TO OUR SHAREHOLDERS:
Sales in the second quarter rose 8.3% to $36.6 million, and increased 6.7%
to $70.7 million for the first six months of the year. Supporting this
growth, we experienced solid performance in all of our distribution
channels, including our estate wineries and Vineyards / The Wine Shoppe
retail stores, provincial liquor boards, restaurants and other licensed
establishments, as well as our consumer-made wines.
This sales growth, combined with our ongoing focus on the higher-margin
premium and ultra-premium Peller Estates, Hillebrand Estates and Trius
brands, resulted in gross profit in the quarter rising to 39.4% of sales from
37.4% last year. For the six months ended September 30, 2002 gross
margin increased to 38.9% of sales from 37.7% in fiscal 2002.
Earnings before interest, taxes, amortization and unusual items (EBITA)
increased 24.3% to $3.6 million in the second quarter and 17.4% to $7.5
million for the six months ended September 30, 2002 compared to the
same periods last year. Selling and administration expenses increased in
both periods compared to the prior year as we continued to invest in the
selling and marketing of our premium brands and by the impact of
increased costs associated with the operating of the Peller Estates Winery
which opened on June 6, 2001.
Net earnings in the second quarter increased 21.3% to $1.0 million or
$0.23 per Class A share. For the six months ended September 30, 2002
net earnings were $2.6 million or $0.56 per Class A share compared to
$3.2 million or $0.70 per Class A share last year. Included in last year’s
first quarter was an after-tax gain of $1.0 million resulting from the sale of
our remaining interest in a Quebec-based winery. Exclusive of the sale,
net earnings for the six months increased by 15.5% over the previous year.
Andrés’ balance sheet strengthened in the quarter due to the enhanced
financial performance and improved cash flow from operations in the
period. Through the first six months of fiscal 2003, the Company
generated cash from