax rate changes
(1)
(43)
Effect of temporary differences not recognized
358
-
Prior period current tax adjustment
2,067
-
Prior period deferred tax adjustment
(2,131)
-
Other
223
(230)
(34)
(888)
The movement of the deferred income tax account is as follows:
2024
$
2023
$
Beginning of year
33,695
32,426
Deferred income taxes in net loss
(4,737)
1,149
Deferred income taxes in other comprehensive income
108
120
End of year
29,066
33,695
The significant temporary differences giving rise to the deferred income tax liability are comprised of the following:
47
| ANDREW PELLER LIMITED 2024
Deferred income tax liability
Accelerated tax
depreciation
and deductions
on property,
plant and
equipment
$
Accelerated
tax
deductions
on intangible
assets
$
Tax
deductions
on goodwill
$
Total
$
March 31, 2022
22,061
14,663
731
37,455
(Income) expense in net loss
1,487
(55)
9
1,441
March 31, 2023
23,548
14,608
740
38,896
(Income) expense in net loss
528
(493)
9
44
March 31, 2024
24,076
14,115
749
38,940
Deferred income tax asset
Lease
obligations
$
Post-
employment
benefits
$
Other
$
Total
$
March 31, 2022
(4,298)
(424)
(307)
(5,029)
Income in net loss
414
(31)
(675)
(292)
Expense in other comprehensive income
-
120
-
120
March 31, 2023
(3,884)
(335)
(982)
(5,201)
(Income) expense in net loss
(865)
111
(4,027)
(4,781)
Expense in other comprehensive income
-
108
-
108
March 31, 2024
(4,749)
(116)
(5,009)
(9,874)
The tax effects of temporary differences and loss carry forwards that give rise to significant portions of the deferred tax
asset, which have not been recognized, are approximately as follows:
2024
$
2023
$
Property, plant and equipment
1,556
229
Non-capital losses
2,948
2,949
4,504
3,178
ANDREW PELLER LIMITED 2024 |
48
The Company has the following non-capital losses available to reduce future years’ federal and provincial taxable
income, which have not been recognized and expire as follows:
$
2042
2,175
2043
773
2,948
The income tax effects relating to components of accumulated other comprehensive loss are as follows:
2024
2023
Before
income tax
amount
$
Deferred
tax
expense
$
Net of
income tax
expense
$
Before
income tax
amount
$
Deferred
tax
expense
$
Net of
income tax
expense
$
Accumulated actuarial
losses
951
233
718
1,362
341
1,021
14 Capital stock
Authorized
Unlimited preference shares
Unlimited Class A Common Shares, non-voting
Unlimited Class B Common Shares, voting
Issued
2024
2023
Number
of shares
Amount
$
Number
of shares
Amount
$
Class A Common
Shares,
non-voting
35,243,647
28,471
35,040,656
27,669
Class B Common
Shares, voting
8,144,183
364
8,144,183
364
43,387,830
28,835
43,184,839
28,033
All of the issued Class A and Class B Common Shares are fully paid and have no par value.
Class A Common 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 Common Shares. Class B Common Shares are voting and convertible into Class A
Common Shares on a one-for-one basis. During the year ended March 31, 2024, no Class B Common Shares were
converted into Class A Common Shares.
As described in note 15, 187,776 Class A Common Shares were issued as a result of the exercise of share-based awards
during the year ended March 31, 2024. In addition to the shares issued due to the exercise, the holders of DSUs, RSUs
and PSUs earn dividends in the form of additional units and as a result, the Company issued an additional 15,215 Class
49
| ANDREW PELLER LIMITED 2024
A Common Shares.
Annual dividends of $0.246 (2023 – $0.246) per Class A Common Share and $0.214 (2023 – $0.214) per Class B
Common Share were approved by the Board of Directors on June 14, 2023 and are formally declared in each quarter.
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, 2024 and 2023, there
were no preference shares issued or outstanding.
Stock purchase plan
The Company’s full-time salaried and certain hourly employees participate in a Company sponsored stock purchase
plan. Under the terms of the plan, employees can purchase a certain number of Class A Common Shares on an annual
basis. Employees are required to pay 67% of the market price per Class A Common Share. The Company is responsible
for the remainder of the cost and, during 2024, expensed $244 (2023 – $251) related to the employee program.
15 Share-based compensation
The Company has a share-based compensation plan comprised of stock options, PSUs, RSUs and DSUs. The impact of
the share-based compensation expense is summarized as follows:
2024
$
2023
$
1,966,500 stock options (2023 – 1,641,335) (a)
322
575
462,114 performance share units (2023 – 402,781) (b)
(130)
481
246,038 restricted share units (2023 – 143,486) (c)
362
427
29,559 deferred share units (2023 – 71,529) (d)
-
-
554
1,483
The stock options, PSUs, RSUs and DSUs are equity settled and, as such, the expense associated with these instruments
is recorded as a share-based compensation expense through the consolidated statements of loss and comprehensive loss
with a corresponding entry made to contributed surplus on the consolidated balance sheets.
The maximum number of shares that may be issued under all share-based compensation arrangements implemented by
the Company, including the stock option plan, the PSU plan, the RSU plan and the DSU plan, may not exceed 10% of
the total number of Class A non-voting Common Shares issued and outstanding from time to time. As at March 31,
2024, the Company had 2,975,821 Class A non-voting Common Shares reserved for issuance under the share-based
compensation arrangements.
ANDREW PELLER LIMITED 2024 |
50
(a) Stock options
The Company has a stock option plan under which options to purchase Class A non-voting Common Shares may
be granted to officers and employees of the Company. Options granted under the plan have an exercise price of
not less than the volume weighted average trading price of the Class A non-voting Common Shares where they are
listed for the five trading days prior to the date of the grant. Options granted vest in tranches, equally over a three-
year period on each anniversary of the grant date, commencing on the first anniversary of the grant date.
The Company’s stock option transactions during the year were as follows:
2024
2023
Number of
options
Weighted
average
exercise price
per share
$
Number of
options
Weighted
average
exercise price
per share
$
Balance – Beginning of year
1,641,335
9.95
1,303,367
11.19
Granted
543,100
4.40
447,133
5.70
Forfeited
(217,935)
(10.93)
(109,165)
(7.28)
Balance – End of year
1,966,500
8.31
1,641,335
9.95
Exercisable
1,109,564
10.80
950,535
12.02
For options granted during the year, the fair value was estimated on the grant date using the Black-Scholes fair
value option pricing model using the following weighted average assumptions:
2024
2023
Weighted average fair value per share option
$0.74
$1.38
Expected volatility (1)
26.64%
25.50%
Dividend yield
4.91%
2.85%
Risk-free interest rate
3.38%
3.14%
Weighted average expected life in years
10
10
(1) Expected volatility was determined using historical volatility.
Information relating to stock options outstanding and exercisable as at March 31, 2024 is as follows:
Share options outstanding
Share options exercisable
Range of
exercise
prices
Weighted
average
remaining
life
(in months)
Number
of share
options
Weighted
average
exercise
price
$
Weighted
average
remaining
life
(in months)
Number
of share
options
Weighted
average
exercise
price
$
0.01 to 5.00
119
543,100
4.40
-
-
-
5.01 to 10.00
89
969,800
7.84
84
655,964
8.51
10.01 to 15.00
56
344,200
13.11
56
344,200
13.11
15.01 to 20.00
53
109,400
17.21
53
109,400
17.21
89 1,966,500
8.31
72
1,109,564
10.80
51
| ANDREW PELLER LIMITED 2024
(b) PSU plan
The Company has established a PSU plan for employees and officers of the Company. PSUs represent the right to
receive Class A non-voting Common Shares settled by the issuance of treasury shares or shares purchased on the
open market. PSUs vest in full at the end of the third fiscal year after the grant date. The number of units that will
vest is determined based on the achievement of certain performance conditions (i.e., financial targets) established
by the Board of Directors and are adjusted by a factor, which ranges from 0.5 to 2.0, depending on the
achievement of the targets established. Therefore, the number of units that will vest and are exchanged for Class A
non-voting Common Shares may be higher or lower than the number of units originally granted to a participant.
The Company’s PSU transactions during the year were as follows:
2024
2023
Number of
units
Grant date
fair value
per unit
$
Number of
units
Grant date
fair value
per unit
$
Balance – Beginning of year
402,781
7.40
292,731
10.13
Granted
183,090
4.40
213,020
5.70
Exercised
(46,555)
(9.31)
(32,165)
(14.14)
Forfeited
(77,202)
(8.30)
(70,805)
(10.52)
Balance – End of year
462,114
5.87
402,781
7.40
Exercisable
-
-
46,555
9.31
Awards granted in September 2021 vested March 31, 2024 and as the performance conditions were not met, no
shares were issued.
(c) RSU plan
The Company has established an RSU plan for employees and officers of the Company. RSUs represent the right
to receive Class A non-voting Common Shares settled by the issuance of treasury shares or shares purchased on
the open market. RSUs will vest ratably over the restriction period, as to one-third of the RSUs on each
anniversary of the grant date, commencing on the first anniversary of the grant date.
The Company’s RSU transactions during the year were as follows:
2024
2023
Number of
units
Grant date
fair value
per unit
$
Number of
units
Grant date
fair value
per unit
$
Balance – Beginning of year
143,486
6.51
62,750
8.75
Granted
165,320
4.40
115,180
5.70
Exercised
(48,921)
(6.77)
(20,916)
(8.75)
Forfeited
(13,847)
(6.52)
(13,528)
(6.58)
Balance – End of year
246,038
5.04
143,486
6.51
ANDREW PELLER LIMITED 2024 |
52
(d) DSU plan
The Company has established a DSU plan for employees, officers and directors of the Company. DSUs represent
the right to receive Class A non-voting Common Shares settled by the issuance of treasury shares or shares
purchased on the open market. DSUs vest immediately but are only exercisable when the participant’s
employment with the Company ceases, or when the participant is no longer a director of the Company. DSUs may
be offered to directors of the Company subsequent to the year in which fees are earned. As a result, the issuance of
DSUs is reflected as an increase to contributed surplus in the year the offer is made, which may not correspond to
when the expense is recognized.
The Company’s DSU transactions during the year were as follows:
2024
2023
Number of
units
Grant date
fair value
per unit
$
Number of
units
Grant date
fair value
per unit
$
Balance – Beginning of year
71,529
12.03
57,799
14.43
Issued
45,800
4.13
19,500
6.77
Exercised
(87,770)
(8.16)
(5,770)
(18.22)
Balance – End of year
29,559
12.82
71,529
12.03
16 Nature of expenses
The nature of expenses included in selling and administration and cost of goods sold, excluding amortization, are as
follows:
2024
$
2023
$
Raw materials and consumables
189,381
186,340
Employee compensation and benefits (note 23)
93,333
89,751
Advertising, promotion and distribution
29,442
33,903
Occupancy
11,861
11,230
Repairs and maintenance
8,050
8,910
Other external charges (note 23)
27,869
24,289
Wine Sector Support Program grant (note 17)
(14,909)
(10,295)
345,027
344,128
Other expenses, net are as follows:
2024
$
2023
$
Ongoing costs related to Port Moody winery facility, net of rental
income (a)
(400)
678
Restructuring (b)
805
2,795
Other (c)
725
74
1,130
3,547
53
| ANDREW PELLER LIMITED 2024
(a) During fiscal 2006, the Company closed its Port Moody winery facility and transferred production to its
winery operations in Kelowna, British Columbia. The costs of maintaining this idle facility are recorded in
other expenses, net and are offset by rental income earned.
(b) Restructuring costs of $805 (2023 – $2,795) were recorded during the year ended March 31, 2024. These costs
relate to severance and other restructuring costs of certain departments within the Company.
(c) During fiscal 2024, other expenses include certain professional fees in relation to the director resignations that
occurred in November 2023.
17 Government programs
Wine Sector Support Program grant
In June 2022, Agriculture Canada announced the Wine Sector Support Program (WSSP) to provide non-repayable
grants to licensed Canadian wineries based on the production of bulk wine fermented in Canada from domestic and/or
imported grapes.
During the year, the Company received $16,215 (2023 – $18,050) under this program, with the offset recorded as a
reduction to the cost of inventory. In the Company’s judgment, based on the provisions of the program, the grants are
intended to compensate for inventory production costs that the Company incurred to produce bulk wine, and will be
recognized in the consolidated statements of loss as a reduction in the cost of goods sold in the period the eligible wine
is sold or is recognized as a reduction in the cost of inventory to the extent that the eligible wine is unsold and remains
in inventory.
For the year ended March 31, 2024, $14,909 of the grants have been recognized as a credit to cost of goods sold (2023
– $10,295) and $9,061 remains recorded as a reduction to the cost of inventory (2023 – $7,755) which will be released
to cost of goods sold as the inventory is sold.
Vintners Quality Alliance (VQA) and other domestic support programs
Included within revenue is product revenue of $375,940 (2023 – $378,931) and other revenue associated with various
provincial wine support programs of $9,916 (2023 – $3,209). The stated objectives of the programs are to provide
grants to help wineries invest in growing their VQA wine business and promote investment in growing the VQA and
the domestic wine industry in Canada. Funds received under these programs are earned in the ordinary course of
business and are estimated based on program documentation and the Company’s determination of product eligibility.
The amounts are subject to change as the programs are administered.
18 Net loss per share
2024
Class A
$
Class B
$
Total
$
Net loss attributed for the year – basic and diluted
(2,374)
(478)
(2,852)
Weighted average number of shares outstanding –
basic and diluted
35,137,593
8,144,183
Net loss per share – basic and diluted
(0.07)
(0.06)
ANDREW PELLER LIMITED 2024 |
54
2023
Class A
$
Class B
$
Total
$
Net loss attributed for the year – basic and diluted
(2,788)
(564)
(3,352)
Weighted average number of shares outstanding –
basic and diluted
35,019,457
8,144,183
Net loss per share – basic and diluted
(0.08)
(0.07)
19 Contingent liabilities and unrecognized contractual commitments
The Company is subject to various claims by third parties arising out of the normal course and conduct of its business,
including, but not limited to, labour and employment and regulatory and environmental claims. In addition, the
Company is potentially subject to regular audits from federal and provincial tax authorities relating to income,
commodity and capital taxes and as a result of these audits, may receive assessments and reassessments. Although such
matters cannot be predicted with certainty, management currently considers the Company’s exposure to such claims
and litigation, to the extent not covered by the Company’s insurance policies or otherwise provided for, not to be
material to these consolidated financial statements.
20 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:
2024
$
2023
$
Accounts receivable
(8,085)
2,079
Inventories and current portion of biological assets
18,040
(20,742)
Prepaid expenses and other assets
843
1,400
Accounts payable and accrued liabilities
(263)
2,775
10,535
(14,488)
21 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:
2024
Assets/liabilities
Category
Measurement
Carrying
amount
$
Fair
value
$
Accounts receivable
Financial assets
Amortized cost
33,382
33,382
Bank indebtedness
Financial liabilities
Amortized cost
199
199
Accounts payable and
accrued liabilities
Financial liabilities
Amortized cost
48,306
48,306
Dividends payable
Financial liabilities
Amortized cost
2,603
2,603
Long-term debt
Financial liabilities
Amortized cost
208,294
208,294
55
| ANDREW PELLER LIMITED 2024
2023
Assets/liabilities
Category
Measurement
Carrying
amount
$
Fair
value
$
Accounts receivable
Financial assets
Amortized cost
25,297
25,297
Bank indebtedness
Financial liabilities
Amortized cost
4,942
4,942
Accounts payable and
accrued liabilities
Financial liabilities
Amortized cost
47,794
47,794
Dividends payable
Financial liabilities
Amortized cost
2,591
2,591
Long-term debt
Financial liabilities
Amortized cost
208,089
208,129
The Company’s interest rate swaps and foreign exchange contracts are derivatives and are recorded at fair value. As a
result, unrealized gains and losses are included each period through (loss) 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 bank indebtedness and 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 swaps used to fix the interest rate on long-term
debt is included in the current and long-term derivative financial instruments in the consolidated balance sheets.
The fair value of foreign exchange forward contracts is determined based on the difference between the contract rate
and the forward rate at the date of the valuation.
The fair value of the interest rate swaps is determined based on the difference between the fixed interest rate in the
contract that will be paid by the Company and the forward curve of the floating interest rates that are expected to be
paid by the counterparty. The fair values of foreign exchange forward contracts and the interest rate swaps are adjusted
to reflect any changes in the Company’s or the counterparty’s credit risk.
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 loss (gain) on derivative financial instruments is comprised of:
2024
$
2023
$
Unrealized loss (gain) on interest rate swaps
739
(340)
Unrealized gain on foreign exchange forward contracts
(98)
(40)
641
(380)
ANDREW PELLER LIMITED 2024 |
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.
2024
Asset/liability
Quoted prices in
active markets
for
identical assets
(Level 1)
$
Significant
observable
inputs
other than
quoted prices
(Level 2)
$
Significant
unobservable
inputs
(Level 3)
$
Interest rate swap liability
-
(739)
-
Foreign exchange forward contracts asset
-
98
-
2023
Asset/liability
Quoted prices in
active markets
for
identical assets
(Level 1)
$
Significant
observable
inputs
other than
quoted prices
(Level 2)
$
Significant
unobservable
inputs
(Level 3)
$
Interest rate swap liability
-
-
-
Foreign exchange forward contracts liability
-
-
-
Objectives and policy relating to financial risk management
Interest rate risk
The Company is exposed to interest rate risk as a result of cash balances and floating rate debt. 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 it meets borrowing covenants, and ensuring 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 $65,000 of its long-term debt until June 13, 2027 by entering into
interest rate swaps. The interest rate swaps are measured at fair value. For the year ended March 31, 2024, the
Company recorded a net unrealized non-cash loss of $739 (2023 – net unrealized gain of $340) related to mark-to-
market adjustments on interest rate swaps, which are classified as a component of the net unrealized loss on derivative
financial instruments in the consolidated statements of loss.
The remaining portion of the Company’s borrowings are funded using a floating interest rate and as such, are sensitive
to interest rate movements. As at March 31, 2024, with other variables unchanged, a 100 basis point change in interest
rates would impact the Company’s net loss by approximately $1,062 (2023 – $1,576), exclusive of the mark-to market
adjustments on the interest rate swaps.
57
| ANDREW PELLER LIMITED 2024
Credit risk
Credit risk arises from cash, derivative financial instruments and accounts receivable. The Company places its cash and
cash equivalents with major Canadian financial institutions. Counterparties to derivative contracts are also major
financial institutions.
Credit risk for trade receivables is monitored through established credit monitoring activities. Over 42% 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 represent $14,311 (2023 – $14,091) of the total accounts receivable against which an expected credit loss of $46
(2023 - $22) has been provided. Of the remaining non-provincial liquor board balances, $1,924 (2023 – $1,246) was
over thirty days past due as at March 31, 2024. An expected credit loss of $222 (2023 – $207) has been provided
against these accounts receivable amounts, which the Company has determined represents a reasonable estimate of the
lifetime expected credit losses for trade receivables.
Sales to its largest customer, a provincial Crown corporation, were $74,185 (2023 – $66,855) during the year ended
March 31, 2024. Sales to its second largest customer, a branch of a provincial government, were $26,923 (2023 –
$25,590) during the year. No other customers accounted for over 10% of sales during the years ended March 31, 2024
and 2023.
An analysis of accounts receivable is as follows:
2024
$
2023
$
Liquor boards
14,311
14,091
Non-liquor boards
Current
15,698
9,475
Past due 0 – 30 days
1,717
714
Past due 31 – 60 days
468
160
Past due > 60 days
1,456
1,086
Expected credit loss
(268)
(229)
33,382
25,297
The change in the expected credit loss was as follows:
2024
$
2023
$
Balance – Beginning of year
229
316
Provision for expected credit losses
97
52
Writeoffs
(58)
(139)
Balance – End of year
268
229
Liquidity risk
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 lease payments.
The Company manages liquidity risk by maintaining adequate cash and cash equivalent balances and by appropriately
utilizing its operating 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
and accrued liabilities are generally due within 30 days.
ANDREW PELLER LIMITED 2024 |
58
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, leases and service agreements as at March 31, 2024.
< 1
year
$
2 – 3
years
$
4 – 5
years
$
> 5
years
$
Total
$
Long-term debt
-
-
208,294
-
208,294
Leases
6,045
8,511
3,279
5,775
23,610
Service and royalty agreements
2,810
3,230
1,100
11,550
18,690
Pension
274
480
-
-
754
Grape, bulk wine and whisky
purchase contracts
77,033
94,852
90,078
251,479
513,442
Packaging purchase contracts
16,730
35,403
-
-
52,133
102,892
142,476
302,751
268,804
816,923
Interest rate swaps
2,896
5,792
611
-
9,299
Foreign exchange forwards
8,859
-
-
-
8,859
Total contractual obligations
114,647
148,268
303,362
268,804
835,081
The Company’s obligations under its interest rate swaps and foreign exchange forward contracts are stated above on a
gross basis rather than net of the corresponding contractual benefits.
The Company has entered into grape purchase contracts with certain suppliers to purchase their crops at the time of
harvest for prices set by the market. The amount of the commitment will change based on the total tonnes harvested or
the prices set by the market for specific grapes, and the amount included in the table above represents management’s
best estimate of the Company’s commitment over the periods noted.
Foreign exchange risk
Certain of the Company’s purchases are denominated in US dollars (US$), euro (EUR) or Australian dollars (AU$).
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 will enter into forward foreign currency contracts.
The Company’s foreign exchange risk arises on the purchase of bulk wine and concentrate, which are priced in US
dollars, euro and Australian dollars. As at March 31, 2024, the Company has forward foreign currency contracts to buy
US$6,000 at rates averaging $1.34 and AU$1,200 at a rate of $0.89. A 1% increase or decrease to the exchange rate of
the US dollar, the euro or the Australian dollar would impact the Company’s net loss by approximately $357 (2023 –
$484), $37 (2023 – $96) or $58 (2023 – $58), respectively. The Company has elected to not use hedge accounting and
as a result, has recognized unrealized foreign exchange gains of $98 (2023 – $40) in the consolidated statements of loss
as a component of the net unrealized loss on derivative financial instruments and has recorded the fair value of $98
(2023 – $nil) in the current portion of derivative financial instruments in the consolidated balance sheets.
59
| ANDREW PELLER LIMITED 2024
22 Capital disclosures
The Company’s objective when managing capital is to safeguard the Company’s ability to continue 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 fund working capital, 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 debt agreement, the Company is subject to financial covenants, which consist of the following:
• Excess availability must exceed 12.5% of the lesser of the facility size or the borrowing limit, which is calculated
based on certain percentages of the fair value of accounts receivable, inventory and real property; and
• At any time that the excess availability is below 12.5%, the Company must maintain a minimum fixed charge
coverage ratio.
Compliance with these covenants is monitored by management on a quarterly basis. As at March 31, 2024, the
Company was in compliance with the excess availability covenant.
23 Related parties and management compensation
During fiscal 2024, the Company entered into agreements with its controlling shareholder, and others to formalize the
retirement and transition of the President and CEO. The Company has also entered into a transition agreement with
Peller Family Enterprises Inc. and the Peller family, which includes provisions relating to the composition of the Board
of Directors for a 24-month period.
The transition agreement also requires Peller Family Enterprises Inc. and John E. Peller to vote in alignment for a
period of 24 months. As such, the Company is jointly controlled by Peller Family Enterprises Inc., which owns 48.6%
(2023 – 61.3%) and John E. Peller, who beneficially owns 24.5% (2023 – 11.7%) of the Company’s Class B voting
Common Shares. No individual has sole voting power or control in respect of the shares of the Company owned by
Peller Family Enterprises Inc.
The Company paid $3,000 in legal and advisory fees incurred by certain shareholders in connection with these
agreements, which has been recorded within other external charges as part of selling and administration expense in the
consolidated statements of loss.
Compensation of directors and executives
The compensation expense recorded for directors and members of the Executive Management Team of the Company is
shown below:
2024
$
2023
$
Compensation and short-term benefits
4,172
4,266
Termination benefits
4,480
1,032
Post-employment benefits
263
339
Share-based compensation expense
390
1,081
9,305
6,718
ANDREW PELLER LIMITED 2024 |
60
The Company has agreed to pay $4,480 in a retirement allowance to the President and CEO, which has been recorded
within employee compensation and benefits as part of selling and administration expense in the consolidated statements
of loss. The Company has also agreed to pay $2,000 in consulting services to the President and CEO, which has been
recorded within other external charges as part of selling and administration expense in the consolidated statements of
loss. These payments will begin once the successor is appointed and will be fully settled within a 24-month period.
The remaining compensation and short-term benefits expense consist of amounts that will primarily be settled within
twelve months.
24 Entity wide disclosures
During the year, export sales were $12,148 (2023 – $10,593), primarily in the United States. The remainder of sales
occurred in Canada. All of the Company’s assets are located in Canada.
25 Events after the reporting period
On June 18, 2024, the Company’s Board of Directors approved a common share dividend of $0.0615 per Class A share
and $0.0535 per Class B share, to be paid on July 12, 2024.
61
| ANDREW PELLER LIMITED 2024
TEN-YEAR SUMMARY
(in thousands, except per share amounts)
2024
2023
2022
2021
2020
Sales and earnings
Net sales
$ 385,856
$ 382,140
$ 373,944
$ 393,036
$ 382,306
EBITA
50,309
38,012
39,188
63,046
61,501
Net (loss) earnings
(2,852)
(3,352)
12,468
27,786
23,494
Financial position
Working capital
171,666
186,318
181,832
170,684
83,654
Total assets
553,199
567,867
558,071
542,521
513,919
Shareholders’ equity
241,437
253,638
265,401
265,574
245,523
Per share (3)
Net (loss) earnings (3)
Basic & diluted Class A
(0.07)
(0.08)
0.29
0.65
0.55
Basic & diluted Class B
(0.06)
(0.07)
0.26
0.57
0.48
Dividends (3)
Class A Common Shares, non-voting
0.246
0.246
0.246
0.218
0.215
Class B Common Shares, voting
0.214
0.214
0.214
0.190
0.187
Number of shares outstanding (3)
Class A Common Shares, non-voting
35,244
35,041
34,978
35,526
35,404
Class B Common Shares, voting
8,144
8,144
8,144
8,144
8,192
43,388
43,185
43,122
43,670
43,596
Other information
Return on average
shareholders’ equity (1)
(1.2%)
(1.3%)
4.7%
10.9%
9.8%
Return on average
capital employed (2)
5.9%
3.2%
3.8%
10.1%
10.7%
(1)
Return on average shareholders' equity is calculated as net (loss) earnings divided by average shareholders’ equity.
(2)
To determine return on average capital employed, return is calculated as EBITA less amortization. Capital employed is calculated as total assets less non-interest bearing liabilities.
(3)
Restated to reflect the three-for-one stock split completed in October of 2016.
(4)
Restated to reflect the adoption of the amendments to IAS 16 and IAS 41
ANDREW PELLER LIMITED 2024 |
62
2019
2018
2017
2016
2015
Restated (4)
$ 381,796
$ 363,897
$ 342,606
$ 334,263
$ 315,697
52,875
52,860
45,137
40,916
35,184 (4)
21,958
30,117
26,350
19,199
15,224 (4)
97,305
104,417
78,825
71,665
68,982
467,019
457,780
327,478
308,309
301,519 (4)
234,751
220,246
177,317
157,736
147,375 (4)
0.51
0.71
0.64
0.46
0.36 (4)
0.44
0.62
0.55
0.40
0.32 (4)
0.205
0.180
0.163
0.150
0.140
0.178
0.156
0.142
0.130
0.122
35,988
35,471
33,581
33,581
33,882
8,199
8,702
9,012
9,012
9,012
44,187
44,173
42,593
42,593
42,894
9.7%
15.2%
15.7%
12.6%
10.6% (4)
11.5%
14.0%
14.1%
13.2%
11.0% (4)
63
| ANDREW PELLER LIMITED 2024
DIRECTORS & OFFICERS
Directors
R. BRUCE MCDONALD
Florida, USA
Corporate Director
BRIAN J. BIDULKA
Ontario, Canada
Corporate Director
DANIEL J. CICERCHI
New York, USA
General Manager and VP, Transportation Management
Solutions
Descartes Systems Group Inc.
PAUL DUBKOWSKI
Ontario, Canada
Chief Executive Officer, Chief Financial Officer and
Executive Vice-President, IT & People and Culture
Andrew Peller Limited
A. ANGUS PELLER M.D.
Ontario, Canada
Senior Medical Consultant
RBC Insurance
JOHN E. PELLER, O.C.
Ontario, Canada
Corporate Director
CHRIS TSIOFAS
Ontario, Canada
President
MTN Professional Corporation
W. JAMES WESTLAKE
Ontario, Canada
Corporate Director
Officers
PAUL DUBKOWSKI
Chief Executive Officer, Chief Financial Officer and
Executive Vice-President, IT & People and Culture
PATRICK R. O’BRIEN
President & Chief Commercial Officer
CRAIG D. MCDONALD
Executive Vice-President, Operations
GREGORY J. BERTI
Vice-President, Industry Relations & Business
Development
RAMIT BORDIA
Vice-President, Integrated Customer Solutions and Global
Vintners Inc.
VINCENT ONG
Vice-President, Government and Industry Relations
MARK TORRANCE
Vice-President, Estate Wine Group Operations
ANDREW PELLER LIMITED 2024 |
64
SHAREHOLDER INFORMATION
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
Registrar and Transfer Agent
COMPUTERSHARE INVESTOR SERVICES INC.
Auditors
PRICEWATERHOUSECOOPERS LLP
Bankers
BANK OF MONTREAL
ROYAL BANK OF CANADA
FARM CREDIT CANADA
NATIONAL BANK
TORONTO DOMINION BANK
Shareholder Inquiries
Computershare Investor Services Inc. operates services for
inquiries regarding changes of address, stock transfers,
registered shareholdings, dividends and lost certificates.
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)
Internet: www.computershare.com
The Investors 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:
Craig Armitage and Jennifer Smith by email at:
ir@andrewpeller.com
2024 Annual Shareholders’ Meeting
The 2024 Annual Meeting of Shareholders’ will be held at
Trius Winery and Restaurant on Wednesday, September
18, 2024 at 2:00 p.m.
Exclusive 2024 Wine Offer for Shareholders
We are pleased to offer exceptional VQA wines from our wineries in both the East & West. These exclusive
collections are available at a 15% Savings on 6 and 12 bottle collections. Complimentary delivery will be
extended to orders of 12+ bottles. Combining two (2)x 6 bottle collections for complimentary delivery is only
applicable to the eastern wineries and to those in the west marked with an asterisk*.
Delivered right to your door, these collections give you the opportunity to enjoy a variety of wines from
Andrew Peller Limited’s award-winning wineries. Stock up for get-togethers and surprise the wine lovers in
your life with a delicious bottle (or two).
To place an order for the 2024 Shareholder Collections, see instructions on the pages to follow.
This special offer ends Thursday, October 31st, 2024.
Don’t forget, Wine Club memberships are also available at Peller Estates Winery, Trius Winery, Thirty
Bench Winery, and Wayne Gretzky Estates Winery & Distillery in the East and Sandhill Wines, Red Rooster
Winery, Black Hills Estate Winery, Gray Monk Estate Winery & Tinhorn Creek in the West. For more
information on our programs, give us a call!
Ontario VQA Wine Collections:
To place an online order for our Ontario Collections please contact the Ontario
Direct to Consumer Team at 1.866.440.4383 or by email at
wineorders@peller.com
Signature Series Ice Cuvee Rosé
Family Reserve Chardonnay
Private Reserve Gamay Noir
Signature Series Sauvignon Blanc
Signature Series Cabernet Franc
Signature Series Vidal Icewine 200ml
6 bottle
Collection
$192.14
(Reg $225.85)
~
12 bottle
Collection
$384.28
(Reg $451.70)
Trius Brut
Showcase Ghost Creek Riesling
Trius Pinot Grigio
Trius Merlot
Trius Red
Showcase Late Harvest Vidal
6 bottle
Collection
$136.85
(Reg $160.80)
~
12 bottle
Collection
$273.69
(Reg $321.60)
Gretzky Sauvignon Blanc
Gretzky Signature Series Pinot Grigio
Gretzky Whisky Oak Aged Chardonnay
Gretzky Baco Noir
Signature Series Cabernet Merlot
Gretzky Whisky Oak Aged Red
6 bottle
Collection
$112.98
(Reg $132.70)
~
12 bottle
Collection
$225.95
(Reg $265.40)
Winemakers Riesling
Small Lot Pinot Gris
Small Lot Rosé
Winemakers Red
Small Lot Cabernet Sauvignon
Small Lot Merlot
6 bottle
Collection
$195.60
(Reg $229.90)
~
12 bottle
Collection
$391.19
(Reg $459.80)
Peller Family Reserve Riesling
Peller Private Reserve Pinot Noir
Trius Sauvignon Blanc
Trius Cabernet Franc
Thirty Bench Winemakers Riesling
Wayne Gretzky Estate Series Shiraz
Cabernet
6 bottle
Collection
$117.23
(Reg $137.70)
~
12 bottle
Collection
$234.45
(Reg $275.40)
British Columbia VQA Wine Collections:
To place an online order for our Red Rooster, Sandhill & Grey Monk Collections please contact the BC Direct to
Consumer Team at 1.236.361.9287 or by email at ordersbc@andrewpeller.com
Order the Black Hills Collection by emailing us at myorder@blackhillswinery.com
Order the Tinhorn Creek Vineyards Collection by calling 1.778.763.4486 or by emailing us at
crushclub@tinhorn.com.
A representative will be sure to contact you.
Red Rooster Sur Lie Chardonnay
Red Rooster Sparkling Rosé
Red Rooster Gewürztraminer
Red Rooster Reserve Merlot
Red Rooster Carbonic Malbec Merlot
Red Rooster Golden Egg
*Prices shown do not include applicable BC Taxes
6 bottle
Collection
$167.20
(Reg $196.60)
~
12 bottle
Collection
$334.40
(Reg $393.20)
Sandhill Pinot Gris
Sandhill Estate Chardonnay
Sandhill Estate Rosé
Sandhill Small Lot Sangiovese
Sandhill Small Lot Barbera
Sandhill Estate Merlot
*Prices shown do not include applicable BC Taxes
6 bottle
Collection
$142.55
(Reg $167.60)
~
12 bottle
Collection
$285.10
(Reg $335.20)
Gray Monk Rosé
Gray Monk Reflection White
Gray Monk Odyssey Chardonnay
Gray Monk Merlot
Gray Monk Cabernet Merlot
Gray Monk Odyssey Meritage
*Prices shown do not include applicable BC Taxes
6 bottle
Collection
$134.39
(Reg $158.00)
~
12 bottle
Collection
$268.78
(Reg $316.00)
*
*
*
Black Hills Nota Bene *
Black Hills Per Se
Black Hills Sauvignon Blanc
Black Hills Roussanne
Black Hills Rosé
Black Hills Ipso Facto
*Prices shown do not include applicable BC Taxes
6 bottle
Collection
$255.60
(Reg $300.60)
~
12 bottle
Collection
$511.20
(Reg $601.20)
Tinhorn Creek Barrel Lot#2 Semillon
Tinhorn Creek The Creek
Tinhorn Creek Reserve Rosé
Tinhorn Creek Reserve Merlot
Tinhorn Creek Edition 94
Tinhorn Creek Reserve Viognier
*Prices shown do not include applicable BC Taxes
6 bottle
Collection
$190.15
(Reg $223.60)
~
12 bottle
Collection
$380.30
(Reg $447.20)
~
Offer Ends Thursday, October 31st, 2024
Delivery Information:
You can expect your order within 5-10 business days based on delivery location. Your wines will be
delivered in a sturdy corrugated box. Please ensure someone of legal drinking age is available to sign at
the time of delivery.