Andrew Peller Limited

John Peller – President and Chief Executive Officer

Vartan Semerijian – IPC Securities

Thank you. Good morning, everyone.

And this is our second quarter of 2015 results which were issued yesterday. For the first six months generally we had a very positive business performance and we’re confident that we’ll continue to do well towards the end of this year.

Our sales were up 7.2% in the second quarter and 8.2% for the first six months of this year with all of this increase being kind of organic growth. We had a strong contribution from the introduction of Wayne Gretzky’s Okanagan VQA wine brand in Western Canada.

We’ve launched our skinnygrape wine spritzers and some Panama Jack mixed – prepared cocktails, kind of introductions into categories where we have not been participating. We also launched a new popular priced varietal called Black Cellar.

And that all those products have done very well and have contributed to our growth, as well we were pleased to see a return to marginal growth with our personal wine-kit business. Our gross margins continued to improve through the year, although on a year-over-year comparison they have been impacted by increased price competition in our main markets, plus the timing of manufacturing spending this quarter and an increase in sales of our lower margin wine.

Offsetting these factors were our successful cost control and production efficiency initiatives such as some changes to our distribution model and some improved packaging investments. Our selling and admin expenses have risen this year compared to the prior as a result of increased advertising and promotional activities to support our new product launches.

We believe these investments have been successful. And despite of increased dollars being spent our percentage of revenues, our selling and admin expenses have improved to 24.3% of sales for the first six months compared to 24.8% last year.

With the higher sales and improving gross margins our EBITDA rose 8% to $9.7 million in the second quarter and 6.5% to $19.9 million for the first six months. Amortization expenses were in line with last year while interest expense in 2015 has declined primarily as a result of lower debt levels resulting from improved management of working capital.

Because we have expensed certain unusual restructuring charges over the last two years, as well as the swings we experienced in non-cash gains and losses on our derivative financial investments and other income and expense, we now disclosed adjusted net earnings not including these items to provide a clear picture of our performance. And for the first six months of this year, our adjusted net-income rose to $9.5 million from $8.7 million last year.

Our balance sheet and cash position remains strong at quarter end with a debt to equity ratio of 0.63 to 1, and an increase in our shareholder’s equity to $143.6 million or $10.5 per common share. Our working capital was strong at $68.2 million, up from $44.6 million.

Our cash flow from operating activities was $14.9 million through the first-half of the year compared to $18.3 million in the prior year. The change resulted from an increase in income tax installments compared to a refund received in the prior year.

An increase in accounts receivable due to strong sales performance and the timing of receipts also contributed to this. So looking ahead we believe we’re well-positioned to continue solid and sustainable growth in sales and profitability.

The market for Canadian wine continues to strengthen. At all price points we’ve seen domestic share increase in the below $10 segment, as well as, we took share from imports nationally above the $10 segment.

We were pleased this year to have won the Canadian Winery of the Year award, which is the most prestigious winery award achievement a Canadian winery can really get. We feel very proud of the achievement.

This has about 200 Canadian wineries competing in this competition and it is by far the most rigorous competition we go in. There are over 19 judges who taste wine for five days and every judge tastes every wine three times and there are over 1,500 wines in the contest.

So they take the top six or seven wines for each winery and total the points. So to win this award really speaks to breadth and quality across your line up and we realized consumers are inundated with awards and the like and it’s difficult for them to tell one from the other, but in the industry the people who know have realized how – what a significant achievement is.

And the company is very, very proud of that award and if anything it only motivates us to work harder going forward. We really did perform well across almost every trade channels.

Well, there weren’t any poor performances. We were pleased to see better visitation in wine regions.

And as a whole we remain optimistic. We definitely are concerned with the recent appointment of this commission of Ed Clark in Ontario to assess government assets, which included the LCBO.

They have had an internal report whereby they decided and have agreed that it’s not in their interest to privatize the LCBO and that the government does not want to extend political capital to make changes. However, the government has told them that they have incredible debt and that they’d like to see if they could raise more money through taxes to help pay for these debts and while they’re in there looking unto the hood of the LCBO, can they recommend some tax increases.

Naturally they have – the LCBO has kind of pointed them towards the brewers retail, and the winery retail stores, because they do not want to accept a broad increase of increased mark-ups on imported and domestic wines which is what we’re advocating our views that if they want to increase taxes on wine that they should increase taxes on import and domestic wine. The last time they did this they put a tax only on our system.

We pointed out to finance that their – that that tax that they did do was grossly unfair and discriminatory. It was based on improper information.

We’re back now indicating it to them again, because this thing is turned into bit of a witch-hunt and is not being done with a proper review of the economic contribution and development potential of our industry. It’s kind of classic asymmetrical thinking in bureaucracy, where they look at half of the situation and not a whole situation, and it’s quite disconcerting.

We naturally are doing our best to communicate with people to educate them on this issue, but there’s a significant concern that their minds were made up before they got involved. So you will hear more on that in the next quarter or so.

But with that, that’s the end of the presentation. And if there are any questions, we’re happy to answer them.

If you are there – is the moderator there?

Yes, congratulations on a quarter. I noticed that you have six consecutive quarterly dividend increases, what's the decision not to increase the dividend this quarter?

Vart, we have historically in all of those years find our increases to dividend around the June quarter. We just, as a matter of routine, it gives us the – we know exactly where we finished the previous year, and we have a good lens on where we’re going in the next year, so that I wouldn’t read anything into that.

This year, we’ll – obviously, we’re having a good year. We’ll review that issue in the June period, and we are optimistic that things look positive going forward for continuing our stream there, if you will.

Okay.

Does that answer your question?

I do have one more. Why is there no analyst coverage on the company?

I mean, that’s a good question. And having said that, I think the biggest challenge is the, the float of our stock is not huge, no.

And although our trading since we've done our trade for one split else improved, and we've seen trading volumes increase kind of double in the last year or so, so there is a lot more trade, because I mean, looking at it from a far – dividend stocks are very popular these days, and all of a sudden, we’ve shun on a few more dashboards because of that. But I'm sure, our analysts have been interested in covering stocks that trade at much higher volumes.

And we communicate as aggressively as we can in terms of promoting our results and making them public and we go out and meet with investment banks on a regular basis. They are calling on us all the time, because they are looking for business, but it’s not necessarily related to their ability to give you coverage.

So we do get mention significant or a fair amount of times in kind of private investor letters….

Yes.

Which has been positive and – but I can't to – say anything more on the coverage side, anything more than that.

Okay. Thank you.

Thank you.

All right. Thanks, everyone, and we look forward to following up with you, I think our call is after the year end in April.

And having said that, Peter and I, are here every day and more than happy to take any of your questions, if you have them. Please just give us a call.

Hope everyone has a safe and happy holiday season, and we’ll look forward to catching up with you in the New Year. Thanks very much.