UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended February 29, 200028, 2001
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ---------------- to
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Commission File No. 0-7570001-08495
Delaware CANANDAIGUACONSTELLATION BRANDS, INC. 16-0716709
and its Subsidiaries:
New York Batavia Wine Cellars, Inc. 16-1222994
New York Canandaigua Wine Company, Inc. 16-1462887
New York Canandaigua Europe Limited 16-1195581
England and Wales Canandaigua Limited 98-0198402
New York Polyphenolics, Inc. 16-1546354
New York Roberts Trading Corp. 16-0865491
Netherlands Canandaigua B.V. 98-0205132
Delaware Franciscan Vineyards, Inc. 94-2602962
California Allberry, Inc. 68-0324763
California Cloud Peak Corporation 68-0324762
California M.J. Lewis Corp. 94-3065450
California Mt. Veeder Corporation 94-2862667
Delaware Barton Incorporated 36-3500366
Delaware Barton Brands, Ltd. 36-3185921
Maryland Barton Beers, Ltd. 36-2855879
Connecticut Barton Brands of California, Inc. 06-1048198
Georgia Barton Brands of Georgia, Inc. 58-1215938
Illinois Barton Canada, Ltd. 36-4283446
New York Barton Distillers Import Corp. 13-1794441
Delaware Barton Financial Corporation 51-0311795
Wisconsin Stevens Point Beverage Co. 39-0638900
Illinois Monarch Import Company 36-3539106
(State or other (Exact name of registrant as (I.R.S. Employer
jurisdiction of specified in its charter) Identification No.)
incorporation or
organization)
300 WillowBrook Office Park, Fairport, New York 14450
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(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code (716) 218-2169
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B)12(b) OF THE ACT:
Title of each class Name of each exhangeexchange on which registered
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Class A Common Stock New York Stock Exchange
(par value $.01 per share)
Class B Common Stock New York Stock Exchange
Class B Common Stock
(par value $.01 per share)
New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G)12(g) OF THE ACT:
None
Indicate by check mark whether the Registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the common stock held by non-affiliates of
CanandaiguaConstellation Brands, Inc., as of May 15, 2000,2001, was $725,728,942.$1,148,305,442.
The number of shares outstanding with respect to each of the classes of common
stock of CanandaiguaConstellation Brands, Inc., as of May 15, 2000,2001, is set forth below (all
of the Registrants, other than CanandaiguaConstellation Brands, Inc., are direct or
indirect wholly-owned subsidiaries of CanandaiguaConstellation Brands, Inc.):
Class Number of Shares Outstanding
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Class A Common Stock, par value $.01 per share 15,159,95135,831,754
Class B Common Stock, par value $.01 per share 3,096,5726,137,670
DOCUMENTS INCORPORATED BY REFERENCE
The proxy statement of CanandaiguaConstellation Brands, Inc. to be issued for the annual
meeting of stockholders to be held July 18, 200017, 2001 is incorporated by reference in
Part III.
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PART I
ITEM 1. BUSINESS
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Unless the context otherwise requires, the term "Company" refers to
CanandaiguaConstellation Brands, Inc. and its subsidiaries, and all references to "net
sales" refer to gross revenue less excise taxes and returns and allowances to
conform with the Company's method of classification. All references to "Fiscal
2000"2001", "Fiscal 1999"2000" and "Fiscal 1998"1999" shall refer to the Company's fiscal year
ended the last day of February of the indicated year.
IndustryDuring Fiscal 2001, the Company changed its name from Canandaigua Brands,
Inc. to Constellation Brands, Inc. The new name better reflects the Company's
dynamic growth, promising potential and diversified portfolio as well as
provides a clear distinction between the corporate parent and its operating
divisions.
Market share and industry data disclosed in this Annual Report on Form 10-K
hashave been obtained from the following industry and government publications: The
Gomberg-Fredrikson Report; Adams Liquor Handbook; Adams Wine Handbook; Adams
Beer Handbook; Adam'sAdams Media Handbook Advance; The U. S.U.S. Wine Market: Impact
Databank Review and Forecast; The U.S. Beer Market: Impact Databank Review and
Forecast; The U.S. Distilled Spirits Markets: Impact Databank Review and
Forecast; NACM; AC Nielsen; the Zenith GuideGuide; Beer Marketer's Insights; and Office for National Statistics (U.K.).The
Drink Pocketbook 2001. The Company has not independently verified thisthese data.
ReferencesUnless otherwise noted, all references to positions within industriesmarket share data are based on unit
volume.volume and unless otherwise noted, the most recent complete industry data
available are for 1999.
The Company is a leading producerleader in the production and marketermarketing of branded beverage alcohol
productsbrands in North America and the United Kingdom, and a leading independent drinks
wholesaler in the United Kingdom. According to available
industry data, the Company ranks asAs the second largest supplier of wine, the
second largest importer of beer and the fourth largest supplier of distilled
spirits, the Company is the largest single-source supplier of these products in
the United States. The Company's British subsidiary, Matthew Clark
plc ("Matthew Clark"),In the United Kingdom, the Company is a leading marketer of
wine and the second largest producer and marketer of cider, wine and
bottled water, and a leading independentcider. With its broad
product portfolio, the Company believes it is distinctly positioned to satisfy
an array of consumer preferences across all beverage alcohol wholesalercategories. Leading
brands in the Company's portfolio include: Franciscan Oakville Estate, Simi,
Estancia, Corona Extra, Modelo Especial, St. Pauli Girl, Almaden, Arbor Mist,
Talus, Vendange, Alice White, Black Velvet, Fleischmann's, Schenley, Ten High,
Stowells of Chelsea, Blackthorn and K.
The Company's products are distributed by more than 1,000 wholesale
distributors in North America. In the United Kingdom.Kingdom, the Company distributes
its branded products and those of other companies to more than 16,500 customers.
The Company operates 29 production facilities throughout the world. In addition
to producing and marketing its own brands, the Company also purchases products
for resale from other producers.
The Company is a Delaware corporation organized inincorporated on December 4, 1972, as
the successor to a business founded in 1945. TheSince the Company's founding in
1945 as a producer and marketer of wine products, the Company has aggressively pursuedgrown through
a combination of internal growth in
recent years throughand acquisitions. The Company's internal growth
has been driven by leveraging the Company's existing portfolio of leading
brands, developing new products, new packaging and line extensions, and focusing
on the faster growing sectors of the beverage alcohol industry. The acquisitions
brand development, new product offerings and
new distribution agreements. The recent acquisitions of the Corus Assets (as defined below), the Turner Road Vintners Assets (as
defined below), Forth Wines Limited ("Forth Wines"), Franciscan Vineyards, Inc.
("Franciscan Estates") and, Simi Winery, Inc. ("Simi"), the Black Velvet Assets (as
defined below) and Matthew Clark plc ("Matthew Clark") continued a series of
strategic acquisitions made by the Company since
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1991 by which itthe Company has diversifiedbroadened its offeringsportfolio and as a result, increased its market
share, net sales and cash flow.
The Company has also achieved internal growth by developing new products and
repositioning existing brands to focus onRECENT DEVELOPMENTS
COMMON STOCK SPLIT
On April 10, 2001, the fastest growing sectorsBoard of Directors of the beverage alcohol industry.
The Company approved a
two-for-one stock split of both the Company's Class A Common Stock and Class B
Common Stock, which was distributed in the form of a stock dividend on May 14,
2001, to stockholders of record on April 30, 2001. Pursuant to the terms of the
stock dividend, each holder of Class A Common Stock received one additional
share of Class A stock for each share of Class A stock held, and each holder of
Class B Common Stock received one additional share of Class B stock for each
share of Class B stock held. All share and per share amounts have been
retroactively restated to give effect to the common stock split.
PENDING ACQUISITION OF RAVENSWOOD WINERY
On April 10, 2001, the Company and Ravenswood Winery, Inc. ("Ravenswood")
announced that they entered into a merger agreement under which the Company will
acquire Ravenswood, a leading premium wine producer based in Sonoma, California.
Under the terms of the merger agreement, the Company will pay $29.50 in cash for
each outstanding share of Ravenswood, or approximately $148 million, and assume
net debt, which the Company does not expect to be significant at the time of
closing.
Ravenswood produces, markets and sells more than 185 premier branded productssuper-premium and ultra-premium
California wines primarily under the Ravenswood brand name. The vast majority of
the wines Ravenswood produces and sells are red wines, including the number one
super-premium Zinfandel in
North America and the United Kingdom.States. The Company intends to manage
Ravenswood through its Franciscan segment.
The proposed Ravenswood acquisition is in line with the Company's products are distributed bystrategy
of further penetrating the faster growing, higher gross profit margin
super-premium and ultra-premium wine categories. The transaction is subject to
satisfaction of customary closing conditions and is expected to close in late
June or early July 2001. The Company cannot guarantee, however, that this
transaction will be completed upon the agreed upon terms, or at all.
ACQUISITION OF THE CORUS ASSETS
On March 26, 2001, in an asset acquisition, the Company acquired certain
wine brands, wineries, working capital (primarily inventories), and other
related assets from Corus Brands, Inc. (the "Corus Assets"). In this
acquisition, the Company acquired several well-known premium wine brands
primarily sold in the northwestern United States, including Covey Run, Columbia,
Ste. Chapelle and Alice White. The purchase price of the Corus Assets, including
assumption of indebtedness, was $52.0 million plus an earn-out over six years
based on the performance of the brands. In connection with the transaction, the
Company also entered into long-term grape supply agreements with affiliates of
Corus Brands, Inc. covering more than 1,000 wholesalersacres of Washington and Idaho
vineyards.
ACQUISITION OF THE TURNER ROAD VINTNERS ASSETS
On March 5, 2001, in North America. In the United Kingdom,an asset acquisition, the Company also distributes its own branded productsacquired several
well-known premium wine brands, including Vendange, Nathanson Creek, Heritage,
and thoseTalus, working capital (primarily inventories), two wineries in California,
and other related assets from Sebastiani Vineyards, Inc. and Tuolomne River
Vintners Group (the "Turner Road Vintners Assets"). The purchase price of other companies to more
than 16,000 customers.the
Turner Road Vintners Assets, including assumption of indebtedness, was $289.7
million.
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The Company operates more than 20 production facilities
throughoutacquisition of the worldCorus Assets, along with the acquisition of the
Turner Road Vintners Assets, has strengthened the Company's portfolio in the
higher margin and purchases products for resale from other producers.growing premium table wine category. The acquired operations
are being integrated into the Company's Canandaigua Wine segment.
ACQUISITIONS IN FISCAL 2001, FISCAL 2000 AND FISCAL 1999
ACQUISITION OF FORTH WINES
On October 27, 2000, Matthew Clark acquired all of the outstanding stock of
Forth Wines, a wine and spirit wholesaler operating primarily in Scotland. The
purchase price of the shares was $4.5 million. The addition of Forth Wines
further strengthened Matthew Clark's position as one of the United Kingdom's
leading drinks wholesalers, and made Matthew Clark the leading provider of wine
to the on-premise market in Scotland.
ACQUISITIONS OF FRANCISCAN ESTATES AND SIMI
On June 4, 1999, the Company purchased all of the outstanding capital stock
of Franciscan Estates and, in related transactions, purchased vineyards,
equipment and other vineyard related assets located in Northern California
(collectively the "Franciscan Acquisition"). The purchase price of the shares,
including the assumption of indebtedness, net of cash acquired, was $243.2
million. Franciscan Estates is one of the foremost super-premium and
ultra-premium wine companies in California.
Franciscan Estates' net sales for its fiscal year ended December 31, 1998, were
approximately $50 million on volume of approximately 600,000 cases. While the
super-premium and ultra-premium wine categories represented only 9% of the total
United States wine market by volume in 1997, they accounted for more than 25% of
sales dollars. Super-premium and ultra-premium wine sales in the United States
grew at an annual rate of 16% between 1995 and 1998 and Franciscan Estates
recorded a compound annual growth rate of more than 17% for the same period.
Also on June 4, 1999, the Company purchased all of the outstanding capital
stock of Simi. (The acquisition of the capital stock of Simi is hereafter
referred to as the "Simi Acquisition".) The purchase price of the shares was
$57.5 million. The Simi Acquisition included the Simi winery (located in
Healdsburg, California), equipment, vineyards, inventory and worldwide ownership
of the Simi brand name. Founded in 1876, Simi is one of the oldest and best
known wineries in California, combining a strong super-premium and ultra-premium
brand with a flexible and well-equipped facility and high quality vineyards in
the key Sonoma appellation. On February 29, 2000, Simi was merged into
Franciscan Estates.
The Franciscan and Simi Acquisitions have established the Company as a
leading producer and marketer of super-premium and ultra-premium wine. The
Franciscan Estates and Simi operations complement each other and offer synergies
in the areas of sales and distribution, grape usage and capacity utilization.
Together,
Franciscan Estates and Simi represent one of the sixth largest presence in
the super-premium and
ultra-premium wine categories.companies in the United States. The Company operates
Franciscan Estates and Simi, and their properties, together as a separate
business segment (collectively, "Franciscan").
The Company's strategy is to
further penetrate the super-premium and ultra-premium wine categories, which
have higher gross profit margins than popularly-priced wine.
ACQUISITION OF THE BLACK VELVET CANADIAN WHISKY BRAND AND RELATED ASSETS
On April 9, 1999, in an asset acquisition, the Company acquired several
well-known Canadian whisky brands, including Black Velvet, the third best
selling Canadian whisky and the 16th best selling distilled spirits brand in the
United States, production facilities located in Alberta and Quebec, Canada, case
goods and bulk whisky inventories and other related assets from affiliates of
Diageo plc (collectively, the "Black Velvet Assets"). Other principal brands
acquired in the transaction were Golden Wedding, OFC, MacNaughton, McMaster's
and Triple Crown. In connection with the transaction, the Company also entered
into multi-year agreements with affiliates of Diageo plc to provide packaging
and distilling services for various brands retained by the Diageo plc
affiliates. The purchase price of the Black Velvet Assets was $183.6 million.
The addition of the Canadian whisky brands from this transaction
strengthensstrengthened the Company's position in the North American distilled spirits
category, and enhancesenhanced the Company's portfolio of brands
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and category participation. The acquired operations have been integrated withinto
the Company's existing spirits business.Barton segment.
ACQUISITION OF MATTHEW CLARK
On December 1, 1998, the Company acquired control of Matthew Clark and as
of February 28, 1999, had acquired all of Matthew Clark's outstanding shares
(the "Matthew Clark Acquisition"). Matthew Clark grew substantially inThe purchase price of the 1990s
through a seriesshares, including
the assumption of strategic acquisitions, including Grantsindebtedness, net of St. James's in
1993, the Gaymer Group in 1994 and Taunton Cider Co. in 1995. These acquisitions
served to solidify Matthew Clark's position within its key markets and
contributed to an increase in net sales to approximately $671 million for
Matthew Clark's fiscal year ended April 30, 1998.cash acquired, was $484.8 million.
Matthew Clark has developed a number of leading market positions, including positions as
a leading independent
beverage supplier to the on-premise trade, the number one producer of branded
boxed wine, the number one branded producer of
fortified British wine, the number onetwo producer of cider, a leading branded
bottler of sparkling water and the number two producer of
cider.leading independent beverage wholesaler to
the on-premise trade.
The Matthew Clark Acquisition strengthenshas given the Company's position in the
beverage alcohol industry by providing the Company with a presence in the
United Kingdom and a platform for growth in the European market. The acquisition
of Matthew Clark also offers potential benefits including distribution
opportunities to market California-produced wine and U.S.-produced distilled
spirits in the United Kingdom, as well as the potential to market Matthew Clark
products in the United States.
Through these and prior acquisitions, the Company has become more
competitive byby: diversifying its portfolio; developing strong market positions
in the growing beverage alcohol product categories of varietal table wine and
imported beer; strengthening its relationships with wholesalers; expanding its
distribution and enhancing its production capabilities; and acquiring additional
management, operational, marketing, and research and development expertise.
BUSINESS SEGMENTS
The Company operates primarily in the beverage alcohol industry in North
America and the United Kingdom. The Company reports its operating results in
five segments: Canandaigua Wine (branded popularly-pricedpopular premium wine and brandy, and
other, primarily grape juice concentrate); Barton (primarily beer and distilled
spirits); Matthew Clark (branded wine, cider and bottled water, and wholesale
wine, cider, distilled spirits, beer and soft drinks); Franciscan (primarily
branded super-premium and ultra-premium wine) and Corporate Operations and Other
(primarily corporate related items).
Information regarding net sales, operating income and total assets of each
of the Company's business segments and information regarding geographic areas is
set forth in Note 1615 to the Company's consolidated financial statements located
in Item 8 of this Annual Report on Form 10-K.
CANANDAIGUA WINE
Canandaigua Wine produces, bottles, imports and markets wine and brandy in
the United States. It is the second largest supplier of wine in the United
States and exports wine to approximately 7060 countries from the United States.
Canandaigua Wine sells table wine, dessert wine, sparkling wine and brandy. Its
leading brands include Alice White, Almaden, Inglenook, Arbor Mist, Covey Run, Dunnewood,
Estate Cellars, Inglenook, Manischewitz, Marcus James, Mystic Cliffs, Paul
Masson, Manischewitz,Talus, Taylor, Marcus James, Estate Cellars,Vendange, Vina Santa Carolina,
Dunnewood, Mystic Cliffs, Cook's, J. Roget, Richards
Wild Irish Rose, and Paul Masson Grande Amber Brandy. Most of its wine is
marketed in the popularly-priced
category of the wine market.$4.00 to $10.00 per 750 ml bottle price range.
As a related part of its U.S. wine business, Canandaigua Wine is a leading
grape juice concentrate producer in the United States. Grape juice concentrate
competes with other domestically produced and imported fruit-based concentrates.
Canandaigua Wine's other wine-related products and services include
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bulk wine, cooking wine, grape juice and Inglenook-St.St. Regis, a leading de-alcoholized
line of wine in the United States.
BARTON
Barton produces, bottles, imports and markets a diversified line of beer
and distilled spirits. It is the second largest marketer of imported beer in the
United States and distributes six of the top 25 imported beer brands in the
United States: Corona Extra, Modelo Especial, Corona Light, Pacifico, St. Pauli
Girl, and Negra Modelo. Corona Extra is the number onebest selling imported beer nationwide.in the
United States. Barton's other imported beer brands include Tsingtao from China,
Peroni from Italy and Double Diamond and Tetley's English Ale from the United
Kingdom. Barton also operates the Stevens Point Brewery, a regional brewer
located in Wisconsin, which produces Point Special, among other brands.
Barton is the fourth largest supplier of distilled spirits in the United
States and exports distilled spirits to approximately 1525 countries from the
United States. Barton's principal distilled spirits brands include Black Velvet,
Fleischmann's, Mr. Boston, Canadian LTD, Chi-Chi's prepared cocktails, Ten High,
Montezuma, Barton, Monte Alban and Inver House and the recently acquired Black
Velvet brand.House. Substantially all of Barton's
distilled spirits unit volume consists of products marketed in the price value and
mid-premium priced category. Barton also sells distilled spirits in bulk and
provides contract production and bottling services for third parties.
MATTHEW CLARK
Matthew Clark is a leading producer and distributormarketer of cider, wine and bottled
water and a leading drinks wholesaler throughout the United Kingdom. Matthew
Clark also exports its branded products to approximately 50 countries from the
United Kingdom. Matthew Clark is the second largest producer and marketer of
cider in the United Kingdom. Matthew Clark distributes its cider brands in both
the on-premise and off-premise markets and these brands compete
in both the mainstream and premium brand categories.off-premise. Matthew Clark's leading
mainstream cider brands include
Blackthorn, and Gaymer's Olde English. Blackthorn
is the number two mainstream cider brand andin the United Kingdom, Gaymer's Olde
English, is the U.K.'sUnited Kingdom's second largest cider brand in the take-home
market. Matthew Clark's leading
premium cider brands aremarket, Diamond White and K.
Matthew Clark's Stowells of Chelsea brand is the best selling branded table
wine in the United Kingdom. Matthew Clark is the largest supplier of wine to the
on-premise trade in the United Kingdom. Its Stowells of Chelsea brand maintains the leading share in
the branded boxed wine segment. Matthew Clark alsoKingdom and maintains a leading market share
position in fortified British wine through its QC and Stone's brand names. It
also produces and markets Strathmore bottled water in the United Kingdom, the
fourth largest bottled water brand and a leading bottled sparkling water brand in the
country.
Matthew Clark is athe leading independent beverage supplierwholesaler to the
on-premise trade in the United Kingdom and has one of the largest customer bases
in the United Kingdom, with more than 16,000 on-premise accounts. Matthew
Clark's wholesaling business involves the distribution of branded wine,
distilled spirits, cider, beer and soft drinks. While these products are
primarily produced by third parties, they also include Matthew Clark's branded
cider and wine branded products.
FRANCISCAN
The Company's Franciscan segment is comprised of the Franciscan Estates and
Simi portfolios. These operations are managed together as a separate business
segment of the Company, and position the Company as a major player in the super-premium and
ultra-premium wine market. The Franciscan also exports its
products to approximately 25 countries from the United States.
Franciscansegment includes the prestigious
Franciscan Oakville Estate (Napa
Valley)(in Napa Valley, California), Estancia (Monterey(in Monterey
and Sonoma)Sonoma, California), Simi (Sonoma)(in Sonoma, California), Mt. Veeder and Quintessa
(Napa Valley)(in Napa Valley, California), and Veramonte (Casablanca(in the Casablanca Valley, Chile)
wines. The portfolio of fine wines is supported by the segment'sdivision's winery and
vineyard holdings in California and Chile. These brands are marketed by a
dedicated sales force, primarily focusing on high-end restaurants and fine wine
shops. Franciscan also exports its products to approximately 20 countries from
the United States.
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CORPORATE OPERATIONS AND OTHER
Corporate Operations and Other includes traditional corporate related items
and the results of an immaterial operation.
MARKETING AND DISTRIBUTION
NORTH AMERICA
The Company's products are distributed and sold throughout North America
through over 1,000 wholesalers, as well as through state and provincial
alcoholic beverage control agencies. Canandaigua Wine, Barton and Franciscan
employ full-time, in-house marketing, sales and customer service organizations
to develop and service their sales to wholesalers and state agencies.
The Company believes that the organization of its sales force into separate
segments positions it to maintain a high degree of focus on each of its
principal product categories. However, where appropriate, the Company leverages
its sales and marketing skills across the organization, particularly in national
accounts.
The Company's marketing strategy places primary emphasis upon promotional
programs directed at its broad national distribution network, and at the
retailers served by that network. The Company has extensive marketing programs
for its brands including promotional programs on both a national basis and
regional basis in accordance with the strength of the brands, point-of-sale
materials, consumer media advertising, event sponsorship, market research, trade
advertising and public relations.
During Fiscal 2000, the Company increased its advertising expenditures to
put more emphasis on consumer advertising for its imported beer brands,
primarily with respect to the Mexican brands. In addition, promotional spending
for the Company's wine brands increased to address competitive factors.
UNITED KINGDOM
The Company's U.K.-produced branded products are marketed and distributed throughout the
United Kingdom by Matthew Clark. The products are packaged at one of three
production facilities. Shipments of cider and wine are then made to Matthew
Clark's national distribution center for branded products. All branded products
are then distributed to either the on-premise or off-premise markets with some
of the sales to on-premise customers made through Matthew Clark's wholesale
business. Matthew Clark's wholesale products are distributed through 1211 depots
located throughout the United Kingdom. On-premise distribution channels include
hotels, restaurants, pubs, wine bars and clubs. The off-premise distribution
channels include grocers, convenience retail and cash-and-carry outlets and wholesalers.outlets.
Matthew Clark employs a full-time, in-house marketing and sales
organization that targets off-premise customers for Matthew Clark's branded
products. Matthew Clark also employs a full-time, in-house branded products
marketing and sales organization that services specifically the on-premise
market in the United Kingdom. Additionally, Matthew Clark employs a full-time,
in-house marketing and sales organization to service the customers of its
wholesale business.
TRADEMARKS AND DISTRIBUTION AGREEMENTS
The Company's products are sold under a number of trademarks, most of which
are owned by the Company. The Company also produces and sells wine and distilled
spirits products under exclusive license or distribution agreements. Important
agreements include a long-term license agreement with Hiram Walker & Sons, Inc.
(which,
which expires in 2116)2116, for the Ten High, Crystal Palace, Northern Light and
Imperial Spirits brands; and a long-term license agreement with the B.
Manischewitz Company, (whichwhich expires in 2042)2042, for the Manischewitz brand of
kosher wine. On September 30, 1998, under the provisions of an existing
long-term license agreement, Nabisco Brands Company agreed to transfer to
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Barton all of its right, title and interest to the corporate name "Fleischmann
Distilling Company" and worldwide trademark rights to the "Fleischmann" mark for
alcoholic beverages. Pending the completion of the assignment of such interests,
the license will remain in effect. The Company also has other less significant
license and distribution agreements related to the sale of wine and distilled
spirits with terms of various durations.
All of the Company's imported beer products are marketed and sold pursuant
to exclusive distribution agreements with the suppliers of these products. These
agreements have terms that vary and prohibit the Companyus from importing other beer from
other producers from the same country. The Company's agreement to distribute
Corona Extra and its other Mexican beer brands exclusively throughout 25 primarily
western U.S. western states expires in December 2006 and, subject to compliance with
certain performance criteria, continued retention of certain Company personnel
and other terms under the agreement, will be automatically renewed for
additional terms of five years. Changes in control of the Company or of its
subsidiaries involved in importing the Mexican beer brands, changes in the
position of the Chief Executive Officer of Barton Beers, Ltd. (including, including by
death or disability)disability, or the termination of the President of Barton Incorporated,
may be a basis for the supplier, unless it consents to such changes, to
terminate the agreement. The supplier's consent to such changes may not be
unreasonably withheld. The Company's agreement for the importation of St. Pauli
Girl expires in June 2003. Prior to their expiration, these agreements may be
terminated if the Company fails to meet certain performance criteria. The
Company believes it is currently in compliance with its material imported beer
distribution agreements. From time to time, the Company has failed, and may in
the future fail, to satisfy certain performance criteria in its distribution
agreements. Although there can be no assurance that itsthe Company's beer
distribution agreements will be renewed, given the Company's long-term
relationships with its suppliers, the Company expects that such agreements will
be renewed prior to their expiration and does not believe that these agreements
will be terminated.
The Company owns the trademarks for the leading brands and most of the
other brands that were acquired
in the Matthew Clark Acquisition.acquisition. The Company has a series of distribution
agreements and supply agreements in the United Kingdom related to the sale of
its products with varying terms and durations.
COMPETITION
The beverage alcohol industry is highly competitive. The Company competes
on the basis of quality, price, brand recognition and distribution. The
Company's beverage alcohol products compete with other alcoholic and
nonalcoholic beverages for consumer purchases, as well as shelf space in retail
stores, a presence in restaurants and marketing focus by the Company's
wholesalers. The Company competes with numerous multinational producers and
distributors of beverage alcohol products, some of which may have significantly greater
resources than the Company. In the United States, Canandaigua Wine's principal
competitors include E & J Gallo Winery and The Wine Group. Barton's principal
competitors include Heineken USA, Molson Breweries USA, Labatt's USA, Guinness
Import Company, Brown-Forman Beverages, Jim Beam Brands and Heaven Hill
Distilleries, Inc. Franciscan's principal competitors include Beringer Blass,
Robert Mondavi Corp., Beringer Wine Estates, Kendall-Jackson and Allied Domecq Wines.Kendall-Jackson. In the United Kingdom, Matthew
Clark's principal competitors include Halewood Vintners,
H.P. Bulmer, Tavern,Halewood Vintners, Waverley
Vintners and Perrier. In connection with its wholesale business, Matthew Clark
distributes the branded wine of third parties that compete directly against its
own wine brands.
PRODUCTION
In the United States, the Company's wine is produced from several varieties
of wine grapes grown principally in California and New York. The grapes are
crushed at the Company's wineries and stored as wine, grape juice or
concentrate. Such grape products may be made into wine for sale under the
Company's brand names, sold to other companies for resale under their own
labels, or shipped to
- 8 -
customers in the form of juice, juice concentrate, unfinished wine, high-proof
grape spirits or brandy. Most of the Company's wine is bottled and sold within
18 months after the grape crush. The Company's inventories of wine, grape juice
and concentrate are usually at their highest levels in November and December
immediately after the crush of each year's grape harvest, and are substantially
reduced prior to the subsequent year's crush.
The bourbon whiskeys, domestic blended whiskeys and light whiskeys marketed
by the Company are primarily produced and aged by the Company at its distillery
in Bardstown, Kentucky, though it may from time to time supplement its
inventories through purchases from other distillers.Kentucky. Following the acquisition
of the Black Velvet Assets acquisition, the
majority of the Company's Canadian whisky requirements are produced and aged at
its Canadian distilleries in Lethbridge, Alberta, and Valleyfield, Quebec. At
its Albany, Georgia, facility, the Company produces all of the neutral grain
spirits and whiskeys it uses in the production of vodka, gin and blended whiskey
it sells to customers in the state of Georgia. The Company's requirements of
Scotch whisky, tequila, mezcal and the neutral grain spirits it uses in the
production of gin and vodka for sale outside of Georgia, and other spirits
products, are purchased from various suppliers.
The Company operates three facilities in the United Kingdom that produce,
bottle and package cider, wine and water. To produce Stowells of Chelsea, wine
is imported in bulk from various countries such as Chile, Germany, France,
Spain, South Africa and Australia, which is then packaged at the Company's
facility at Bristol and distributed under the Stowells of Chelsea brand name.
The Strathmore brand of bottled water (which is available in still, sparkling,
and flavored varieties) is sourced and bottled in Forfar, Scotland. Cider production was consolidated at the Company's facility at Shepton Mallet,
where apples of many different varieties are purchased from U.K. growers and
crushed. This juice, along with European-sourced concentrate, is then fermented
into cider. The Strathmore brand of bottled water (which is available in still,
sparkling, and flavored varieties) is sourced and bottled in Forfar, Scotland.
The Company operates one winery in Chile that crushes, vinifies, cellars
and bottles wine.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The principal components in the production of the Company's branded
beverage alcohol products are packaging materials (primarily glass) and
agricultural products, such as grapes and grain. The Company utilizes glass and
PETpolyethylene terephthalate ("PET") bottles and other materials such as caps,
corks, capsules, labels and cardboard cartons in the bottling and packaging of
its products. Glass bottle costs are one of the largest components of the
Company's cost of product sold. The glass bottle industry is highly concentrated
with only a small number of producers. The Company has traditionally obtained,
and continues to obtain, its glass requirements from a limited number of
producers. The Company has not experienced difficulty in satisfying its
requirements with respect to any of the foregoing and considers its sources of
supply to be adequate. However, the inability of any of the Company's glass
bottle suppliers to satisfy the Company's requirements could adversely affect
the Company's operations.
Most of the Company's annual grape requirements are satisfied by purchases
from each year's harvest which normally begins in August and runs through
October. The Company believes that it has adequate sources of grape supplies to
meet its sales expectations. However, in the event demand for certain wine
products exceeds expectations, the Company could experience shortages.
The Company purchases grapes from overapproximately 800 independent growers,
principally in the San Joaquin Valley Central Coast and North CoastMonterey regions of California and in
New York State. The Company enters into written purchase agreements with a
majority of these growers on a year-to-year basis. The Company currently owns or
leases approximately 7,0008,000 acres of land and vineyards, either fully bearing or
under development, in California, New York and Chile. This acreage supplies only
a small percentage of the Company's total needs. The Company continues to
consider the purchase or lease of additional vineyards, and additional land for
vineyard plantings, to supplement its grape supply.
- 9 -
The distilled spirits manufactured by the Company require various
agricultural products, neutral grain spirits and bulk spirits. The Company
fulfills its requirements through purchases from various sources through
contractual arrangements and through purchases on the open market. The Company
believes that adequate supplies of the aforementioned products are available at
the present time.
The Company manufactures cider, perry, and light and fortified British wine
from materials that are purchased either on a contracted basis or on the open
market. In particular, supplies of cider apples are sourced through long termlong-term
supply arrangements with owners of apple orchards. There are adequate supplies
of the various raw materials at this particular time.
GOVERNMENT REGULATION
The Company's operations in the United States are subject to extensive
Federalfederal and state regulation. These regulations cover, among other matters,
sales promotion, advertising and public relations, labeling and packaging,
changes in officers or directors, ownership or control, distribution methods and
relationships, and requirements regarding brand registration and the posting of
prices and price changes. All of the Company's operations and facilities are
also subject to Federal,federal, state, foreign and local environmental laws and
regulations and the Company is required to obtain permits and licenses to
operate its facilities.
In the United Kingdom, the Company has secured a Customs and Excise License
to carry on its excise trade. Licenses are required for all premises where wine
is produced. The Company holds a license to act as an excise warehouse operator.
Registrations have been secured for the production of cider and bottled water.
Formal approval of product labeling is not required.
In Canada, the Company's operations are also subject to extensive federal
and provincial regulation. These regulations cover, among other matters,
advertising and public relations, labeling and packaging, environmental matters
and customs and duty requirements. The Company is also required to obtain
licenses and permits to operate its facilities.
The Company believes that it is in compliance in all material respects with
all applicable governmental laws and regulations and that the cost of
administration and compliance with, and liability under, such laws and
regulations does not have, and is not expected to have, a material adverse
impact on the Company's financial condition, results of operations or cash
flows.
EMPLOYEES
The Company had approximately 2,5203,000 full-time employees in the United
States at the end of April 2000,2001, of which approximately 830 were covered by
collective bargaining agreements. Additional workers may be employed by the
Company during the grape crushing season.
The Company had approximately 1,7201,770 full-time employees in the United
Kingdom at the end of April 2000,2001, of which approximately 400410 were covered by
collective bargaining agreements. Additional workers may be employed during the
peak season.
The Company had approximately 260220 full-time employees in Canada at the end
of April 2000,2001, of which approximately 200160 were covered by collective bargaining
agreements.
The Company considers its employee relations generally to be good.
- 10 -
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These forward-looking statements are
subject to a number of risks and uncertainties, many of which are beyond the
Company's control, that could cause actual results to differ materially from
those set forth in, or implied by, such forward-looking statements. All
statements other than statements of historical facts included in this Annual
Report on Form 10-K, including the statements under this Item 1 "Business" and
Item 7 "Management's Discussion and Analysis of Financial Condition and Results
of Operations" regarding our business strategy, future financial position,
prospects, plans and objectives of management, as well as information concerning
expected actions of third parties are forward-looking statements. All
forward-looking statements speak only as of the date of this Annual Report on
Form 10-K. The Company undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Although the Company believes that the expectations
reflected in the forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to be correct. In addition to the
risks and uncertainties of ordinary business operations, important factors that
could cause actual results to differ materially from those set forth in, or
implied by the Company's forward-looking statements contained in this Annual
Report on Form 10-K are as follows:
COMPETITION COULD HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY'S BUSINESS.
The Company is in a highly competitive industry and the dollar amount, and
unit volume, of its sales could be negatively affected 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 our wholesale
customers, retailers or consumers to purchase competitive products instead of
the Company's products. Wholesaler, 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 pricing, purchasing, financing, operational, advertising or
promotional decisions made by wholesalers and retailers which could affect their
supply of, or consumer demand for, the Company's products. The Company could
also experience higher than expected selling, general and administrative
expenses if the Company finds it necessary to increase the number of its
personnel or advertising or promotional expenditures to maintain its competitive
position or for other reasons.
INCREASE IN EXCISE TAXES AND GOVERNMENT RESTRICTIONS COULD HAVE A MATERIAL
ADVERSE EFFECT ON THE COMPANY'S BUSINESS.
In the United States, the federal government and individual states impose
excise taxes on beverage alcohol products in varying amounts which have been
subject to change. Increases in excise taxes on beverage alcohol products, if
enacted, could materially and adversely affect the Company's financial condition
or results of operations. In addition, the beverage alcohol products industry is
subject to extensive regulation by state and federal agencies. The federal U.S.
Bureau of Alcohol, Tobacco and Firearms and the various state liquor authorities
regulate such matters as licensing requirements, trade and pricing practices,
permitted and required labeling, advertising and relations with wholesalers and
retailers. In recent years, federal and state regulators have required warning
labels and signage. In the United Kingdom, Matthew Clark carries on its
operations under a Customs and Excise License. Licenses are required for all
premises where wine is produced. Matthew Clark holds a license to act as an
excise warehouse operator and registrations have been secured for the production
of cider and bottled water. New or revised regulations or increased licensing
fees and requirements could have a material adverse effect on the Company's
financial condition or results of operations.
- 11 -
THE COMPANY RELIES ON THE PERFORMANCE OF WHOLESALE DISTRIBUTORS FOR THE SUCCESS
OF ITS BUSINESS.
In the United States, the Company sells its products principally to
wholesalers for resale to retail outlets including grocery stores, package
liquor stores, club and discount stores and restaurants. The replacement or poor
performance of the Company's major wholesalers or the Company's inability to
collect accounts receivable from the Company's major wholesalers could
materially and adversely affect the Company's results of operations and
financial condition. Distribution channels for beverage alcohol products have
been characterized in recent years by rapid change, including consolidations of
certain wholesalers. In addition, wholesalers and retailers of the Company's
products offer products which compete directly with the Company's products for
retail shelf space and consumer purchases. Accordingly, there is a risk that
these wholesalers or retailers may give higher priority to products of the
Company's competitors. In the future, the Company's wholesalers and retailers
may not continue to purchase the Company's products or provide the Company's
products with adequate levels of promotional support.
THE COMPANY'S BUSINESS COULD BE ADVERSELY AFFECTED BY A GENERAL DECLINE IN THE
CONSUMPTION OF PRODUCTS THE COMPANY SELLS.
In the United States the overall per capita consumption of beverage alcohol
products by adults (ages 21 and over) has declined substantially over the past
20 years. These declines have been caused by a variety of factors including:
- increased concern about the health consequences of consuming beverage
alcohol products and about drinking and driving;
- a trend toward a healthier diet including lighter, lower calorie
beverages such as diet soft drinks, juices and water products;
- the increased activity of anti-alcohol consumer groups; and
- increased federal and state excise taxes.
THE COMPANY GENERALLY DOES NOT HAVE LONG-TERM SUPPLY CONTRACTS AND THE COMPANY
IS SUBJECT TO SUBSTANTIAL PRICE FLUCTUATIONS FOR GRAPES AND GRAPE-RELATED
MATERIALS; THE COMPANY HAS A LIMITED GROUP OF SUPPLIERS OF GLASS BOTTLES.
The Company's business is heavily dependent upon raw materials, such as
grapes, grape juice concentrate, grains, alcohol and packaging materials from
third-party suppliers. The Company could experience raw material supply,
production or shipment difficulties which could adversely affect the Company's
ability to supply goods to its customers. The Company is also directly affected
by increases in the costs of such raw materials. In the past, the Company has
experienced dramatic increases in the cost of grapes. Although the Company
believes it has adequate sources of grape supplies, in the event demand for
certain wine products exceeds expectations, the Company could experience
shortages. In addition, one of the Company's largest components of cost of goods
sold is that of glass bottles, which have only a small number of producers. The
inability of any of the Company's glass bottle suppliers to satisfy its
requirements could adversely affect the Company's business.
CURRENCY RATE FLUCTUATIONS/FOREIGN OPERATIONS.
The Company has operations in different countries and, therefore, is
subject to the risks associated with currency fluctuations. The Company could
experience changes in its ability to obtain or hedge against foreign currency,
foreign exchange rates and fluctuations in those rates. The Company could also
be affected by nationalizations or unstable governments or legal systems or
intergovernmental
- 12 -
disputes. These currency, economic and political uncertainties may affect the
Company's results, especially to the extent these matters, or the decisions,
policies or economic strength of the Company's suppliers, affect the Company's
foreign operations or imported beer products.
THE COMPANY'S ACQUISITION STRATEGY MAY NOT BE SUCCESSFUL.
The Company has recently made a number of acquisitions and anticipates that
it may, from time to time, acquire additional businesses, assets or securities
of companies that the Company believes would provide a strategic fit with its
business. Any other acquired business will need to be integrated with the
Company's existing operations. There can be no assurance that the Company will
effectively assimilate the business or product offerings of acquired companies
into its business or product offerings. Any acquisitions also will be
accompanied by risks such as potential exposure to unknown liabilities of
acquired companies, the difficulty and expense of integrating the operations and
personnel of the acquired companies, the potential disruption to the Company's
business, the diversion of management time and attention, the impairment of
relationships with and the possible loss of key employees and customers of the
acquired business, and the incurrence of amortization expenses if any
acquisition is accounted for as a purchase. The Company's failure to adequately
manage the risks associated with any acquisition could have a material adverse
effect on the Company's financial condition or results of operations.
THE TERMINATION OR NON-RENEWAL OF IMPORTED BEER DISTRIBUTION AGREEMENTS COULD
HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY'S BUSINESS.
All of the Company's imported beer products are marketed and sold pursuant
to exclusive distribution agreements with the suppliers of these products which
are subject to renewal from time to time. Our exclusive agreement to distribute
Corona Extra and our other Mexican beer brands in 25 primarily western U.S.
states expires in December 2006 and, subject to compliance with certain
performance criteria, continued retention of certain personnel and other terms
of the agreement, will be automatically renewed for additional terms of five
years. Changes in control of the Company or its subsidiaries involved in
importing the Mexican beer brands, or changes in the chief executive officer of
such subsidiaries, may be a basis for the supplier, unless it consents to such
changes, to terminate the agreement. The supplier's consent to such changes may
not be unreasonably withheld. Prior to their expiration, these agreements may be
terminated if the Company fails to meet certain performance criteria. The
Company believes that it is currently in compliance with all of its material
imported beer distribution agreements. From time to time the Company has failed,
and may in the future fail, to satisfy certain performance criteria in the
Company's distribution agreements. It is possible that the Company's beer
distribution agreements may not be renewed or may be terminated prior to
expiration.
THE COMPANY'S INDEBTEDNESS COULD HAVE A MATERIAL ADVERSE EFFECT ON ITS FINANCIAL
HEALTH.
The Company has incurred substantial indebtedness to finance its
acquisitions and may incur substantial additional indebtedness in the future to
finance further acquisitions. The Company's ability to satisfy its financial
obligations under the Company's indebtedness outstanding from time to time will
depend upon the Company's future operating performance, which is subject to
prevailing economic conditions, levels of interest rates and financial, business
and other factors, many of which are beyond the Company's control. Therefore,
there can be no assurance that the Company's cash flow from operations will be
sufficient to meet all of its debt service requirements and to fund its capital
expenditure requirements.
The Company's current and future debt service obligations and covenants
could have important consequences. Such obligations and covenants, include and
may include the following:
- 13 -
- the Company's ability to obtain financing for future working capital
needs or acquisitions or other purposes may be limited;
- a significant portion of the Company's cash flow from operations will
be dedicated to the payment of principal and interest on its
indebtedness, thereby reducing funds available for operations;
- the Company is subject to restrictive covenants that could limit its
ability to conduct its business; and
- the Company may be more vulnerable to adverse economic conditions than
less leveraged competitors and, thus, may be limited in its ability to
withstand competitive pressures.
The restrictive covenants included in the Company's senior credit facility
and its indentures include, among others, those restricting additional liens,
additional borrowing, the sale of assets, changes of control, the payment of
dividends, transactions with affiliates, the making of investments and certain
other fundamental changes. The senior credit facility also contains restrictions
on acquisitions and certain financial ratio tests including a debt coverage
ratio, a senior debt coverage ratio, a fixed charges ratio and an interest
coverage ratio. These restrictions could limit the Company's ability to conduct
business. A failure to comply with the obligations contained in the senior
credit facility or its indentures could result in an event of default under such
agreements, which could require the Company to immediately repay the related
debt and also debt under other agreements that may contain cross-acceleration or
cross-default provisions.
-------------------------------------
ITEM 2. PROPERTIES
- ------- ----------
The Company maintaining its corporate headquarters in offices leased in
Fairport, New York, consists of four business operating segments. Through these
business segments, the Company currently operates wineries, distilling plants,
bottling plants, a brewery, cider and water producing facilities, most of which
include warehousing and distribution facilities on the premises. The Company
also operates separate distribution centers under the Matthew Clark segment's
wholesaling business. The Company believes that all of itsour facilities are in
good condition and working order and have adequate capacity to meet its needs
for the foreseeable future. The Company's corporate headquarters are located in
offices leased in Fairport, New York.
CANANDAIGUA WINE
Canandaigua Wine maintains its headquarters in owned and leased offices in
Canandaigua, New York. It operates three wineries in New York, located in
Canandaigua, Naples and Batavia, andBatavia; six wineries in California, located in Madera,
Gonzales, Lodi, Escalon, Fresno and Ukiah.Ukiah; three wineries in Washington, located
in Woodinville, Sunnyside and Zillah; and one winery in Caldwell, Idaho. All of
the facilities in which these wineries operate are owned, except for the
winerywineries in Batavia, New York,York; Caldwell, Idaho; and Woodinville, Washington,
which isare leased. Canandaigua Wine considers its principal wineries to be the
Mission Bell winery in Madera, California; the Canandaigua winery in
Canandaigua, New York; and the Riverland Vineyards winery in Gonzales,
California. The Mission Bell winery crushes grapes, produces, bottles and
distributes wine and produces grape juice concentrate. The Canandaigua winery
crushes grapes and produces, bottles and distributes wine. The Riverland
Vineyards winery crushes grapes and produces, bottles and distributes wine for
Canandaigua Wine's account and, on a contractual basis, for third parties.
Canandaigua Wine currently owns or leases approximately 4,200 acres of
vineyards, either fully bearing or under development, in California and New
York.
- 14 -
BARTON
Barton maintains its headquarters in leased offices in Chicago, Illinois.
It owns and operates four distilling plants, two in the United States and two in
Canada. The two distilling plants in the United States are located in Bardstown,
Kentucky; and Albany, Georgia; and the two distilling plants in Canada, which
were acquired in connection with the Black Velvet Assets,Acquisition, are located in
Valleyfield, Quebec; and Lethbridge, Alberta. Barton considers its principal
distilling plants to be the facilities located in Bardstown, Kentucky;
Valleyfield, Quebec; and Lethbridge, Alberta. The Bardstown facility distills,
bottles and warehouses distilled spirits products for Barton's account and, on a
contractual basis, for other participants in the industry. The two Canadian
facilities distill, bottle and store Canadian whisky for Barton's own account,
and distill and/or bottle and store Canadian whisky, vodka, rum, gin and
liqueurs for third parties.
In the United States, Barton also operates a brewery and three bottling
plants. The brewery is located in Stevens Point, Wisconsin; and the bottling
plants are located in Atlanta, Georgia; Owensboro, Kentucky; and Carson,
California. All of these facilities are owned by Barton except for the bottling
plant in Carson, California, which is operated and leased through an arrangement
involving an ongoing management contract. Barton considers the bottling plant
located in Owensboro, Kentucky to be one of its principal facilities. The
Owensboro facility bottles and warehouses distilled spirits products for
Barton's account and is also performsutilized for contract bottling.
MATTHEW CLARK
Matthew Clark maintains its headquarters in owned offices in Bristol,
England. It currently owns and operates two facilities in England that are
located in Bristol and Shepton Mallet and one facility in Scotland, located in
Forfar. Matthew Clark considers all three facilities to be its principal
facilities. The Bristol facility produces, bottles and packages wine; the
Shepton Mallet facility produces, bottles and packages cider; and the Forfar
facility produces, bottles and packages water products. Matthew Clark also owns
another facility in England, located in Taunton, the operations of which have
now been consolidated into its Shepton Mallet facility. Matthew Clark plans to
sell the Taunton property.
Matthew Clark operates thea National Distribution Centre, located inat
Severnside, England to distribute its products that are produced at the Bristol
and Shepton Mallet facilities. This distribution facility is leased by Matthew
Clark. To support its wholesaling business, Matthew Clark operates 1211
distribution centers located throughout the United Kingdom, all of which are
leased. These 11 distribution centers are used to distribute products produced
by third parties, as well as by Matthew Clark. Matthew Clark has been and will
continue consolidating the operations of its wholesaling distribution centers.
FRANCISCAN
Franciscan maintains its headquarters in offices owned in Rutherford,
California. Through this segment the Company owns and operates four wineries in
the United States and, through a majority owned subsidiary, operates one winery
in Chile. All four wineries in the United States are located in the state of
California, in Rutherford, Healdsburg, Monterey and Mt. Veeder, and the winery
in Chile is located in the Casablanca Valley. Franciscan considers its principal
wineries to be those located in Rutherford, California; Healdsburg, California;
Monterey, California; and the Casablanca Valley, Chile. The wineries in
Rutherford, California; Healdsburg, California; and the Casablanca Valley, Chile
crush grapes, and vinify, cellar and bottle wine. The winery in Monterey, California
crushes, vinifies and cellars wine.
- 15 -
Franciscan also owns and leases approximately 2,0002,800 plantable acres of
vineyards in California and approximately 8001,000 plantable acres of vineyards in
Chile.
ITEM 3. LEGAL PROCEEDINGS
- ------- -----------------
The Company and its subsidiaries are subject to litigation from time to
time in the ordinary course of business. Although the amount of any liability
with respect to such litigation cannot be determined, in the opinion of
management such liability will not have a material adverse effect on the
Company's financial condition, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- -----------------------------------------------------------------------------------------------------
Not Applicable.
EXECUTIVE OFFICERS OF THE COMPANY
Information with respect to the current executive officers of the Company
is as follows:
NAME AGE OFFICE HELD
- ---- --- -----------
Richard Sands 4950 Chairman of the Board, President and Chief
Executive Officer
Robert Sands 4142 Group President
Peter Aikens 6162 President and Chief Executive Officer of
Matthew Clark plc
Alexander L. Berk 5051 President and Chief Executive Officer of
Barton Incorporated
Agustin Francisco Huneeus 3435 President of Franciscan Vineyards, Inc.
Jon Moramarco 4344 President and Chief Executive Officer of
Canandaigua Wine Company, Inc.
Thomas J. Mullin 4849 Executive Vice President and General Counsel
George H. Murray 5354 Executive Vice President and Chief Human
Resources Officer
Thomas S. Summer 4647 Executive Vice President and Chief Financial
Officer
Richard Sands, Ph.D., has been employed by the Company in various
capacities since 1979. He was elected Executive Vice President and a director in
1982, became President and Chief Operating Officer in May 1986 and was elected
Chief Executive Officer in October 1993. In September 1999, Mr. Sands was
elected Chairman of the Board. He is the brother of Robert Sands.
Robert Sands was appointed Group President in April 2000 and has served as
a director since January 1990. Mr. Sands also had served as Vice President from
June 1990 through October 1993, as Executive Vice President from October 1993
through April 2000, and as General Counsel from June 1986 through May 2000. He
is the brother of Richard Sands.
Peter Aikens serves as President and Chief Executive Officer of Matthew
Clark plc, a wholly-ownedwholly owned subsidiary of the Company. In this capacity, Mr.
Aikens is in charge of the Company's Matthew Clark segment, and has been since
the Company acquired control of Matthew Clark in December 1998. He has been the
Chief Executive Officer of Matthew Clark plc since May 1990 and has been in the
brewing and drinks industry for most of his career.
Alexander L. Berk serves as President and Chief Executive Officer of Barton
Incorporated, a wholly-ownedwholly owned subsidiary of the Company. In this capacity, Mr.
Berk is in charge of the Company's
- 16 -
Barton segment. From 1990 until February 1998, Mr. Berk was President and Chief
Operating Officer of Barton and from 1988 to 1990, he was the President and
Chief Executive Officer of Schenley Industries. Mr. Berk has been in the
alcoholic beverage alcohol industry for most of his career, serving in various positions.
Agustin Francisco Huneeus serves as President of Franciscan Vineyards,
Inc., a wholly-ownedwholly owned subsidiary of the Company. In this capacity, Mr. Huneeus is
in charge of the Company's Franciscan segment. Since December 1995 and prior to
becoming President on May 15, 2000, he served in various positions with
Franciscan, the last of which was Senior Vice President, Sales and Marketing.
From June 1994 to December 1995, he was an associate in the branded consumer
venture group of Hambrecht & Quist.
Jon Moramarco joined Canandaigua Wine Company, Inc., a wholly-ownedwholly owned
subsidiary of the Company, in November 1999 as its President and Chief Executive
Officer. In this capacity, Mr. Moramarco is in charge of the Company's
Canandaigua Wine segment. Prior to joining Canandaigua Wine Company, Inc., he
served as President and Chief Executive Officer of Allied Domecq Wines, USA
since 1992. Mr. Moramarco has more than 15 years of diverse experience in the
wine industry, including prior service as Chairman of the American Vintners
Association, a national wine trade organization.
Thomas J. Mullin joined the Company as Executive Vice President and General
Counsel on May 30, 2000. Prior to joining the Company, Mr. Mullin served as
President and Chief Executive Officer of TD Waterhouse Bank, NA since February
2000, of CT USA, F.S.B. since September 1998, and of CT USA, Inc. since March
1997. He also served as Executive Vice President, Business Development and
Corporate Strategy of C.T. Financial Services, Inc. from March 1997 through
February 2000. From 1985 through 1997, Mr. Mullin served as Vice Chairman and
Senior Executive Vice President of First Federal Savings and Loan Association of
Rochester, New York and from 1982 through 1985, he was a partner in the law firm
of Phillips, Lytle, Hitchcock, Blaine & Huber.
George H. Murray joined the Company in April 1997 as Senior Vice President
and Chief Human Resources Officer and in April 2000 was elected Executive Vice
President. From August 1994 to April 1997, Mr. Murray served as Vice President -
Human Resources and Corporate Communications of ACC Corp., an international long
distance reseller. For eight and a half years prior to that, he served in
various senior management positions with First Federal Savings and Loan
Association of Rochester, New York, including the position of Senior Vice
President of Human Resources and Marketing from 1991 to 1994.
Thomas S. Summer joined the Company in April l997 as Senior Vice President
and Chief Financial Officer and in April 2000 was elected Executive Vice
President. From November 1991 to April 1997, Mr. Summer served as Vice
President, Treasurer of Cardinal Health, Inc., a large national health care
services company, where he was responsible for directing financing strategies
and treasury matters. Prior to that, from November 1987 to November 1991, Mr.
Summer held several positions in corporate finance and international treasury
with PepsiCo, Inc.
Executive officers of the Company hold office until the next Annual Meeting
of the Board of Directors and until their successors are chosen and qualify.
- 17 -
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- ------- -----------------------------------------------------------------
MATTERS
-------
On October 12, 1999,September 19, 2000, when the Company changed its name to Constellation
Brands, Inc., the Company's Class A Common Stock (the "Class A Stock") and Class
B Common Stock (the "Class B Stock") began trading on the New York Stock
Exchange(R) ("NYSE") under the symbols "CDB"STZ and "CDB.B,"STZ.B, respectively. From October
12, 1999, to September 18, 2000, the Company's Class A Stock and Class B Stock
traded on the NYSE under the symbols CDB and CDB.B, respectively. Prior to
October 12, 1999, the Company's Class A Stock and Class B Stock traded on the
Nasdaq Stock Market(R) ("NASDAQ") under the symbols "CBRNA"CBRNA and "CBRNB,"CBRNB,
respectively. (The Company delisted voluntarily its securities from NASDAQ in
order to list its Class A Stock and Class B Stock on the NYSE.)
The following tables set forth for the periods indicated the high and low
sales prices of the Class A Stock and the Class B Stock.Stock, as adjusted to give
retroactive effect to the May 14, 2001, two-for-one stock split. With respect to all
periods for Fiscal 1999 and
the first two quarters of Fiscal 2000, the high and low sales prices of the
Class A Stock and the Class B Stock reflect trades on the NASDAQ. For the 3rd
Quarter of Fiscal 2000, the high and low sales prices of the Class A Stock
reflect trades on the NASDAQ and the NYSE, respectively, and the high and low
sales prices of the Class B Stock reflect trades on the NASDAQ. For the 4th
Quarter of Fiscal 2000 and for all periods of Fiscal 2001, the high and low
sales prices of the Class A Stock and Class B Stock reflect trades on the NYSE.
CLASS A STOCK
-------------------------------------------------------------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- ----------- -----------
Fiscal 1999
High $ 59 3/4 $ 52 3/8 $ 52 1/8 $ 61 1/2
Low $ 45 9/16 $ 40 1/4 $ 35 1/4 $ 45 5/8
Fiscal 2000
High $ 55 1/427.63 $ 60 3/830.19 $ 61 3/1630.59 $ 54 11/1627.34
Low $ 45 3/822.69 $ 42 7/821.44 $ 5326.50 $ 46 3/423.38
Fiscal 2001
High $ 27.88 $ 27.78 $ 29.22 $ 34.30
Low $ 20.19 $ 21.91 $ 22.94 $ 23.50
CLASS B STOCK
-------------------------------------------------------------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- ----------- -----------
Fiscal 1999
High $ 59 3/4 $ 51 1/2 $ 52 $ 62 1/4
Low $ 45 1/2 $ 40 3/4 $ 37 1/4 $ 46 7/8
Fiscal 2000
High $ 55 3/426.50 $ 6030.00 $ 60 3/430.38 $ 58 1/828.88
Low $ 47 1/223.75 $ 44 1/422.13 $ 5628.00 $ 4924.50
Fiscal 2001
High $ 27.00 $ 27.50 $ 28.06 $ 33.50
Low $ 21.25 $ 24.13 $ 24.00 $ 24.50
At May 15, 2000,2001, the number of holders of record of Class A Stock and Class
B Stock of the Company were 940961 and 273,263, respectively.
The Company's policy is to retain all of its earnings to finance the
development and expansion of its business, and the Company has not paid any cash
dividends since its initial public offering in 1973. In addition, the Company's
current senior credit facility, the Company's indenture for its $130 million 8
3/4% Senior Subordinated Notes due December 2003, its indenture for its $65
million 8 3/4% Series C Senior Subordinated Notes due December 2003, its
indenture for its $200 million 8 1/2% Senior Subordinated Notes due March 2009,
its indenture for its $200 million 8 5/8% Senior Notes due August 2006, its
indenture for its $200 million 8% Senior Notes due February 2008, its indenture
for its (pound)751 million 8 1/2% Series B Senior Notes due November 2009 and its
(pound)80154 million 8 1/2% Series C Senior Notes due November 2009 restrict the
payment of cash dividends. On April 10, 2001, the Company's
- 18 -
Board of Directors approved a two-for-one split of both the Company's Class A
Stock and Class B Stock, which was distributed in the form of a stock dividend
on May 14, 2001, to stockholders of record on April 30, 2001. All share and per
share amounts have been retroactively restated to give effect to the common
stock split.
ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------
FOR THE SIX
FOR THE MONTHS FOR THE YEAR
YEAR ENDED FOR THE YEARS ENDED
YEAR ENDED YEAR ENDED FEBRUARY 29,28,
FEBRUARY 28, FEBRUARY 29, AUGUST 31,
------------ -------------------------------------- -------------- -------------------------------------------------------
2001 2000 1999 1998 1997
1996 1995
------------ ----------- ----------- ----------- -------------------------- ------------ ------------ ------------
(in thousands, except per share data)
Gross sales $ 3,154,294 $ 3,088,699 $ 1,984,801 $ 1,632,357 $ 1,534,452
$ 738,415 $ 1,185,074
Less-excise taxes (757,609) (748,230) (487,458) (419,569) (399,439)
(203,391) (278,530)
------------ ----------- ----------- ----------- -------------------------- ------------ ------------ ------------
Net sales 2,396,685 2,340,469 1,497,343 1,212,788 1,135,013
535,024 906,544
Cost of product sold (1,639,230) (1,618,009) (1,049,309) (869,038) (812,812)
(389,281) (657,883)
------------ ----------- ----------- ----------- -------------------------- ------------ ------------ ------------
Gross profit 757,455 722,460 448,034 343,750 322,201 145,743 248,661
Selling, general and
administrative expenses (486,587) (481,909) (299,526) (231,680) (208,991)
(112,411) (159,196)
Nonrecurring charges - (5,510) (2,616) - -
(2,404) (2,238)
------------ ----------- ----------- ----------- -------------------------- ------------ ------------ ------------
Operating income 270,868 235,041 145,892 112,070 113,210
30,928 87,227
Interest expense, net (108,631) (106,082) (41,462) (32,189) (34,050)
(17,298) (24,601)
------------ ----------- ----------- ----------- -------------------------- ------------ ------------ ------------
Income before taxes and
extraordinary item 162,237 128,959 104,430 79,881 79,160
13,630 62,626
Provision for income taxes (64,895) (51,584) (42,521) (32,751) (32,977)
(6,221) (24,008)
------------ ----------- ----------- ----------- -------------------------- ------------ ------------ ------------
Income before
extraordinary item 97,342 77,375 61,909 47,130 46,183 7,409 38,618
Extraordinary item, net of
income taxes - - (11,437) - -
- -
------------ ----------- ----------- ----------- -------------------------- ------------ ------------ ------------
Net income $ 97,342 $ 77,375 $ 50,472 $ 47,130 $ 46,183
$ 7,409 $ 38,618
============ =========== =========== =========== ========================== ============ ============ ============
Earnings per common share:
Basic:
Income before
extraordinary item $ 4.292.65 $ 3.382.14 $ 2.521.69 $ 2.39 $ 0.38 $ 2.061.26 1.19
Extraordinary item - (0.62) - -(0.31) - -
------------ ----------- ----------- ----------- -------------------------- ------------ ------------ ------------
Earnings per common
share - basic $ 4.292.65 $ 2.762.14 $ 2.521.38 $ 2.391.26 $ 0.38 $ 2.061.19
============ =========== =========== =========== ========================== ============ ============ ============
Diluted:
Income before
extraordinary item $ 4.182.60 $ 3.302.09 $ 2.471.65 $ 2.371.23 $ 0.37 $ 2.031.18
Extraordinary item - (0.61) - -(0.30) - -
------------ ----------- ----------- ----------- -------------------------- ------------ ------------ ------------
Earnings per common
share - diluted $ 4.182.60 $ 2.692.09 $ 2.471.35 $ 2.371.23 $ 0.37 $ 2.031.18
============ =========== =========== =========== ========================== ============ ============ ============
Total assets $ 2,512,169 $ 2,348,791 $ 1,793,776 $ 1,090,555 $ 1,043,281
$ 1,045,590 $ 770,004
============ =========== =========== =========== ========================== ============ ============ ============
Long-term debt $ 1,307,437 $ 1,237,135 $ 831,689 $ 309,218 $ 338,884
$ 327,616 $ 198,859
============ =========== =========== =========== ========================== ============ ============ ============
For the fiscal year ended February 29, 2000,28, 2001, and for the fiscal year ended
February 28, 1999,29, 2000, see Management's Discussion and Analysis of Financial
Condition and Results of Operations under Item 7 of this Annual Report on Form
10-K and Notes to Consolidated Financial Statements as of February 29, 2000,28, 2001,
under Item 8 of this Annual Report on Form 10-K.
During January 1996,On April 10, 2001, the Board of Directors of the Company changedapproved a
two-for-one stock split of both the Company's fiscal year end from August 31Class A Common Stock and Class B
Common Stock, which was distributed in the
- 19 -
form of a stock dividend on May 14, 2001, to stockholders of record on April 30,
2001. All share and per share amounts have been retroactively restated to give
effect to the last day of February.common stock split.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------
OF OPERATIONS
-------------
INTRODUCTION
- ------------
The Company is a leader in the production and marketing of beverage alcohol
brands in North America and the United Kingdom, and a leading independent drinks
wholesaler in the United Kingdom. As the second largest supplier of wine, the
second largest importer of beer and the fourth largest supplier of distilled
spirits, the Company is the largest single-source supplier of these products in
the United States. In the United Kingdom, the Company is a leading marketer of
wine and the second largest producer and marketer of cider.
The Company reports its operating results in five segments: Canandaigua
Wine (branded popular premium wine and brandy, and other, primarily grape juice
concentrate); Barton (primarily beer and distilled spirits); Matthew Clark
(branded wine, cider, and bottled water, and wholesale wine, cider, distilled
spirits, beer and soft drinks); Franciscan (primarily branded super-premium and
ultra-premium wine); and Corporate Operations and Other (primarily corporate
related items).
The following discussion and analysis summarizes the significant factors
affecting (i) consolidated results of operations of the Company for the year
ended February 28, 2001 ("Fiscal 2001"), compared to the year ended February 29,
2000 ("Fiscal 2000"), and Fiscal 2000 compared to the year ended February 28,
1999 ("Fiscal 1999"), and Fiscal 1999 compared to the year ended February 28,
1998 ("Fiscal 1998"), and (ii) financial liquidity and capital resources for
Fiscal 2000.2001. This discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and notes thereto included herein.
TheRECENT DEVELOPMENTS
COMMON STOCK SPLIT
On April 10, 2001, the Board of Directors of the Company operates primarilyapproved a
two-for-one stock split of both the Company's Class A Common Stock and Class B
Common Stock, which was distributed in the beverage alcohol industryform of a stock dividend on May 14,
2001, to stockholders of record on April 30, 2001. All share and per share
amounts have been retroactively restated to give effect to the common stock
split.
PENDING ACQUISITION OF RAVENSWOOD WINERY
On April 10, 2001, the Company and Ravenswood Winery, Inc. ("Ravenswood")
announced that they entered into a merger agreement under which the Company will
acquire Ravenswood, a leading premium wine producer based in North
AmericaSonoma, California.
Under the terms of the merger agreement, the Company will pay $29.50 in cash for
each outstanding share of Ravenswood, or approximately $148 million, and assume
net debt, which the United Kingdom. The Company reports its operating results in
five segments: Canandaigua Wine (branded popularly-priced winedoes not expect to be significant at the time of
closing.
Ravenswood produces, markets and brandy, and
other, primarily grape juice concentrate); Barton (primarily beer and spirits);
Matthew Clark (branded wine, cider and bottled water, and wholesale wine, cider,
spirits, beer and soft drinks); Franciscan (primarily brandedsells super-premium and ultra-premium
wine);California wines primarily under the Ravenswood brand name. The vast majority of
the wines Ravenswood produces and Corporate Operationssells are red wines, including the number one
super-premium Zinfandel in the United States. The Company intends to manage
Ravenswood through its Franciscan segment.
The proposed Ravenswood acquisition is in line with the Company's strategy
of further penetrating the faster growing, higher gross profit margin
super-premium and Otherultra-premium wine
- 20 -
categories. The transaction is subject to satisfaction of customary closing
conditions and is expected to close in late June or early July 2001. The Company
cannot guarantee, however, that this transaction will be completed upon the
agreed upon terms, or at all.
ACQUISITION OF THE CORUS ASSETS
On March 26, 2001, in an asset acquisition, the Company acquired certain
wine brands, wineries, working capital (primarily corporateinventories), and other
related items)assets from Corus Brands, Inc. (the "Corus Assets"). In this
acquisition, the Company acquired several well-known premium wine brands
primarily sold in the northwestern United States, including Covey Run, Columbia,
Ste. Chapelle and Alice White. In connection with the transaction, the Company
also entered into long-term grape supply agreements with affiliates of Corus
Brands, Inc. covering more than 1,000 acres of Washington and Idaho vineyards.
The acquired operations are being integrated into the Company's Canandaigua Wine
segment.
ACQUISITION OF THE TURNER ROAD VINTNERS ASSETS
On March 5, 2001, in an asset acquisition, the Company acquired several
well-known premium wine brands, including Vendange, Nathanson Creek, Heritage,
and Talus, working capital (primarily inventories), two wineries in California,
and other related assets from Sebastiani Vineyards, Inc. and Tuolomne River
Vintners Group (the "Turner Road Vintners Assets"). The acquired operations are
being integrated into the Company's Canandaigua Wine segment. The acquisition of
the Turner Road Vintners Assets is significant and the Company expects it to
have a material impact on the Company's future results of operations.
ACQUISITIONS IN FISCAL 2001, FISCAL 2000 AND FISCAL 1999
ACQUISITION OF FORTH WINES
On October 27, 2000, Matthew Clark acquired all of the outstanding stock of
Forth Wines, a wine and spirit wholesaler operating primarily in Scotland. The
results of operation from the Forth Wines acquisition are reported in the
Matthew Clark segment and have been included in the consolidated results of
operations of the Company since the date of acquisition.
ACQUISITIONS OF FRANCISCAN ESTATES AND SIMI
On June 4, 1999, the Company purchased all of the outstanding capital stock
of Franciscan Vineyards, Inc. ("Franciscan Estates")Estates and, in related transactions, purchased vineyards,
equipment and other vineyard related assets located in Northern California
(collectively the "Franciscan Acquisition"). Also on June 4, 1999, the Company
purchased all of the outstanding capital stock of Simi Winery, Inc. ("Simi").Simi. (The acquisition of the
capital stock of Simi is hereafter referred to as the "Simi Acquisition".) The
Simi Acquisition included the Simi winery (located in Healdsburg, California),
equipment, vineyards, inventory and worldwide ownership of the Simi brand name.
The results of operations from the Franciscan and Simi Acquisitions
(collectively, "Franciscan") are reported together in the Franciscan segment and
have been included in the consolidated results of operationsoperation of the Company since
the date of acquisition. On February 29, 2000, Simi was merged into Franciscan
Estates.
- 21 -
ACQUISITION OF THE BLACK VELVET ASSETS
On April 9, 1999, in an asset acquisition, the Company acquired several
well-known Canadian whisky brands, including Black Velvet, production facilities
located in Alberta and Quebec, Canada, case goods and bulk whisky inventories
and other related assets from affiliates of Diageo plc (collectively, the "Black
Velvet Assets"). In connection with the transaction, the Company also entered
into multi-year agreements with affiliates of Diageo plc to provide packaging
and distilling services for various brands retained by the Diageo plc
affiliates. The results of operations from the Black Velvet Assets are reported
in the Barton segment and have been included in the consolidated results of
operations of the Company since the date of acquisition.
ACQUISITION OF MATTHEW CLARK
On December 1, 1998, the Company acquired control of Matthew Clark plc
("Matthew Clark") and as of February 28, 1999, had acquired all of Matthew
Clark's outstanding shares (the "Matthew Clark Acquisition"). Prior to the
Matthew Clark Acquisition, the Company was principally a producer and supplier
of wine and an importer and producer of beer and distilled spirits in the United
States. The Matthew Clark Acquisition established the Company as a leading
British producer of cider, wine and bottled water and as a leading beverage
alcohol wholesaler in the United Kingdom. The results of operations of Matthew
Clark have been included in the consolidated results of operations of the
Company since the date of acquisition, December 1, 1998.
RESULTS OF OPERATIONS
- ---------------------
FISCAL 2001 COMPARED TO FISCAL 2000
NET SALES
The following table sets forth the net sales (in thousands of dollars) by
operating segment of the Company for Fiscal 2001 and Fiscal 2000.
Fiscal 2001 Compared to Fiscal 2000
---------------------------------------
Net Sales
---------------------------------------
%Increase/
2001 2000 (Decrease)
----------- ----------- ----------
Canandaigua Wine:
Branded:
External customers $ 603,948 $ 623,796 (3.2)%
Intersegment 6,451 5,524 16.8 %
----------- -----------
Total Branded 610,399 629,320 (3.0)%
----------- -----------
Other:
External customers 61,480 81,442 (24.5)%
Intersegment 16,562 1,146 1345.2 %
----------- -----------
Total Other 78,042 82,588 (5.5)%
----------- -----------
Canandaigua Wine net sales $ 688,441 $ 711,908 (3.3)%
----------- -----------
Barton:
Beer $ 659,371 $ 570,380 15.6 %
Spirits 285,743 267,762 6.7 %
----------- -----------
Barton net sales $ 945,114 $ 838,142 12.8 %
----------- -----------
- 22 -
Fiscal 2001 Compared to Fiscal 2000
---------------------------------------
Net Sales
---------------------------------------
%Increase/
2001 2000 (Decrease)
----------- ----------- ----------
Matthew Clark:
Branded:
External customers $ 285,717 $ 313,027 (8.7)%
Intersegment 1,193 75 1490.7 %
----------- -----------
Total Branded 286,910 313,102 (8.4)%
Wholesale 404,209 416,644 (3.0)%
----------- -----------
Matthew Clark net sales $ 691,119 $ 729,746 (5.3)%
----------- -----------
Franciscan:
External customers $ 92,898 $ 62,046 49.7 %
Intersegment 217 73 197.3 %
----------- -----------
Franciscan net sales $ 93,115 $ 62,119 49.9 %
----------- -----------
Corporate Operations and Other $ 3,319 $ 5,372 (38.2)%
----------- -----------
Intersegment eliminations $ (24,423) $ (6,818) 258.2 %
----------- -----------
Consolidated Net Sales $ 2,396,685 $ 2,340,469 2.4 %
=========== ===========
Net sales for Fiscal 2001 increased to $2,396.7 million from $2,340.5
million for Fiscal 2000, an increase of $56.2 million, or 2.4%.
Canandaigua Wine
----------------
Net sales for Canandaigua Wine for Fiscal 2001 decreased to $688.4 million
from $711.9 million for Fiscal 2000, a decrease of $23.5 million, or (3.3)%. The
decline resulted primarily from a decrease in table wine sales, a decrease in
sparkling wine sales as third quarter 2000 included the impact of sales
associated with Millennium activities, and a decrease in grape juice concentrate
sales. These decreases were partially offset by increases in sales of Paul
Masson Grande Amber and Arbor Mist.
Barton
------
Net sales for Barton for Fiscal 2001 increased to $945.1 million from
$838.1 million for Fiscal 2000, an increase of $107.0 million, or 12.8%. This
increase resulted primarily from volume growth and selling price increases in
the Mexican beer portfolio, selling price increases on tequila products and the
inclusion of $11.3 million of incremental net sales during the first quarter of
Fiscal 2001 from the Canadian whisky brands acquired as part of the Black Velvet
Assets acquisition, which was completed in April 1999.
Matthew Clark
-------------
Net sales for Matthew Clark for Fiscal 2001 decreased to $691.1 million
from $729.7 million for Fiscal 2000, a decrease of $38.6 million, or (5.3)%.
This decrease resulted primarily from an adverse foreign currency impact of
$58.8 million. On a local currency basis, net sales increased 2.8% primarily due
to an increase in wholesale sales, including sales from the recent Forth Wines
acquisition, an increase in branded table wine sales, and an increase in
packaged cider sales. These increases were partially offset by decreases in
private label cider and draft cider sales.
Franciscan
----------
Net sales for Franciscan for Fiscal 2001 increased to $93.1 million from
$62.1 million for Fiscal 2000, an increase of $31.0 million, or 49.9%. As the
acquisition of Franciscan was completed in June
- 23 -
1999, this increase resulted primarily from the inclusion of $21.9 million of
net sales from the first quarter of Fiscal 2001 and from selling price increases
instituted during the second quarter of Fiscal 2001.
GROSS PROFIT
The Company's gross profit increased to $757.5 million for Fiscal 2001 from
$722.5 million for Fiscal 2000, an increase of $35.0 million, or 4.8%. The
dollar increase in gross profit was primarily related to volume growth and
selling price increases in the Company's Mexican beer portfolio, sales
attributable to the acquisitions of Franciscan (completed in June 1999) and the
Black Velvet Assets (completed in April 1999), and increases in Franciscan's
selling prices. These increases were partially offset by an adverse foreign
currency impact. As a percent of net sales, gross profit increased to 31.6% for
Fiscal 2001 from 30.9% for Fiscal 2000, resulting primarily from sales of
higher-margin distilled spirits and super-premium and ultra-premium wine
acquired in the acquisitions of the Black Velvet Assets and Franciscan,
respectively, and from improved margins resulting from selling price increases
in the Company's imported beer business and the Franciscan fine wine portfolio,
as well as cost improvements in Matthew Clark's cider and wholesale businesses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $486.6 million
for Fiscal 2001 from $481.9 million for Fiscal 2000, an increase of $4.7
million, or 1.0%. The dollar increase in selling, general and administrative
expenses resulted primarily from an increase in selling expenses in all
operating segments, the inclusion of the Franciscan business and expenses
related to the brands acquired in the Black Velvet Assets acquisition for a full
year in Fiscal 2001, and an increase in expenses in Corporate Operations. These
increases were partially offset by a decrease in advertising and promotion
expenses, primarily in Canandaigua Wine, and a favorable foreign currency
impact. Selling, general and administrative expenses as a percent of net sales
decreased to 20.3% for Fiscal 2001 as compared to 20.6% for Fiscal 2000 as the
percent increase in net sales for Fiscal 2001 was greater than the percent
increase in selling, general and administrative expenses for Fiscal 2001.
NONRECURRING CHARGES
The Company incurred nonrecurring charges of $5.5 million in Fiscal 2000
related to the closure of a cider production facility within the Matthew Clark
operating segment in the United Kingdom ($2.9 million) and to a management
reorganization within the Canandaigua Wine operating segment ($2.6 million). No
such charges were incurred in Fiscal 2001.
OPERATING INCOME
The following table sets forth the operating income/(loss) (in thousands of
dollars) by operating segment of the Company for Fiscal 2001 and Fiscal 2000.
Fiscal 2001 Compared to Fiscal 2000
-------------------------------------
Operating Income/(Loss)
-------------------------------------
2001 2000 % Increase
---------- ---------- ----------
Canandaigua Wine $ 50,789 $ 46,778 8.6%
Barton 167,680 142,931 17.3%
Matthew Clark 48,961 48,473 1.0%
Franciscan 24,495 12,708 92 8%
Corporate Operations and Other (21,057) (15,849) 32.9%
---------- ----------
Consolidated Operating Income $ 270,868 $ 235,041 15.2%
========== ==========
- 24 -
As a result of the above factors, operating income increased to $270.9
million for Fiscal 2001 from $235.0 million for Fiscal 2000, an increase of
$35.8 million, or 15.2%. Exclusive of the aforementioned $2.6 million in
nonrecurring charges, operating income for the Canandaigua Wine operating
segment increased 2.9% in Fiscal 2001 from $49.3 million in Fiscal 2000.
Operating income for the Matthew Clark operating segment, excluding the
aforementioned nonrecurring charges of $2.9 million, decreased 4.8% in Fiscal
2001 from $51.4 million in Fiscal 2000.
INTEREST EXPENSE, NET
Net interest expense increased to $108.6 million for Fiscal 2001 from
$106.1 million for Fiscal 2000, an increase of $2.5 million, or 2.4%. The
increase resulted primarily from an increase in the average interest rate which
was partially offset by a decrease in average borrowings.
NET INCOME
As a result of the above factors, net income increased to $97.3 million for
Fiscal 2001 from $77.4 million for Fiscal 2000, an increase of $20.0 million, or
25.8%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Fiscal 2001 were
$341.3 million, an increase of $41.5 million over EBITDA of $299.8 million for
Fiscal 2000. EBITDA should not be construed as an alternative to operating
income or net cash flow from operating activities and should not be construed as
an indication of operating performance or as a measure of liquidity.
FISCAL 2000 COMPARED TO FISCAL 1999
NET SALES
The following table sets forth the net sales (in thousands of dollars) by
operating segment of the Company for Fiscal 2000 and Fiscal 1999.
Fiscal 2000 Compared to Fiscal 1999
-------------------------------------
Net Sales
-------------------------------------
2000 1999 %Increase
------------ ----------------------- ----------- ---------
Canandaigua Wine:
Branded:
External customers $ 623,796 $ 598,782 4.2%
Intersegment 5,524 - N/A
------------ ----------------------- -----------
Total Branded 629,320 598,782 5.1%
------------ ----------------------- -----------
Other:
External customers 81,442 70,711 15.2%
Intersegment 1,146 - N/A
------------ ----------------------- -----------
Total Other 82,588 70,711 16.8%
------------ ----------------------- -----------
Canandaigua Wine net sales $ 711,908 $ 669,493 6.3%
------------ ----------------------- -----------
Barton:
Beer $ 570,380 $ 478,611 19.2%
Spirits 267,762 185,938 44.0%
------------ ----------------------- -----------
Barton net sales $ 838,142 $ 664,549 26.1%
------------ ----------------------- -----------
- 25 -
Fiscal 2000 Compared to Fiscal 1999
-------------------------------------
Net Sales
-------------------------------------
2000 1999 %Increase
----------- ----------- ---------
Matthew Clark:/
Branded:
External customers $ 313,027 $ 64,879 382.5%
Intersegment 75 - N/A
------------ ----------------------- -----------
Total Branded 313,102 64,879 382.6%
Wholesale 416,644 93,881 343.8%
------------ ----------------------- -----------
Matthew Clark net sales $ 729,746 $ 158,760 359.7%
------------ ----------------------- -----------
Franciscan:
External customers $ 62,046 $ - N/A
Intersegment 73 - N/A
------------ ----------------------- -----------
Franciscan net sales $ 62,119 $ - N/A
------------ ----------------------- -----------
Corporate Operations and Other $ 5,372 $ 4,541 18.3%
------------ ----------------------- -----------
Intersegment eliminations $ (6,818) $ - N/A
------------ ----------------------- -----------
Consolidated Net Sales $ 2,340,469 $ 1,497,343 56.3%
============ ======================= ===========
Net sales for Fiscal 2000 increased to $2,340.5 million from $1,497.3
million for Fiscal 1999, an increase of $843.1 million, or 56.3%.
Canandaigua Wine
----------------
Net sales for Canandaigua Wine for Fiscal 2000 increased to $711.9 million
from $669.5 million for Fiscal 1999, an increase of $42.4 million, or 6.3%. This
increase resulted primarily from (i) an increase in sales of Arbor Mist, which
was introduced in the second quarter of Fiscal 1999, (ii) an increase in the
Company's bulk wine sales, (iii) an increase in sparkling wine sales as a result
of millenniumMillennium sales, and (iv) an increase in Almaden box wine sales. These
increases were partially offset by declines in certain other wine brands.
Barton
------
Net sales for Barton for Fiscal 2000 increased to $838.1 million from
$664.5 million for Fiscal 1999, an increase of $173.6 million, or 26.1%. This
increase resulted primarily from volume growth and selling price increases in
the Mexican beer portfolio as well as from $81.3 million of sales of products
and services acquired in the acquisition of the Black Velvet Assets, which was
completed in April 1999.
Matthew Clark
-------------
Net sales for Matthew Clark for Fiscal 2000 increased to $729.7 million
from $158.8 million for Fiscal 1999, an increase of $571.0 million, or 359.7%.
The Company acquired control of Matthew Clark during the fourth quarter of
Fiscal 1999.
Franciscan
----------
Net sales for Franciscan for Fiscal 2000 since the date of acquisition,
June 4, 1999, were $62.1 million.
GROSS PROFIT
The Company's gross profit increased to $722.5 million for Fiscal 2000 from
$448.0 million for Fiscal 1999, an increase of $274.4 million, or 61.3%. The
dollar increase in gross profit was primarily related to sales fromattributable to
the acquisitions of Matthew Clark, the Black Velvet Assets and Franciscan,
- 26 -
all completed after the third quarter of Fiscal 1999, as well as increased
Barton beer and Canandaigua Wine branded wine sales. As a percent of net sales,
gross profit increased to 30.9% for Fiscal 2000 from 29.9% for Fiscal 1999. The
increase in the gross profit margin resulted primarily from the sales of
higher-margin distilled spirits and super-premium and ultra-premium wine
acquired in the acquisitions of the Black Velvet Assets and Franciscan,
respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $481.9 million
for Fiscal 2000 from $299.5 million for Fiscal 1999, an increase of $182.4
million, or 60.9%. The dollar increase in selling, general and administrative
expenses resulted primarily from the addition of the Matthew Clark and
Franciscan businesses and expenses related to the brands acquired in the Black
Velvet Assets acquisition. The Company also increased its marketing and
promotional costs to generate additional sales volume, particularly of certain
Canandaigua Wine brands and Barton beer brands. Selling, general and
administrative expenses as a percent of net sales increased to 20.6% for Fiscal
2000 as compared to 20.0% for Fiscal 1999. The increase in percent of net sales
resulted primarily from (i) Canandaigua Wine's investment in brand building and
efforts to increase market share and (ii) the acquisitions of Matthew Clark and
Franciscan, as Matthew Clark's and Franciscan's selling, general and
administrative expenses as a percent of net sales are typically at the high end
of the range of the Company's operating segments' percentages.
NONRECURRING CHARGES
The Company incurred nonrecurring charges of $5.5 million in Fiscal 2000
related to the closure of a cider production facility within the Matthew Clark
operating segment in the United Kingdom and to a management reorganization
within the Canandaigua Wine operating segment. In Fiscal 1999, nonrecurring
charges of $2.6 million were incurred related to the closure of the
aforementioned cider production facility in the United Kingdom.
OPERATING INCOME
The following table sets forth the operating profit/income/(loss) (in thousands of
dollars) by operating segment of the Company for Fiscal 2000 and Fiscal 1999.
Fiscal 2000 Compared to Fiscal 1999
----------------------------------------------------------------------------
Operating Profit/Loss
-------------------------------------Income/(Loss)
---------------------------------------
2000 1999 %Increase
---------- ---------- ---------
Canandaigua Wine $ 46,778 $ 46,283 1.1%
Barton 142,931 102,624 39.3%
Matthew Clark 48,473 8,998 438.7%
Franciscan 12,708 - N/A
Corporate Operations and Other (15,849) (12,013) 31.9%
---------- ----------
Consolidated Operating ProfitIncome $ 235,041 $ 145,892 61.1%
========== ==========
As a result of the above factors, operating income increased to $235.0
million for Fiscal 2000 from $145.9 million for Fiscal 1999, an increase of
$89.1 million, or 61.1%. Operating income for the Canandaigua Wine operating
segment was up $0.5 million, or 1.1%, due to the nonrecurring charges of $2.6
million related to the segment's management reorganization, as well as
additional marketing expenses associated with new product introductions.
Exclusive of the nonrecurring charges, operating income increased by 6.6% to
$49.3 million in Fiscal 2000. Operating income for the Matthew Clark operating
segment, excluding nonrecurring charges of $2.9 million, was $51.4 million.
- 27 -
INTEREST EXPENSE, NET
Net interest expense increased to $106.1 million for Fiscal 2000 from $41.5
million for Fiscal 1999, an increase of $64.6 million, or 155.9%. The increase
resulted primarily from additional interest expense associated with the
borrowings related to the acquisitions of Matthew Clark, the Black Velvet Assets
and Franciscan.
NET INCOME
As a result of the above factors, net income increased to $77.4 million for
Fiscal 2000 from $50.5 million for Fiscal 1999, an increase of $26.9 million, or
53.3%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Fiscal 2000 were
$299.8 million, an increase of $115.3 million over EBITDA of $184.5 million for
Fiscal 1999. EBITDA should not be construed as an alternative to operating income or
net cash flow from operating activities and should not be construed as an
indication of operating performance or as a measure of liquidity.
FISCAL 1999 COMPARED TO FISCAL 1998
NET SALES
The following table sets forth the net sales (in thousands of dollars) by
operating segment of the Company for Fiscal 1999 and Fiscal 1998.
Fiscal 1999 Compared to Fiscal 1998
---------------------------------------
Net Sales
---------------------------------------
%Increase/
1999 1998 (Decrease)
----------- ----------- ----------
Canandaigua Wine:
Branded $ 598,782 $ 570,807 4.9 %
Other 70,711 71,988 (1.8)%
----------- -----------
Canandaigua Wine net sales $ 669,493 $ 642,795 4.2 %
----------- -----------
Barton:
Beer $ 478,611 $ 376,607 27.1 %
Spirits 185,938 191,190 (2.7)%
----------- -----------
Barton net sales $ 664,549 $ 567,797 17.0 %
----------- -----------
Matthew Clark:
Branded $ 64,879 $ - N/A
Wholesale 93,881 - N/A
----------- -----------
Matthew Clark net sales $ 158,760 $ - N/A
----------- -----------
Corporate Operations and Other $ 4,541 $ 2,196 106.8 %
----------- -----------
Consolidated Net Sales $ 1,497,343 $ 1,212,788 23.5 %
=========== ===========
Net sales for Fiscal 1999 increased to $1,497.3 million from $1,212.8
million for Fiscal 1998, an increase of $284.6 million, or 23.5%.
Canandaigua Wine
----------------
Net sales for Canandaigua Wine for Fiscal 1999 increased to $669.5 million
from $642.8 million for Fiscal 1998, an increase of $26.7 million, or 4.2%. This
increase resulted primarily from (i) the introduction of two new products, Arbor
Mist and Mystic Cliffs, in Fiscal 1999, (ii) Paul Masson Grande Amber Brandy
growth, and (iii) Almaden boxed wine growth. These increases were partially
offset by declines in other wine brands and in the Company's grape juice
concentrate business.
Barton
------
Net sales for Barton for Fiscal 1999 increased to $664.5 million from
$567.8 million for Fiscal 1998, an increase of $96.8 million, or 17.0%. This
increase resulted primarily from an increase in sales of beer brands led by
Barton's Mexican portfolio. This increase was partially offset by a decrease in
revenues from Barton's spirits contract bottling business.
Matthew Clark
-------------
Net sales for Matthew Clark for Fiscal 1999 since the date of acquisition,
December 1, 1998, were $158.8 million.
GROSS PROFIT
The Company's gross profit increased to $448.0 million for Fiscal 1999 from
$343.8 million for Fiscal 1998, an increase of $104.3 million, or 30.3%. The
dollar increase in gross profit resulted primarily from the sales generated by
the Matthew Clark Acquisition completed in the fourth quarter of Fiscal 1999,
increased beer sales and the combination of higher average selling prices and
lower average costs for branded wine sales. As a percent of net sales, gross
profit increased to 29.9% for Fiscal 1999 from 28.3% for Fiscal 1998. The
increase in the gross profit margin resulted primarily from higher selling
prices and lower costs for Canandaigua Wine's branded wine sales, partially
offset by a sales mix shift towards lower margin products, particularly due to
the growth in Barton's beer sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $299.5 million
for Fiscal 1999 from $231.7 million for Fiscal 1998, an increase of $67.8
million, or 29.3%. The dollar increase in selling, general and administrative
expenses resulted primarily from expenses related to the Matthew Clark
Acquisition, as well as marketing and promotional costs associated with the
Company's increased branded sales volume. The year-over-year comparison also
benefited from a one time charge for separation costs incurred in Fiscal 1998
related to an organizational change within Barton. Selling, general and
administrative expenses as a percent of net sales increased to 20.0% for Fiscal
1999 as compared to 19.1% for Fiscal 1998. The increase in percent of net sales
resulted primarily from (i) Canandaigua Wine's investment in brand building and
efforts to increase market share and (ii) the Matthew Clark Acquisition, as
Matthew Clark's selling, general and administrative expenses as a percent of net
sales is typically higher than for the Company's other operating segments.
NONRECURRING CHARGES
The Company incurred nonrecurring charges of $2.6 million in Fiscal 1999
related to the closure of a cider production facility in the United Kingdom. No
such charges were incurred in Fiscal 1998.
OPERATING INCOME
The following table sets forth the operating profit/(loss) (in thousands of
dollars) by operating segment of the Company for Fiscal 1999 and Fiscal 1998.
Fiscal 1999 Compared to Fiscal 1998
---------------------------------------
Operating Profit/(Loss)
---------------------------------------
%Increase/
1999 1998 (Decrease)
----------- ----------- ----------
Canandaigua Wine $ 46,283 $ 45,440 1.9 %
Barton 102,624 77,010 33.3 %
Matthew Clark 8,998 - N/A
Corporate Operations and Other (12,013) (10,380) (15.7)%
----------- -----------
Consolidated Operating Profit $ 145,892 $ 112,070 30.2 %
=========== ===========
As a result of the above factors, operating income increased to $145.9
million for Fiscal 1999 from $112.1 million for Fiscal 1998, an increase of
$33.8 million, or 30.2%.
INTEREST EXPENSE, NET
Net interest expense increased to $41.5 million for Fiscal 1999 from $32.2
million for Fiscal 1998, an increase of $9.3 million, or 28.8%. The increase
resulted primarily from additional interest expense associated with the
borrowings related to the Matthew Clark Acquisition.
EXTRAORDINARY ITEM, NET OF INCOME TAXES
The Company incurred an extraordinary charge of $11.4 million after taxes
in Fiscal 1999. This charge resulted from fees related to the replacement of the
Company's senior credit facility, including extinguishment of the Term Loan. No
extraordinary charges were incurred in Fiscal 1998.
NET INCOME
As a result of the above factors, net income increased to $50.5 million for
Fiscal 1999 from $47.1 million for Fiscal 1998, an increase of $3.3 million, or
7.1%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Fiscal 1999 were
$184.5 million, an increase of $39.3 million over EBITDA of $145.2 million for
Fiscal 1998. EBITDA should not be construed as an alternative to operating
income or net cash flow from operating activities and should not be construed as
an indication of operating performance or as a measure of liquidity.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
- -----------------------------------------
GENERAL
The Company's principal use of cash in its operating activities is for
purchasing and carrying inventories. The Company's primary source of liquidity
has historically been cash flow from operations, except during the annual fall
grape harvests when the Company has relied on short-term borrowings. The annual
grape crush normally begins in August and runs through October. The Company
generally begins purchasing grapes in August with payments for such grapes
beginning to come due in September. The Company's short-term borrowings to
support such purchases generally reach their highest levels in November or
December. Historically, the Company has used cash flow from operating activities
to repay its short-term borrowings. The Company will continue to use its
short-term borrowings to support its working capital requirements. The Company
believes that cash provided by operating activities and its financing
activities, primarily short-term borrowings, will provide adequate resources to
satisfy its working capital, liquidity and anticipated capital expenditure
requirements for both its short-term and long-term capital needs.
FISCAL 20002001 CASH FLOWS
OPERATING ACTIVITIES
Net cash provided by operating activities for Fiscal 20002001 was $148.1$103.8
million, which resulted from $139.9$177.5 million in net income adjusted for noncash
items, plus $8.2less $73.8 million representing the net change in the Company's operating
assets and liabilities. The net change in operating assets and liabilities
resulted primarily from increases in accrued income taxes, accrued interest
expenseinventories and accrued salariesaccounts receivable, and commissions,a
decrease in accounts payable, partially offset by decreasesan increase in
accounts payable and accrued excise
taxes.
INVESTING ACTIVITIES AND FINANCING ACTIVITIES
Net cash used in investing activities for Fiscal 20002001 was $495.7$70.7 million,
which resulted primarily from net cash paidcapital expenditures of $452.9$68.2 million, including
$16.8 million for the
acquisitions of the Black Velvet Assets and Franciscan and $57.7 million of
capital expenditures, including $8.9 million for vineyards.
- 28 -
Net cash provided by financing activities for Fiscal 20002001 was $355.6$83.4
million, which resulted primarily from proceeds of $1,486.2$319.4 million from the
issuance of long-term debt, including $400.0$200.0 million incurred in connection with
the acquisitionsacquisition of the Black VelvetTurner Road Vintners' Assets and Franciscan and $900.0(pound)80.0 million
incurred($119.4 million upon issuance, net of $0.6 million unamortized discount) of 8
1/2% Sterling Series C Senior Notes used to repay amounts outstandinga portion of the Company's
British pound sterling borrowings under theits senior credit facility. This amount
was partially offset by principal payments of $1,060.2long-term debt of $221.9 million,
which included $27.5 million of long-term debtscheduled and repayment of $60.4required principal payments and
$75.0 million of net revolving loan borrowings.
As of February 29, 2000, under the 2000 Credit Agreement (as defined
below), the Company had outstanding term loans of $570.1 million bearing a
weighted average interest rate of 7.95%, $26.8 million of revolving loans
bearing a weighted average interest rate of 7.43%, undrawn revolving letters of
credit of $10.7 million, and $262.5 million in revolving loans available to be
drawn.
Total debt outstanding as of February 29, 2000, amounted to $1,317.9
million, an increase of $392.5 million from February 28, 1999. The ratio of
total debt to total capitalization increased to 71.7% as of February 29, 2000,
from 68.0% as of February 28, 1999.principal prepayments.
During June 1998, the Company's Board of Directors authorized the
repurchase of up to $100.0 million of its Class A Common Stock and Class B
Common Stock. The repurchase of shares of common stock will be accomplished,
from time to time, in management's discretion and depending upon market
conditions, through open market or privately negotiated transactions. The
Company may finance such repurchases through cash generated from operations or
through the senior credit facility. The repurchased shares will become treasury
shares. As of May 26, 2000,29, 2001, the Company had purchased 1,018,8362,037,672 shares of Class
A Common Stock at an aggregate cost of $44.9 million, or at an average cost of
$44.05$22.02 per share.
DEBT
Total debt outstanding as of February 28, 2001, amounted to $1,365.8
million, an increase of $47.9 million from February 29, 2000. The ratio of total
debt to total capitalization decreased to 68.9% as of February 28, 2001, from
71.7% as of February 29, 2000.
SENIOR CREDIT FACILITY
As of February 28, 2001, under the 2000 Credit Agreement (as defined
below), the Company had outstanding term loans of $337.6 million bearing a
weighted average interest rate of 8.2%, no outstanding revolving loans, undrawn
letters of credit of $12.3 million, and $287.7 million in revolving loans
available to be drawn.
During June 1999, the Company financed the purchase price for the
Franciscan Acquisition primarily through additional term loan borrowings under
theits previous senior credit facility. The Company financed the purchase price for
the Simi Acquisition with revolving loan borrowings under the same senior credit
facility. During August 1999, as discussed below, a portion of the Company's
borrowings under itsthat senior credit facility were repaid with the net proceeds
of its Senior Notes (as defined below) offering.
On October 6, 1999, the Company, certain of its principal operating
subsidiaries, and a syndicate of banks (the "Syndicate Banks"), for which The
Chase Manhattan Bank acts as administrative agent, entered into a new senior credit
facility (the(as subsequently amended, the "2000 Credit Agreement"). The 2000 Credit
Agreement includes both U.S. dollar and British pound sterling commitments of
the Syndicate Banks of up to, in the aggregate, the equivalent of $1.0 billion
(subject to increase as therein provided to $1.2 billion). Proceeds of the 2000
Credit Agreement were used to repay all outstanding principal and accrued
interest on all loans under the Company's prior senior credit facility, and are
available to fund permitted acquisitions and ongoing working capital needs of
the Company and its subsidiaries.
The 2000 Credit Agreement provides for a $380.0 million Tranche I Term Loan
facility due in December 2004, a $320.0 million Tranche II Term Loan facility
available for borrowing in British pound sterling due in December 2004, and a
$300.0 million Revolving Credit facility (including letters of credit up to a
maximum of $20.0 million) which expires in December 2004. The Tranche I Term
Loan facility ($380.0 million) and the Tranche II Term Loan facility
((pound)193.4 million, or approximately $320.0 million) were fully drawn at closing. TheDuring
Fiscal 2001, the Company used cash from operating activities to prepay a
- 29 -
portion of the $380.0 million Tranche I Term Loan facility. After this
prepayment, the required quarterly repayments of the Tranche I Term Loan
facility requires quarterly repayments,were revised to $15.6 million starting at $12.0 million in March 2000June 2001 and increasing
thereafter annually with final payments of $23.0$20.6 million in each quarter in
2004. On November 17, 1999, proceeds from the Sterling Senior Notes (as defined
below) were used to repay a portion of the $320.0 million Tranche II Term Loan
facility ((pound)73.0 million, or approximately $118.3 million). On May 15, 2000, proceeds
from the Sterling Series C Senior Notes (as defined below) were used to repay an
additional portion of the $320.0 million Tranche II Term Loan facility
((pound)78.8 million, or $118.2 million). After this repayment,these repayments, the required
quarterly repayments of the Tranche II Term Loan facility were revised to
(pound)0.60.4 million ($1.0 million) for each quarter in 2000, (pound)1.2 million
($1.90.6 million) for each quarter in 2001 and 2002, (pound)1.50.5
million ($2.40.7 million) for each quarter in 2003, and (pound)25.68.5 million ($40.412.3
million) for each quarter in 2004 (the foregoing U.S. dollar equivalents are as
of February 29, 2000)28, 2001). On May 15, 2000, the Company issued (pound)80.0 million aggregate
principal amount of 8 1/2% Series C Senior Notes. The proceeds of the offering
were used to repay a portion of the Tranche II Term Loan. See Senior Notes
below. There are certain mandatory term loan prepayments,
including those based on sale of assets and issuance of debt and equity, in each
case subject to customary baskets, exceptions and thresholds which are generally more favorable to the
Company than those contained in its prior senior credit facility.thresholds.
The rate of interest payable, at the Company's option, is a function of the
London interbank offering rate ("LIBOR") plus a margin, federal funds rate plus
a margin, or the prime rate plus a margin. The margin is adjustable based upon
the Company's Debt Ratio (as defined in the 2000 Credit Agreement) and, with
respect to LIBOR borrowings, ranges between 0.75% and 1.25% for Revolving Credit
loans and 1.00% and 1.75% for Term Loans. As of February 29, 2000,28, 2001, the margin
was 1.25%1.125% for Revolving Credit loans and 1.75%1.625% for Term Loans. In addition to
interest, the Company pays a facility fee on the Revolving Credit commitments at
0.50% per annum as of February 29, 2000.28, 2001. This fee is based upon the Company's
quarterly Debt Ratio and can range from 0.25% to 0.50%.
Certain of the Company's principal operating subsidiaries have guaranteed
the Company's obligations under the 2000 Credit Agreement. The 2000 Credit
Agreement is secured by (i) first priority pledges of 100% of the capital stock
of Canandaigua Limited and all of the Company's domestic operating subsidiaries
and (ii) first priority pledges of 65% of the capital stock of Matthew Clark and
certain other foreign subsidiaries.
The Company and its subsidiaries are subject to customary lending covenants
including those restricting additional liens, incurring additional indebtedness,
the sale of assets, the payment of dividends, transactions with affiliates and
the making of certain investments, in each case subject to customary baskets,
exceptions and thresholds which are generally more favorable to the Company than those
contained in its prior senior credit facility.thresholds. The primary financial covenants require the
maintenance of a debt coverage ratio, a senior debt coverage ratio, a fixed
charges ratio and an interest coverage ratio. Among the most restrictive
covenants contained in the 2000 Credit Agreement is the debt coverage ratio.
On February 13, 2001, the 2000 Credit Agreement was amended to, among other
things, permit the Company to finance the acquisition of the Turner Road
Vintners Assets with revolving loan borrowings, permit the refinancing of the
Original Notes (as defined below) and Series C Notes (as defined below) with
senior notes, and adjust the senior debt coverage ratio.ratio covenant.
SENIOR NOTES
On August 4, 1999, the Company issued $200.0 million aggregate principal
amount of 8 5/8% Senior Notes due August 2006 (the "Senior"August 1999 Senior Notes").
The net proceeds of the offering (approximately $196.0($196.0 million) were used to repay a portion
of the Company's borrowings under its senior credit facility. Interest on the
August 1999 Senior Notes is payable semiannually on February 1 and August 1 of
each year, beginning February 1, 2000. The August 1999 Senior Notes are
redeemable at the option of the Company, in whole or in part, at any time. The
August 1999 Senior Notes are unsecured senior obligations and rank equally in
right of payment to all existing and future unsecured senior indebtedness of the
Company. The August 1999 Senior Notes are guaranteed, on a senior basis, by
certain of the Company's significant operating subsidiaries.
- 30 -
On November 17, 1999, the Company issued (pound)75.0 million (approximately
$121.7($121.7
million upon issuance and $118.4 million as of February 29, 2000)issuance) aggregate principal amount of 8 1/2% Senior Notes due
November 2009 (the "Sterling Senior Notes"). The net proceeds of the offering
((pound)73.0 million, or approximately $118.3 million) were used to repay a portion of the
Company's British pound sterling borrowings under its senior credit facility.
Interest on the Sterling Senior Notes is payable semiannually on May 15 and
November 15 of each year, beginning on May 15, 2000. The Sterling Senior Notes
are redeemable at the option of the Company, in whole or in part, at any time.
The Sterling Senior Notes are unsecured senior obligations and rank equally in
right of payment to all existing and future unsecured senior indebtedness of the
Company. The Sterling Senior Notes are guaranteed, on a senior basis, by certain
of the Company's significant operating subsidiaries. In March 2000, the Company
exchanged (pound)75.0 million aggregate principal amount of 8 1/2% Series B
Senior Notes due in November 2009 (the "Sterling Series B Senior Notes") for all
of the Sterling Senior Notes. The terms of the Sterling Series B Senior Notes
are identical in all material respects to the Sterling Senior Notes. In October
2000, the Company exchanged (pound)74.0 million aggregate principal amount of
Sterling Series C Senior Notes (as defined below) for (pound)74.0 million of the
Sterling Series B Notes. The terms of the Sterling Series C Senior Notes are
identical in all material respects to the Sterling Series B Senior Notes. As of
February 28, 2001, the Company had outstanding (pound)1.0 million ($1.4 million)
aggregate principal amount of Sterling Series B Senior Notes.
On May 15, 2000, the Company issued (pound)80.0 million (approximately
$120.4 million)($120.0 million
upon issuance) aggregate principal amount of 8 1/2% Series C Senior Notes due
November 2009 at an issuance price of (pound)79.6 million (approximately $119.8($119.4 million upon
issuance, net of $0.6 million unamortized discount, with an effective interest
rate of 8.6%) (the "Sterling Series C Senior Notes"). The net proceeds of the
offering ((pound)78.8 million, or approximately $118.6$118.2 million) were used to repay a portion
of the Company's British pound sterling borrowings under its senior credit
facility. After this repayment, the required quarterly repayments of the
Tranche II Term Loan facility were revised to (pound)0.2 million ($0.3 million)
for the remaining three quarters in 2000, (pound)0.4 million ($0.6 million) for
each quarter in 2001 and 2002, (pound)0.5 million ($0.8 million) for each
quarter in 2003, and (pound)8.5 million ($12.8 million) for each quarter in
2004. (The foregoing U.S. dollar equivalents are as of May 15, 2000.) Interest on the Sterling Series C Senior Notes is payable semiannually
on May 15 and November 15 of each year, beginning on November 15, 2000. The
Sterling Series C Senior Notes are redeemable at the option of the Company, in
whole or in part, at any time. The Sterling Series C Senior Notes are unsecured
senior obligations and rank equally in right of payment to all existing and
future unsecured senior indebtedness of the Company. The Sterling Series C
Senior Notes are guaranteed, on a senior basis, by certain of the Company's
significant operating subsidiaries. As of February 28, 2001, the Company had
outstanding (pound)154.0 million ($222.1 million, net of $0.5 million
unamortized discount) aggregate principal amount of Sterling Series C Senior
Notes.
On February 21, 2001, the Company issued $200.0 million aggregate principal
amount of 8% Senior Notes due February 2008 (the "February 2001 Senior Notes").
The net proceeds of the offering ($197.0 million) were used to partially fund
the acquisition of the Turner Road Vintners Assets. Interest on the February
2001 Senior Notes is payable semiannually on February 15 and August 15 of each
year, beginning August 15, 2001. The February 2001 Senior Notes are redeemable
at the option of the Company, in whole or in part, at any time. The February
2001 Senior Notes are unsecured senior obligations and rank equally in right of
payment to all existing and future unsecured senior indebtedness of the Company.
The February 2001 Senior Notes are guaranteed, on a senior basis, by certain of
the Company's significant operating subsidiaries.
SENIOR SUBORDINATED NOTES
As of February 29, 2000,28, 2001, the Company had outstanding $195.0 million
aggregate principal amount of 8 3/4% Senior Subordinated Notes due December
2003, being the $130.0 million aggregate principal amount of 8 3/4% Senior
Subordinated Notes due December 2003 issued in December 1993 (the "Original
Notes") and the $65.0 million aggregate principal amount of 8 3/4% Series C
Senior Subordinated Notes due December 2003 issued in February 1997 (the "Series
C Notes"). The Original Notes and the Series C Notes are currently redeemable,
in whole or in part, at the option of the Company.
- 31 -
A brief description of the Original Notes and the Series C Notes is contained in
Note 6 to the Company's consolidated financial statements located in Item 8 of
this Annual Report on Form 10-K.
On March 4, 1999, the Company issued $200.0 million aggregate principal
amount of 8 1/2% Senior Subordinated Notes due March 2009 (the "Senior
Subordinated Notes"). The net proceeds of the offering (approximately $195.0($195.0 million) were
used to fund the acquisition of the Black Velvet Assets and to pay the fees and
expenses related thereto with the remainder of the net proceeds used for general
corporate purposes. Interest on the Senior Subordinated Notes is payable
semiannually on March 1 and September 1 of each year, beginning September 1,
1999. The Senior Subordinated Notes are redeemable at the option of the Company,
in whole or in part, at any time on or after March 1, 2004. The Company may also
redeem up to $70.0 million of the Senior Subordinated Notes using the proceeds
of certain equity offerings completed before March 1, 2002. The Senior
Subordinated Notes are unsecured and subordinated to the prior payment in full
of all senior indebtedness of the Company, which includes the senior credit
facility. The Senior Subordinated Notes are guaranteed, on a senior subordinated
basis, by certain of the Company's significant operating subsidiaries.
EQUITY OFFERING
During March, 2001, the Company completed a public offering of 4,370,000
shares of its Class A Common Stock resulting in net proceeds to the Company,
after deducting underwriting discounts and expenses, of $139.4 million. The net
proceeds were used to repay revolving loan borrowings under the senior credit
facility of which a portion was incurred to partially finance the acquisition of
the Turner Road Vintners Assets.
CAPITAL EXPENDITURES
During Fiscal 2000,2001, the Company incurred $57.7$68.2 million for capital
expenditures, including $8.9$16.8 million related to vineyards. The Company plans to
spend approximatelybetween $65.0 million and $70.0 million for capital expenditures,
exclusive of vineyards, in fiscal 2001.2002. In addition, the Company continues to
consider the purchase, lease and development of vineyards and may incur
additional expenditures for vineyards if opportunities become available. See
"Business - Sources and Availability of Raw Materials" under Item 1 of this
Annual Report on Form 10-K. Management reviews the capital expenditure program
periodically and modifies it as required to meet current business needs.
COMMITMENTS
The Company has agreements with suppliers to purchase various spirits of
which certain agreements are denominated in British pound sterling and Canadian
dollars. The maximum future obligation under these agreements, based upon
exchange rates at February 29, 2000,28, 2001, aggregate approximately $28.4$22.6 million for contracts
expiring through December 2005.
At February 29, 2000,28, 2001, the Company had open currency forward contracts to
purchase various foreign currencies of $6.8$7.3 million which mature within twelve
months. The Company's use of such contracts is limited to the management of
currency rate risks related to purchases denominated in a foreign currency. The
Company's strategy is to enter only into currency exchange contracts that are
matched to specific purchases and not to enter into any speculative contracts.
EFFECTS OF INFLATION AND CHANGING PRICES
The Company's results of operations and financial condition have not been
significantly affected by inflation and changing prices.prices, including rising energy
and tequila costs. The Company has been able, subject to normal competitive
conditions, to pass along rising costs through increased selling prices.
- 32 -
There can be no assurances, however, that the Company will continue to be able
to pass along rising costs through increased selling prices.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. SFAS No. 133 requires that every
derivative be recorded as either an asset or liability in the balance sheet and
measured at its fair value. SFAS No. 133 also requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting.
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137 ("SFAS No. 137"), "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
FASB Statement No. 133." SFAS No. 137 delays the effective date of SFAS No. 133
for one year. With the issuance of SFAS No. 137, the Company is required to
adopt SFAS No. 133 on a prospective basis for interim periods and fiscal years
beginning March 1, 2001.
In June 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 138 ("SFAS No. 138"), "Accounting for Certain
Derivative Instruments and Certain Hedging Activities--an amendment of FASB
Statement No. 133." SFAS No. 138 amends the accounting and reporting standards
of SFAS No. 133 for certain derivative instruments and certain hedging
activities. The Company is required to adopt SFAS No. 138 concurrently with SFAS
No. 133. The Company believes the effect of the adoption of these statements on
its financial statements will not be material based on the Company's current
risk management strategies.
YEAR 2000 ISSUE
Prior to January 1,In May 2000, the Emerging Issues Task Force ("EITF") issued EITF Issue No.
00-14 ("EITF No. 00-14"), "Accounting for Certain Sales Incentives," which was
subsequently amended in April 2001. EITF No. 00-14 addresses the recognition,
measurement and income statement classification of certain sales incentives.
EITF No. 00-14 requires that sales incentives, including coupons, rebate offers,
and free product offers, given concurrently with a single exchange transaction
be recognized when incurred and reported as a reduction of revenue. The Company
put into place detailed programscurrently reports these costs in selling, general and administrative expenses.
The Company is required to address Year 2000 readinessadopt EITF 00-14 in its internal systems andfinancial statements
beginning March 1, 2002. Upon adoption of EITF 00-14, financial statements for
prior periods presented for comparative purposes are to be reclassified to
comply with its key customers
and suppliers. These programs included contingency plans to protect the Company's business and operations from Year 2000 related interruptions. The
costs incurred related to its Year 2000 activities and its readiness programs
were not material to the Company.requirements of EITF 00-14. The Company did not experience any interruptions in its business or
operations whenbelieves the date changed from 1999 to 2000. Based upon operations since
January 1, 2000, the Company does not expect any significant impact of
EITF 00-14 on its on-going business asfinancial statements will result in a resultmaterial
reclassification that will decrease previously reported net sales and decrease
previously reported selling, general and administrative expenses, but will have
no effect on operating income or net income. The Company has not yet determined
the amount of the Year 2000 issue.reclassification.
- 33 -
EURO CONVERSION ISSUES
Effective January 1, 1999, eleven of the fifteen member countries of the
European Union (the "Participating Countries") established fixed conversion
rates between their existing sovereign currencies and the euro. For three years
after the introduction of the euro, the Participating Countries can perform
financial transactions in either the euro or their original local currencies.
This will result in a fixed exchange rate among the Participating Countries,
whereas the euro (and the Participating Countries' currency in tandem) will
continue to float freely against the U.S. dollar and other currencies of the
non-participating countries. The Company does not believe that the effects of
the conversion will have a material adverse effect on the Company's business and
operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------- ----------------------------------------------------------
The Company is exposed to market risk associated with changes in interest
rates and foreign currency exchange rates. To manage the volatility relating to
these risks, the Company periodically enters into derivative transactions
including foreign currency exchange contracts and interest rate swap agreements.
The Company has limited involvement with derivative financial instruments and
does not use them for trading purposes. The Company uses derivative instruments
solely to reduce the financial impact of these risks.
The fair value of long-term debt is subject to interest rate risk.
Generally, the fair value of long-term debt will increase as interest rates fall
and decrease as interest rates rise. The estimated fair value of the Company's
total long-term debt, including current maturities, was approximately $1,255.4$1,380.1 million at
February 29, 2000.28, 2001. A hypothetical 1% increase from prevailing interest rates at
February 29, 2000,28, 2001, would result in a decrease in fair value of fixed interest
rate long-term debt by approximately $33.3$49.9 million. Also, a hypothetical 1% increase from
prevailing interest rates at February 29, 2000,28, 2001, would result in an approximate
increase in cash required for interest on variable interest rate debt during the
next five fiscal years as follows:
2001 $ 5.4 million
2002 $ 4.8$3.1 million
2003 $ 4.0$2.5 million
2004 $ 3.0$1.7 million
2005 $0.7 million
2006 $ 1.3 million-
The Company periodically enters into interest rate swap agreements to
reduce its exposure to interest rate changes relative to its long-term debt. At
February 29, 2000,28, 2001, the Company had no interest rate swap agreements outstanding.
The Company has exposure to foreign currency risk as a result of having
international subsidiaries in the United Kingdom and Canada. For the Company's
operations in the United Kingdom, the Company uses local currency borrowings to
hedge its earnings and cash flow exposure to adverse changes in foreign currency
exchange rates. At February 29, 2000,28, 2001, management believes that a hypothetical
10% adverse change in foreign currency exchange rates would not result in a
material adverse impact on either earnings or cash flow. The Company also has
exposure to foreign currency risk as a result of contracts to purchase inventory
items that are denominated in various foreign currencies. In order to reduce the
risk of foreign currency exchange rate fluctuations resulting from these
contracts, the Company periodically enters into foreign exchange hedging
agreements. At February 29, 2000,28, 2001, the potential loss on outstanding foreign
exchange hedging agreements from a hypothetical 10% adverse change in foreign
currency exchange rates would not be material.
- 34 -
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
CANANDAIGUACONSTELLATION BRANDS, INC. AND SUBSIDIARIES
------------------------------------------------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
AND
---
SUPPLEMENTARY SCHEDULES
-----------------------
FEBRUARY 29, 200028, 2001
-----------------
Page
----
The following information is presented in this Annual Report on Form 10-K:
Report of Independent Public Accountants................................ 29
Consolidated Balance Sheets - February 29, 2000, and February 28, 1999.. 30
Consolidated Statements of Income for the years ended February 29, 2000,
February 28, 1999, and February 28, 1998............................. 31
Consolidated Statements of Changes in Stockholders' Equity for the years
ended February 29, 2000, February 28, 1999, and February 28, 1998.... 32
Consolidated Statements of Cash Flows for the years ended
February 29, 2000, February 28, 1999, and February 28, 1998.......... 33
Notes to Consolidated Financial Statements.............................. 34
Selected Quarterly Financial Information (unaudited).................... 53
Page
----
Report of Independent Public Accountants............................................. 35
Consolidated Balance Sheets - February 28, 2001, and February 29, 2000............... 36
Consolidated Statements of Income for the years ended February 28, 2001,
February 29, 2000, and February 28, 1999.......................................... 37
Consolidated Statements of Changes in Stockholders' Equity for the years
ended February 28, 2001, February 29, 2000, and February 28, 1999................. 38
Consolidated Statements of Cash Flows for the years ended
February 28, 2001, February 29, 2000, and February 28, 1999....................... 39
Notes to Consolidated Financial Statements........................................... 40
Selected Quarterly Financial Information (unaudited)................................. 68
Schedules I through V are not submitted because they are not applicable or not
required under the rules of Regulation S-X.
Individual financial statements of the Registrant have been omitted because the
Registrant is primarily an operating company and no subsidiary included in the
consolidated financial statements has minority equity interest and/or noncurrent
indebtedness, not guaranteed by the Registrant, in excess of 5% of total
consolidated assets.
- 35 -
[LOGO] ARTHUR ANDERSEN
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To CanandaiguaConstellation Brands, Inc.:
We have audited the accompanying consolidated balance sheets of CanandaiguaConstellation
Brands, Inc. (a Delaware corporation) and subsidiaries as of February 29, 200028, 2001
and February 28, 1999,29, 2000, and the related consolidated statements of income,
changes in stockholders' equity and cash flows for each of the three years in
the period ended February 29, 2000.28, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CanandaiguaConstellation Brands, Inc. and
subsidiaries as of February 29, 200028, 2001 and February 28, 1999,29, 2000, and the results of
their operations and their cash flows for each of the three years in the period
ended February 29, 200028, 2001 in conformity with accounting principles generally
accepted in the United States.
/s/ Arthur Andersen LLP
Rochester, New York
May 15, 2000
CANANDAIGUAApril 10, 2001
- 36 -
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
February 28, February 29,
February 28,2001 2000 1999
------------ ------------
ASSETS
------
CURRENT ASSETS:
Cash and cash investments $ 34,308145,672 $ 27,64534,308
Accounts receivable, net 314,262 291,108 260,433
Inventories, net 670,018 615,700 508,571
Prepaid expenses and other current assets 61,037 54,881 59,090
------------ ------------
Total current assets 1,190,989 995,997 855,739
PROPERTY, PLANT AND EQUIPMENT, net 548,614 542,971 428,803
OTHER ASSETS 772,566 809,823 509,234
------------ ------------
Total assets $ 2,348,7912,512,169 $ 1,793,7762,348,791
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 26,8004,184 $ 87,72828,134
Current maturities of long-term debt 53,987 6,00554,176 52,653
Accounts payable 114,793 122,213 122,746
Accrued excise taxes 55,954 30,446 49,342
Other accrued expenses and liabilities 198,053 204,771 149,451
------------ ------------
Total current liabilities 427,160 438,217 415,272
------------ ------------
LONG-TERM DEBT, less current maturities 1,307,437 1,237,135 831,689
------------ ------------
DEFERRED INCOME TAXES 131,974 116,447 88,179
------------ ------------
OTHER LIABILITIES 29,330 36,152 23,364
------------ ------------
COMMITMENTS AND CONTINGENCIES (See Note 12)
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value-
Authorized, 1,000,000 shares;
Issued, none at February 29, 2000,28, 2001,
and February 28, 199929, 2000 - -
Class A Common Stock, $.01 par value-
Authorized, 120,000,000 shares;
Issued, 18,206,66237,438,968 shares at
February 28, 2001, and 36,413,324 shares
at February 29, 2000 and 17,915,359 shares
at February 28, 1999 182 179374 364
Class B Convertible Common Stock,
$.01 par value-
Authorized, 20,000,000 shares;
Issued, 3,745,5607,402,594 shares at
February 28, 2001, and 7,491,120 shares
at February 29, 2000 and 3,849,173 shares
at February 28, 1999 38 3974 75
Additional paid-in capital 247,949 239,912267,655 247,730
Retained earnings 455,798 358,456 281,081
Accumulated other comprehensive income-loss-
Cumulative translation adjustment (26,004) (4,149) (4,173)
------------ ------------
697,897 602,476 517,038
------------ ------------
Less-Treasury stock-
Class A Common Stock, 3,137,2446,200,600 shares at
February 28, 2001, and 6,274,488 shares at
February 29, 2000, and 3,168,306 shares
at February 28, 1999, at cost (79,271) (79,429) (79,559)
Class B Convertible Common Stock, 625,7251,251,450
shares at February 29, 2000,28, 2001, and
February 28, 1999,29, 2000, at cost (2,207) (2,207)
------------ ------------
(81,478) (81,636)
(81,766)------------ ------------
Less-Unearned compensation-
restricted stock awards (151) -
------------ ------------
Total stockholders' equity 616,268 520,840 435,272
------------ ------------
Total liabilities and stockholders' equity $ 2,348,7912,512,169 $ 1,793,7762,348,791
============ ============
The accompanying notes to consolidated financial statements
are an integralintergral part of these balance sheets.
- 37 -
CANANDAIGUACONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the YearYears Ended
------------------------------------------------
February 28, February 29, For the Years Ended February 28,
------------------ --------------------------------2001 2000 1999
1998
------------------ -------------- -------------------------- ------------ ------------
GROSS SALES $ 3,154,294 $ 3,088,699 $ 1,984,801 $ 1,632,357
Less - Excise taxes (757,609) (748,230) (487,458)
(419,569)
------------------ -------------- -------------------------- ------------ ------------
Net sales 2,396,685 2,340,469 1,497,343 1,212,788
COST OF PRODUCT SOLD (1,639,230) (1,618,009) (1,049,309)
(869,038)
------------------ -------------- -------------------------- ------------ ------------
Gross profit 757,455 722,460 448,034 343,750
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (486,587) (481,909) (299,526)
(231,680)
NONRECURRING CHARGES - (5,510) (2,616)
-
------------------ -------------- -------------------------- ------------ ------------
Operating income 270,868 235,041 145,892 112,070
INTEREST EXPENSE, net (108,631) (106,082) (41,462)
(32,189)
------------------ -------------- -------------------------- ------------ ------------
Income before income taxes and extraordinary item 162,237 128,959 104,430 79,881
PROVISION FOR INCOME TAXES (64,895) (51,584) (42,521)
(32,751)
------------------ -------------- -------------------------- ------------ ------------
Income before extraordinary item 97,342 77,375 61,909
47,130
EXTRAORDINARY ITEM, NET OF INCOME TAXESnet of income taxes - - (11,437)
-
------------------ -------------- -------------------------- ------------ ------------
NET INCOME $ 97,342 $ 77,375 $ 50,472
$ 47,130
================== ============== ========================== ============ ============
SHARE DATA:
Earnings per common share:
Basic:
Income before extraordinary item $ 4.292.65 $ 3.382.14 $ 2.521.69
Extraordinary item, net of income taxes - (0.62) - ------------------ -------------- --------------(0.31)
------------ ------------ ------------
Earnings per common share - basic $ 4.292.65 $ 2.762.14 $ 2.52
================== ============== ==============1.38
============ ============ ============
Diluted:
Income before extraordinary item $ 4.182.60 $ 3.302.09 $ 2.471.65
Extraordinary item, net of income taxes - (0.61) - ------------------ -------------- --------------(0.30)
------------ ------------ ------------
Earnings per common share - diluted $ 4.182.60 $ 2.692.09 $ 2.47
================== ============== ==============1.35
============ ============ ============
Weighted average common shares outstanding:
Basic 18,054 18,293 18,67236,723 36,108 36,587
Diluted 18,499 18,754 19,10537,375 36,998 37,507
The accompanying notes to consolidated financial statements are an integral part of these statements.
- 38 -
CANANDAIGUACONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except per share data)
Accumulated
Common Stock Additional Other
----------------- Paid-in Retained Comprehensive Treasury RestrictedUnearned
Class A Class B Capital Earnings IncomeLoss Stock StockCompensation Total
------- ------- ---------- --------- ------------- ---------- ------------- -------- ---------------------- ---------
BALANCE, February 28, 19971998 $ 174352 $ 4079 $ 222,336231,472 $ 183,479 $ - $(28,092)230,609 $ - $ 377,937
Net income and comprehensive
income for fiscal 1998(37,085) $ - - - 47,130 - - - 47,130
Exercise of 117,452 Class A
stock options 2 - 1,799 - - - - 1,801
Employee stock purchases of
78,248 treasury shares - - 1,016 - - 240 - 1,256
Repurchase of 362,100 Class A
Common shares - - - - - (9,233) - (9,233)
Acceleration of 142,437 Class A
stock options - - 3,625 - - - - 3,625
Issuance of 25,000 restricted
Class A Common shares - - 1,144 - - - (1,144) -
Amortization of unearned restricted
stock compensation - - - - - - 267 267
Accelerated amortization of unearned
restricted stock compensation - - 200 - - - 877 1,077
Tax benefit on Class A stock
options exercised - - 1,382 - - - - 1,382
Tax benefit on disposition of
employee stock purchases - - 185 - - - - 185
------- ------- ---------- ---------- ------------ -------- ---------- ---------
BALANCE, February 28, 1998 176 40 231,687 230,609 - (37,085) -$ 425,427
Comprehensive income:
Net income for fiscalFiscal 1999 - - - 50,472 - - - 50,472
Cumulative translation adjustment - - - - (4,173) - - (4,173)
-----------------
Comprehensive income 46,299
Conversion of 107,010214,020 Class B
Convertible Common shares to
Class A Common shares 1 (1)2 (2) - - - - - -
Exercise of 203,565407,130 Class A
stock options 24 - 4,0854,083 - - - - 4,087
Employee stock purchases of
49,85099,700 treasury shares - - 1,643 - - 197 - 1,840
RepurchaseRepurchases of 1,018,8362,037,672 Class A
Common shares - - - - - (44,878) - (44,878)
Acceleration of 1,2502,500 Class A
stock options - - 43 - - - - 43
Tax benefit on Class A stock
options exercised - - 2,320 - - - - 2,320
Tax benefit on disposition of
employee stock purchases - - 134 - - - - 134
------- ------- ---------- --------- ------------- ---------- ------------ -------- ---------- ---------
BALANCE, February 28, 1999 179 39 239,912358 77 239,695 281,081 (4,173) (81,766) - 435,272
Comprehensive income:
Net income for fiscalFiscal 2000 - - - 77,375 - - - 77,375
Cumulative translation adjustment - - - - 24 - - 24
---------
Comprehensive income 77,399
Conversion of 103,613207,226 Class B
Convertible Common shares to
Class A Common shares 1 (1)2 (2) - - - - - -
Exercise of 187,690375,380 Class A
stock options 24 - 3,3613,359 - - - - 3,363
Employee stock purchases of 31,06262,124
treasury shares - - 1,298 - - 130 - 1,428
Acceleration of 94,725189,450 Class A
stock options - - 835 - - - - 835
Tax benefit on Class A stock
options exercised - - 2,634 - - - - 2,634
Tax benefit on disposition of
employee stock purchases - - 43 - - - - 43
Other - - (134) - - - - (134)
------- ------- ---------- --------- ------------- ---------- ------------ -------- ---------- ---------
BALANCE, February 29, 2000 364 75 247,730 358,456 (4,149) (81,636) - 520,840
Comprehensive income:
Net income for Fiscal 2001 - - - 97,342 - - - 97,342
Cumulative translation adjustment - - - - (21,855) - - (21,855)
---------
Comprehensive income 75,487
Conversion of 88,526 Class B
Convertible Common shares to
Class A Common shares 1 (1) - - - - - -
Exercise of 929,568 Class A
stock options 9 - 13,821 - - - - 13,830
Employee stock purchases of 73,888
treasury shares - - 1,389 - - 158 - 1,547
Acceleration of 31,750 Class A
stock options - - 179 - - - - 179
Issuance of 7,550 restricted
Class A Common shares - - 201 - - - (201) -
Amortization of unearned restricted
stock compensation - - - - - - 50 50
Tax benefit on Class A stock
options exercised - - 4,256 - - - - 4,256
Tax benefit on disposition of
employee stock purchases - - 28 - - - - 28
Other - - 51 - - - - 51
------- ------- ---------- --------- ------------- ---------- ------------ ---------
BALANCE, February 28, 2001 $ 182374 $ 3874 $ 247,949267,655 $ 358,456455,798 $ (4,149) $(81,636)(26,004) $ -(81,478) $ 520,840(151) $ 616,268
======= ======= ========== ========= ============= ========== ============ ======== ========== =========
The accompanying notes to consolidated financial statements are an integral part of these statements.
- 39 -
CANANDAIGUACONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the YearYears Ended
--------------------------------------------
February 28, February 29, For the Years Ended February 28,
------------------ --------------------------------2001 2000 1999
1998
------------------ -------------- -------------------------- ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 97,342 $ 77,375 $ 50,472 $ 47,130
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of property, plant and equipment 44,613 40,892 27,282 23,847
Extraordinary item, net of income taxes - - 11,437 -
Amortization of intangible assets 25,770 23,831 11,308
9,314
Stock-based compensation expense 856 144 1,747Deferred tax provision (benefit) 6,677 (1,500) 10,053
Loss (gain) on sale of assets 2,356 (2,003) 1,193
Amortization of discount on long-term debt 503 427 388
352
(Gain) loss on sale of assets (2,003) 1,193 (3,001)
Deferred tax (benefit) provision (1,500) 10,053 4,275Stock-based compensation expense 280 856 144
Change in operating assets and liabilities,
net of effects from purchases of businesses:
Accounts receivable, net (27,375) (10,812) 44,081
749
Inventories, net (57,126) 1,926 1,190 (60,659)
Prepaid expenses and other current assets (6,443) 4,663 (14,115)
(4,354)
Accounts payable (11,354) (17,070) (17,560) (3,288)
Accrued excise taxes 26,519 (18,719) 17,124 440
Other accrued expenses and liabilities 4,333 44,184 (31,807) 14,655
Other assets and liabilities, net (2,320) 4,005 (3,945)
(2,452)
------------------ -------------- -------------------------- ------------ ------------
Total adjustments 6,433 70,680 56,773
(18,375)
------------------ -------------- -------------------------- ------------ ------------
Net cash provided by operating activities 103,775 148,055 107,245
28,755
------------------ -------------- -------------------------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (68,217) (57,747) (49,857)
Purchases of businesses, net of cash acquired (4,459) (452,910) (332,216) -
Purchases of property, plant and equipment (57,747) (49,857) (31,203)
Proceeds from sale of assets 2,009 14,977 431 12,552
Purchase of joint venture minority interest - - (716)
-
------------------ -------------- -------------------------- ------------ ------------
Net cash used in investing activities (70,667) (495,680) (382,358)
(18,651)
------------------ -------------- -------------------------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 319,400 1,486,240 635,090 140,000
Exercise of employee stock options 13,806 3,358 4,083 1,776
Proceeds from employee stock purchases 1,547 1,428 1,840 1,256
Principal payments of long-term debt (1,060,229)(221,908) (1,059,952) (264,101)
(186,367)
Net (repayment of) proceeds fromrepayments of notes payable (60,352)(23,615) (60,629) (13,907) 34,900
Payment of issuance costs of long-term debt (5,794) (14,888) (17,109) (1,214)
Purchases of treasury stock - - (44,878)
(9,233)
------------------ -------------- -------------------------- ------------ ------------
Net cash provided by (used in) financing activities 83,436 355,557 301,018
(18,882)
------------------ -------------- -------------------------- ------------ ------------
Effect of exchange rate changes on cash and cash investments (5,180) (1,269) 508
-
------------------ -------------- -------------------------- ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH INVESTMENTS 111,364 6,663 26,413 (8,778)
CASH AND CASH INVESTMENTS, beginning of year 34,308 27,645 1,232
10,010
------------------ -------------- -------------------------- ------------ ------------
CASH AND CASH INVESTMENTS, end of year $ 145,672 $ 34,308 $ 27,645
$ 1,232
================== ============== ========================== ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 105,644 $ 95,004 $ 35,869
$ 33,394
================== ============== ========================== ============ ============
Income taxes $ 54,427 $ 35,478 $ 40,714
$ 32,164
================== ============== ========================== ============ ============
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Fair value of assets acquired, including cash acquired $ 15,115 $ 562,204 $ 740,880
$ -
Liabilities assumed (10,656) (106,805) (382,759)
-
------------------ -------------- -------------------------- ------------ ------------
Cash paid 4,459 455,399 358,121 -
Less - cash acquired - (2,489) (25,905)
-
------------------ -------------- -------------------------- ------------ ------------
Net cash paid for purchases of businesses $ 4,459 $ 452,910 $ 332,216
$ -
================== ============== ========================== ============ ============
The accompanying notes to consolidated financial statements are an integral part of these statements.
CANANDAIGUA
- 40 -
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 200028, 2001
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS -
Constellation Brands, Inc. (formerly Canandaigua Brands, Inc.) and its
subsidiaries (the "Company") operate primarily in the beverage alcohol industry.
The Company is a leading producerleader in the production and marketermarketing of branded beverage alcohol
productsbrands in North America and the United Kingdom. It
maintainsKingdom, and a portfolio of over 185 premier branded productsleading independent drinks
wholesaler in North America and the United Kingdom. The Company is the largest single-source
supplier of wine, imported beer and distilled spirits in the United States. In
the United Kingdom, the Company is a leading producer and marketer of wine and
cider. The Company's products are distributed by more than 1,000 wholesalerswholesale
distributors in North America. In the United Kingdom, the Company distributes
its own brands of cider, wine and bottled water and is a leading independent
beverage supplier to the on-premise trade, distributing its own branded products and those of other companies to more than 16,000 on-premise establishments in
the U.K.16,500 customers.
PRINCIPLES OF CONSOLIDATION -
The consolidated financial statements of the Company include the accounts
of CanandaiguaConstellation Brands, Inc. and all of its subsidiaries. All intercompany
accounts and transactions have been eliminated.
MANAGEMENT'S USE OF ESTIMATES AND JUDGMENT -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION -
The "functional currency" for translating the accounts of the Company's
operations outside the U.S. is the local currency. The translation from the
applicable foreign currencies to U.S. dollars is performed for balance sheet
accounts using current exchange rates in effect at the balance sheet date and
for revenue and expense accounts using a weighted average exchange rate during
the period. The resulting translation adjustments are recorded as a component of
accumulated other comprehensive income. Gains or losses resulting from foreign
currency transactions are included in selling, general and administrative
expenses.
CASH INVESTMENTS -
Cash investments consist of highly liquid investments with an original
maturity when purchased of three months or less and are stated at cost, which
approximates market value. At February 28, 2001, cash investments consist of
investments in commercial paper of $141.0 million, which were classified as
held-to-maturity. The amounts at February 29, 2000, and February 28,
1999, arewere not significant.
FAIR VALUE OF FINANCIAL INSTRUMENTS -
To meet the reporting requirements of Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments," the
Company calculates the fair value of financial instruments using quoted market
prices whenever available. When quoted market prices are not available, the
Company uses standard pricing models for various types of financial instruments
(such as forwards, options, swaps, etc.) which take into account the present
value of estimated future cash flows. The methods and assumptions used to
estimate the fair value of financial instruments are summarized as follows:
- 41 -
ACCOUNTS RECEIVABLE: The carrying amount approximates fair value due to the
short maturity of these instruments, the creditworthiness of the customers and
the large number of customers constituting the accounts receivable balance.
NOTES PAYABLE: These instruments are variable interest rate bearing notes
for which the carrying value approximates the fair value.
LONG-TERM DEBT: The carrying value of the debt facilities with short-term
variable interest rates approximates the fair value. The fair value of the fixed
rate debt was estimated by discounting cash flows using interest rates currently
available for debt with similar terms and maturities.
FOREIGN EXCHANGE HEDGING AGREEMENTS: The fair value of currency forward
contracts is estimated based on quoted market prices.
LETTERS OF CREDIT: At February 29, 2000,28, 2001, and February 28, 1999,29, 2000, the Company
had letters of credit outstanding totaling $10.8$12.3 million and $4.0$10.8 million,
respectively, which guarantee payment for certain obligations. The Company
recognizes expense on these obligations as incurred and no material losses are
anticipated.
The carrying amount and estimated fair value of the Company's financial
instruments are summarized as follows:
February 28, 2001 February 29, 2000
February 28, 1999
----------------------------------------- ----------------------------------------------------------------------------- -------------------------------------
Notional Carrying Fair Notional Carrying Fair
Amount Amount Value Amount Amount Value
---------- ----------- ----------- ---------- ---------- --------------------- -----------
(in thousands)
Liabilities:
- -----------------------
Notes payable $ - $ 26,8004,184 $ 26,8004,184 $ - $ 87,72828,134 $ 87,72828,134
Long-term debt, including
current portion $ - $ 1,291,1221,361,613 $ 1,255,4241,380,050 $ - $ 837,6941,289,788 $ 844,5681,254,090
Derivative Instruments:
- ---------------------------------------------
Foreign exchange hedging
agreements:
Currency forward contracts $ 7,250 $ - $ 353 $ 6,895 $ - $ (125) $ 12,444 $ - $ (1,732)
INTEREST RATE FUTURES AND CURRENCY FORWARD CONTRACTS -
From time to time, the Company enters into interest rate futures and a
variety of currency forward contracts in the management of interest rate risk
and foreign currency transaction exposure. The Company has limited involvement
with derivative instruments and does not use them for trading purposes. The
Company uses derivatives solely to reduce the financial impact of the related
risks. Unrealized gains and losses on interest rate futures are deferred and
recognized as a component of interest expense over the borrowing period.
Unrealized gains and losses on currency forward contracts are deferred and
recognized as a component of the related transactions in the accompanying
financial statements. Discounts or premiums on currency forward contracts are
recognized over the life of the contract. Cash flows from derivative instruments
are classified in the same category as the item being hedged. The Company's open
currency forward contracts at February 29, 2000,28, 2001, hedge purchase commitments
denominated in foreign currencies and mature within twelve months.
INVENTORIES -
Inventories are stated at the lower of cost (computed in accordance with
the first-in, first-out method) or market. Elements of cost include materials,
labor and overhead and consist of the following:
February 28, February 29,
2001 2000
February 28, 1999
----------------- ----------------------------- ------------
(in thousands)
Raw materials and supplies $ 29,41728,007 $ 32,38829,417
In-process inventories 450,650 419,558 344,175
Finished case goods 191,361 166,725
132,008
----------------- ----------------------------- ------------
$ 670,018 $ 615,700
$ 508,571
================= ============================= ============
- 42 -
A substantial portion of barreled whiskey and brandy will not be sold
within one year because of the duration of the aging process. All barreled
whiskey and brandy are classified as in-process inventories and are included in
current assets, in accordance with industry practice. Bulk wine inventories are
also included as in-process inventories within current assets, in accordance
with the general practices of the wine industry, although a portion of such
inventories may be aged for periods greater than one year. Warehousing,
insurance, ad valorem taxes and other carrying charges applicable to barreled
whiskey and brandy held for aging are included in inventory costs.
PROPERTY, PLANT AND EQUIPMENT -
Property, plant and equipment is stated at cost. Major additions and
betterments are charged to property accounts, while maintenance and repairs are
charged to operations as incurred. The cost of properties sold or otherwise
disposed of and the related accumulated depreciation are eliminated from the
accounts at the time of disposal and resulting gains and losses are included as
a component of operating income.
DEPRECIATION -
Depreciation is computed primarily using the straight-line method over the
following estimated useful lives:
Depreciable Life in Years
-------------------------
Buildings and improvements 10 to 33 1/3
Machinery and equipment 3 to 15
Motor vehicles 3 to 7
Amortization of assets capitalized under capital leases is included with
depreciation expense. Amortization is calculated using the straight-line method
over the shorter of the estimated useful life of the asset or the lease term.
OTHER ASSETS -
Other assets, which consist of goodwill, distribution rights, trademarks,
agency license agreements, deferred financing costs, prepaid pension benefits
cash
surrender value of officers' life insurance and other amounts, are stated at cost, net of accumulated amortization.
Amortization is calculated on a straight-line or effective interest basis over
the following estimated useful lives:
Useful Life in Years
--------------------
Goodwill 40
Distribution rights 40
Trademarks 40
Agency license agreements 16 to 40
Deferred financing costs 5 to 10
At February 29, 2000,28, 2001, the weighted average remaining useful life of these assets is
36.436.3 years. At February 29, 2000, there were no officers' life insurance
policies with face values. The face value of the officers' life insurance
policies totaled $2.9 million at February 28, 1999.
LONG-LIVED ASSETS AND INTANGIBLES -
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," the Company reviews its long-lived assets and certain
identifiable intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable on an undiscounted cash flow basis. The statement also requires
that, when an impairment has occurred, long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of carrying
amount or fair value less cost to sell. The Company did not record any asset
impairment in fiscal 2000.Fiscal 2001.
- 43 -
ADVERTISING AND PROMOTION COSTS -
The Company generally expenses advertising and promotion costs as incurred,
shown or distributed. Prepaid advertising costs at February 29, 2000,28, 2001, and
February 28, 1999,29, 2000, were not material. Advertising and promotion expense for the
years ended February 28, 2001, February 29, 2000, and February 28, 1999, and February 28, 1998, were
$264.4 million, $279.6 million, $173.1 million, and $111.7$173.1 million, respectively.
INCOME TAXES -
The Company uses the liability method of accounting for income taxes. The
liability method accounts for deferred income taxes by applying statutory rates
in effect at the balance sheet date to the difference between the financial
reporting and tax basis of assets and liabilities.
ENVIRONMENTAL -
Environmental expenditures that relate to current operations are expensed
as appropriate. Expenditures that relate to an existing condition caused by past
operations, and which do not contribute to current or future revenue generation,
are expensed. Liabilities are recorded when environmental assessments and/or
remedial efforts are probable, and the cost can be reasonably estimated.
Generally, the timing of these accruals coincides with the completion of a
feasibility study or the Company's commitment to a formal plan of action.
Liabilities for environmental costs were not material at February 29, 2000,28, 2001, and
February 28, 1999.29, 2000.
COMPREHENSIVE INCOME -
During fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). This
statement establishes rules for the reporting of comprehensive income and its
components. Comprehensive income consists of net income and foreign currency
translation adjustments and is presented in the Consolidated Statements of
Changes in Stockholders' Equity. The adoption of SFAS No. 130 had no impact on
total stockholders' equity.
EARNINGS PER COMMON SHARE -
Basic earnings per common share excludes the effect of common stock
equivalents and is computed by dividing income available to common stockholders
by the weighted average number of common shares outstanding during the period
for Class A Common Stock and Class B Convertible Common Stock. Diluted earnings
per common share reflects the potential dilution that could result if securities
or other contracts to issue common stock were exercised or converted into common
stock. Diluted earnings per common share assumes the exercise of stock options
using the treasury stock method and assumes the conversion of convertible
securities, if any, using the "if converted" method.
COMMON STOCK SPLIT -
On April 10, 2001, the Board of Directors of the Company approved a
two-for-one stock split of both the Company's Class A Common Stock and Class B
Convertible Common Stock, which will be distributed in the form of a stock
dividend on May 14, 2001, to stockholders of record on April 30, 2001. All share
and per share amounts have been retroactively restated to give effect to the
common stock split.
OTHER -
Certain fiscal 1999Fiscal 2000 balances have been reclassified to conform to current
year presentation.
- 44 -
2. ACQUISITIONS:
MATTHEW CLARK ACQUISITION -
On December 1, 1998, the Company acquired control of Matthew Clark plc
("Matthew Clark") and as of February 28, 1999, had acquired all of Matthew
Clark's outstanding shares (the "Matthew Clark Acquisition"). The total purchase
price, including assumption of indebtedness, for the acquisition of Matthew
Clark shares was $484.8 million, net of cash acquired. Matthew Clark founded in 1810,
is a
leading U.K.-based producer and distributor of its own brands of cider, wine and bottled
water and a leading independent drinks wholesaler in the U.K.United Kingdom.
The purchase price for the Matthew Clark shares was funded with proceeds
from loans under the Company's prior senior credit facility. The Matthew Clark
Acquisition was accounted for using the purchase method; accordingly, the
Matthew Clark assets were recorded at fair market value based upon a final
appraisal, at the date of
acquisition, December 1, 1998. The excess of the purchase price over the
estimated fair market value of the net assets acquired (goodwill), (pound)108.5
million ($179.5 million as of December 1, 1998), is being amortized on a
straight-line basis over 40 years. The results of operations of the Matthew
Clark Acquisition have been included in the Consolidated Statements of Income
since the date of acquisition.
The Company incurred an extraordinary loss of $19.3 million ($11.4 million
after taxes) in the fourth quarter of 1999 resulting from fees related to the
replacement of the existing bank credit agreement, including extinguishment of
the Term Loan, in conjunction with the Matthew Clark Acquisition.
BLACK VELVET ASSETS ACQUISITION -
On April 9, 1999, in an asset acquisition, the Company acquired several
well-known Canadian whisky brands, including Black Velvet, production facilities
located in Alberta and Quebec, Canada, case goods and bulk whisky inventories
and other related assets from affiliates of Diageo plc (the "Black Velvet
Assets"). In connection with the transaction, the Company also entered into
multi-year agreements with affiliates of Diageo plc to provide packaging and
distilling services for various brands retained by the Diageo plc affiliates.
The purchase price was $185.5$183.6 million and was financed by the proceeds from the
sale of the Senior Subordinated Notes (as defined in Note 6).
The Black Velvet Assets acquisition was accounted for using the purchase
method; accordingly, the acquired assets were recorded at fair market value at
the date of acquisition. The excess of the purchase price over the estimated
fair market value of the net assets acquired (goodwill), $35.5$36.0 million, is being
amortized on a straight-line basis over 40 years. The results of operations of
the Black Velvet Assets acquisition have been included in the Consolidated
Statements of Income since the date of acquisition.
FRANCISCAN AND SIMI ACQUISITIONS -
On June 4, 1999, the Company purchased all of the outstanding capital stock
of Franciscan Vineyards, Inc. ("Franciscan Estates") and, in related
transactions, purchased vineyards, equipment and other vineyard related assets
located in Northern California (collectively, the "Franciscan Acquisition"). The
purchase price was $212.4 million in cash plus assumed debt, net of cash
acquired, of $30.8 million. The purchase price was financed primarily by
additional term loan borrowings under the senior credit facility. Also, on June
4, 1999, the Company acquired all of the outstanding capital stock of Simi
Winery, Inc. ("Simi") (the "Simi Acquisition"). The cash purchase price was
$57.5 million and was financed by revolving loan borrowings under the senior
credit facility. The purchases were accounted for using the purchase method;
accordingly, the acquired assets were recorded at fair market value at the date
of acquisition. The excess of the purchase price over the estimated fair market
value of the net assets acquired (goodwill) for the Franciscan Acquisition and
the Simi Acquisition, $96.5$94.5 million and $8.3$5.8 million, respectively, is being
amortized on a straight-line basis over 40 years. The Franciscan Estates
- 45 -
and Simi operations are managed together as a separate business segment of the
Company ("Franciscan"). The results of operations of Franciscan have been
included in the Consolidated Statements of Income since the date of acquisition.
FORTH WINES ACQUISITION -
On October 27, 2000, the Company purchased all of the issued Ordinary
Shares and Preference Shares of Forth Wines Limited ("Forth Wines"). The
purchase price was $4.5 million and was financed through cash from operating
activities. The purchase was accounted for using the purchase method;
accordingly, the acquired assets were recorded at fair market value at the date
of acquisition. The excess of the purchase price over the estimated fair market
value of the net assets acquired (goodwill), $2.2 million, is being amortized on
a straight-line basis over 40 years. The results of operations of Forth Wines
have been included in the Consolidated Statements of Income since the date of
acquisition.
The following table sets forth unaudited pro forma results of operations of
the Company for the fiscal years ended February 28, 2001, and February 29, 2000.
The unaudited pro forma results of operations for the fiscal years ended
February 28, 2001, and February 29, 2000, and February 28, 1999.do not give pro forma effect to the
acquisition of Forth Wines as if it occurred on March 1, 1999, as it is not
significant. The unaudited pro forma results of operations give effect to the
acquisitions of Matthew Clark, the Black Velvet Assets and Franciscan as if they occurred on
March 1, 1998.1999. The unaudited pro forma results of operations are presented after
giving effect to certain adjustments for depreciation, amortization of goodwill,
interest expense on the acquisition financing and related income tax effects.
During fiscal 2000 and fiscal 1999, the Company incurred and paid $2.9 million
and $2.6 million, respectively, in nonrecurring charges related to the closing
of a Matthew Clark cider production facility. The charges were part of a
production facility consolidation program that was begun prior to the Matthew
Clark Acquisition. The unaudited pro forma results of operations for fiscal 1999
(shown in the table below) reflect total nonrecurring charges of $21.5 million
($0.69 per share on a diluted basis) related to this facility consolidation
program, of which $18.9 million was incurred prior to the acquisition. The
unaudited pro forma results of operations for fiscalFiscal 2000 (shown in the
table below), reflect total nonrecurring charges of $12.4 million ($0.400.20 per
share on a diluted basis) related to transaction costs, primarily for exercise
of stock options, which were incurred by Franciscan Estates prior to the
acquisition.
The unaudited pro forma results of operations are based upon currently
available information and upon certain assumptions that the Company believes are
reasonable under the circumstances. The unaudited pro forma results of
operations do not purport to present what the Company's results of operations
would actually have been if the aforementioned transactions had in fact occurred
on such date or at the beginning of the period indicated, nor do they project
the Company's financial position or results of operations at any future date or
for any future period.
February 28, February 29,
February 28,2001 2000
1999
----------- ----------------------- ------------
(in thousands, except per share data)
Net sales $ 2,367,8332,396,685 $ 2,154,9922,367,833
Income before extraordinary item $ 68,277 $ 45,793
Extraordinary item, net of income taxes $ -162,237 $ (11,437)113,779
Net income $ 68,27797,342 $ 34,35668,267
Earnings per common share:
Basic:
Income before extraordinary itemBasic $ 3.782.65 $ 2.50
Extraordinary item - (0.62)
----------- -----------
Earnings per common share - basic1.89
============ ============
Diluted $ 3.782.60 $ 1.88
=========== ===========
Diluted:
Income before extraordinary item $ 3.69 $ 2.44
Extraordinary item - (0.61)
---------- -----------
Earnings per common share - diluted $ 3.69 $ 1.83
========== ===========1.85
============ ============
Weighted average common shares outstanding:
Basic 18,054 18,29336,723 36,108
Diluted 18,499 18,75437,375 36,998
- 46 -
3. PROPERTY, PLANT AND EQUIPMENT:
The major components of property, plant and equipment are as follows:
February 28, February 29,
2001 2000
February 28, 1999
----------------- ----------------------------- ------------
(in thousands)
Land $ 82,976 $ 62,871
$ 25,434
Vineyards 47,227 37,756 266
Buildings and improvements 140,349 131,588 104,152
Machinery and equipment 455,197 440,008 380,069
Motor vehicles 9,190 7,241 20,191
Construction in progress 18,347 27,874
35,468
----------------- ----------------------------- ------------
753,286 707,338 565,580
Less - Accumulated depreciation (204,672) (164,367)
(136,777)
----------------- ----------------------------- ------------
$ 548,614 $ 542,971
$ 428,803
================= ============================= ============
4. OTHER ASSETS:
The major components of other assets are as follows:
February 28, February 29,
February 28,2001 2000
1999
----------- ----------------------- ------------
(in thousands)
Goodwill $ 447,813 $ 463,577
$ 311,908
Trademarks 247,139 253,148 102,183
Distribution rights and agency
license agreements 87,052 76,89487,052
Other 73,935 64,504
53,779
----------- ----------------------- ------------
855,939 868,281 544,764
Less - Accumulated amortization (83,373) (58,458)
(35,530)
----------- ----------------------- ------------
$ 772,566 $ 809,823
$ 509,234
=========== ======================= ============
5. OTHER ACCRUED EXPENSES AND LIABILITIES:
The major components of other accrued expenses and liabilities are as
follows:
February 28, February 29,
February 28,2001 2000
1999
----------- ----------------------- ------------
(in thousands)
Accrued advertising and promotions $ 37,08344,501 $ 38,60437,083
Accrued interest 28,542 24,757
11,384Accrued salaries and commissions 24,589 23,850
Accrued income taxes payable 21,122 24,093
9,347
Accrued salaries and commissions 23,850 15,584
Other 79,299 94,988
74,532
----------- ----------------------- ------------
$ 198,053 $ 204,771
$ 149,451
=========== ======================= ============
- 47 -
6. BORROWINGS :BORROWINGS:
Borrowings consist of the following:
February 29,
February 28, February 29,2001 2000
1999
----------------------------------------- ---------------------------------------------------------- ------------
Current Long-term Total Total
------------ ------------ ------------ ------------
(in thousands) ----------- ----------- ----------- -----------
Notes Payable:
- ---------------------------
Senior Credit Facility:Facility -
Revolving Credit Loans $ 26,800- $ - $ - $ 26,800
Other 4,184 - 4,184 1,334
------------ ------------ ------------ ------------
$ 83,075
Other - - - 4,653
----------- ----------- ----------- -----------
$ 26,8004,184 $ - $ 26,8004,184 $ 87,728
=========== =========== =========== ===========28,134
============ ============ ============ ============
Long-term Debt:
- -----------------------------
Senior Credit Facility - Term Loans $ 51,80149,218 $ 518,249288,377 $ 570,050337,595 $ 625,630570,050
Senior Notes - 623,507 623,507 318,433 318,433 -
Senior Subordinated Notes - 393,418 393,418 392,947 392,947 192,520
Other Long-term Debt 2,186 7,506 9,692 19,544
----------- ----------- ----------- -----------4,958 2,135 7,093 8,358
------------ ------------ ------------ ------------
$ 53,98754,176 $ 1,237,1351,307,437 $ 1,291,1221,361,613 $ 837,694
=========== =========== =========== ===========1,289,788
============ ============ ============ ============
SENIOR CREDIT FACILITY -
On October 6, 1999, the Company, certain of its principal operating
subsidiaries and a syndicate of banks (the "Syndicate Banks"), for which The
Chase Manhattan Bank acts as administrative agent, entered into a new senior credit
facility (the(as subsequently amended, the "2000 Credit Agreement"). The 2000 Credit
Agreement includes both U.S. dollar and British pound sterling commitments of
the Syndicate Banks of up to, in the aggregate, the equivalent of $1.0 billion
(subject to increase as therein provided to $1.2 billion). Proceeds of the 2000
Credit Agreement were used to repay all outstanding principal and accrued
interest on all loans under the Company's prior senior credit facility, and are
available to fund permitted acquisitions and ongoing working capital needs of
the Company and its subsidiaries.
The 2000 Credit Agreement provides for a $380.0 million Tranche I Term Loan
facility due in December 2004, a $320.0 million Tranche II Term Loan facility
available for borrowing in British pound sterling due in December 2004, and a
$300.0 million Revolving Credit facility (including letters of credit up to a
maximum of $20.0 million) which expires in December 2004. The Tranche I Term
Loan facility ($380.0 million) and the Tranche II Term Loan facility
((pound)193.4 million, or approximately $320.0 million) were fully drawn at closing. TheDuring
Fiscal 2001, the Company used proceeds from operating activities to prepay a
portion of the $380.0 million Tranche I Term Loan facility. After this
prepayment, the required quarterly repayments of the Tranche I Term Loan
facility requires quarterly repayments,were revised to $15.6 million starting at $12.0 million in March 2000June 2001 and increasing
thereafter annually with final payments of $23.0$20.6 million in each quarter in
2004. On November 17, 1999, proceeds from the Sterling Senior Notes (as defined
below) were used to repay a portion of the $320.0 million Tranche II Term Loan
facility ((pound)73.0 million, or approximately $118.3 million). On May 15, 2000, proceeds
from the Sterling Series C Senior Notes (as defined below) were used to repay an
additional portion of the $320.0 million Tranche II Term Loan facility
((pound)78.8 million, or $118.2 million). After this repayment,these repayments, the required
quarterly repayments of the Tranche II Term Loan facility were revised to
(pound)0.60.4 million ($1.0 million) for each quarter in 2000, (pound)1.2 million
($1.90.6 million) for each quarter in 2001 and 2002, (pound)1.50.5
million ($2.40.7 million) for each quarter in 2003, and (pound)25.68.5 million ($40.412.3
million) for each quarter in 2004 (the foregoing U.S. dollar equivalents are as
of February 29, 2000). On May 15, 2000, the Company issued (pound)80.0 million aggregate
principal amount of 8 1/2% Series C Senior Notes. The proceeds of the offering
were used to repay a portion of the Tranche II Term Loan (see Note 19 -
Subsequent Event)28, 2001). There are certain mandatory term loan prepayments,
including those based on sale of assets and issuance of debt and equity, in each
case subject to customary baskets, exceptions and thresholds which are generally more favorable
to the Company than those contained in its prior senior credit facility.thresholds.
- 48 -
The rate of interest payable, at the Company's option, is a function of the
London interbank offering rate ("LIBOR") plus a margin, federal funds rate plus
a margin, or the prime rate plus a margin. The margin is adjustable based upon
the Company's Debt Ratio (as defined in the 2000 Credit Agreement) and, with
respect to LIBOR borrowings, ranges between 0.75% and 1.25% for Revolving Credit
loans and 1.00% and 1.75% for Term Loans. As of February 29, 2000,28, 2001, the margin
was 1.25%1.125% for Revolving Credit loans and 1.75%1.625% for Term Loans. In addition to
interest, the Company pays a facility fee on the Revolving Credit commitments at
0.50% per annum as of February 29, 2000.28, 2001. This fee is based upon the Company's
quarterly Debt Ratio and can range from 0.25% to 0.50%.
Certain of the Company's principal operating subsidiaries have guaranteed
the Company's obligations under the 2000 Credit Agreement. The 2000 Credit
Agreement is secured by (i) first priority pledges of 100% of the capital stock
of Canandaigua Limited and all of the Company's domestic operating subsidiaries
and (ii) first priority pledges of 65% of the capital stock of Matthew Clark and
certain other foreign subsidiaries.
The Company and its subsidiaries are subject to customary lending covenants
including those restricting additional liens, incurring additional indebtedness,
the sale of assets, the payment of dividends, transactions with affiliates and
the making of certain investments, in each case subject to customary baskets,
exceptions and thresholds which are generally more favorable to the Company than those
contained in its prior senior credit facility.thresholds. The primary financial covenants require the
maintenance of a debt coverage ratio, a senior debt coverage ratio, a fixed
charges ratio and an interest coverage ratio. Among the most restrictive
covenants contained in the 2000 Credit Agreement is the debt coverage ratio.
On February 13, 2001, the 2000 Credit Agreement was amended to, among other
things, permit the Company to finance the acquisition of the Turner Road
Vintners Assets with revolving loan borrowings, permit the refinancing of the
Original Notes (as defined below) and Series C Notes (as defined below) with
senior notes, and adjust the senior debt coverage ratio.ratio covenant.
As of February 29, 2000,28, 2001, under the 2000 Credit Agreement, the Company had
outstanding term loans of $570.1$337.6 million bearing a weighted average interest
rate of 7.95%8.2% and $26.8 million ofno outstanding revolving loans bearing a weighted average
interest rate of 7.43%. The Company had average outstanding Revolving Credit
Loans of approximately $73.0 million, $75.5 million, and $59.9 million for the
years ended February 29, 2000, February 28, 1999, and February 28, 1998,
respectively.loans. Amounts available to be drawn
down under the Revolving Credit Loans were $287.7 million and $262.5 million at
February 28, 2001, and $212.9February 29, 2000, respectively. The Company had average
outstanding Revolving Credit Loans of $47.6 million, at$73.0 million, and $75.5
million for the years ended February 28, 2001, February 29, 2000, and February
28, 1999, respectively. The average interest rate on the Revolving Credit Loans
was 7.31%7.8%, 6.23%7.4%, and 6.57%6.2% for fiscalFiscal 2001, Fiscal 2000, fiscaland Fiscal 1999, and fiscal 1998,
respectively.
SENIOR NOTES -
On August 4, 1999, the Company issued $200.0 million aggregate principal
amount of 8 5/8% Senior Notes due August 2006 ("(the "August 1999 Senior Notes").
The net proceeds of the offering (approximately $196.0($196.0 million) were used to repay a portion
of the Company's borrowings under its senior credit facility. Interest on the
August 1999 Senior Notes is payable semiannually on February 1 and August 1 of
each year, beginning February 1, 2000. The August 1999 Senior Notes are
redeemable at the option of the Company, in whole or in part, at any time. The
August 1999 Senior Notes are unsecured senior obligations and rank equally in
right of payment to all existing and future unsecured senior indebtedness of the
Company. The August 1999 Senior Notes are guaranteed, on a senior basis, by
certain of the Company's significant operating subsidiaries.
On November 17, 1999, the Company issued (pound)75.0 million (approximately
$121.7($121.7
million upon issuance and $118.4 million as of February 29, 2000)issuance) aggregate principal amount of 8 1/2% Senior Notes due
November 2009 ("Sterling(the "Sterling Senior Notes"). The net proceeds of the offering
((pound)73.0 million, or
approximately $118.3 million) were used to repay a portion of the
Company's British pound sterling borrowings under its senior credit facility.
Interest on the Sterling Senior Notes is payable semiannually on May 15 and
November 15 of each year, beginning on May 15,
- 49 -
2000. The Sterling Senior Notes are redeemable at the option of the Company, in
whole or in part, at any time. The Sterling Senior Notes are unsecured senior
obligations and rank equally in right of payment to all existing and future
unsecured senior indebtedness of the Company. The Sterling Senior Notes are
guaranteed, on a senior basis, by certain of the Company's significant operating
subsidiaries. In March 2000, the Company exchanged (pound)75.0 million aggregate
principal amount of 8 1/2% Series B Senior Notes due in November 2009 (the
"Sterling Series B Senior Notes") for all of the Sterling Senior Notes. The
terms of the Sterling Series B Senior Notes are identical in all material
respects to the Sterling Senior Notes. In October 2000, the Company exchanged
(pound)74.0 million aggregate principal amount of Sterling Series C Senior Notes
(as defined below) for (pound)74.0 million of the Sterling Series B Notes. The
terms of the Sterling Series C Senior Notes are identical in all material
respects to the Sterling Series B Senior Notes. As of February 28, 2001, the
Company had outstanding (pound)1.0 million ($1.4 million) aggregate principal
amount of Sterling Series B Senior Notes.
On May 15, 2000, the Company issued (pound)80.0 million ($120.0 million
upon issuance) aggregate principal amount of 8 1/2% Series C Senior Notes due
November 2009 at an issuance price of (pound)79.6 million ($119.4 million upon
issuance, net of $0.6 million unamortized discount, with an effective interest
rate of 8.6%) (the "Sterling Series C Senior Notes"). The net proceeds of the
offering ((pound)78.8 million, or $118.2 million) were used to repay a portion
of the Company's British pound sterling borrowings under its senior credit
facility. Interest on the Sterling Series C Senior Notes is payable semiannually
on May 15 and November 15 of each year, beginning on November 15, 2000. The
Sterling Series C Senior Notes are redeemable at the option of the Company, in
whole or in part, at any time. The Sterling Series C Senior Notes are unsecured
senior obligations and rank equally in right of payment to all existing and
future unsecured senior indebtedness of the Company. The Sterling Series C
Senior Notes are guaranteed, on a senior basis, by certain of the Company's
significant operating subsidiaries. As of February 28, 2001, the Company had
outstanding (pound) 154.0 million ($222.1 million, net of $0.5 million
unamortized discount) aggregate principal amount of Sterling Series C Senior
Notes.
On February 21, 2001, the Company issued $200.0 million aggregate principal
amount of 8% Senior Notes due February 2008 (the "February 2001 Senior Notes").
The net proceeds of the offering ($197.0 million) were used to partially fund
the acquisition of the Turner Road Vintners Assets (see Note 18 - Subsequent
Events). Interest on the February 2001 Senior Notes is payable semiannually on
February 15 and August 15 of each year, beginning August 15, 2001. The February
2001 Senior Notes are redeemable at the option of the Company, in whole or in
part, at any time. The February 2001 Senior Notes are unsecured senior
obligations and rank equally in right of payment to all existing and future
unsecured senior indebtedness of the Company. The February 2001 Senior Notes are
guaranteed, on a senior basis, by certain of the Company's significant operating
subsidiaries.
SENIOR SUBORDINATED NOTES -
On December 27, 1993, the Company issued $130.0 million aggregate principal
amount of 8 3/4% Senior Subordinated Notes due in December 2003 (the "Original
Notes"). Interest on the Original Notes is payable semiannually on June 15 and
December 15 of each year. The Original Notes are unsecured and subordinated to
the prior payment in full of all senior indebtedness of the Company, which
includes the senior credit facility. The Original Notes are guaranteed, on a
senior subordinated basis, by certain of the Company's significant operating
subsidiaries.
On October 29, 1996, the Company issued $65.0 million aggregate principal
amount of 8 3/4% Series B Senior Subordinated Notes ($63.4 million, net of $1.6
million unamortized discount, with an effective interest rate of 9.8% as of
February 28, 2001) due in December 2003 (the "Series B Notes"). In February
1997, the Company exchanged $65.0 million aggregate principal amount of 8 3/4%
Series C Senior Subordinated Notes due in December 2003 (the "Series C Notes")
for the Series B Notes. The terms of the Series C Notes are substantially
identical in all material respects to the Original Notes.
- 50 -
On March 4, 1999, the Company issued $200.0 million aggregate principal
amount of 8 1/2% Senior Subordinated Notes due March 2009 ("Senior Subordinated
Notes"). The net proceeds of the offering (approximately $195.0($195.0 million) were used to fund the
acquisition of the Black Velvet Assets and to pay the fees and expenses related
thereto with the remainder of the net proceeds used for general corporate
purposes. Interest on the Senior Subordinated Notes is payable semiannually on
March 1 and September 1 of each year, beginning September 1, 1999. The Senior
Subordinated Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after March 1, 2004. The Company may also redeem up to
$70.0 million of the Senior Subordinated Notes using the proceeds of certain
equity offerings completed before March 1, 2002. The Senior Subordinated Notes
are unsecured and subordinated to the prior payment in full of all senior
indebtedness of the Company, which includes the senior credit facility. The
Senior Subordinated Notes are guaranteed, on a senior subordinated basis, by
certain of the Company's significant operating subsidiaries.
On December 27, 1993, the Company issued $130.0 million aggregate principal
amount of 8 3/4% Senior Subordinated Notes due in December 2003 (the "Original
Notes"). Interest on the Original Notes is payable semiannually on June 15 and
December 15 of each year. The Original Notes are unsecured and subordinated to
the prior payment in full of all senior indebtedness of the Company, which
includes the senior credit facility. The Original Notes are guaranteed, on a
senior subordinated basis, by all of the Company's significant operating
subsidiaries (other than Matthew Clark and its subsidiaries).
On October 29, 1996, the Company issued $65.0 million aggregate principal amount
of 8 3/4% Series B Senior Subordinated Notes ($62.9 million, net of $2.1 million
unamortized discount, with an effective rate of 9.76% as of February 29, 2000)
due in December 2003 (the "Series B Notes"). In February 1997, the Company
exchanged $65.0 million aggregate principal amount of 8 3/4% Series C Senior
Subordinated Notes due in December 2003 (the "Series C Notes") for the Series B
Notes. The terms of the Series C Notes are substantially identical in all
material respects to the Original Notes.
TRUST INDENTURES -
The Company's various Trust Indentures relating to the senior notes and
senior subordinated notes contain certain covenants, including, but not limited
to: (i) limitation on indebtedness; (ii) limitation on restricted payments;
(iii) limitation on transactions with affiliates; (iv) limitation on senior
subordinated indebtedness; (v) limitation on liens; (vi) limitation on sale of
assets; (vii) limitation on issuance of guarantees of and pledges for
indebtedness; (viii) restriction on transfer of assets; (ix) limitation on
subsidiary capital stock; (x) limitation on the creation of any restriction on
the ability of the Company's subsidiaries to make distributions and other
payments; and (xi) restrictions on mergers, consolidations and the transfer of
all or substantially all of the assets of the Company to another person. The
limitation on indebtedness covenant is governed by a rolling four quarter fixed
charge ratio requiring a specified minimum.
DEBT PAYMENTS -
Principal payments required under long-term debt obligations (excluding
unamortized discount) during the next five fiscal years and thereafter are as
follows:
(in thousands)
20012002 $ 53,987
2002 83,57558,360
2003 88,46975,183
2004 294,753278,429
2005 253,705131,392
2006 99
Thereafter 518,686
-----------824,462
------------
$ 1,293,175
===========1,367,925
============
7. INCOME TAXES:
The provisionCompany provides for (benefit from) income taxes consistsunder the provisions of SFAS No. 109
"Accounting for Income Taxes". SFAS No. 109 requires an asset and liability
based approach to accounting for income taxes.
Deferred income taxes reflect the temporary difference between assets and
liabilities recognized for financial reporting and such amounts recognized for
tax purposes.
- 51 -
The income tax provision consisted of the following:
For the Years Ended
---------------------------------------------
February 28, -------------------
For the Year Ended February 29, February 28,
2001 2000 1999
1998
----------------------------------------- -------- --------
State and
Federal Local Foreign Total Total Total
-------- -------- -------- -------- -------- -------------------- ------------ ------------
(in thousands)
CurrentCurrent:
Federal $ 39,082 $ 38,588 $ 23,827
State 7,934 6,091 $8,539
Foreign 11,202 8,405 $102
------------ ------------ -----------
Total current 58,218 53,084 $ 32,468
$ 28,476
DeferredDeferred:
Federal (2,017) (10,804) 5,732
State 402 2,874 2,195
Foreign 8,292 6,430 2,126
------------ ------------ -----------
Total deferred 6,677 (1,500) 10,053
4,275
-------- -------- -------- -------- -------- -------------------- ------------ -----------
Income tax provision $ 27,784 $ 8,965 $ 14,83564,895 $ 51,584 $ 42,521
$ 32,751
======== ======== ======== ======== ======== ==================== ============ ===========
The foreign provision for income taxes is based on foreign pretax earnings.
Earnings of foreign subsidiaries would be subject to U.S. income taxation on
repatriation to the U.S. The Company's consolidated financial statements fully
provide for any related tax liability on amounts that may be repatriated.
A reconciliation of the total tax provision to the amount computed by applying
the statutory U.S. Federal income tax rate to income before provision for income
taxes is as follows:
For the Year Ended
February 29, For the Years Ended February 28,
-------------------- --------------------------------------------
2000 1999 1998
-------------------- -------------------- --------------------
% of % of % of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
-------- -------- -------- -------- -------- --------
(in thousands)
Income tax provision at statutory rate $ 45,136 35.0 $ 36,551 35.0 $ 27,958 35.0
State and local income taxes, net of
Federal income tax benefit 3,077 2.4 6,977 6.7 4,793 6.0
Earnings of subsidiaries taxed at
other than U.S. statutory rate 1,294 1.0 227 0.2 - -
Miscellaneous items, net 2,077 1.6 (1,234) (1.2) - -
-------- -------- -------- -------- -------- --------
$ 51,584 40.0 $ 42,521 40.7 $ 32,751 41.0
======== ======== ======== ======== ======== ========
Deferred tax assets and liabilities reflect the future income tax effects
of temporary differences between the consolidated financial statement carrying
amounts of existing assets and liabilities and their respective tax bases and
are measured using enacted tax rates that apply to taxable income.
Significant components of deferred tax liabilities (assets)(liabilities) assets consist of the
following:
February 28, February 29,
February 28,2001 2000
1999
----------- ----------------------- ------------
(in thousands)
Depreciation and amortization $ 127,436(140,864) $ 89,447(127,436)
Effect of change in accounting method 11,200 16,546(7,928) (11,200)
Inventory reserves 4,542 6,975
Restructuring (6,824) (3,244)(5,791) (4,542)
Insurance accruals (3,868) (3,112)4,964 3,868
Restructuring 4,292 6,824
Other accruals (11,136) (8,653)
----------- -----------13,995 11,136
------------ ------------
$ 121,350(131,332) $ 97,959
=========== ===========(121,350)
============ ============
- 52 -
A reconciliation of the total tax provision to the amount computed by
applying the statutory U.S. Federal income tax rate to income before provision
for income taxes is as follows:
For the Years Ended
----------------------------------------------------------------------
February 28, February 29, February 28,
2001 2000 1999
--------------------- --------------------- ---------------------
% of % of % of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
--------- --------- --------- --------- --------- ---------
(in thousands)
Income tax provision at statutory rate $ 56,783 35.0 $ 45,136 35.0 $ 36,551 35.0
State and local income taxes, net of
federal income tax benefit 5,022 3.1 3,077 2.4 6,977 6.7
Earnings of subsidiaries taxed at
other than U.S. statutory rate 616 0.4 1,294 1.0 227 0.2
Miscellaneous items, net 2,474 1.5 2,077 1.6 (1,234) (1.2)
--------- --------- --------- --------- --------- ---------
$ 64,895 40.0 $ 51,584 40.0 $ 42,521 40.7
========= ========= ========= ========= ========= =========
At February 29, 2000,28, 2001, the Company has U.S. Federal net operating loss
carryforwards (NOL) of $1.8$0.9 million to offset future taxable income that, if not
otherwise utilized, will expire during fiscal 2011.
8. PROFIT SHARING AND RETIREMENT SAVINGS PLANS:
The Company's retirement and profit sharing plan, the CanandaiguaConstellation Brands,
Inc. 401(k) and Profit Sharing Plan (the "Plan"), covers substantially all
employees, excluding those employees covered by collective bargaining agreements
and Matthew Clark employees. The 401(k) portion of the Plan permits eligible
employees to defer a portion of their compensation (as defined in the Plan) on a
pretax basis. Participants may defer up to 12% of their compensation for the
year, subject to limitations of the Plan. The Company makes a matching
contribution of 50% of the first 6% of compensation a participant defers. The
amount of the Company's contribution under the profit sharing portion of the
Plan is in such discretionary amount as the Board of Directors may annually
determine, subject to limitations of the Plan. Company contributions were $8.2
million, $7.3 million, $6.8 million, and $5.9$6.8 million, for the years ended February 28, 2001,
February 29, 2000, and February 28, 1999, and February 28, 1998, respectively.
On December 31, 1999, theThe Company's subsidiary, Matthew Clark, and the Trustees
of the Matthew Clark Group Pension Plan and the Matthew Clark Executive Pension
Plan (the "Plans") entered into an agreement to merge the Plans into the Matthew
Clark Group Pension Plan effective December 31, 1999. The Matthew Clark Group
Pension Plan ishas a defined benefit pension
plan, withwhich covers substantially all of its employees, and its assets are held
by a Trustee who administers funds separately from the Company's finances. As
part of the acquisition of the Black Velvet Assets, the Company's subsidiary,
Barton, acquired defined benefit pension plans, which cover certain Canadian
employees.
- 53 -
Net periodic benefit cost included the following components:
For the For the
Year Ended Year Ended
February 29, February 28,
For the Year Ended February 28, 2001 2000 1999
------------------------------------------ ------------ ------------
Matthew Clark Barton Total Total Total
------------- ------------ ----------- ------------ ------------
(in thousands)
Service cost $ 4,077 $ 303 $ 4,380 $ 4,635 $ 1,335
Interest cost 10,269 985 11,254 11,205 2,671
Expected return on plan assets (15,034) (1,130) (16,164) (16,340) (3,848)
Amortization of prior service cost - (95) (95) - -
------------- ------------ ----------- ------------ ------------
Net periodic benefit (income) cost $ (688) $ 63 $ (625) $ (500) $ 158
============= ============ =========== ============ ============
The following table summarizes the funded status of the Company's defined
benefit pension plans and the related amounts that are primarily included in
other assets in the Consolidated Balance Sheets.
February 29,
February 28, February 29,2001 2000
1999
--------------------------------------------- ------------------------------------------------------- ------------
Matthew Clark Barton Total Total
------------- ------------ ----------- -----------------------
(in thousands)
Change in benefit obligation:
Benefit obligation atas of March 1 $ 163,680 $ - $ 163,680 $ -
Acquisition - 15,348 15,348 165,997
Service cost 4,299 336 4,635 1,335
Interest cost 10,494 711 11,205 2,671
Plan participants' contribution 1,507 - 1,507 481
Actuarial loss/(gain) 12,350 (2,222) 10,128 -
Benefits paid (4,939) (405) (5,344) (1,517)
Foreign currency exchange rate changes (2,875) 513 (2,362) (5,287)
------------- ------------ ----------- -----------
Benefit obligation at last day of February $ 184,516 $ 14,281 $ 198,797 $ 163,680
Acquisition - - - 15,348
Service cost 4,077 303 4,380 4,635
Interest cost 10,269 985 11,254 11,205
Plan participants' contributions 1,436 - 1,436 1,507
Actuarial (gain)/loss (467) 308 (159) 10,128
Benefits paid (4,666) (847) (5,513) (5,344)
Foreign currency exchange rate changes (15,851) (828) (16,679) (2,362)
------------- ------------ ----------- ------------
Benefit obligation as of last day of February $ 179,314 $ 14,202 $ 193,516 $ 198,797
============= ============ =========== =======================
Change in plan assets:
Fair value of plan assets atas of March 1 $ 194,606 $ - $ 194,606 $ -
Acquisition - 12,318 12,318 194,001
Actual return on plan assets 20,903 948 21,851 7,935
Plan participants' contributions 1,507 - 1,507 481
Employer contribution - 670 670 -
Benefits paid (4,939) (431) (5,370) (1,517)
Foreign currency exchange rate changes (3,198) 445 (2,753) (6,294)
------------- ------------ ----------- -----------
Fair value of plan assets at last day of February $ 208,879 $ 13,950 $ 222,829 $ 194,606
Acquisition - - - 12,318
Actual return on plan assets 6,161 765 6,926 21,851
Plan participants' contributions 1,436 - 1,436 1,507
Employer contribution - 573 573 670
Benefits paid (4,666) (847) (5,513) (5,370)
Foreign currency exchange rate changes (17,739) (801) (18,540) (2,753)
------------- ------------ ----------- ------------
Fair value of plan assets as of last day of February $ 194,071 $ 13,640 $ 207,711 $ 222,829
============= ============ =========== =======================
Funded status of the plan as of last day of February:
Funded status $ 24,36214,757 $ (330)(562) $ 14,195 $ 24,032
$ 30,927
Unrecognized actuarial gain/(loss) 2,945 (2,369)loss/(gain) 10,912 (1,489) 9,423 576 (3,950)
------------- ------------ ----------- -----------------------
Prepaid (accrued) benefit cost $ 27,30725,669 $ (2,699)(2,051) $ 24,60823,618 $ 26,97724,608
============= ============ =========== ===========
Assumptions as of last day of February:============
The following table sets forth the principal assumptions used in developing
the benefit obligation and the net periodic pension expense:
February 28, 2001 February 29, 2000
----------------------- -----------------------
Matthew Clark Barton Matthew Clark Barton
------------- -------- ------------- --------
Rate of return on plan assets 7.75% 8.50% 8.00% 8.50% 8.00%
Discount rate 6.00% 7.25% 6.50%
Increase in6.00% 7.25%
Rate of compensation levelsincrease 4.00% - 4.50%
Components of net periodic benefit cost for the
twelve months ended the last day of February:
Service cost $ 4,299 $ 336 $ 4,635 $ 1,335
Interest cost 10,494 711 11,205 2,671
Expected return on plan assets (15,533) (807) (16,340) (3,848)
------------- ------------ ----------- -----------
Net periodic benefit (income) cost $ (740) $ 240 $ (500) $ 158
============= ============ =========== ===========4.00% -
- 54 -
9. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS:
In connection with the acquisition of the Black Velvet Assets, the
Company's subsidiary, Barton, currently sponsors multiple non-pension
postretirement and postemployment benefit plans for certain of its Canadian
employees.
The status of the plans is as follows:
February 28, February 29,
2001 2000
------------ ------------
(in thousands)
Change in benefit obligation:
Benefit obligation at April 9, 1999as of March 1 $ 647 $ -
Acquisition - 698
Service cost 15 14
Interest cost 51 32
Benefits paid (25) (10)
Actuarial gainloss/(gain) 325 (110)
Foreign currency exchange rate changes (47) 23
----------------------- ------------
Benefit obligation atas of the last day of February 29, 2000$ 966 $ 647
======================= ============
Funded status as of February 29, 2000:the last day of February:
Funded status $ (966) $ (647)
Unrecognized net gainloss/(gain) 211 (111)
----------------------- ------------
Accrued benefit liability $ (755) $ (758)
======================= ============
Assumptions as of February 29, 2000:the last day of February:
Discount rate 7.00% 7.25%
Increase in compensation levels 4.00% 4.00%
Components of net periodic benefit cost for the
periodtwelve months ended February 29, 2000:the last day of February:
Service cost $ 15 $ 14
Interest cost 50 32
----------------------- ------------
Net periodic benefit cost $ 65 $ 46
======================= ============
At February 29, 2000,28, 2001, a 9.2%10% annual rate of increase in the per capita cost
of covered health benefits was assumed for the first year. The rate was assumed
to decrease gradually to 4.3%4.8% over seven years and to remain at this level
thereafter. Assumed healthcare trend rates could have a significant effect on
the amount reported for health care plans. A 1% change in assumed health care
cost trend rate would have the following effects:
1% 1%
Increase Decrease
-------- --------
(in thousands) -------- --------
Effect on total service and interest cost components $ 6 $ (5)
Effect on postretirement benefit obligation $ 7284 $ (73)(75)
10. STOCKHOLDERS' EQUITY:
COMMON STOCK -
The Company has two classes of common stock: Class A Common Stock and Class
B Convertible Common Stock. Class B Convertible Common Stock shares are
convertible into shares of Class A Common Stock on a one-to-one basis at any
time at the option of the holder. Holders of Class B Convertible Common Stock
are entitled to ten votes per share. Holders of Class A Common Stock are
entitled to only one vote per share but are entitled toand a cash dividend premium. If the Company pays
a cash dividend on
- 55 -
Class B Convertible Common Stock, each share of Class A Common Stock will
receive an amount at least ten percent greater than the amount of the cash
dividend per share paid on Class B Convertible Common Stock. In addition, the
Board of Directors may declare and pay a dividend on Class A Common Stock
without paying any dividend on Class B Convertible Common Stock.
At February 29, 2000,28, 2001, there were 15,069,41831,238,368 shares of Class A Common Stock
and 3,119,8356,151,144 shares of Class B Convertible Common Stock outstanding, net of
treasury stock.
STOCK REPURCHASE AUTHORIZATION -
In January 1996, the Company's Board of Directors authorized the repurchase of
up to $30.0 million of its Class A Common Stock and Class B Convertible Common
Stock. The Company was permitted to finance such purchases, which became
treasury shares, through cash generated from operations or through the senior
credit facility. Throughout the year ended February 28, 1997, the Company
repurchased 787,450 shares of Class A Common Stock totaling $20.8 million. The
Company completed its repurchase program during fiscal 1998, repurchasing
362,100 shares of Class A Common Stock for $9.2 million.
In June 1998, the Company's Board of Directors authorized the repurchase of
up to $100.0 million of its Class A Common Stock and Class B Convertible Common
Stock. The Company may finance such purchases, which will become treasury
shares, through cash generated from operations or through the senior credit
facility. During fiscalFiscal 1999, the Company repurchased 1,018,8362,037,672 shares of Class
A Common Stock for $44.9 million. No repurchases were made during fiscal 2000.Fiscal 2000
and Fiscal 2001.
LONG-TERM STOCK INCENTIVE PLAN -
Under the Company's Long-Term Stock Incentive Plan, nonqualified stock
options, stock appreciation rights, restricted stock and other stock-based
awards may be granted to employees, officers and directors of the Company. At
the Company's Annual Meeting of Stockholders held on July 20, 1999, stockholders
approved the amendment to the Company's Long-Term Stock Incentive Plan to
increase the aggregate number of shares of the Class A Common Stock available
for awards under the plan from 4,000,0008,000,000 shares to 7,000,00014,000,000 shares. The
exercise price, vesting period and term of nonqualified stock options granted
are established by the committee administering the plan (the "Committee").
Grants of stock appreciation rights, restricted stock and other stock-based
awards may contain such vesting, terms, conditions and other requirements as the
Committee may establish. During fiscalFiscal 2001 and Fiscal 2000, and fiscal 1999, no stock
appreciation rights or
restricted stock were granted. At February 29, 2000, thereDuring Fiscal 2001, 7,550 shares of restricted
Class A Common Stock were 3,557,568 shares
available for future grant.
A summary of nonqualified stock option activity is as follows:
Weighted Weighted
Average Average
Shares Under Exercise Options Exercise
Option Price Exercisable Price
------------ -------- ----------- --------
Balance, February 28, 1997 1,432,975 $ 18.85 51,425 $ 10.67
Options granted 569,400 $ 38.72
Options exercised (117,452) $ 15.33
Options forfeited/canceled (38,108) $ 17.66
------------
Balance, February 28, 1998 1,846,815 $ 25.23 360,630 $ 25.46
Options granted 728,200 $ 50.57
Options exercised (203,565) $ 20.08
Options forfeited/canceled (116,695) $ 37.13
------------
Balance, February 28, 1999 2,254,755 $ 33.26 492,285 $ 24.55
Options granted 819,800 $ 50.42
Options exercised (187,690) $ 17.92
Options forfeited/canceled (148,615) $ 44.95
------------
Balance, February 29, 2000 2,738,250 $ 38.81 737,455 $ 27.04
============
The following table summarizes information about stock options outstanding at February 29, 2000:
Options Outstanding Options Exercisable
------------------------------------ ----------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
- --------------- ----------- ----------- -------- ----------- --------
$ 4.44 - $11.50 12,150 2.3 years $ 11.50 12,150 $ 11.50
$17.00 - $25.63 633,420 5.4 years $ 17.28 365,280 $ 17.42
$26.75 - $31.25 335,180 6.5 years $ 28.45 145,300 $ 27.50
$35.38 - $50.00 940,600 8.5 years $ 45.41 185,325 $ 42.76
$51.00 - $59.56 816,900 8.9 years $ 52.57 29,400 $ 51.74
----------- -----------
2,738,250 7.6 years $ 38.81 737,455 $ 27.04
=========== ===========
Thea weighted average grant date fair value of
options granted during fiscal$26.63 per share. During Fiscal 2000, fiscal
1999, and fiscal 1998no restricted stock was $26.28, $26.21, and $20.81, respectively. The fair
value of options is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions: risk-free
interest rate of 5.7% for fiscal 2000, 5.3% for fiscal 1999, and 6.4% for fiscal
1998; volatility of 40.0% for fiscal 2000, 40.6% for fiscal 1999, and 41.3% for
fiscal 1998; expected option life of 7.0 years for fiscal 2000 and fiscal 1999,
and 6.9 years for fiscal 1998. The dividend yield was 0% for fiscal 2000, fiscal
1999, and fiscal 1998. Forfeitures are recognized as they occur.granted.
INCENTIVE STOCK OPTION PLAN -
Under the Company's Incentive Stock Option Plan, incentive stock options
may be granted to employees, including officers, of the Company. Grants, in the
aggregate, may not exceed 1,000,0002,000,000 shares of the Company's Class A Common
Stock. The exercise price of any incentive stock option may not be less than the
fair market value of the Company's Class A Common Stock on the date of grant.
The vesting period and term of incentive stock options granted are established
by the Committee. The maximum term of incentive stock options is ten years.
During fiscal
- 56 -
A summary of stock option activity under the Company's long-term stock
incentive plan and the incentive stock option plan is as follows:
Weighted Weighted
Shares Average Average
Under Exercise Options Exercise
Option Price Exercisable Price
---------- -------- ----------- --------
Balance, February 28, 1998 3,693,630 $ 12.62 721,260 $ 12.73
Options granted 1,456,400 $ 25.29
Options exercised (407,130) $ 10.04
Options forfeited/canceled (233,390) $ 18.57
----------
Balance, February 28, 1999 4,509,510 $ 16.63 984,570 $ 12.28
Options granted 1,639,600 $ 25.21
Options exercised (375,380) $ 8.96
Options forfeited/canceled (297,230) $ 22.48
----------
Balance, February 29, 2000 5,476,500 $ 19.41 1,474,910 $ 13.52
Options granted 1,930,200 $ 26.03
Options exercised (929,568) $ 14.88
Options forfeited/canceled (322,730) $ 23.82
----------
Balance, February 28, 2001 6,154,402 $ 21.94 2,408,442 $ 17.02
==========
The following table summarizes information about stock options outstanding
at February 28, 2001:
Options Outstanding Options Exercisable
------------------------------------ ----------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
- --------------- ----------- ----------- -------- ----------- --------
$ 5.75 - $12.82 764,920 4.6 years $ 8.54 662,500 $ 8.52
$13.38 - $15.63 625,440 5.5 years $ 14.18 572,200 $ 14.24
$17.69 - $25.00 1,498,552 7.5 years $ 22.78 758,502 $ 21.55
$25.50 - $29.78 3,265,490 8.5 years $ 26.17 415,240 $ 26.10
----------- -----------
6,154,402 7.5 years $ 21.94 2,408,442 $ 17.02
=========== ===========
The weighted average fair value of options granted during Fiscal 2001,
Fiscal 2000, and fiscalFiscal 1999 no incentive stockwas $10.91, $13.14, and $13.11, respectively. The
fair value of options were granted.is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions: risk-free
interest rate of 6.2% for Fiscal 2001, 5.7% for Fiscal 2000, and 5.3% for Fiscal
1999; volatility of 38.8% for Fiscal 2001, 40.0% for Fiscal 2000, and 40.6% for
Fiscal 1999; and expected option life of 4.7 years for Fiscal 2001, and 7.0
years for Fiscal 2000 and Fiscal 1999. The dividend yield was 0% for Fiscal
2001, Fiscal 2000, and Fiscal 1999. Forfeitures are recognized as they occur.
EMPLOYEE STOCK PURCHASE PLAN -
The Company has a stock purchase plan under which 1,125,0002,250,000 shares of Class
A Common Stock can be issued. Under the terms of the plan, eligible employees
may purchase shares of the Company's Class A Common Stock through payroll
deductions. The purchase price is the lower of 85% of the fair market value of
the stock on the first or last day of the purchase period. During fiscalFiscal 2001,
Fiscal 2000, fiscaland Fiscal 1999, and fiscal 1998, employees purchased 31,06273,888 shares, 49,85062,124 shares,
and 78,24899,700 shares, respectively.
The weighted average fair value of purchase rights granted during fiscalFiscal
2001, Fiscal 2000, fiscaland Fiscal 1999 was $7.55, $6.09, and fiscal 1998 was $12.18, $12.35, and $11.90,$6.18, respectively.
The fair value of purchase rights is estimated on
- 57 -
the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions: risk-free interest rate of 5.7% for
Fiscal 2001, 5.4% for fiscalFiscal 2000, and 4.7% for fiscal
1999, and 5.3% for fiscal 1998;Fiscal 1999; volatility of 36.8%
for Fiscal 2001, 33.6% for fiscalFiscal 2000, and 33.5% for fiscal 1999, and 35.1% for fiscal 1998;Fiscal 1999; expected
purchase right life of 0.5 years for fiscalFiscal 2001, Fiscal 2000, fiscal 1999, and fiscal 1998.Fiscal 1999.
The dividend yield was 0% for fiscalFiscal 2001, Fiscal 2000, fiscal 1999, and fiscal 1998.Fiscal 1999.
PRO FORMA DISCLOSURE -
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its plans. The Company adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("SFAS No. 123"). Accordingly, no incremental compensation
expense has been recognized for its stock-based compensation plans. Had the
Company recognized the compensation cost based upon the fair value at the date
of grant for awards under its plans consistent with the methodology prescribed
by SFAS No. 123, net income and earnings per common share would have been
reduced to the pro forma amounts as follows:
For the YearYears Ended
--------------------------------------------------------------------
February 28, February 29, For the Years Ended February 28,
-------------------- --------------------------------------------2001 2000 1999 1998
-------------------- -------------------- --------------------
As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma
-------- -------- -------- -------- -------- --------
(in thousands, except per share data)
Net income $ 97,342 $ 86,784 $ 77,375 $ 71,474 $ 50,472 $ 46,942 $ 47,130 $ 43,230
======== ======== ======== ======== ======== ========
Earnings per common share:
Basic $ 4.292.65 $ 3.962.36 $ 2.762.14 $ 2.571.98 $ 2.521.38 $ 1.28
Diluted $ 2.60 $ 2.32 Diluted $ 4.182.09 $ 3.861.93 $ 2.691.35 $ 2.50 $ 2.47 $ 2.261.25
The pro forma effect on net income may not be representative of that to be
expected in future years.
11. EARNINGS PER COMMON SHARE:
The following table presents earnings per common share as follows:
For the Year
Ended
For the Years Ended
------------------------------------------------
February 28, February 29, February 28,
2001 2000 1999
------------ ------------ ------------ -------------------
2000 1999 1998
----------- -------- --------
(in thousands, except per share data)
Income before extraordinary item $ 97,342 $ 77,375 $ 61,909 $ 47,130
Extraordinary item, net of income taxes - - (11,437)
------------ ------------ ------------
Income applicable to common shares $ 97,342 $ 77,375 $ 50,472
============ ============ ============
Weighted average common shares outstanding - basic 36,723 36,108 36,587
Stock options 652 890 920
------------ ------------ ------------
Weighted average common shares outstanding - diluted 37,375 36,998 37,507
============ ============ ============
Earnings per common share:
Basic:
Income before extraordinary item $ 2.65 $ 2.14 $ 1.69
Extraordinary item, net of income taxes - - (0.31)
------------ ------------ ------------
Earnings per common share - basic $ 2.65 $ 2.14 $ 1.38
============ ============ ============
Diluted:
Income before extraordinary item $ 2.60 $ 2.09 $ 1.65
Extraordinary item, net of income taxes - - (0.30)
------------ ------------ ------------
Earnings per common share - diluted $ 2.60 $ 2.09 $ 1.35
============ ============ ============
- (11,437)58 -
----------- -------- --------
Income applicable to common shares $ 77,375 $ 50,472 $ 47,130
=========== ======== ========
Weighted average common shares
outstanding - basic 18,054 18,293 18,672
Stock options 445 461 433
----------- -------- --------
Weighted average common shares
outstanding - diluted 18,499 18,754 19,105
=========== ======== ========
Earnings per common share:
Basic:
Income before extraordinary item $ 4.29 $ 3.38 $ 2.52
Extraordinary item - (0.62) -
----------- -------- ---------
Earnings per common share - basic $ 4.29 $ 2.76 $ 2.52
=========== ======== ========
Diluted:
Income before extraordinary item $ 4.18 $ 3.30 $ 2.47
Extraordinary item - (0.61) -
----------- -------- ---------
Earnings per common share - diluted $ 4.18 $ 2.69 $ 2.47
=========== ======== ========
12. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES -
Future payments under noncancelable operating leases having initial or
remaining terms of one year or more are as follows during the next five fiscal
years and thereafter:
(in thousands)
20012002 $ 16,312
2002 14,86718,717
2003 13,82717,787
2004 12,93616,939
2005 12,06715,430
2006 13,459
Thereafter 96,301
---------96,362
----------
$ 166,310
=========178,694
==========
Rental expense was $19.6 million, $17.4 million, and $8.2 million for
Fiscal 2001, Fiscal 2000, and $5.6 million for fiscal
2000, fiscalFiscal 1999, and fiscal 1998, respectively.
PURCHASE COMMITMENTS AND CONTINGENCIES -
The Company has agreements with suppliers to purchase various spirits of
which certain agreements are denominated in British pound sterling and Canadian
dollars. The maximum future obligation under these agreements, based upon
exchange rates at February 29, 2000,28, 2001, aggregate $28.4$22.6 million for contracts
expiring through December 2005.
All of the Company's imported beer products are marketed and sold pursuant
to exclusive distribution agreements from the suppliers of these products. The
Company's agreement to distribute Corona Extra and its other Mexican beer brands
exclusively throughout 25 primarily western U.S. states expires in December
2006, with automatic five year renewals thereafter, subject to compliance with
certain performance criteria and other terms under the agreement. The remaining
agreements expire through December 2007. Prior to their expiration, these
agreements may be terminated if the Company fails to meet certain performance
criteria. At February 29, 2000,28, 2001, the Company believes it is in compliance with
all of its material distribution agreements and, given the Company's long-term
relationships with its suppliers, the Company does not believe that these
agreements will be terminated.
In connection with previous acquisitions, the Company assumed grape
purchase contracts with certain growers and suppliers. In addition, the Company
has entered into other grape purchase contracts with various growers and
suppliers in the normal course of business. Under the grape purchase contracts,
the Company is committed to purchase all grape production yielded from a
specified number of acres for a period of time ranging up to eighteenseventeen years.
The actual tonnage and price of grapes that must be purchased by the Company
will vary each year depending on certain factors, including weather, time of
harvest, overall market conditions and the agricultural practices and location
of the growers and suppliers under contract. The Company purchased $126.8$135.0
million of grapes under these contracts during fiscal 2000.Fiscal 2001. Based on current
production yields and published grape prices, the Company estimates that the
aggregate purchases under these contracts over the remaining term of the
contracts will be approximately $800.5$647.6 million.
The Company's aggregate obligations under bulk wine purchase contracts will
be approximately $8.3$8.1 million over the remaining term of the contracts which expire through
fiscal 2001.2003.
EMPLOYMENT CONTRACTS -
The Company has employment contracts with certain of its executive officers
and certain other management personnel with remaining terms ofautomatic one year.year renewals unless
terminated by either party. These agreements provide for minimum salaries, as
adjusted for annual increases, and may include incentive bonuses based upon
attainment of specified management goals. In addition, these agreements provide
for
- 59 -
severance payments in the event of specified termination of employment. The
aggregate commitment for future compensation and severance, excluding incentive
bonuses, was $4.2$4.0 million as of February 29, 2000,28, 2001, of which $2.0 million is
accrued in other liabilities as of February 29, 2000.28, 2001.
EMPLOYEES COVERED BY COLLECTIVE BARGAINING AGREEMENTS -
Approximately 31%30% of the Company's full-time employees are covered by
collective bargaining agreements at February 29, 2000.28, 2001. Agreements expiring
within one year cover approximately 18%12% of the Company's full-time employees.
LEGAL MATTERS -
The Company is subject to litigation from time to time in the ordinary
course of business. Although the amount of any liability with respect to such
litigation cannot be determined, in the opinion of management such liability
will not have a material adverse effect on the Company's financial condition,
results of operations or cash flows.
13. SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK:
Gross sales to the five largest customers of the Company represented 17.1%17.6%,
25.2%17.1%, and 26.4%25.2% of the Company's gross sales for the fiscal years ended
February 28, 2001, February 29, 2000, and February 28, 1999, and February 28, 1998, respectively. Gross
sales to the Company's largest customer, Southern Wine and Spirits, represented
8.0%8.2%, 10.9%8.0%, and 12.1%10.9% of the Company's gross sales for the fiscal years ended
February 28, 2001, February 29, 2000, and February 28, 1999, and February 28, 1998, respectively.
Accounts receivable from the Company's largest customer represented 8.6%9.8%, 8.5%8.6%,
and 14.1%8.5% of the Company's total accounts receivable as of February 28, 2001,
February 29, 2000, and February 28, 1999, and February 28, 1998, respectively. Gross sales to the
Company's five largest customers are expected to continue to represent a
significant portion of the Company's revenues. The Company's arrangements with
certain of its customers may, generally, be terminated by either party with
prior notice. The Company performs ongoing credit evaluations of its customers'
financial position, and management of the Company is of the opinion that any
risk of significant loss is reduced due to the diversity of customers and
geographic sales area.
14. SUMMARIZEDCONDENSED CONSOLIDATING FINANCIAL INFORMATION - SUBSIDIARY GUARANTORS:INFORMATION:
The following table presents summarized financial information sets forth the condensed consolidating balance
sheets of the Company as of February 28, 2001, and February 29, 2000, and the
condensed consolidating statements of operations and cash flows for each of the
three years in the period ended February 28, 2001, for the Company, the parent
company, the combined subsidiaries of the Company which guarantee the Company's
senior notes and senior subordinated notes ("Subsidiary Guarantors") and the
combined subsidiaries of the Company which are not Subsidiary Guarantors,
primarily Matthew Clark ("Subsidiary Nonguarantors"). The Subsidiary Guarantors
are wholly owned and the guarantees are full, unconditional, joint and several
obligations of each of the Subsidiary Guarantors. Separate financial statements
for the Subsidiary Guarantors of the Company are not presented because the
Company has determined that such financial statements would not be material to
investors. The Subsidiary Guarantors comprise all of the direct and indirect
subsidiaries of the Company, other than Matthew Clark, the Company's Canadian
subsidiary, and certain other subsidiaries which individually, and in the
aggregate, are inconsequential. The accounting policies of the subsidiaries are
the same as those described in Note 1 - Summary of Significant Accounting
Policies. There are no restrictions on the ability of the Subsidiary Guarantors
to transfer funds to the Company in the form of cash dividends, loans or
advances.
- 60 -
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
----------- ------------ ------------- ------------ ------------
(in thousands)
BALANCE SHEET DATA:Condensed Consolidating Balance Sheet
- -------------------------------------
at February 28, 2001
- --------------------
Current assets:
Cash and cash investments $ 142,104 $ 3,239 $ 329 $ - $ 145,672
Accounts receivable, net 80,299 116,784 117,179 - 314,262
Inventories, net 31,845 515,274 122,965 (66) 670,018
Prepaid expenses and other
current assets 6,551 33,565 20,921 - 61,037
Intercompany receivable (payable) (61,783) 54,169 7,614 - -
----------- ------------ ------------- ------------ ------------
Total current assets 199,016 723,031 269,008 (66) 1,190,989
Property, plant and equipment, net 30,554 320,143 197,917 - 548,614
Investments in subsidiaries 1,835,088 525,442 - (2,360,530) -
Other assets 87,764 434,782 250,020 - 772,566
----------- ------------ ------------- ------------ ------------
Total assets $ 2,152,422 $ 2,003,398 $ 716,945 $ (2,360,596) $ 2,512,169
=========== ============ ============= ============ ============
Current liabilities:
Notes payable $ - $ - $ 4,184 $ - $ 4,184
Current maturities of long-term debt 49,218 70 4,888 - 54,176
Accounts payable and other liabilities 111,388 58,448 143,010 - 312,846
Accrued excise taxes 9,411 35,474 11,069 - 55,954
----------- ------------ ------------- ------------ ------------
Total current liabilities 170,017 93,992 163,151 - 427,160
Long-term debt, less current maturities 1,305,302 758 1,377 - 1,307,437
Deferred income taxes 33,232 71,619 27,123 - 131,974
Other liabilites 437 2,953 25,940 - 29,330
Stockholders' equity:
Class A and class B common stock 448 6,434 64,867 (71,301) 448
Additional paid-in capital 267,655 742,343 436,466 (1,178,809) 267,655
Retained earnings 455,864 1,086,311 24,109 (1,110,486) 455,798
Accumulated other comprehensive
income (loss) 1,096 (1,012) (26,088) - (26,004)
Treasury stock and other (81,629) - - - (81,629)
----------- ------------ ------------- ------------ ------------
Total stockholders' equity 643,434 1,834,076 499,354 (2,360,596) 616,268
----------- ------------ ------------- ------------ ------------
Total liabilities and
stockholders' equity $ 2,152,422 $ 2,003,398 $ 716,945 $ (2,360,596) $ 2,512,169
=========== ============ ============= ============ ============
Condensed Consolidating Balance Sheet
- -------------------------------------
at February 29, 2000
- -------------------------------------
Current assets $ 105,884 $ 611,646 $ 278,467assets:
Cash and cash investments $ - $ 995,997
Noncurrent assets231 $ 913,026 $ 1,695,790 $ 25,628 $ (1,281,650) $ 1,352,794
Current liabilities $ 150,507 $ 84,860 $ 202,85034,077 $ - $ 438,217
Noncurrent liabilities34,308
Accounts receivable, net 81,076 95,350 114,682 - 291,108
Inventories, net 29,870 467,152 118,766 (88) 615,700
Prepaid expenses and other
current assets 6,175 38,269 10,437 - 54,881
Intercompany receivable (payable) 30,174 (3,273) (26,901) - -
----------- ------------ ------------- ------------ ------------
Total current assets 147,295 597,729 251,061 (88) 995,997
Property, plant and equipment, net 30,397 298,513 214,061 - 542,971
Investments in subsidiaries 1,714,150 529,267 - (2,243,417) -
Other assets 86,652 447,945 275,226 - 809,823
----------- ------------ ------------- ------------ ------------
Total assets $ 1,230,1391,978,494 $ 97,4101,873,454 $ 62,185740,348 $ (2,243,505) $ 2,348,791
=========== ============ ============= ============ ============
- 61 -
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
----------- ------------ ------------- ------------ ------------
(in thousands)
Current liabilities:
Notes payable $ 26,800 $ - $ 1,389,734
February 28, 1999
- -----------------
Current assets $ 114,243 $ 532,028 $ 209,4681,334 $ - $ 855,739
Noncurrent assets28,134
Current maturities of long-term debt 51,801 - 852 - 52,653
Accounts payable and other liabilities 110,018 74,154 142,812 - 326,984
Accrued excise taxes 4,712 14,737 10,997 - 30,446
----------- ------------ ------------- ------------ ------------
Total current liabilities 193,331 88,891 155,995 - 438,217
Long-term debt, less current maturities 1,229,629 446 7,060 - 1,237,135
Deferred income taxes 28,697 65,350 22,400 - 116,447
Other liabilites 511 2,917 32,724 - 36,152
Stockholders' equity:
Class A and class B common stock 439 6,434 64,867 (71,301) 439
Additional paid-in capital 247,730 742,343 436,466 (1,178,809) 247,730
Retained earnings 358,544 965,373 27,934 (993,395) 358,456
Accumulated other comprehensive
income (loss) 1,249 1,700 (7,098) - (4,149)
Treasury stock and other (81,636) - - - (81,636)
----------- ------------ ------------- ------------ ------------
Total stockholders' equity 526,326 1,715,850 522,169 (2,243,505) 520,840
----------- ------------ ------------- ------------ ------------
Total liabilities and
stockholders' equity $ 646,1331,978,494 $ 396,1251,873,454 $ 421,867740,348 $ (526,088)(2,243,505) $ 938,037
Current liabilities2,348,791
=========== ============ ============= ============ ============
Condensed Consolidating Statement of Income
- -------------------------------------------
for the Year Ended February 28, 2001
- ------------------------------------
Gross sales $ 157,648741,668 $ 126,8031,759,368 $ 130,821979,509 $ (326,251) $ 3,154,294
Less - excise taxes (131,997) (396,773) (228,839) - (757,609)
----------- ------------ ------------- ------------ ------------
Net sales 609,671 1,362,595 750,670 (326,251) 2,396,685
Cost of product sold (474,913) (955,893) (534,697) 326,273 (1,639,230)
----------- ------------ ------------- ------------ ------------
Gross profit 134,758 406,702 215,973 22 757,455
Selling, general and administrative
expenses (140,757) (150,241) (195,589) - (486,587)
----------- ------------ ------------- ------------ ------------
Operating income (5,999) 256,461 20,384 22 270,868
Interest expense, net (27,840) (76,076) (4,715) - (108,631)
Equity earnings in subsidiary 120,937 (3,825) - (117,112) -
----------- ------------ ------------- ------------ ------------
Income before income taxes 87,098 176,560 15,669 (117,090) 162,237
Provision for income taxes 10,222 (55,623) (19,494) - (64,895)
----------- ------------ ------------- ------------ ------------
Net income $ 415,272
Noncurrent liabilities97,320 $ 815,421120,937 $ 73,178(3,825) $ 54,633(117,090) $ 97,342
=========== ============ ============= ============ ============
Condensed Consolidating Statement of Income
- $ 943,232
INCOME STATEMENT DATA:
For-------------------------------------------
for the year endedYear Ended February 29, 2000
- ------------------------------------
Gross sales $ 742,375 $ 1,692,070 $ 1,010,526 $ (356,272) $ 3,088,699
Less - excise taxes (135,196) (372,450) (240,584) - (748,230)
----------- ------------ ------------- ------------ ------------
Net sales $ 620,631 $ 1,305,032 $ 761,762 $ (346,956) $607,179 1,319,620 769,942 (356,272) 2,340,469
Cost of product sold (444,993) (983,026) (546,174) 356,184 (1,618,009)
----------- ------------ ------------- ------------ ------------
Gross profit $ 174,231 $ 332,641 $ 215,588 $162,186 336,594 223,768 (88) 722,460
Selling, general and administrative
expenses (150,732) (160,749) (170,428) - $ 722,460
(Loss)(481,909)
Nonrecurring charges - (2,565) (2,945) - (5,510)
----------- ------------ ------------- ------------ ------------
Operating income 11,454 173,280 50,395 (88) 235,041
Interest expense, net (18,701) (82,265) (5,116) - (106,082)
Equity earnings in subsidiary 81,776 22,974 - (104,750) -
----------- ------------ ------------- ------------ ------------
Income before income taxes $ (192) $ 92,433 $ 36,718 $74,529 113,989 45,279 (104,838) 128,959
Provision for income taxes 2,934 (32,213) (22,305) - $ 128,959(51,584)
----------- ------------ ------------- ------------ ------------
Net (loss) income $ (115)77,463 $ 55,46081,776 $ 22,03022,974 $ -(104,838) $ 77,375
For=========== ============ ============= ============ ============
- 62 -
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
----------- ------------ ------------- ------------ ------------
(in thousands)
Condensed Consolidating Statement of Income
- -------------------------------------------
for the year endedYear Ended February 28, 1999
- ------------------------------------
NetGross sales $ 615,270695,533 $ 1,080,4661,439,543 $ 158,761206,879 $ (357,154) $ 1,984,801
Less - excise taxes (126,770) (312,569) (48,119) - (487,458)
----------- ------------ ------------- ------------ ------------
Net sales 568,763 1,126,974 158,760 (357,154) 1,497,343
Cost of product sold (410,968) (878,757) (116,738) 357,154 (1,049,309)
----------- ------------ ------------- ------------ ------------
Gross profit $ 168,575 $ 237,437 $157,795 248,217 42,022 $ - $ 448,034
Selling, general and administrative
expenses (155,730) (113,387) (30,409) - (299,526)
Nonrecurring charges - - (2,616) - (2,616)
----------- ------------ ------------- ------------ ------------
Operating income 2,065 134,830 8,997 - 145,892
Interest expense, net 834 (40,487) (1,809) - (41,462)
Equity earnings in subsidiary 60,896 4,960 - (65,856) -
----------- ------------ ------------- ------------ ------------
Income before income taxes and
extraordinary item 63,795 99,303 7,188 (65,856) 104,430
Provision for income taxes (1,886) (38,407) (2,228) - (42,521)
----------- ------------ ------------- ------------ ------------
Income before extraordinary item 61,909 60,896 4,960 (65,856) 61,909
Extraordinary item, net of income taxes (11,437) - - - (11,437)
----------- ------------ ------------- ------------ ------------
Net income $ 4,84950,472 $ 96,93560,896 $ 2,6464,960 $ (65,856) $ 50,472
=========== ============ ============= ============ ============
Condensed Consolidated Statement of Cash
- ----------------------------------------
Flows for the Year Ended February 28,2001
- -----------------------------------------
Net cash provided by (used in)
operating activities $ 92,765 $ 20,479 $ (9,469) $ - $ 104,430103,775
Cash flows from investing activities:
Purchases of property, plant and
equipment (5,609) (42,771) (19,837) - (68,217)
Purchases of businesses, net of
cash acquired - - (4,459) - (4,459)
Other 120 930 959 - 2,009
----------- ------------ ------------- ------------ ------------
Net incomecash used in investing activities (5,489) (41,841) (23,337) - (70,667)
----------- ------------ ------------- ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt 319,400 - - - 319,400
Exercise of employee stock options 13,806 - - - 13,806
Proceeds from employee stock
purchases 1,547 - - - 1,547
Principal payments of long-term debt (220,888) 639 (1,659) - (221,908)
Net repayments of notes payable (26,800) (704) 3,889 - (23,615)
Payment of issuance costs of
long-term debt (5,794) - - - (5,794)
----------- ------------ ------------- ------------ ------------
Net cash provided by (used in)
financing activities 81,271 (65) 2,230 - 83,436
----------- ------------ ------------- ------------ ------------
Effect of exchange rate changes on
cash and cash investments (26,443) 24,435 (3,172) - (5,180)
----------- ------------ ------------- ------------ ------------
Net increase (decrease) in cash
and cash investments 142,104 3,008 (33,748) - 111,364
Cash and cash investments, beginning
of year - 231 34,077 - 34,308
----------- ------------ ------------- ------------ ------------
Cash and cash investments, end of year $ 2,861142,104 $ 45,7813,239 $ 1,830329 $ - $ 50,472
For145,672
=========== ============ ============= ============ ============
- 63 -
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
----------- ------------ ------------- ------------ ------------
(in thousands)
Condensed Consolidated Statement of Cash
- ----------------------------------------
Flows for the year endedYear Ended February 28, 199829, 2000
- ------------------------------------------------------------------------------
Net salescash (used in) provided by
operating activities $ 562,760(137,490) $ 985,757245,989 $ 2,197 $ (337,926) $ 1,212,788
Gross profit $ 151,092 $ 191,658 $ 1,00039,556 $ - $ 343,750
Income (loss) before income taxes $ 21,024 $ 59,285 $ (428)148,055
Cash flows from investing activities:
Purchases of property, plant and
equipment (5,163) (42,220) (10,364) - (57,747)
Purchases of businesses, net of
cash acquired - (453,117) 207 - (452,910)
Intercompany equity contributions (269,899) 269,899 - - -
Other 13,000 (2,198) 4,175 - 14,977
----------- ------------ ------------- ------------ ------------
Net cash used in investing activities (262,062) (227,636) (5,982) - (495,680)
----------- ------------ ------------- ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt 1,486,240 - - - 1,486,240
Exercise of employee stock options 3,358 - - - 3,358
Proceeds from employee stock
purchases 1,428 - - - 1,428
Principal payments of long-term debt (1,017,850) (25,550) (16,552) - (1,059,952)
Net repayments of notes payable (56,675) 400 (4,354) - (60,629)
Payment of issuance costs of
long-term debt (14,888) - - - (14,888)
----------- ------------ ------------- ------------ ------------
Net cash provided by (used in)
financing activities 401,613 (25,150) (20,906) - 355,557
----------- ------------ ------------- ------------ ------------
Effect of exchange rate changes on
cash and cash investments (5,820) 5,850 (1,299) - (1,269)
----------- ------------ ------------- ------------ ------------
Net (decrease) increase in cash
and cash investments (3,759) (947) 11,369 - 6,663
Cash and cash investments, beginning
of year 3,759 1,178 22,708 - 27,645
----------- ------------ ------------- ------------ ------------
Cash and cash investments, end of year $ - $ 79,881
Net income (loss)231 $ 12,404 $ 35,154 $ (428)34,077 $ - $ 47,13034,308
=========== ============ ============= ============ ============
- 64 -
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
----------- ------------ ------------- ------------ ------------
(in thousands)
Condensed Consolidated Statement of Cash
- ----------------------------------------
Flows for the Year Ended February 28, 1999
- ------------------------------------------
Net cash (used in) provided by
operating activities $ (254,656) $ 315,343 $ 46,558 $ - $ 107,245
Cash flows from investing activities:
Purchases of property, plant and
equipment (15,615) (23,798) (10,444) - (49,857)
Purchases of businesses, net of
cash acquired - (358,121) 25,905 - (332,216)
Intercompany equity contributions (158,016) 67,655 90,361 - -
Other - (475) 190 - (285)
----------- ------------ ------------- ------------ ------------
Net cash (used in) provided by
investing activities (173,631) (314,739) 106,012 - (382,358)
----------- ------------ ------------- ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt 625,630 9,460 - - 635,090
Exercise of employee stock options 4,083 - - - 4,083
Proceeds from employee stock
purchases 1,840 - - - 1,840
Principal payments of long-term debt (140,118) - (123,983) - (264,101)
Net repayments of notes payable (8,824) - (5,083) - (13,907)
Payment of issuance costs of
long-term debt (7,201) (9,908) - - (17,109)
Purchases of treasury stock (44,878) - - - (44,878)
----------- ------------ ------------- ------------ ------------
Net cash provided by (used in)
financing activities 430,532 (448) (129,066) - 301,018
----------- ------------ ------------- ------------ ------------
Effect of exchange rate changes on
cash and cash investments 1,128 176 (796) - 508
----------- ------------ ------------- ------------ ------------
Net increase in cash and cash
investments 3,373 332 22,708 - 26,413
Cash and cash investments, beginning
of year 386 846 - - 1,232
----------- ------------ ------------- ------------ ------------
Cash and cash investments, end of year $ 3,759 $ 1,178 $ 22,708 $ - $ 27,645
=========== ============ ============= ============ ============
15. BUSINESS SEGMENT INFORMATION:
The Company reports its operating results in five segments: Canandaigua
Wine (branded popular premium wine and brandy, and other, primarily grape juice
concentrate); Barton (primarily beer and spirits); Matthew Clark (branded wine,
cider and bottled water, and wholesale wine, cider, spirits, beer and soft
drinks); Franciscan (primarily branded super-premium and ultra-premium wine) and
Corporate Operations and Other (primarily corporate related items). Segment
selection was based upon internal organizational structure, the way in which
these operations are managed and their performance evaluated by management and
the Company's Board of Directors, the availability of separate financial
results, and materiality considerations. The accounting policies of the segments
are the same as those described in Note 1 - Summary of Significant Accounting
Policies. The Company evaluates performance based on operating profits of the
respective business units.
- 65 -
Segment information is as follows:
For the Years Ended
--------------------------------------------
February 28, February 29, February 28,
2001 2000 1999
------------ ------------ ------------
(in thousands)
Canandaigua Wine:
- -----------------
Net sales:
Branded:
External customers $ 603,948 $ 623,796 $ 598,782
Intersegment 6,451 5,524 -
------------ ------------ ------------
Total Branded 610,399 629,320 598,782
------------ ------------ ------------
Other:
External customers 61,480 81,442 70,711
Intersegment 16,562 1,146 -
------------ ------------ ------------
Total Other 78,042 82,588 70,711
------------ ------------ ------------
Net sales $ 688,441 $ 711,908 $ 669,493
Operating income $ 50,789 $ 46,778 $ 46,283
Long-lived assets $ 189,393 $ 192,828 $ 191,762
Total assets $ 644,697 $ 639,687 $ 650,578
Capital expenditures $ 17,940 $ 20,213 $ 25,275
Depreciation and amortization $ 22,952 $ 20,828 $ 20,838
Barton:
- -------
Net sales:
Beer $ 659,371 $ 570,380 $ 478,611
Spirits 285,743 267,762 185,938
------------ ------------ ------------
Net sales $ 945,114 $ 838,142 $ 664,549
Operating income $ 167,680 $ 142,931 $ 102,624
Long-lived assets $ 76,777 $ 78,876 $ 50,221
Total assets $ 724,511 $ 684,228 $ 478,580
Capital expenditures $ 6,589 $ 7,218 $ 3,269
Depreciation and amortization $ 16,069 $ 14,452 $ 10,765
Matthew Clark:
- --------------
Net sales:
Branded:
External customers $ 285,717 $ 313,027 $ 64,879
Intersegment 1,193 75 -
------------ ------------ ------------
Total Branded 286,910 313,102 64,879
Wholesale 404,209 416,644 93,881
------------ ------------ ------------
Net sales $ 691,119 $ 729,746 $ 158,760
Operating income $ 48,961 $ 48,473 $ 8,998
Long-lived assets $ 145,794 $ 158,119 $ 169,693
Total assets $ 583,203 $ 636,807 $ 631,313
Capital expenditures $ 15,562 $ 17,949 $ 10,444
Depreciation and amortization $ 17,322 $ 20,238 $ 4,836
Franciscan:
- -----------
Net sales:
External customers $ 92,898 $ 62,046 $ -
Intersegment 217 73 -
------------ ------------ ------------
Net sales $ 93,115 $ 62,119 $ -
Operating income $ 24,495 $ 12,708 $ -
Long-lived assets $ 130,375 $ 106,956 $ -
Total assets $ 394,740 $ 357,999 $ -
Capital expenditures $ 27,780 $ 10,741 $ -
Depreciation and amortization $ 10,296 $ 6,028 $ -
- 66 -
For the Years Ended
--------------------------------------------
February 28, February 29, February 28,
2001 2000 1999
------------ ------------ ------------
(in thousands)
Corporate Operations and Other:
- -------------------------------
Net sales $ 3,319 $ 5,372 $ 4,541
Operating loss $ (21,057) $ (15,849) $ (12,013)
Long-lived assets $ 6,275 $ 6,192 $ 17,127
Total assets $ 165,018 $ 30,070 $ 33,305
Capital expenditures $ 346 $ 1,626 $ 10,869
Depreciation and amortization $ 3,744 $ 3,177 $ 2,151
Intersegment eliminations:
- --------------------------
Net sales $ (24,423) $ (6,818) $ -
Consolidated:
- -------------
Net sales $ 2,396,685 $ 2,340,469 $ 1,497,343
Operating income $ 270,868 $ 235,041 $ 145,892
Long-lived assets $ 548,614 $ 542,971 $ 428,803
Total assets $ 2,512,169 $ 2,348,791 $ 1,793,776
Capital expenditures $ 68,217 $ 57,747 $ 49,857
Depreciation and amortization $ 70,383 $ 64,723 $ 38,590
The Company's areas of operations are principally in the United States.
Operations outside the United States consist of Matthew Clark's operations,
which are primarily in the United Kingdom. No other single foreign country or
geographic area is significant to the consolidated operations.
16. NONRECURRING CHARGES:
During Fiscal 2000, the Company incurred nonrecurring charges of $5.5
million related to the closure of a cider production facility within the Matthew
Clark operating segment in the United Kingdom ($2.9 million) and to a management
reorganization within the Canandaigua Wine operating segment ($2.6 million).
During Fiscal 1999, the Company incurred nonrecurring charges of $2.6 million
also related to the closure of the aforementioned Matthew Clark cider production
facility.
17. ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. SFAS No. 133 requires that every
derivative be recorded as either an asset or liability in the balance sheet and
measured at its fair value. SFAS No. 133 also requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting.
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137 ("SFAS No. 137"), "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
FASB Statement No. 133." SFAS No. 137 delays the effective date of SFAS No. 133
for one year. With the issuance of SFAS No. 137, the Company is required to
adopt SFAS No. 133 on a prospective basis for interim periods and fiscal years
beginning March 1, 2001.
- 67 -
In June 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 138 ("SFAS No. 138"), "Accounting for Certain
Derivative Instruments and Certain Hedging Activities--an amendment of FASB
Statement No. 133." SFAS No. 138 amends the accounting and reporting standards
of SFAS No. 133 for certain derivative instruments and certain hedging
activities. The Company is required to adopt SFAS No. 138 concurrently with SFAS
No. 133. The Company believes the effect of the adoption of these statements on
its financial statements will not be material based on the Company's current
risk management strategies.
16. BUSINESS SEGMENT INFORMATION:In May 2000, the Emerging Issues Task Force ("EITF") issued EITF Issue No.
00-14 ("EITF No. 00-14"), "Accounting for Certain Sales Incentives," which was
subsequently amended in April 2001. EITF No. 00-14 addresses the recognition,
measurement and income statement classification of certain sales incentives.
EITF No. 00-14 requires that sales incentives, including coupons, rebate offers,
and free product offers, given concurrently with a single exchange transaction
be recognized when incurred and reported as a reduction of revenue. The Company
currently reports these costs in selling, general and administrative expenses.
The Company is required to adopt EITF 00-14 in its financial statements
beginning March 1, 2002. Upon adoption of EITF 00-14, financial statements for
prior periods presented for comparative purposes are to be reclassified to
comply with the requirements of EITF 00-14. The Company believes the impact of
EITF 00-14 on its financial statements will result in a material
reclassification that will decrease previously reported net sales and decrease
previously reported selling, general and administrative expenses, but will have
no effect on operating resultsincome or net income. The Company has not yet determined
the amount of the reclassification.
18. SUBSEQUENT EVENTS:
ACQUISITIONS -
On March 5, 2001, in five segments: Canandaigua Wine
(branded popularly-pricedan asset acquisition, the Company acquired several
well-known premium wine brands, including Vendange, Nathanson Creek, Heritage,
and brandy,Talus, working capital (primarily inventories), two wineries in California,
and other primarily grape juice
concentrate); Barton (primarily beerrelated assets from Sebastiani Vineyards, Inc. and spirits); Matthew Clark (branded wine,
cider and bottled water, and wholesale wine, cider, spirits, beer and soft
drinks); Franciscan (primarily branded super-premium and ultra-premium wine) and
Corporate Operations and Other (primarily corporate related items)Tuolomne River
Vintners Group (the "Turner Road Vintners Assets"). Segment
selection was based upon internal organizational structure, the way in which
these operations are managed and their performance evaluated by management and
the Company's Board of Directors, the availability of separate financial
results, and materiality considerations. The accounting policiespurchase price of the
segments
areTurner Road Vintners Assets, including assumption of indebtedness, was $289.7
million. The acquisition was financed by the same as those describedproceeds from the sale of the
February 2001 Senior Notes and revolving loan borrowings under the senior credit
facility.
On March 26, 2001, in an asset acquisition, the Company acquired certain
wine brands, wineries, working capital (primarily inventories), and other
related assets from Corus Brands, Inc. (the "Corus Assets"). In this
acquisition, the Company acquired several well-known premium wine brands
primarily sold in the summarynorthwestern United States, including Covey Run, Columbia,
Ste. Chapelle and Alice White. The purchase price of the Corus assets, including
assumption of indebtedness, was $52.0 million plus an earn-out over six years
based on the performance of the brands. In connection with the transaction, the
Company also entered into long-term grape supply agreements with affiliates of
Corus Brands, Inc. covering more than 1,000 acres of Washington and Idaho
vineyards. The acquisition was financed with revolving loan borrowings under the
senior credit facility.
On April 10, 2001, the Company and Ravenswood Winery, Inc. ("Ravenswood")
announced that they entered into a merger agreement under which the Company will
acquire Ravenswood, a leading premium wine producer based in Sonoma, California.
Under the terms of the merger agreement, the Company will pay $29.50 in cash for
each outstanding share of Ravenswood, or approximately $148 million, and assume
net debt, which the Company does not expect to be significant accounting
policies.at the time of
closing. The transaction is subject to satisfaction of customary closing
conditions and is expected to close in late June or early July 2001. The Company
evaluates performance based on operating profitscannot guarantee, however, that this transaction will be completed
- 68 -
upon the agreed upon terms, or at all. The acquisition is expected to be
financed with borrowings under the senior credit facility.
EQUITY OFFERING -
During March, 2001, the Company completed a public offering of 4,370,000
shares of its Class A Common Stock resulting in net proceeds to the Company,
after deducting underwriting discounts and expenses, of $139.4 million. The net
proceeds were used to repay revolving loan borrowings under the senior credit
facility of which a portion was incurred to partially finance the acquisition of
the respective business units.
Segment information is as follows:
For the Year Ended
February 29, For the Years Ended February 28,
------------------ --------------------------------
2000 1999 1998
------------------ ------------- -------------
(in thousands)
CANANDAIGUA WINE:
- -----------------
Net sales:
Branded:
External customers $ 623,796 $ 598,782 $ 570,807
Intersegment 5,524 - -
------------------ ------------- -------------
Total Branded 629,320 598,782 570,807
------------------ ------------- -------------
Other:
External customers 81,442 70,711 71,988
Intersegment 1,146 - -
------------------ ------------- -------------
Total Other 82,588 70,711 71,988
------------------ ------------- -------------
Net sales $ 711,908 $ 669,493 $ 642,795
Operating profit $ 46,778 $ 46,283 $ 45,440
Long-lived assets $ 192,828 $ 191,762 $ 185,317
Total assets $ 639,687 $ 650,578 $ 632,636
Capital expenditures $ 20,213 $ 25,275 $ 25,666
Depreciation and amortization $ 20,828 $ 20,838 $ 21,189
BARTON:
- -------
Net sales:
Beer $ 570,380 $ 478,611 $ 376,607
Spirits 267,762 185,938 191,190
------------------ ------------- -------------
Net sales $ 838,142 $ 664,549 $ 567,797
Operating profit $ 142,931 $ 102,624 $ 77,010
Long-lived assets $ 78,876 $ 50,221 $ 51,574
Total assets $ 684,228 $ 478,580 $ 439,317
Capital expenditures $ 7,218 $ 3,269 $ 5,021
Depreciation and amortization $ 14,452 $ 10,765 $ 10,455
For the Year Ended
February 29, For the Years Ended February 28,
------------------ --------------------------------
2000 1999 1998
------------------ ------------ -------------
(in thousands)
MATTHEW CLARK:
- --------------
Net sales:
Branded:
External customers $ 313,027 $ 64,879 $ -
Intersegment 75 - -
------------------ ------------ -------------
Total Branded 313,102 64,879 -
Wholesale 416,644 93,881 -
------------------ ------------ -------------
Net sales $ 729,746 $ 158,760 $ -
Operating profit $ 48,473 $ 8,998 $ -
Long-lived assets $ 158,119 $ 169,693 $ -
Total assets $ 636,807 $ 631,313 $ -
Capital expenditures $ 17,949 $ 10,444 $ -
Depreciation and amortization $ 20,238 $ 4,836 $ -
FRANCISCAN:
- -----------
Net sales:
External customers $ 62,046 $ - $ -
Intersegment 73 - -
------------------ ------------ -------------
Net sales $ 62,119 $ - $ -
Operating profit $ 12,708 $ - $ -
Long-lived assets $ 106,956 $ - $ -
Total assets $ 357,999 $ - $ -
Capital expenditures $ 10,741 $ - $ -
Depreciation and amortization $ 6,028 $ - $ -
CORPORATE OPERATIONS AND OTHER:
- -------------------------------
Net sales $ 5,372 $ 4,541 $ 2,196
Operating loss $ (15,849) $ (12,013) $ (10,380)
Long-lived assets $ 6,192 $ 17,127 $ 7,144
Total assets $ 30,070 $ 33,305 $ 18,602
Capital expenditures $ 1,626 $ 10,869 $ 516
Depreciation and amortization $ 3,177 $ 2,151 $ 1,517
INTERSEGMENT ELIMINATIONS:
- --------------------------
Net sales $ (6,818) $ - $ -
CONSOLIDATED:
- -------------
Net sales $ 2,340,469 $ 1,497,343 $ 1,212,788
Operating profit $ 235,041 $ 145,892 $ 112,070
Long-lived assets $ 542,971 $ 428,803 $ 244,035
Total assets $ 2,348,791 $ 1,793,776 $ 1,090,555
Capital expenditures $ 57,747 $ 49,857 $ 31,203
Depreciation and amortization $ 64,723 $ 38,590 $ 33,161
The Company's areas of operations are principally in the United States.
Operations outside the United States consist of Matthew Clark's operations,
which are primarily in the United Kingdom. No other single foreign country or
geographic area is significant to the consolidated operations.
17.Turner Road Vintners Assets.
19. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
A summary of selected quarterly financial information is as follows:
QUARTER ENDED
--------------------------------------------------------------------------------------------------------------------
May 31, August 31, November 30, February 28,
Fiscal 2001 2000 2000 2000 2001 Full Year
- ------------------------------------ ----------- ----------- ------------ ------------ -----------
(in thousands, except per share data)
Net sales $ 585,580 $ 637,490 $ 629,577 $ 544,038 $ 2,396,685
Gross profit $ 183,873 $ 200,639 $ 208,053 $ 164,890 $ 757,455
Net income $ 17,902 $ 26,110 $ 34,953 $ 18,377 $ 97,342
Earnings per common share: (1)
Basic $ 0.49 $ 0.71 $ 0.95 $ 0.50 $ 2.65
Diluted $ 0.48 $ 0.70 $ 0.93 $ 0.48 $ 2.60
QUARTER ENDED
---------------------------------------------------------
May 31, August 31, November 30, February 29,
Fiscal 2000 1999 1999 1999 2000 Full Year
- ------------------------------------------ ---------- ---------------------------------------------- ----------- ----------- ------------ ------------ -----------
(in thousands, except per share data)
Net sales $ 530,169 $ 621,580 $ 661,520652,969 $ 527,200535,751 $ 2,340,469
Gross profit $ 156,123 $ 189,128 $ 209,687 $ 167,522 $ 722,460
Net income $ 10,846 $ 21,101 $ 29,900 $ 15,528 $ 77,375
Earnings per common share: (1)
Basic $ 0.60 $ 1.17 $ 1.65 $ 0.86 $ 4.29
Diluted0.30 $ 0.59 $ 1.140.83 $ 1.600.43 $ 0.842.14
Diluted $ 4.18
QUARTER ENDED
-----------------------------------------------------------
May 31, August 31, November 30, February 28,
Fiscal 1999 1998 1998 1998 1999 Full Year
- ------------------------------------------ ---------- ---------- ------------ ------------ -----------
(in thousands, except per share data)
Net sales0.29 $ 312,9280.57 $ 349,3860.80 $ 375,5860.42 $ 459,443 $ 1,497,343
Gross profit $ 92,061 $ 103,236 $ 115,695 $ 137,042 $ 448,034
Income before extraordinary item $ 13,099 $ 16,731 $ 20,161 $ 11,918 $ 61,909
Extraordinary item, net of income taxes (2) $ - $ - $ - $ (11,437) $ (11,437)
Net income $ 13,099 $ 16,731 $ 20,161 $ 481 $ 50,472
Earnings per common share: (1)
Basic:
Income before extraordinary item $ 0.70 $ 0.90 $ 1.13 $ 0.67 $ 3.38
Extraordinary item - - - (0.64) (0.62)
---------- ---------- ------------ ------------ -----------
Earnings per common share - basic $ 0.70 $ 0.90 $ 1.13 $ 0.03 $ 2.76
========== ========== ============ ============ ===========
Diluted:
Income before extraordinary item $ 0.68 $ 0.88 $ 1.10 $ 0.65 $ 3.30
Extraordinary item - - - (0.62) (0.61)
----------- ---------- ------------ ------------ -----------
Earnings per common share - diluted $ 0.68 $ 0.88 $ 1.10 $ 0.03 $ 2.69
=========== ========== ============ ============ ===========2.09
(1) The sum of the quarterly earnings per common share in fiscalFiscal 2001 and
Fiscal 2000 and
fiscal 1999 may not equal the total computed for the respective years as
the earnings per common share are computed independently for each of the
quarters presented and for the full year.
(2) Represents fees related to the replacement of the prior senior credit
facility, including extinguishment of the term loan.
18. NONRECURRING CHARGES:
During fiscal 2000, the Company incurred nonrecurring charges of $5.5 million
related to the closure of a cider production facility within the Matthew Clark
operating segment in the U.K. ($2.9 million) and to a management reorganization
within the Canandaigua Wine operating segment ($2.6 million). During fiscal
1999, the Company incurred nonrecurring charges of $2.6 million also related to
the closure of the aforementioned Matthew Clark cider production facility.
19. SUBSEQUENT EVENT:
On May 15, 2000, the Company issued (pound)80.0 million (approximately $120.4
million) aggregate principal amount of 8 1/2% Series C Senior Notes due November
2009 at an issuance price of (pound)79.6 million (approximately $119.8 million,
net of $0.6 million unamortized discount, with an effective rate of 8.6%)
("Sterling Series C Senior Notes"). The net proceeds of the offering
((pound)78.8 million, or approximately $118.6 million) were used to repay a
portion of the Company's British pound sterling borrowings under its senior
credit facility. After this repayment, the required quarterly repayments of the
Tranche II Term Loan facility were revised to (pound)0.2 million ($0.3 million)
for the remaining three quarters in 2000, (pound)0.4 million ($0.6 million) for
each quarter in 2001 and 2002, (pound)0.5 million ($0.8 million) for each
quarter in 2003, and (pound)8.5 million ($12.8 million) for each quarter in
2004. (The foregoing U.S. dollar equivalents are as of May 15, 2000.) Interest
on the Sterling Series C Senior Notes is payable semiannually on May 15 and
November 15 of each year, beginning on November 15, 2000. The Sterling Series C
Senior Notes are redeemable at the option of the Company, in whole or in part,
at any time. The Sterling Series C Senior Notes are unsecured senior obligations
and rank equally in right of payment to all existing and future unsecured senior
indebtedness of the Company. The Sterling Series C Senior Notes are guaranteed,
on a senior basis, by certain of the Company's significant operating
subsidiaries.
- 69 -
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- -----------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------- --------------------------------------------------
The information required by this Item (except for the information regarding
executive officers required by Item 401 of Regulation S-K which is included in
Part I hereof in accordance with General Instruction G(3)) is incorporated
herein by reference to the Company's proxy statement to be issued in connection
with the Annual Meeting of Stockholders of the Company to be held on July 18,
2000,17,
2001, under those sections of the proxy statement titled "Election of Directors"
and "Section 16(a) Beneficial Ownership Reporting Compliance", which proxy
statement will be filed within 120 days after the end of the Company's fiscal
year.
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
The information required by this Item is incorporated herein by reference
to the Company's proxy statement to be issued in connection with the Annual
Meeting of Stockholders of the Company to be held on July 18, 2000,17, 2001, under that
section of the proxy statement titled "Executive Compensation" and that caption
titled "Director Compensation" under "Election of Directors", which proxy
statement will be filed within 120 days after the end of the Company's fiscal
year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- --------------------------------------------------------------
The information required by this Item is incorporated herein by reference
to the Company's proxy statement to be issued in connection with the Annual
Meeting of Stockholders of the Company to be held on July 18, 2000,17, 2001, under those
sections of the proxy statement titled "Beneficial Ownership" and "Stock
Ownership of Management", which proxy statement will be filed within 120 days
after the end of the Company's fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
The information required by this Item is incorporated herein by reference
to the Company's proxy statement to be issued in connection with the Annual
Meeting of Stockholders of the Company to be held on July 18, 2000,17, 2001, under that
section of the proxy statement titled "Executive Compensation", which proxy
statement will be filed within 120 days after the end of the Company's fiscal
year.
- 70 -
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- -------- ----------------------------------------------------------------
(a) 1. Financial Statements
The following consolidated financial statements of the Company are
submitted herewith:
Report of Independent Public Accountants
Consolidated Balance Sheets - February 29, 2000,28, 2001, and February 28,
199929,
2000
Consolidated Statements of Income for the years ended February
28, 2001, February 29, 2000, and February 28, 1999 and February 28, 1998
Consolidated Statements of Changes in Stockholders' Equity for
the years ended February 28, 2001, February 29, 2000, and
February 28, 1999 and
February 28, 1998
Consolidated Statements of Cash Flows for the years ended
February 28, 2001, February 29, 2000, and February 28, 1999 and February 28, 1998
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
The following consolidated financial information is submitted
herewith:
Selected Quarterly Financial Information (unaudited)
All other schedules are not submitted because they are not applicable or not
required under Regulation S-X or because the required information is included in
the financial statements or notes thereto.
Individual financial statements of the Registrant have been omitted because the
Registrant is primarily an operating company and no subsidiary included in the
consolidated financial statements has minority equity interests and/or
noncurrent indebtedness, not guaranteed by the Registrant, in excess of 5% of
total consolidated assets.
3. Exhibits required to be filed by Item 601 of Regulation S-K
For the exhibits that are filed herewith or incorporated herein by
reference, see the Index to Exhibits located on Page 8195 of this
Report.
(b) Reports on Form 8-K
The following ReportReports on Form 8-K waswere filed by the Company with the
Securities and Exchange Commission during the fourth quarter of the
fiscal year ended February 29, 2000:28, 2001:
(i) Form 8-K dated January 4, 2000.2001. This Form 8-K reported
information under Item 5 (Other Events) and included (i) the
Company's Condensed Consolidated Balance Sheets as of November
30, 19992000 (unaudited) and February 28, 199929, 2000 (audited); (ii) the
Company's Condensed Consolidated Statements of Income for the
three months ended November 30, 19992000 (unaudited) and November 30,
19981999 (unaudited); and (iii) the
- 71 -
Company's Condensed Consolidated Statements of Income for the
nine months ended November 30, 19992000 (unaudited) and November 30,
19981999 (unaudited).
(ii) Form 8-K dated February 1, 2001. This Form 8-K reported
information under Item 5 (Other Events).
(iii) Form 8-K dated February 12, 2001. This Form 8-K reported
information under Item 5 (Other Events).
(iv) Form 8-K dated February 14, 2001. This Form 8-K reported
information under Item 5 (Other Events).
(v) Form 8-K dated February 21, 2001. This Form 8-K reported
information under Item 5 (Other Events).
- 72 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 CANANDAIGUA29, 2001 CONSTELLATION BRANDS, INC.
By: /s/ Richard Sands
---------------------------------
Richard Sands, Chairman of the
Board, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Richard Sands /s/ Thomas S. Summer
- ------------------------------------------------------------------- ----------------------------------
Richard Sands, Chairman of the Thomas S. Summer, Executive Vice
Board, President, and Chief President and Chief Financial
Executive Officer (Principal Officer (Principal Financial
Executive Officer) Officer and Principal Accounting
Dated: May 30, 200029, 2001 Officer)
Dated: May 30, 200029, 2001
/s/ Robert Sands /s/ George Bresler
- ------------------------------------------------------------------- ----------------------------------
Robert Sands, Director George Bresler, Director
Dated: May 30, 200029, 2001 Dated: May 30, 200029, 2001
/s/ James A. Locke /s/ Thomas C. McDermott
- ------------------------------------------------------------------- ----------------------------------
James A. Locke, III, Director Thomas C. McDermott, Director
Dated: May 30, 200029, 2001 Dated: May 30, 200029, 2001
/s/ Paul L. Smith /s/ Jeananne K. Hauswald
- --------------------------------- ----------------------------------
Paul L. Smith, Director Jeananne K. Hauswald, Director
Dated: May 30, 200029, 2001 Dated: May 29, 2001
- 73 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 BATAVIA WINE CELLARS, INC.29, 2001 Batavia Wine Cellars, Inc.
By: /s/ Ned Cooper
----------------------------------
Ned Cooper, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 200029, 2001 /s/ Ned Cooper
----------------------------------
Ned Cooper, President
(Principal Executive Officer)
Dated: May 30, 200029, 2001 /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 200029, 2001 /s/ Richard Sands
----------------------------------
Richard Sands, Director
Dated: May 30, 200029, 2001 /s/ Robert Sands
----------------------------------
Robert Sands, Director
- 74 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 CANANDAIGUA WINE COMPANY, INC.29, 2001 Canandaigua Wine Company, Inc.
By: /s/ Jon Moramarco
----------------------------------
Jon Moramarco, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 200029, 2001 /s/ Jon Moramarco
----------------------------------
Jon Moramarco, President and Chief
Executive Officer (Principal
Executive Officer)
Dated: May 30, 200029, 2001 /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 200029, 2001 /s/ Richard Sands
----------------------------------
Richard Sands, Director
Dated: May 30, 200029, 2001 /s/ Robert Sands
----------------------------------
Robert Sands, Director
- 75 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 CANANDAIGUA EUROPE LIMITED29, 2001 Canandaigua Europe Limited
By: /s/ Douglas Kahle
----------------------------------
Douglas Kahle, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 200029, 2001 /s/ Douglas Kahle
----------------------------------
Douglas Kahle, President
(Principal Executive Officer)
Dated: May 30, 200029, 2001 /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 200029, 2001 /s/ Richard Sands
----------------------------------
Richard Sands, Director
- 76 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 CANANDAIGUA LIMITED29, 2001 Canandaigua Limited
By: /s/ Robert Sands
-------------------------------------------------------------------
Robert Sands, Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 200029, 2001 /s/ Robert Sands
-------------------------------------------------------------------
Robert Sands, Chief Executive
Officer and Director (Principal
Executive Officer)
Dated: May 30, 200029, 2001 /s/ Thomas S. Summer
-------------------------------------------------------------------
Thomas S. Summer, Finance Director
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 200029, 2001 /s/ Peter Aikens
-------------------------------------------------------------------
Peter Aikens, Director
Dated: May 30, 200029, 2001 /s/ Anne Colquhoun
-------------------------------------------------------------------
Anne Colquhoun, Director
Dated: May 30, 200029, 2001 /s/ Hugh Etheridge
---------------------------------
Hugh Etheridge,Nigel Hodges
----------------------------------
Nigel Hodges, Director
- 77 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 POLYPHENOLICS, INC.29, 2001 Polyphenolics, Inc.
By: /s/ Howard Jacobson
---------------------------------
Howard Jacobson,Anil Shrikhande
----------------------------------
Anil Shrikhande, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 200029, 2001 /s/ Howard Jacobson
---------------------------------
Howard Jacobson,Anil Shrikhande
----------------------------------
Anil Shrikhande, President and
Director
(Principal Executive Officer)
Dated: May 30, 200029, 2001 /s/ Thomas S. Summer
-------------------------------------------------------------------
Thomas S. Summer, Vice President,
Treasurer and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 29, 2001 /s/ Ronald C. Fondiller
----------------------------------
Ronald C. Fondiller, Director
- 78 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 ROBERTS TRADING CORP.29, 2001 Roberts Trading Corp.
By: /s/ Thomas S. Summer
-------------------------------------------------------------------
Thomas S. Summer, President and
Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 200029, 2001 /s/ Thomas S. Summer
-------------------------------------------------------------------
Thomas S. Summer, President and
Treasurer (Principal Executive
Officer, Principal Financial
Officer and Principal Accounting
Officer)
Dated: May 30, 200029, 2001 /s/ Richard Sands
-------------------------------------------------------------------
Richard Sands, Director
Dated: May 30, 200029, 2001 /s/ Robert Sands
-------------------------------------------------------------------
Robert Sands, Director
- 79 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 CANANDAIGUA29, 2001 Canandaigua B.V.
By: /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Authorized
RepresentativeG.A.L.R. Diepenhorst
----------------------------------
G.A.L.R. Diepenhorst, Managing
Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 200029, 2001 /s/ G.A.L.R. Diepenhorst
-------------------------------------------------------------------
G.A.L.R. Diepenhorst, Managing
Director (Principal Executive
Officer)
Dated: May 30, 200029, 2001 /s/ E.F. Switters
---------------------------------
E.F. Switters, Managing DirectorThomas S. Summer
----------------------------------
Thomas S. Summer, Chief Financial
Officer (Principal Financial
Officer and Principal Accounting
Officer)
Dated: May 30, 200029, 2001 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Authorized
Representative in the United
StatesE.F. Switters
----------------------------------
E.F. Switters, Managing Director
- 80 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 FRANCISCAN VINEYARDS, INC.29, 2001 Franciscan Vineyards, Inc.
By: /s/ Agustin Francisco Huneeus
----------------------------------
Agustin Francisco Huneeus,
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 29, 2001 /s/ Agustin Francisco Huneeus
----------------------------------
Agustin Francisco Huneeus,
President (Principal Executive
Officer)
Dated: May 29, 2001 /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
Dated: May 29, 2001 /s/ Richard Sands
----------------------------------
Richard Sands, Director
Dated: May 29, 2001 /s/ Robert Sands
----------------------------------
Robert Sands, Director
- 81 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 2001 Allberry, Inc.
By: /s/ Agustin Francisco Huneeus
----------------------------------
Agustin Francisco Huneeus,
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 29, 2001 /s/ Agustin Francisco Huneeus
----------------------------------
Agustin Francisco Huneeus,
President (Principal Executive
Officer)
Dated: May 29, 2001 /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
Dated: May 29, 2001 /s/ Richard Sands
----------------------------------
Richard Sands, Director
Dated: May 29, 2001 /s/ Robert Sands
----------------------------------
Robert Sands, Director
- 82 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 2001 Cloud Peak Corporation
By: /s/ Agustin Francisco Huneeus
----------------------------------
Agustin Francisco Huneeus,
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 29, 2001 /s/ Agustin Francisco Huneeus
----------------------------------
Agustin Francisco Huneeus,
President (Principal Executive
Officer)
Dated: May 29, 2001 /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
Dated: May 29, 2001 /s/ Richard Sands
----------------------------------
Richard Sands, Director
Dated: May 29, 2001 /s/ Robert Sands
----------------------------------
Robert Sands, Director
- 83 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 2001 M.J. Lewis Corp.
By: /s/ Agustin Francisco Huneeus
----------------------------------
Agustin Francisco Huneeus,
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 29, 2001 /s/ Agustin Francisco Huneeus
----------------------------------
Agustin Francisco Huneeus,
President (Principal Executive
Officer)
Dated: May 29, 2001 /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
Dated: May 29, 2001 /s/ Richard Sands
----------------------------------
Richard Sands, Director
Dated: May 29, 2001 /s/ Robert Sands
----------------------------------
Robert Sands, Director
- 84 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 2001 Mt. Veeder Corporation
By: /s/ Agustin Francisco Huneeus
---------------------------------
Agustin Francisco Huneeus,
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 200029, 2001 /s/ Agustin Francisco Huneeus
-------------------------------------------------------------------
Agustin Francisco Huneeus,
President (Principal Executive
Officer)
Dated: May 30, 200029, 2001 /s/ Thomas S. Summer
-------------------------------------------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
Dated: May 30, 200029, 2001 /s/ Richard Sands
-------------------------------------------------------------------
Richard Sands, Director
Dated: May 30, 200029, 2001 /s/ Robert Sands
-------------------------------------------------------------------
Robert Sands, Director
- 85 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 ALLBERRY, INC.
By: /s/ Agustin Francisco Huneeus
---------------------------------
Agustin Francisco Huneeus,
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Agustin Francisco Huneeus
---------------------------------
Agustin Francisco Huneeus,
President (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 30, 2000 /s/ Richard Sands
---------------------------------
Richard Sands, Director
Dated: May 30, 2000 /s/ Robert Sands
---------------------------------
Robert Sands, Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 CLOUD PEAK CORPORATION
By: /s/ Agustin Francisco Huneeus
---------------------------------
Agustin Francisco Huneeus,
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Agustin Francisco Huneeus
---------------------------------
Agustin Francisco Huneeus,
President (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 30, 2000 /s/ Richard Sands
---------------------------------
Richard Sands, Director
Dated: May 30, 2000 /s/ Robert Sands
---------------------------------
Robert Sands, Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 M.J. LEWIS CORP.
By: /s/ Agustin Francisco Huneeus
---------------------------------
Agustin Francisco Huneeus,
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 s/ Agustin Francisco Huneeus
--------------------------------
Agustin Francisco Huneeus,
President (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 30, 2000 /s/ Richard Sands
---------------------------------
Richard Sands, Director
Dated: May 30, 2000 /s/ Robert Sands
---------------------------------
Robert Sands, Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 MT. VEEDER CORPORATION
By: /s/ Agustin Francisco Huneeus
---------------------------------
Agustin Francisco Huneeus,
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Agustin Francisco Huneeus
---------------------------------
Agustin Francisco Huneeus,
President (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 30, 2000 /s/ Richard Sands
---------------------------------
Richard Sands, Director
Dated: May 30, 2000 /s/ Robert Sands
---------------------------------
Robert Sands, Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 BARTON INCORPORATED29, 2001 Barton Incorporated
By: /s/ Alexander L. Berk
-------------------------------------------------------------------
Alexander L. Berk, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 200029, 2001 /s/ Alexander L. Berk
-------------------------------------------------------------------
Alexander L. Berk, President,
Chief Executive Officer and
Director (Principal Executive
Officer)
Dated: May 30, 200029, 2001 /s/ Thomas S. Summer
-------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 200029, 2001 /s/ Troy J. Christensen
-------------------------------------------------------------------
Troy J. Christensen, Director
Dated: May 30, 200029, 2001 /s/ Edward L. Golden
-------------------------------------------------------------------
Edward L. Golden, Director
Dated: May 30, 200029, 2001 /s/ William F. Hackett
-------------------------------------------------------------------
William F. Hackett, Director
Dated: May 30, 200029, 2001 /s/ Elizabeth Kutyla
-------------------------------------------------------------------
Elizabeth Kutyla, Director
Dated: May 30, 200029, 2001 /s/ Richard Sands
-------------------------------------------------------------------
Richard Sands, Director
Dated: May 30, 200029, 2001 /s/ Robert Sands
-------------------------------------------------------------------
Robert Sands, Director
- 86 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 BARTON BRANDS, LTD.29, 2001 Barton Brands, Ltd.
By: /s/ Edward L. Golden
-------------------------------------------------------------------
Edward L. Golden, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 200029, 2001 /s/ Edward L. Golden
-------------------------------------------------------------------
Edward L. Golden, President and
Director (Principal Executive
Officer)
Dated: May 30, 200029, 2001 /s/ Thomas S. Summer
-------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 200029, 2001 /s/ Alexander L. Berk
-------------------------------------------------------------------
Alexander L. Berk, Director
Dated: May 30, 200029, 2001 /s/ Troy J. Christensen
-------------------------------------------------------------------
Troy J. Christensen, Director
Dated: May 30, 200029, 2001 /s/ Elizabeth Kutyla
-------------------------------------------------------------------
Elizabeth Kutyla, Director
- 87 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 BARTON BEERS, LTD.29, 2001 Barton Beers, Ltd.
By: /s/ Richard Sands
-------------------------------------------------------------------
Richard Sands, Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 200029, 2001 /s/ Richard Sands
-------------------------------------------------------------------
Richard Sands, Chief Executive
Officer and Director (Principal
Executive Officer)
Dated: May 30, 200029, 2001 /s/ Thomas S.Summer
---------------------------------S. Summer
----------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 200029, 2001 /s/ Alexander L. Berk
-------------------------------------------------------------------
Alexander L. Berk, Director
Dated: May 30, 200029, 2001 /s/ Troy J. Christensen
-------------------------------------------------------------------
Troy J. Christensen, Director
Dated: May 30, 200029, 2001 /s/ William F. Hackett
-------------------------------------------------------------------
William F. Hackett, Director
Dated: May 30, 200029, 2001 /s/ Elizabeth Kutyla
-------------------------------------------------------------------
Elizabeth Kutyla, Director
- 88 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 BARTON BRANDS OF CALIFORNIA, INC.29, 2001 Barton Brands of California, Inc.
By: /s/ Alexander L. Berk
-------------------------------------------------------------------
Alexander L. Berk, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 200029, 2001 /s/ Alexander L. Berk
-------------------------------------------------------------------
Alexander L. Berk, President and
Director (Principal Executive
Officer)
Dated: May 30, 200029, 2001 /s/ Thomas S. Summer
-------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 200029, 2001 /s/ Troy J. Christensen
-------------------------------------------------------------------
Troy J. Christensen, Director
Dated: May 30, 200029, 2001 /s/ Edward L. Golden
-------------------------------------------------------------------
Edward L. Golden, Director
Dated: May 30, 200029, 2001 /s/ Elizabeth Kutyla
-------------------------------------------------------------------
Elizabeth Kutyla, Director
- 89 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 BARTON BRANDS OF GEORGIA, INC.29, 2001 Barton Brands of Georgia, Inc.
By: /s/ Alexander L. Berk
-------------------------------------------------------------------
Alexander L. Berk, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 200029, 2001 /s/ Alexander L. Berk
-------------------------------------------------------------------
Alexander L. Berk, President and
Director (Principal Executive
Officer)
Dated: May 30, 200029, 2001 /s/ Thomas S. Summer
-------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 200029, 2001 /s/ Troy J. Christensen
-------------------------------------------------------------------
Troy J. Christensen, Director
Dated: May 30, 200029, 2001 /s/ Edward L. Golden
-------------------------------------------------------------------
Edward L. Golden, Director
Dated: May 30, 200029, 2001 /s/ Elizabeth Kutyla
-------------------------------------------------------------------
Elizabeth Kutyla, Director
- 90 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 BARTON CANADA, LTD.29, 2001 Barton Canada, Ltd.
By: /s/ Alexander L. Berk
-------------------------------------------------------------------
Alexander L. Berk, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 200029, 2001 /s/ Alexander L. Berk
-------------------------------------------------------------------
Alexander L. Berk, President and
Director (Principal Executive
Officer)
Dated: May 30, 200029, 2001 /s/ Thomas S. Summer
-------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 200029, 2001 /s/ Troy J. Christensen
-------------------------------------------------------------------
Troy J. Christensen, Director
Dated: May 30, 200029, 2001 /s/ Edward L. Golden
-------------------------------------------------------------------
Edward L. Golden, Director
Dated: May 30, 200029, 2001 /s/ Elizabeth Kutyla
-------------------------------------------------------------------
Elizabeth Kutyla, Director
- 91 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 BARTON DISTILLERS IMPORT CORP.29, 2001 Barton Distillers Import Corp.
By: /s/ Alexander L. Berk
-------------------------------------------------------------------
Alexander L. Berk, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 200029, 2001 /s/ Alexander L. Berk
-------------------------------------------------------------------
Alexander L. Berk, President and
Director (Principal Executive
Officer)
Dated: May 30, 200029, 2001 /s/ Thomas S. Summer
-------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 200029, 2001 /s/ Troy J. Christensen
-------------------------------------------------------------------
Troy J. Christensen, Director
Dated: May 30, 200029, 2001 /s/ Edward L. Golden
-------------------------------------------------------------------
Edward L. Golden, Director
Dated: May 30, 200029, 2001 /s/ Elizabeth Kutyla
-------------------------------------------------------------------
Elizabeth Kutyla, Director
- 92 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 BARTON FINANCIAL CORPORATION29, 2001 Barton Financial Corporation
By: /s/ Troy J. Christensen
-------------------------------------------------------------------
Troy J. Christensen, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 200029, 2001 /s/ Troy J. Christensen
-------------------------------------------------------------------
Troy J. Christensen, President,
Secretary and Director (Principal
Executive Officer)
Dated: May 30, 200029, 2001 /s/ Thomas S. Summer
-------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 200029, 2001 /s/ Charles T. Schlau
---------------------------------
Charles T. Schlau,Michael A. Napientek
----------------------------------
Michael A. Napientek, Director
- 93 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 STEVENS POINT BEVERAGE CO.29, 2001 Stevens Point Beverage Co.
By: /s/ James P. Ryan
-------------------------------------------------------------------
James P. Ryan, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 200029, 2001 /s/ James P. Ryan
-------------------------------------------------------------------
James P. Ryan, President, Chief
Executive Officer and Director
(Principal Executive Officer)
Dated: May 30, 200029, 2001 /s/ Thomas S. Summer
-------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 200029, 2001 /s/ Alexander L. Berk
-------------------------------------------------------------------
Alexander L. Berk, Director
Dated: May 30, 200029, 2001 /s/ Troy J. Christensen
-------------------------------------------------------------------
Troy J. Christensen, Director
Dated: May 30, 200029, 2001 /s/ William F. Hackett
-------------------------------------------------------------------
William F. Hackett, Director
Dated: May 30, 200029, 2001 /s/ Elizabeth Kutyla
-------------------------------------------------------------------
Elizabeth Kutyla, Director
- 94 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 MONARCH IMPORT COMPANY29, 2001 Monarch Import Company
By: /s/ James P. Ryan
-------------------------------------------------------------------
James P. Ryan, Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 200029, 2001 /s/ James P. Ryan
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James P. Ryan, Chief Executive
Officer (Principal Executive
Officer)
Dated: May 30, 200029, 2001 /s/ Thomas S. Summer
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Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 200029, 2001 /s/ Alexander L. Berk
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Alexander L. Berk, Director
Dated: May 30, 200029, 2001 /s/ Troy J. Christensen
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Troy J. Christensen, Director
Dated: May 30, 200029, 2001 /s/ William F. Hackett
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William F. Hackett, Director
Dated: May 30, 200029, 2001 /s/ Elizabeth Kutyla
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Elizabeth Kutyla, Director
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INDEX TO EXHIBITS
Exhibit No.
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2.1 Asset Purchase Agreement among Barton Incorporated (a
wholly-owned subsidiary of the Company), United Distillers
Glenmore, Inc., Schenley Industries, Inc., Medley Distilling
Company, United Distillers Manufacturing, Inc., and The Viking
Distillery, Inc., dated August 29, 1995 (filed as Exhibit 2(a)
to the Company's Current Report on Form 8-K, dated August 29,
1995 and incorporated herein by reference).
2.2 Recommended Cash Offer, by Schroders on behalf of Canandaigua
Limited, a wholly-owned subsidiary of the Company, to acquire
Matthew Clark plc (filed as Exhibit 2.1 to the Company's Current
Report on Form 8-K dated December 1, 1998 and incorporated
herein by reference).
2.32.2 Asset Purchase Agreement dated as of February 21, 1999 by and
among Diageo Inc., UDV Canada Inc., United Distillers Canada
Inc. and the Company (filed as Exhibit 2 to the Company's
Current Report on Form 8-K dated April 9, 1999 and incorporated
herein by reference).
2.42.3 Stock Purchase Agreement, dated April 21, 1999, between
Franciscan Vineyards, Inc., Agustin Huneeus, Agustin Francisco
Huneeus, Jean-Michel Valette, Heidrun Eckes-Chantre Und Kinder
Beteiligungsverwaltung II, GbR, Peter Eugen Eckes Und Kinder
Beteiligungsverwaltung II, GbR, Harald Eckes-Chantre, Christina
Eckes-Chantre, Petra Eckes-Chantre and Canandaigua Brands, Inc.
(now known as Constellation Brands, Inc.) (filed as Exhibit 2.1
to the Company's Current Report on Form 8-K dated June 4, 1999
and incorporated herein by reference).
2.52.4 Stock Purchase Agreement by and between Canandaigua Wine
Company, Inc. (a wholly-owned subsidiary of the Company) and
Moet Hennessy, Inc. dated April 1, 19991,1999 (filed as exhibit 2.3 to
the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended May 31, 1999 and incorporated herein by
reference).
2.5 Purchase Agreement dated as of January 30, 2001, by and among
Sebastiani Vineyards, Inc., Tuolomne River Vintners Group and
Canandaigua Wine Company, Inc. (a wholly-owned subsidiary of the
Company) (including a list briefly identifying the contents of
all omitted schedules thereto) (filed herewith). The Company
will furnish supplementally to the Commission, upon request, a
copy of any omitted schedule.
3.1 Restated Certificate of Incorporation of the Company (filed as
Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended August 31, 19982000 and incorporated herein
by reference).
3.2 Amended and Restated By-Laws of the Company (filed as Exhibit 3.2 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 19982000 and incorporated herein by reference).
4.1 Indenture, with respect to 8 3/4% Senior Subordinated Notes due
2003, dated as of December 27, 1993, among the Company, its
Subsidiaries and The Chase Manhattan Bank (as successor to
Chemical Bank) (filed as Exhibit 4.1 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended November 30,
1993 and incorporated herein by reference).
4.2 First Supplemental Indenture, dated as of August 3, 1994, among
the Company, Canandaigua West, Inc. (a subsidiary of the Company
now known as Canandaigua Wine Company, Inc.) and The Chase
Manhattan Bank (as successor to Chemical Bank) (filed as Exhibit
4.5 to the Company's Registration Statement on Form S-8
(Registration No. 33-56557) and incorporated herein by
reference).
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4.3 Second Supplemental Indenture, dated August 25, 1995, among the
Company, V Acquisition Corp. (a subsidiary of the Company now
known as The Viking Distillery, Inc.) and The Chase Manhattan
Bank (as successor to Chemical Bank) (filed as Exhibit 4.5 to
the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1995 and incorporated herein by reference).
4.4 Third Supplemental Indenture, dated as of December 19, 1997,
among the Company, Canandaigua Europe Limited, Roberts Trading
Corp. and The Chase Manhattan Bank (filed as Exhibit 4.4 to the
Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1998 and incorporated herein by reference).
4.5 Fourth Supplemental Indenture, dated as of October 2, 1998,
among the Company, Polyphenolics, Inc. and The Chase Manhattan
Bank (filed as Exhibit 4.5 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended November 30, 1998 and
incorporated herein by reference).
4.6 Fifth Supplemental Indenture, dated as of December 11, 1998,
among the Company, Canandaigua B.V., Canandaigua Limited and The
Chase Manhattan Bank (filed as Exhibit 4.6 to the Company's
Annual Report on Form 10-K for the fiscal year ended February
28, 1999 and incorporated herein by reference).
4.7 Sixth Supplemental Indenture, dated as of July 28, 1999, among
the Company, Barton Canada, Ltd., Simi Winery, Inc., Franciscan
Vineyards, Inc., Allberry, Inc., M.J. Lewis Corp., Cloud Peak
Corporation, Mt. Veeder Corporation, SCV-EPI Vineyards, Inc.,
and The Chase Manhattan Bank, as Trustee (filed as Exhibit 4.7
to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended August 31, 1999 and incorporated herein by
reference).
4.8 Indenture with respect to the 8 3/4% Series C Senior
Subordinated Notes due 2003, dated as of October 29, 1996, among
the Company, its Subsidiaries and Harris Trust and Savings Bank
(filed as Exhibit 4.2 to the Company's Registration Statement on
Form S-4 (Registration No. 333-17673) and incorporated herein by
reference).
4.9 First Supplemental Indenture, dated as of December 19, 1997,
among the Company, Canandaigua Europe Limited, Roberts Trading
Corp. and Harris Trust and Savings Bank (filed as Exhibit 4.6 to
the Company's Annual Report on Form 10-K for the fiscal year
ended February 28, 1998 and incorporated herein by reference).
4.10 Second Supplemental Indenture, dated as of October 2, 1998,
among the Company, Polyphenolics, Inc. and Harris Trust and
Savings Bank (filed as Exhibit 4.8 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended November 30,
1998 and incorporated herein by reference).
4.11 Third Supplemental Indenture, dated as of December 11, 1998,
among the Company, Canandaigua B.V., Canandaigua Limited and
Harris Trust and Savings Bank (filed as Exhibit 4.10 to the
Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1999 and incorporated herein by reference).
4.12 Fourth Supplemental Indenture, dated as of July 28, 1999, among
the Company, Barton Canada, Ltd., Simi Winery, Inc., Franciscan
Vineyards, Inc., Allberry, Inc., M.J. Lewis Corp., Cloud Peak
Corporation, Mt. Veeder Corporation, SCV-EPI Vineyards, Inc.,
and Harris Trust
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and Savings Bank, as Trustee (filed as Exhibit 4.12 to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended August 31, 1999 and incorporated herein by reference).
4.13 Indenture, with respect to 8 1/2% Senior Subordinated Notes due
2009, dated as of February 25, 1999, among the Company, as
issuer, itscertain principal operating subsidiaries, as Guarantors, and
Harris Trust and Savings Bank, as Trustee (filed as Exhibit 99.1
to the Company's Current Report on Form 8-K dated February 25,
1999 and incorporated herein by reference).
4.14 Supplemental Indenture No. 1, with respect to 8 1/2% Senior
Subordinated Notes due 2009, dated as of February 25, 1999, by
and among the Company, as Issuer, itscertain principal operating
subsidiaries, as Guarantors, and Harris Trust and Savings Bank,
as Trustee (filed as Exhibit 99.2 to the Company's Current
Report on Form 8-K dated February 25, 1999 and incorporated
herein by reference).
4.15 Supplemental Indenture No. 2, with respect to 8 5/8% Senior
Notes due 2006, dated as of August 4, 1999, by and among the
Company, as Issuer, itscertain principal operating subsidiaries, as
Guarantors, and Harris Trust and Savings Bank, as Trustee (filed
as Exhibit 4.1 to the Company's Current Report on Form 8-K dated
July 28, 1999 and incorporated herein by reference).
4.16 Supplemental Indenture No. 3, dated as of August 6, 1999, by and
among the Company, Canandaigua B.V., Barton Canada, Ltd., Simi
Winery, Inc., Franciscan Vineyards, Inc., Allberry, Inc., M.J.
Lewis Corp., Cloud Peak Corporation, Mt. Veeder Corporation,
SCV-EPI Vineyards, Inc., and Harris Trust and Savings Bank, as
Trustee (filed as Exhibit 4.20 to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended August 31, 1999 and
incorporated herein by reference).
4.17 Supplemental Indenture No. 4, with respect to 8 1/2% Senior
Notes due 2009, dated as of May 15, 2000, by and among the
Company, as Issuer, itscertain principal operating subsidiaries, as
Guarantors, and Harris Trust and Savings Bank, as Trustee (filed
herewith)as Exhibit 4.17 to the Company's Annual Report on Form 10-K for
the fiscal year ended February 29, 2000 and incorporated herein
by reference).
4.18 Supplemental Indenture No. 5, dated as of September 14, 2000, by
and among the Company, as Issuer, certain principal
subsidiaries, as Guarantors, and The Bank of New York, as
Trustee (filed as Exhibit 4.1 to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended August 31, 2000 and
incorporated herein by reference).
4.19 Credit Agreement, dated as of October 6, 1999, between the
Company, certain principal subsidiaries, and certain banks for
which The Chase Manhattan Bank acts as Administrative Agent, The
Bank of Nova Scotia acts as Syndication Agent, and Credit Suisse
First Boston and Citicorp USA, Inc. acts as Co-Documentation
Agents (filed as Exhibit 4.1 to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended November 30, 1999 and
incorporated herein by reference).
4.194.20 Amendment No. 1 to Credit Agreement, dated as of February 13,
2001, between the Company, certain principal subsidiaries, and
The Chase Manhattan Bank, as administrative agent for certain
banks (filed herewith).
4.21 Indenture, with respect to 8 1/2% Senior Notes due 2009, dated
as of November 17, 1999, among the Company, as Issuer, certain
principal subsidiaries, as Guarantors, and Harris Trust and
Savings Bank, as Trustee (filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-4 (Registration No. 333-9436902)333-94369)
and incorporated herein by reference).
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4.22 Indenture, with respect to 8% Senior Notes due 2008, dated as of
February 21, 2001, by and among the Company, as Issuer, certain
principal subsidiaries, as Guarantors and BNY Midwest Trust
Company, as Trustee (filed as Exhibit 4.1 to the Company's
Registration Statement filed on Form S-4 (Registration No.
333-60720) and incorporated herein by reference).
4.23 Registration Rights Agreement, dated as of February 21, 2001, by
and among the Company, certain subsidiaries and the Initial
Purchasers named therein (filed as Exhibit 4.2 to the Company's
Registration Statement filed on Form S-4 (Registration No.
333-60720) and incorporated herein by reference).
10.1 Barton Incorporated Management Incentive Plan (filed as Exhibit
10.6 to the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1993 and incorporated herein by
reference).
10.2 Marvin Sands Split Dollar Insurance Agreement (filed as Exhibit
10.9 to the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1993 and incorporated herein by
reference).
10.3 Employment Agreement between Barton Incorporated and Alexander
L. Berk dated as of September 1, 1990 as amended by Amendment
No. 1 to Employment Agreement between Barton Incorporated and
Alexander L. Berk dated November 11, 1996 (filed as Exhibit 10.7
to the Company's Annual Report on Form 10-K for the fiscal year
ended February 28, 1998 and incorporated herein by reference).
10.4 Amendment No. 2 to Employment Agreement between Barton
Incorporated and Alexander L. Berk dated October 20, 1998 (filed
as Exhibit 10.5 to the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1999 and incorporated herein
by reference).
10.5 Long-Term Stock Incentive Plan, which amends and restates the
Canandaigua Wine Company, Inc. Stock Option and Stock
Appreciation Right Plan (filed as Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended May
31, 1997 and incorporated herein by reference).
10.6 Amendment Number One to the Company's Long-Term Stock Incentive
Plan (filed as Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended August 31, 1997 and
incorporated herein by reference).
10.7 Amendment Number Two to the Company's Long-Term Stock Incentive
Plan (filed as Exhibit 10 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended August 31, 1999 and
incorporated herein by reference).
10.8 Amendment Number Three to the Company's Long-Term Stock
Incentive Plan (filed as Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended August 31, 2000
and incorporated herein by reference).
10.9 Amendment Number Four to the Company's Long-Term Stock Incentive
Plan (filed herewith).
10.10 Incentive Stock Option Plan of the Company (filed as Exhibit
10.2 to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended August 31, 1997 and incorporated herein by
reference).
10.9
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10.11 Amendment Number One to the Company's Incentive Stock Option
Plan of the
Company (filed as Exhibit 10.3 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended August 31, 1997 and
incorporated herein by reference).
10.1010.12 Amendment Number Two to the Company's Incentive Stock Option
Plan (filed as Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended August 31, 2000 and
incorporated herein by reference).
10.13 Amendment Number Three to the Company's Incentive Stock Option
Plan (filed herewith).
10.14 Annual Management Incentive Plan of the Company (filed as
Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended August 31, 1997 and incorporated herein
by reference).
10.1110.15 Amendment Number One to the Company's Annual Management
Incentive Plan of
the Company (filed as Exhibit 10.14 to the Company's Annual
Report on Form 10-K for the fiscal year ended February 28, 1998
and incorporated herein by reference).
10.1210.16 Amendment Number Two to the Company's Annual Management
Incentive Plan (filed herewith).
10.17 Lease, effective December 25, 1997, by and among Matthew Clark
Brands Limited and Pontsarn Investments Limited (filed as
Exhibit 10.13 to the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1999 and incorporated herein
by reference).
10.1310.18 Supplemental Executive Retirement Plan of the Company (filed as
Exhibit 10.14 to the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1999 and incorporated herein
by reference).
10.1410.19 First Amendment to the Company's Supplemental Executive
Retirement Plan of
the Company (filed as Exhibit 10 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended May 31, 1999
and incorporated herein by reference).
10.1510.20 Second Amendment to the Company's Supplemental Executive
Retirement Plan (filed herewith).
10.21 Credit Agreement, dated as of October 6, 1999, between the
Company, certain principal subsidiaries, and certain banks for
which The Chase Manhattan Bank acts as Administrative Agent, The
Bank of Nova Scotia acts as Syndication Agent, and Credit Suisse
First Boston and Citicorp USA, Inc. acts as Co-Documentation
Agents (filed as Exhibit 4.1 to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended November 30, 1999 and
incorporated herein by reference).
10.1610.22 Amendment No. 1 to Credit Agreement, dated as of February 13,
2001, between the Company, certain principal subsidiaries, and
The Chase Manhattan Bank, as administrative agent for certain
banks (filed herewith as Exhibit 4.20).
10.23 Letter Agreement between the Company and Thomas S. Summer, dated
March 10, 1997, addressing compensation (filed herewith)as Exhibit 10.16
to the Company's Annual Report on Form 10-K for the fiscal year
ended February 29, 2000 and incorporated herein by reference).
10.17 Service10.24 Letter Agreement as amended, between Matthew Clark plcthe Company and Peter Aikens,Jon Moramarco, dated
September 27, 1991October 5, 1999, addressing compensation (filed herewith).
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11.1 Statement re Computation of Per Share Earnings (filed herewith).
21.1 Subsidiaries of Company (filed herewith).
23.1 Consent of Arthur Andersen LLP (filed herewith).
27.1 Financial Data Schedule for the fiscal year ended February 29,
2000 (filed herewith).
99.1 1989 Employee Stock Purchase Plan of the Company, as amended by
Amendment Number 1 through Amendment Number 5 (filed as Exhibit
99.1 to the Company's Annual Report on Form 10-K for the fiscal
year ended February 28, 1998 and incorporated herein by
reference).
99.2 Amendment Number 6 to the Company's 1989 Employee Stock Purchase
Plan of
the Company (filed as Exhibit 99.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1999 and
incorporated herein by reference).
99.3 Amendment Number 7 to the Company's 1989 Employee Stock Purchase
Plan (filed herewith).