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 28, 199829, 2000
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ---------------- to ------------------ -------------------
COMMISSION FILE NO.----------------
Commission File No. 0-7570
DELAWAREDelaware CANANDAIGUA BRANDS, INC. 16-0716709
AND ITS SUBSIDIARIES:
NEW YORK BATAVIA WINE CELLARS, INC.and its Subsidiaries:
New York Batavia Wine Cellars, Inc. 16-1222994
NEW YORK CANANDAIGUA WINE COMPANY, INC.New York Canandaigua Wine Company, Inc. 16-1462887
NEW YORK CANANDAIGUA EUROPE LIMITEDNew York Canandaigua Europe Limited 16-1195581
NEW YORK ROBERTS TRADING CORP.England and Wales Canandaigua Limited 98-0198402
New York Polyphenolics, Inc. 16-1546354
New York Roberts Trading Corp. 16-0865491
DELAWARE BARTON INCORPORATEDNetherlands 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.Delaware Barton Brands, Ltd. 36-3185921
MARYLAND BARTON BEERS, LTD.Maryland Barton Beers, Ltd. 36-2855879
CONNECTICUT BARTON BRANDS OF CALIFORNIA, INC.Connecticut Barton Brands of California, Inc. 06-1048198
GEORGIA BARTON BRANDS OF GEORGIA, INC.Georgia Barton Brands of Georgia, Inc. 58-1215938
NEW YORK BARTON DISTILLERS IMPORT CORP.Illinois Barton Canada, Ltd. 36-4283446
New York Barton Distillers Import Corp. 13-1794441
DELAWARE BARTON FINANCIAL CORPORATIONDelaware Barton Financial Corporation 51-0311795
WISCONSIN STEVENS POINT BEVERAGE CO.Wisconsin Stevens Point Beverage Co. 39-0638900
ILLINOIS MONARCH IMPORT COMPANYIllinois Monarch Import Company 36-3539106
GEORGIA THE VIKING DISTILLERY, INC. 58-2183528
(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 YORKWillowBrook Office Park, Fairport, New York 14450
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(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code (716) 393-4130218-2169
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b)12(B) OF THE ACT:
Title of each class Name of each exchangeexhange on which registered
------------------- -----------------------------------------
None None----------------------------------------
Class A Common Stock
(par value $.01 per share) 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:
Class A Common Stock (Par Value $.01 Per Share) of Canandaigua Brands, Inc.
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(Title of Class)
Class B Common Stock (Par Value $.01 Per Share) of Canandaigua Brands, Inc.
---------------------------------------------------------------------------
(Title of Class)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
Canandaigua Brands, Inc., as of May 18, 1998,15, 2000, was $665,089,755.$725,728,942.
The number of shares outstanding with respect to each of the classes of common
stock of Canandaigua Brands, Inc., as of May 18, 1998,15, 2000, is set forth below (all
of the Registrants, other than Canandaigua Brands, Inc., are direct or indirect
wholly-owned subsidiaries of Canandaigua Brands, Inc.):
CLASS NUMBER OF SHARES OUTSTANDINGClass Number of Shares Outstanding
----- ----------------------------
Class A Common Stock, Par Valuepar value $.01 Per Share 15,470,066per share 15,159,951
Class B Common Stock, Par Valuepar value $.01 Per Share 3,296,976per share 3,096,572
DOCUMENTS INCORPORATED BY REFERENCE
The proxy statement of Canandaigua Brands, Inc. to be issued for the annual
meeting of stockholders to be held July 21, 1998,18, 2000 is incorporated by reference in
Part III.
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PART I
ITEM 1. BUSINESS
- ------- --------
UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM "COMPANY" REFERS TO
CANANDAIGUA BRANDS, INC. AND ITS SUBSIDIARIES, ALL REFERENCES TO "NET SALES"
REFER TO GROSS REVENUES LESS EXCISE TAXES AND RETURNS AND ALLOWANCES TO CONFORM
WITH THE COMPANY'S METHOD OF CLASSIFICATION. ALL REFERENCES TO "FISCALUnless the context otherwise requires, the term "Company" refers to
Canandaigua 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",
"Fiscal 1999" and "Fiscal 1998" AND
"FISCAL 1997" SHALL REFER TO THE COMPANY'S FISCAL YEAR ENDED THE LAST DAY OF
FEBRUARY OF THE INDICATED YEAR. DURING JANUARY 1996, THE BOARD OF DIRECTORS OF
THE COMPANY CHANGED THE COMPANY'S FISCAL YEAR END FROM AUGUST 31 TO THE LAST DAY
OF FEBRUARY. ACCORDINGLY, THIS FORMshall refer to the Company's fiscal year ended
the last day of February of the indicated year.
Industry data disclosed in this Annual Report on Form 10-K INCLUDES AND PRESENTS INFORMATION FOR
THE COMPANY'S TRANSITION PERIOD FROM SEPTEMBER 1, 1995, TO FEBRUARY 29, 1996
(THE "TRANSITION PERIOD"), AS WELL AS INFORMATION FOR THE PERIOD FROM MARCH 1,
1995, TO FEBRUARY 29, 1996 ("PRO FORMA FISCAL 1996"has been
obtained from the following industry and government publications: Adams Liquor
Handbook; Adams Wine Handbook; Adams Beer Handbook; Adam's Media Handbook
Advance; The 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 Guide
and Office for National Statistics (U.K.). REFERENCES TO "FISCAL
1995" SHALL REFER TO THE COMPANY'S FISCAL YEAR ENDED AUGUST 31, 1995.
DURING FISCAL 1998, THE COMPANY CHANGED ITS NAME FROM CANANDAIGUA WINE
COMPANY, INC. TO CANANDAIGUA BRANDS, INC. THE NEW NAME BETTER REFLECTS THE SCOPE
OF THE COMPANY'S OPERATIONS AS A PRODUCER, MARKETER AND IMPORTER OF BRANDS
WITHIN ALL THREE BEVERAGE ALCOHOL PRODUCT CATEGORIES IN WHICH THE COMPANY
OPERATES: WINE, BEER AND DISTILLED SPIRITS.
MARKET SHARE AND INDUSTRY DATA DISCLOSED IN THIS REPORT HAVE BEEN OBTAINED
FROM THE FOLLOWING INDUSTRY AND GOVERNMENT PUBLICATIONS: THE GOMBERG-FREDRIKSON
REPORT; JOBSON'S LIQUOR HANDBOOK; JOBSON'S WINE HANDBOOK; JOBSON'S BEER
HANDBOOK; ADAMS MEDIA HANDBOOK ADVANCE; THE U.S. WINE MARKET: IMPACT DATABANK
REVIEW AND FORECAST; THE U.S. BEER MARKET: IMPACT DATABANK REVIEW AND FORECAST;
BEER MARKETER'S INSIGHTS; BEER INDUSTRY UPDATE; THE BEER INSTITUTE; U.S.
DEPARTMENT OF THE TREASURY STATISTICAL RELEASES; AND THE MAXWELL CONSUMER
REPORT. THE COMPANY HAS NOT INDEPENDENTLY VERIFIED THIS DATA. REFERENCES TO
MARKET SHARE DATA ARE BASED ON UNIT VOLUME. The Company is a Delaware corporation organized in 1972 as the successorhas not independently
verified this data. References to a business founded in 1945 by Marvin Sands, Chairman of the Board of the
Company.positions within industries are based on unit
volume.
The Company is a leading producer and marketer of branded beverage alcohol
products with over 130 nationalin North America and regional brands which are distributed by
over 850 wholesalers throughout the United States and in selected international
markets. The Company's beverage alcohol brands are marketed in three general
categories: wine (primarily table wine), beer (primarily imported beer) and
distilled spirits. TheKingdom. According to available
industry data, the Company isranks as the second largest supplier of wine, the
second largest importer of beer and the fourth largest supplier of distilled
spirits in the United States. The Company's principalBritish subsidiary, Matthew Clark
plc ("Matthew Clark"), is a leading producer and marketer of cider, wine and
bottled water, and a leading independent beverage alcohol wholesaler in the
United Kingdom.
The Company is a Delaware corporation organized in 1972 as the successor to
a business founded in 1945. The Company has aggressively pursued growth in
recent years through acquisitions, brand development, new product offerings and
new distribution agreements. The recent acquisitions of Franciscan Vineyards,
Inc. ("Franciscan Estates") and Simi Winery, Inc. ("Simi"), the Black Velvet
Assets (as defined below) and Matthew Clark continued a series of strategic
acquisitions made by the Company since 1991 by which it has diversified its
offerings 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 includeto focus on the following:
WINE: Inglenook, Almaden, Paul Masson, Manischewitz, Taylor, Marcus James,
Estate Cellars, Vina Santa Carolina, Dunnewood, Cook's, J. Roget, Great
Western, Richards Wild Irish Rose and Cisco
BEER: Corona Extra, Corona Light, St. Pauli Girl, Modelo Especial,
Pacifico, Tsingtao, Negra Modelo, Peroni, Double Diamond and Point
DISTILLED SPIRITS: Fleischmann's, Barton, Mr. Boston, Canadian LTD, Ten
High, Montezuma, Inver House, Monte Alban and Chi-Chi's Prepared Cocktails
Manyfastest growing sectors of the
beverage alcohol industry.
The Company markets and sells more than 185 premier branded products in
North America and the United Kingdom. The Company's brandsproducts are leadersdistributed by
more than 1,000 wholesalers in their respectiveNorth America. In the United Kingdom, the Company
also distributes its own branded products and those of other companies to more
than 16,000 customers. The Company operates more than 20 production facilities
throughout the world and purchases products for resale from other producers.
ACQUISITIONS IN FISCAL 2000 AND FISCAL 1999
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"). 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
including Corona Extra,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 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 the sixth largest selling imported beer
brand; Almadenpresence in
the super-premium and Inglenook, the fifth and seventh largest selling tableultra-premium wine brands; Richards Wild Irish Rose, the largest selling dessert wine brand; Cook's
champagne, the second largest selling sparkling wine brand; Fleischmann's, the
fourth largest blended whiskey and fourth largest domestically bottled gin;
Montezuma, the second largest selling tequila brand; and Monte Alban, the
largest selling mezcal brand.categories. The Company has diversified its productoperates
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 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 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 addition of the Canadian whisky brands from this transaction
strengthens the Company's position in the North American distilled spirits
category and enhances the Company's portfolio of brands and category
participation. The acquired operations have been integrated with the Company's
existing spirits business.
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 in the 1990s
through a series of strategic acquisitions, that have resultedincluding Grants 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. 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 one branded bottler of sparkling water and the number two producer of
cider.
The Matthew Clark Acquisition strengthens the Company's net
sales from $176.6 millionposition in fiscal 1991the
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 $1,212.8 million for Fiscal 1998.market California-produced wine and U.S.-produced 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 developedbecome more
competitive by diversifying its portfolio; developing strong market positions in
the growing beverage alcohol product categories of varietal table wine (wine
named for the grape that comprises the principal component of the wine) and
imported beer. During this period, the Company has strengthenedbeer; strengthening its relationshiprelationships with wholesalers, expandedwholesalers; expanding its
distribution and enhancedenhancing its production capabilities as well as acquiredcapabilities; and acquiring additional
management, operational, marketing, and research and development expertise.
In October 1991, theBUSINESS SEGMENTS
The Company acquired Cook's, Cribari, Dunnewood and other
brands and related facilities and assets from Guild Wineries & Distilleries. In
June 1993, the Company acquired Barton Incorporated ("Barton"), which enabled
the Company to diversify into the imported beer and distilled spirits categories
(the "Barton Acquisition"). With the Barton Acquisition, the Company acquired
distribution rights with respect to the Corona, St. Pauli Girl, and other
imported beer brands; the Barton, Ten High, Montezuma, and other distilled
spirits brands; and related facilities and assets. In October 1993, the Company
acquired the Paul Masson, Taylor California Cellars and other brands and related
facilities and assets of Vintners International Company, Inc. ("Vintners") (the
"Vintners Acquisition"). In August 1994, the Company acquired the Almaden,
Inglenook and other brands, a grape juice concentrate business and related
facilities and assets (the "Almaden/Inglenook Product Lines") from Heublein,
Inc. (the "Almaden/Inglenook Acquisition"). On September 1, 1995, the Company
acquired the Mr. Boston, Canadian LTD, Skol, Old Thompson, Kentucky Tavern,
Glenmore and di Amore distilled spirits brands; the rights to the Fleischmann's
and Chi-Chi's distilled spirits brands under long-term license agreements; the
U.S. rights to the Inver House, Schenley and El Toro distilled spirits brands;
and related facilities and assets from United Distillers Glenmore, Inc. and
certain of its North American affiliates (collectively, "UDG"); in addition, the
transaction included multiyear agreements under which UDG supplies the Company
with bulk whiskey and the Company supplies UDG with services including continued
packaging of various UDG brands not acquired by the Company (collectively, the
"UDG Acquisition").
The Company's growth through acquisitions has substantially expanded its
portfolio of brands and has enabled it to become a major participant in
additional product categories of the beverage alcohol business. This expansion
has positioned the Company to benefit from faster growing categories with over
40% of the Company's net sales generated from the growth categories of imported
beer and varietal table wine.
The Company's business strategy is to manage its existing portfolio of
brands and businesses in order to maximize profit and return on investment, and
reposition its portfolio of brands to benefit from growth trendsoperates primarily in the beverage alcohol industry. To achieve the foregoing, the Company intends to: (i) adjust
the price/volume relationships of certain brands; (ii) develop new brands and
introduce line extensions; (iii) expand geographic distribution; and (iv)
acquire businesses that meet its strategic and financial objectives.
INDUSTRY
The beverage alcohol industry in North
America and the United States consistsKingdom. The Company reports its operating results in
five segments: Canandaigua Wine (branded popularly-priced 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).
Information regarding net sales, operating income and total assets of each
of the production, importation, marketingCompany's business segments and distributioninformation regarding geographic areas is
set forth in Note 16 to the Company's consolidated financial statements located
in Item 8 of wine, beerthis Annual Report on Form 10-K.
CANANDAIGUA WINE
Canandaigua Wine produces, bottles, imports and distilled
spirits products. Over the past five years there has been increasing
consolidation at the supplier, wholesaler and, in certain markets retailer
tiers of the beverage alcohol industry. As a result, it has become advantageous
for certain suppliers to expand their portfolio of brands through acquisitions
and internal development in order to take advantage of economies of scale and to
increase their importance to a more limited number of wholesalers and, in
certain markets, retailers. During the 1990's, the overall per capita
consumption of beverage alcohol products in the United States has declined
slightly; however, consumption of table wine, in particular varietal table wine and imported beer has increased during the period.
The following table sets forth the industry unit volume for shipments of
beverage alcohol products in the Company's three principal beverage alcohol
product categories in the United States for the five calendar years ended
December 31, 1997:
INDUSTRY DATA 1997 1996 1995 1994 1993
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Wine (a)(b) 219,970 212,399 197,258 193,052 188,846
Imported Beer (c) 197,355 173,077 157,023 146,096 128,815
Distilled Spirits (b) 137,798 138,536 137,330 139,997 144,162
(a) Includes domestic and imported table, sparkling and dessert wine, wine
coolers and vermouth
(b) Units are in thousands of 9-liter case equivalents (2.378 gallons per
case)
(c) Units are in thousands of 2.25 gallon cases
WINE: From 1993 to 1997, shipments of wine in the United States increased
at an average compound annual rate of 4%. In 1997, wine shipments increased by
4% when compared to 1996, led by increased shipments of table wine (wine
containing 14% or less alcohol by volume). Table wine accounted for 88% of the
total United States wine market in 1997 while sparkling wine (includes
effervescent wine like champagne and spumante) and dessert wine (wine containing
more than 14% alcohol by volume) each accounted for 6%. Over the last five
years, sparkling and dessert wine, as a percentage of total wine, have been
decliningbrandy in
the United States. The Company believes the improvement in the
table wine consumption may be due in part to published reports, over recent
years, from a number of sources, citing the health benefits of moderate wine
consumption. The Company believes the declines in sparkling and dessert wine
consumption in the United States reflect a general shift in consumer preferences
and, with respect to sparkling wine, concerns about drinking and driving, as a
large part of sparkling wine consumption occurs outside the home at social
gatherings and restaurants.
IMPORTED BEER: Shipments of imported beer have increased at an average
compound annual rate of 11% from 1993 to 1997. Shipments of Mexican beer in 1997
increased 37% over 1996 as compared to an increase of 14% for the entire
imported beer category. Shipments of imported beer as a percentage of the United
States beer market, increased to 7.3% in 1997 from 6.5% in 1996. Imported beer,
along with microbrews and super-premium priced domestic beer, is generally
priced above the leading domestic premium brands.
DISTILLED SPIRITS: Although shipments of distilled spirits in the United
States declined at an average compound annual rate of 1% from 1993 to 1997,
certain types of distilled spirits, such as rum, tequila and brandy have
increased. In 1997, shipments of distilled spirits declined by 0.5% as compared
to 1996. The Company believes shipments of certain types of distilled spirits
may have been negatively affected by concerns about drinking and driving, and a
shift in consumer preference toward lower alcohol or lighter tasting products
like imported beer and varietal table wine which have grown substantially during
the period from 1993 to 1997.
PRODUCT CATEGORIES
The Company produces, markets and imports beverage alcohol products in
three principal product categories: wine (primarily table wine), beer (primarily
imported beer) and distilled spirits. The following tables include net sales and
unit volume of branded products sold by the Company and the distilled spirits
table includes the brands and products acquired in the UDG Acquisition for all
periods shown as if they had been owned by the Company for the entire period.
WINE: The CompanyIt is the second largest supplier of wine in the United
States and exports wine to approximately 70 countries from the United States.
The Company participates in theCanandaigua Wine sells table wine, dessert andwine, sparkling wine categories. The table below sets forth the net sales (in thousands of dollars)
and unit volume (in thousands of 9-liter case equivalents) for all of the
branded wine sold by the Company for the periods shown:
PRO FORMA
FISCAL 1998 FISCAL 1997 FISCAL 1996 FISCAL 1995
------------------ ------------------ ------------------ ------------------
WINE (a) NET SALES VOLUME NET SALES VOLUME NET SALES VOLUME NET SALES VOLUME
--------- ------ --------- ------ --------- ------ --------- ------
$ 533,257 34,587 $ 512,510 33,787 $ 499,962 35,396 $ 487,101 34,910
(a) Includes domestic and imported table, dessert and sparkling wine
Net sales and unit volume of the Company's wine brands increased 4% and 2%,
respectively, in Fiscal 1998 compared to Fiscal 1997. These increases can be
attributed to increased sales of table wine.
The Company sells over 70 different brands of wine, substantially all of
which are marketed in the popularly priced segment (wine that retails at less
than $5.75 per 750 ml. bottle). The Company's principal winebrandy. Its
leading brands include Almaden, Inglenook, Almaden,Arbor Mist, Paul Masson,
Manischewitz, Taylor, Marcus James, Estate Cellars, Vina Santa Carolina,
Dunnewood, Mystic Cliffs, Cook's, J. Roget, Richards Wild Irish Rose Cisco,
Cook's, J. Roget and Great Western.
BEER: The CompanyPaul
Masson Grande Amber Brandy. Most of its wine is marketed in the popularly-priced
category of the wine market.
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 bulk wine,
cooking wine, grape juice and Inglenook-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. The CompanyStates and distributes fivesix of the top 2025 imported beer brands in the
United States: Corona Extra, Modelo Especial, Corona Light, Pacifico, St. Pauli
Girl Modelo
Especial and Pacifico. The Company'sNegra Modelo. Corona Extra is the number one imported beer nationwide.
Barton's other imported beer brands include Negra
Modelo from Mexico, Tsingtao from China, Peroni from
Italy and Double Diamond and Tetley's English Ale from the United Kingdom.
The CompanyBarton also operates the Stevens Point Brewery, a regional brewer located in
Wisconsin, which produces Point Special, among other brands.
The table below sets forth the net sales (in thousands of dollars) and
unit volume (in thousands of 2.25 gallon cases) for the beer sold by the Company
for the periods shown:
PRO FORMA
FISCAL 1998 FISCAL 1997 FISCAL 1996 FISCAL 1995
------------------ ------------------ ------------------ ------------------
BEER NET SALES VOLUME NET SALES VOLUME NET SALES VOLUME NET SALES VOLUME
--------- ------ --------- ------ --------- ------ --------- ------
$ 376,607 30,016 $ 298,925 23,848 $ 239,785 19,344 $ 216,159 17,471
Net sales and unit volume of the Company's beer brands have grown since
Fiscal 1995, primarily as a result of the increased sales of Corona and the
Company's other Mexican beer brands. Net sales and unit volume increased 26.0%
in Fiscal 1998 compared to Fiscal 1997. This sales growth helped Corona Extra
become the number one imported beer nationwide.
DISTILLED SPIRITS: The CompanyBarton is the fourth largest supplier of distilled spirits in the United
States. The Company produces, bottles, importsStates and markets
a diversified line of quality distilled spirits, and also exports distilled spirits to approximately 20 foreign countries. The Company's15 countries from the
United States. Barton's principal distilled spirits brands include
Fleischmann's, Barton, Mr. Boston, Canadian LTD, Chi-Chi's prepared cocktails, Ten High,
Montezuma, Barton, Monte Alban, Inver House and Monte Alban.the recently acquired Black
Velvet brand. Substantially all of the Company'sBarton's spirits unit volume consists of
products marketed in the price value segment.
The table below sets forth the net sales (in thousands of dollars) and unit
volume (in thousands of 9-liter case equivalents) for the distilled products
case goods sold by the Company for the periods shown:
PRO FORMA
FISCAL 1998 FISCAL 1997 FISCAL 1996 (a) FISCAL 1995 (a)
DISTILLED ------------------ ------------------ ------------------ ------------------
SPIRITS NET SALES VOLUME NET SALES VOLUME NET SALES VOLUME NET SALES VOLUME
--------- ------ --------- ------ --------- ------ --------- ------
$ 200,276 11,456 $ 183,843 10,899 $ 178,803 10,740 $ 184,536 10,930
(a) Net sales and volume include the brands and products acquired in the
UDG Acquisition as if they had been owned by the Company for the
entire period.
For Fiscal 1998, net sales and unit volume of distilled spirits brands sold
by the Company increased 9% and 5%, respectively, compared to Fiscal 1997. Unit
volume of vodka, tequila, brandy, bourbon whiskey and Canadian whisky have
increased while blended whiskey, Scotch whisky and gin have experienced
decreases in unit volume.
From the beginning of Fiscal 1995 to the end of Pro Forma Fiscal 1996, the
unit volume of brands acquired in the UDG Acquisition declined in excess of
industry rates. The Company believes that these declines resulted from
noncompetitive retail pricing and promotional activities. The Company
implemented pricing and promotional activities during Fiscal 1997 which
eliminated the rate of decline and resulted in a volume increase of 3% in Fiscal
1997 and 4% in Fiscal 1998.
OTHER PRODUCTS AND RELATED SERVICES: As a related part of its wine
business, the Company produces grape juice concentrate. Grape juice concentrate
is sold to the food and wine industries as a raw material for the production of
juice-based products, no-sugar-added foods and beverages. Grape juice
concentrate competes with other domestically produced and imported fruit-based
concentrates. The Company is one of the leading grape juice concentrate
producers in the United States. The Company's other wine related products and
services include: bulk wine; grape juice; St. Regis, a leading nonalcoholic line
of wine in the United States; cooking wine; and wine for the production of
vinegar. The Companycategory. 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 distributor 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. Matthew Clark's leading
mainstream cider brands include Blackthorn and Gaymer's Olde English. Blackthorn
is the number two mainstream cider brand and Gaymer's Olde English is the U.K.'s
second largest cider brand in the take-home market. Matthew Clark's leading
premium cider brands are Diamond White and K.
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 also 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
leading bottled sparkling water brand in the country.
Matthew Clark is a leading independent beverage supplier 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, spirits, cider,
beer and soft drinks. While these products are primarily produced by third
parties, they also include Matthew Clark's 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. Franciscan also exports its
products to approximately 25 countries from the United States.
Franciscan includes the prestigious Franciscan Oakville Estate (Napa
Valley), Estancia (Monterey and Sonoma), Simi (Sonoma), Mt. Veeder and Quintessa
(Napa Valley), and Veramonte (Casablanca Valley, Chile) wines. The portfolio of
fine wines is supported by the segment'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.
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 the United
StatesNorth America
through over 8501,000 wholesalers, as well as through state and provincial
alcoholic beverage control agencies. The Company employs aCanandaigua Wine, Barton and Franciscan
employ full-time, in-house marketing, sales and customer service organization of approximately 415 peopleorganizations
to develop and service itstheir sales to wholesalers and state agencies. The Company's sales force is
organized in separate sales divisions: a beer division, a spirits division and a
wine division. The
Company believes that the organization of its sales force into separate divisionssegments
positions it to maintain a high degree of focus on each of its principal product
categories.
The Company's marketing strategy places primary emphasis upon promotional
programs directed at its broad national distribution network, (and toand at the
retailers served by that network).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.
In fiscal 1999,During Fiscal 2000, the Company expects to increaseincreased its advertising expenditures to
put more emphasis on consumer advertising for certain wine
brands, including newly introduced brands, and for its imported beer brands,
primarily with respect to the Mexican brands. In addition, promotional spending
in fiscal 1999 could
increase as it relates tofor 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
12 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, cash-and-carry
outlets and wholesalers.
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 wine and distilled spirits products are sold under a number of trademarks. Mosttrademarks, most of these trademarkswhich
are owned by the Company. The Company also produces and sells wine and distilled
spirits products under exclusive license or distribution agreements. SignificantImportant
agreements include: a long-term license agreement with Nabisco Brands Company for a term
which expires in 2008 and which automatically renews for successive additional
20 year terms unless canceled by the Company for the Fleischmann's spirits
brands;include a long-term license agreement with Hiram Walker & Sons, Inc.
for a term
which(which expires in 21162116) for the Ten High, Crystal Palace, Northern Light and
Imperial Spirits brands; and a long-term license agreement with the B.
Manischewitz Company for a term which(which expires in 20422042) 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 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 Company from importing other
beer from the same country. The Company's agreement to distribute Corona and its
other Mexican beer brands exclusively throughout 25 primarily 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. The Company's
agreementChanges 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 by death or disability) or
the termination of the President of Barton Incorporated, may be a basis for the
importation of St. Pauli Girl expires in 2003, subjectsupplier, unless it consents to compliance with certain performance criteria.such changes, to terminate the agreement. The
Company's agreement for the
exclusive importation of Tsingtao throughout the entire United States expires in
December 1999 and, subjectsupplier's consent to compliance with certain performance criteria and
other terms under the agreement, willsuch changes may not be automatically renewed until December
2002.unreasonably withheld. 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 its 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. 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, manysome of which have significantly
greater resources than the Company. The Company'sIn the United States, Canandaigua Wine's
principal competitors include E & J Gallo Winery and The Wine Group in the wine category;Group. Barton's
principal competitors include Heineken USA, Molson Breweries USA, Labatt's USA,
and
Guinness Import Company, in the imported beer category; andBrown-Forman Beverages, Jim Beam Brands and Heaven Hill
Distilleries, Inc. inFranciscan's principal competitors include Robert Mondavi
Corp., Beringer Wine Estates, Kendall-Jackson and Allied Domecq Wines. In the
distilled spirits category.United Kingdom, Matthew Clark's principal competitors include Halewood Vintners,
H.P. Bulmer, Tavern, 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
TheIn 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 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. Following the acquisition
of the Black Velvet Assets, 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 used by it uses in the production
of vodka, gin and blended whiskey sold by it sells to customers in the state of Georgia.
The Company's requirements of Canadian and
Scotch whiskies, andwhisky, tequila, mezcal and the neutral
grain spirits used by 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 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:are packaging materials primarily glass; grapes;(primarily glass) and
other
agricultural products, such as grapes and grain. The Company utilizes glass and
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. Costs per ton for grapes in the fall 1995 and fall 1996 grape harvests
escalated dramatically. Costs per ton for grapes in the fall 1997 grape harvest
decreased slightly as compared to the fall 1996 grape harvest. 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 over 700800 independent growers, principally
in the San Joaquin Valley, Central Coast and MontereyNorth Coast 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 under various arrangements approximately 4,2007,000 acres of land and vineyards, either fully bearing
or under development, in California, New York and New York.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.
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 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 presently applicable governmental laws and regulations and that the cost of
administration ofand 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, or results of operations.operations or cash
flows.
EMPLOYEES
The Company had approximately 2,5002,520 full-time employees in the United
States at the end of Fiscal 1998 and Fiscal 1997. AsApril 2000, of February 28, 1998,which approximately 1,030
employees830 were covered by
collective bargaining agreements. Additional workers may be employed by the
Company during the grape crushing season.
The Company had approximately 1,720 full-time employees in the United
Kingdom at the end of April 2000, of which approximately 400 were covered by
collective bargaining agreements. Additional workers may be employed during the
peak season.
The Company had approximately 260 full-time employees in Canada at the end
of April 2000, of which approximately 200 were covered by collective bargaining
agreements.
The Company considers its employee relations generally to be good.
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 10 wineries, two distilling plants,
one of
which includes bottling operations, three bottling plants, and a brewery, cider and water producing facilities, most of which
include warehousing and distribution facilities on the premises. All of
these facilities are owned by the Company other than a winery in Escalon,
California, a winery in Batavia, New York and a bottling plant in Carson,
California, each of which is leased. The Company considers its principal
facilities to be the Mission Bell winery in Madera, California; the Canandaigua,
New York winery; the Monterey Cellars winery in Gonzales, California; the
distilling and bottling facility located in Bardstown, Kentucky; and the
bottling facility located in Owensboro, Kentucky.
In New York, the Company operates three wineries located in Canandaigua,
Naples and Batavia. The Company currently operates seven winery facilities in
California. The Mission Bell winery is a crushing, wine production, bottling and
distribution facility and a grape juice concentrate production facility. The
Monterey Cellars winery is a crushing, wine production and bottling facility.
The other wineries operated in California are located in Escalon, Madera,
Fresno, and Ukiah. The Company has exercised its option to buy the Escalon
facility and is in the process of transferring the facility's ownership to the
Company. The Company currently owns or leases under various arrangements
approximately 4,200 acres of vineyards, either fully bearing or under
development, in California and New York.
The Company operates five facilities that produce, bottle and store
distilled spirits. It owns a distilling, bottling and storage facility in
Bardstown, Kentucky, and a distilling and storage facility in Albany, Georgia,
and operates bottling plants in Atlanta, Georgia; Owensboro, Kentucky; and
Carson, California. The Carson plant is operated under a management contract and
a sublease, each of which is scheduled to expire on December 31, 1998. The
parties are currently negotiating an extension of this arrangement. The Carson
plant receives distilled spirits in bulk from Bardstown and outside vendors,
which it bottles and distributes. The Company
also performs contract bottling atoperates separate distribution centers under the Carson plant. The Bardstown facility distills, bottles and warehouses
distilled spirits products for the Company's account and on a contractual basis
for other participants in the industry. The Owensboro facility bottles and
warehouses distilled spirits products for the Company's account and performs
contract bottling. The Company's Atlanta, Georgia facility bottles, for itself
and on a contract basis, and its Albany, Georgia facility distills, for its own
account, vodka, gin and blended whiskeys.
The Company owns a brewery in Stevens Point, Wisconsin, where it produces
and bottles Point beer and brews and packages on a contract basis for a variety
of brewing and other food and beverage industry members.
The Company maintains its corporate headquarters in offices leased in
Fairport, New York, and maintains its wine division headquarters in offices
owned in Canandaigua, New York, where it also leases additional office space.
The Company also leases office space in Chicago, Illinois, for its Barton
headquarters.Matthew Clark segment's
wholesaling business. The Company believes that all of its facilities are in
good condition and working order and have adequate capacity to meet its needs
for the foreseeable future.
MostCANANDAIGUA 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, and six wineries in California, located in
Madera, Gonzales, Escalon, Fresno and Ukiah. All of the Company's real propertyfacilities in which
these wineries operate are owned, except for the winery in Batavia, New York,
which is 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.
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, 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 also performs 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 the National Distribution Centre, located in
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 12
distribution centers located throughout the United Kingdom, all of which are
leased. These distribution centers are used to distribute products produced by
third parties, as well as by Matthew Clark. Matthew Clark has been pledged underand will
continue consolidating the termsoperations of collateral security mortgages as security forits wholesaling distribution centers.
FRANCISCAN
Franciscan maintains its headquarters in offices owned in Rutherford,
California. Through this segment the paymentCompany 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
outstanding loans
underCalifornia, in Rutherford, Healdsburg, Monterey and Mt. Veeder, and the Company's bank Credit Agreement (as definedwinery
in Item 7Chile 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.
Franciscan also owns and leases approximately 2,000 plantable acres of
this Report
on Form 10-K under "Financial Liquidityvineyards in California and Capital Resources").approximately 800 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, or results of operations.operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
Not Applicable.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth informationInformation with respect to the current executive officers of the Company:Company
is as follows:
NAME AGE OFFICE HELD
- ---- --- -----------
MarvinRichard Sands 7449 Chairman of the Board,
Richard Sands 47 President and Chief
Executive Officer
Robert Sands 3941 Group President
Peter Aikens 61 President and Chief Executive ViceOfficer of
Matthew Clark plc
Alexander L. Berk 50 President General Counsel and Secretary
Daniel C. Barnett 48Chief Executive Officer of
Barton Incorporated
Agustin Francisco Huneeus 34 President of Franciscan Vineyards, Inc.
Jon Moramarco 43 President and Chief Executive Officer of
Canandaigua Wine Company, Inc.
Alexander L. BerkThomas J. Mullin 48 Executive Vice President and General Counsel
George H. Murray 53 Executive Vice President and Chief OperatingHuman
Resources Officer of Barton
Incorporated
Thomas S. Summer 44 Senior46 Executive Vice President and Chief Financial
Officer
Marvin Sands is the founder of the Company, which is the successor to a
business he started in 1945. He has been a director of the Company and its
predecessor since 1946 and was Chief Executive Officer until October 1993.
Marvin Sands is the father of Richard Sands and Robert Sands.
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 a son of Marvin Sands and the brother of Robert Sands.
Robert Sands was appointed Executive ViceGroup President General Counsel in October 1993. In January 1995, he was appointed Secretary of the Company. He was
electedApril 2000 and has served as
a director of the Company insince January 1990 and1990. 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 since June 1990. Fromfrom June 1986 until his appointment as Vice
President, General Counsel, Mr. Sands was employed by the Company as General
Counsel.through May 2000. He
is a son of Marvin Sands and the brother of Richard Sands.
Daniel C. BarnettPeter Aikens serves as President and Chief Executive Officer of Canandaigua Wine Company, Inc.,Matthew
Clark plc, a wholly-owned subsidiary of the Company. In this capacity, Mr.
BarnettAikens is in charge of the Company's wine division,Matthew Clark segment, and has been since
he joined the Company acquired control of Matthew Clark in November 1995. From July 1994 to October 1995, Mr. Barnett served as
President andDecember 1998. He has been the
Chief Executive Officer of Koala Springs International, a juice
beverage company. Prior to that, from April 1991 to June 1994, Mr. Barnett was
Vice PresidentMatthew Clark plc since May 1990 and General Managerhas been in the
brewing and drinks industry for most of Nestle USA's beverage businesses. From
October 1988 to April 1991, he was President of Weyerhauser's baby diaper
division.his career.
Alexander L. Berk serves as President and Chief OperatingExecutive Officer of Barton
Incorporated, a wholly-owned subsidiary of the Company. In this capacity, Mr.
Berk is in charge of the Company's beer and spirits divisions.Barton segment. From 1990 until February
1998, Mr. Berk became
an executive officer of the Company on February 28, 1998, when his position was
expanded to include overall responsibility for the beer and spirits divisions.
This change occurred when Ellis M. Goodman, who formerly held this
responsibility, left Barton to pursue other interests. Mr. Berk has served as President and Chief Operating Officer of Barton since 1990. Fromand from 1988
to 1990, Mr. Berkhe was the President and Chief Executive Officer of Schenley
IndustriesIndustries. Mr. Berk has been in the alcoholic beverage industry for most of his
career, serving in various positions.
Agustin Francisco Huneeus serves as President of Franciscan Vineyards,
Inc., a wholly-owned subsidiary of the Company. In this capacity, Mr. Huneeus is
in charge of the Company's Franciscan segment. Since December 1995 and previouslyprior to
becoming President on May 15, 2000, he served in various other positions with
SchenleyFranciscan, 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-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 1971.1992. Mr. Berk served during an interim periodMoramarco has more than 15 years of 1974 to 1978diverse 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 DirectorGeneral
Counsel on May 30, 2000. Prior to joining the Company, Mr. Mullin served as
President and Chief Executive Officer of Marketing for SchieffelinTD 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, and from 1982 through 1985, he was a partner in the law firm of
Phillips, Lytle, Hitchcock, Blaine & Co., Inc.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 importerinternational 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 of
wineRochester, New York, including the position of Senior Vice President of Human
Resources and spirits.Marketing from 1991 to 1994.
Thomas S. Summer joined the Company duringin April l997 as Senior Vice President
and Chief Financial Officer.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.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- ------- -----------------------------------------------------------------
MATTERS
-------
TheOn October 12, 1999, the Company's Class A Common Stock (the "Class A
Stock") and Class B Common Stock (the "Class B Stock") tradebegan trading on the NASDAQ NationalNew
York Stock MarketExchange(R) ("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"
and "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. 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 as reportedand 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 Nationaland the NYSE, respectively, and
the high and low sales prices of the Class B Stock Market.reflect trades on the NASDAQ.
For the 4th Quarter of Fiscal 2000, 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--------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- ----------- -----------
Fiscal 19971999
High $39 1/2 $32 1/4 $27 1/2 $31$ 59 3/4 Low $27 $22 7/$ 52 3/8 $15 3/4 $25$ 52 1/2
Fiscal 1998
High $32 1/4 $42 3/4 $53 1/2 $588 $ 61 1/2
Low $21$ 45 9/16 $ 40 1/4 $ 35 1/4 $ 45 5/8
Fiscal 2000
High $ 55 1/4 $ 60 3/8 $ 61 3/16 $ 54 11/16
Low $ 45 3/8 $ 42 7/8 $29 3/8 $39 1/2 $43$ 53 $ 46 3/4
CLASS B STOCK
---------------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER--------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- ----------- -----------
Fiscal 19971999
High $39$ 59 3/4 $ 51 1/2 $32$ 52 $ 62 1/2 $29 3/4 $34
Low $27 3/4 $25 3/8 $19 $28 3/4
Fiscal 1998
High $37 $43 $54 5/8 $57 3/4
Low $27 $35$ 45 1/2 $40$ 40 3/4 $45$ 37 1/4 $ 46 7/8
Fiscal 2000
High $ 55 3/4 $ 60 $ 60 3/4 $ 58 1/8
Low $ 47 1/2 $ 44 1/4 $ 56 $ 49
At May 18, 1998,15, 2000, the number of holders of record of Class A Stock and Class
B Stock of the Company were 1,076940 and 317,273, 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 bank Credit Agreement,senior credit facility, the Company's indenture for its $130 million 8
3/4% Senior Subordinated Notes due December 2003, and 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 (pound)75 million 8 1/2% Series B Senior Notes due November
2009 and its (pound)80 million 8 1/2% Series C Senior Notes due November 2009
restrict the payment of cash dividends.
ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------
FOR THE SIX
FOR THE YEARS ENDED MONTHS FOR THE YEAR
YEAR ENDED FOR THE YEARS ENDED ENDED ENDED
FEBRUARY 29, FEBRUARY 28, FEBRUARY 29, AUGUST 31,
--------------------------------------- -------------------------------------- -------------- -------------------------------------------------
2000 1999 1998 1997 1996 1995
1994 1993
------------ ----------------------- ----------- ----------- -------------- ---------- ----------- ----------------------
(in thousands, except per share data)
Gross sales $ 3,088,699 $ 1,984,801 $ 1,632,357 $ 1,534,452 $ 738,415 $ 1,185,074
$ 861,059 $ 389,417
Less-excise taxes (748,230) (487,458) (419,569) (399,439) (203,391) (278,530)
(231,475) (83,109)
------------ ------------- ------------ ------------ ----------- ----------- ----------- -------------- ------------
Net sales 2,340,469 1,497,343 1,212,788 1,135,013 535,024 906,544
629,584 306,308
Cost of product sold (864,053) (844,181) (396,208) (653,811) (447,211) (214,931)
------------ ------------- ------------(1,618,009) (1,049,309) (869,038) (812,812) (389,281) (657,883)
------------ ----------- ----------- ----------- -------------- ------------
Gross profit 348,735 290,832 138,816 252,733 182,373 91,377722,460 448,034 343,750 322,201 145,743 248,661
Selling, general and
administrative expenses (481,909) (299,526) (231,680) (208,991) (112,411) (159,196)
(121,388) (59,983)
Nonrecurring restructuring
expensescharges (5,510) (2,616) - - (2,404) (2,238)
(24,005) -
------------ ------------- ------------ ------------ ----------- ----------- ----------- -------------- ------------
Operating income 117,055 81,841 24,001 91,299 36,980 31,394235,041 145,892 112,070 113,210 30,928 87,227
Interest expense, net (106,082) (41,462) (32,189) (34,050) (17,298) (24,601)
(18,056) (6,126)
------------ ------------- ------------ ------------ ----------- ----------- ----------- -------------- ------------
Income before provisiontaxes and
extraordinary item 128,959 104,430 79,881 79,160 13,630 62,626
Provision for Federal and state income taxes 84,866 47,791 6,703 66,698 18,924 25,268
Provision for Federal and
state income taxes (34,795) (20,116) (3,381) (25,678) (7,191) (9,664)
------------ ------------- ------------(51,584) (42,521) (32,751) (32,977) (6,221) (24,008)
------------ ----------- ----------- ----------- -------------- ------------
Income before extraordinary item 77,375 61,909 47,130 46,183 7,409 38,618
Extraordinary item, net of income taxes - (11,437) - - - -
------------ ----------- ----------- ----------- -------------- ------------
Net income $ 50,07177,375 $ 27,67550,472 $ 3,32247,130 $ 41,02046,183 $ 11,7337,409 $ 15,604
============ ============= ============38,618
============ =========== =========== =========== ============== ============
Earnings per common share:
BasicBasic:
Income before extraordinary item $ 2.684.29 $ 1.433.38 $ 0.172.52 $ 2.182.39 $ 0.760.38 $ 1.32
============ ============= ============2.06
Extraordinary item - (0.62) - - - -
------------ ----------- ----------- ----------- -------------- ------------
Earnings per common share - basic $ 4.29 $ 2.76 $ 2.52 $ 2.39 $ 0.38 $ 2.06
============ =========== =========== Diluted=========== ============== ============
Diluted:
Income before extraordinary item $ 2.624.18 $ 1.423.30 $ 0.172.47 $ 2.162.37 $ 0.750.37 $ 1.20
============ ============= ============2.03
Extraordinary item - (0.61) - - - -
------------ ----------- ----------- ----------- -------------- ------------
Earnings per common share - diluted $ 4.18 $ 2.69 $ 2.47 $ 2.37 $ 0.37 $ 2.03
============ =========== =========== =========== ============== ============
Total assets $ 1,073,1592,348,791 $ 1,020,9011,793,776 $ 1,054,5801,090,555 $ 785,9211,043,281 $ 826,5621,045,590 $ 355,182
============ ============= ============770,004
============ =========== =========== =========== ============== ============
Long-term debt $ 1,237,135 $ 831,689 $ 309,218 $ 338,884 $ 327,616 $ 198,859
$ 289,122 $ 108,303
============ ============= ============ ============ =========== =========== =========== ============== ============
For the fiscal yearsyear ended February 29, 2000, and for the fiscal year ended
February 28, 1998 and 1997, and the six months ended
February 29, 1996,1999, 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 28, 1998,29, 2000,
under Item 8 of this Report.
Earnings per common share for all periods presented reflectAnnual Report on Form 10-K. During January 1996, the Board
of Directors of the Company changed the Company's adoptionfiscal year end from August 31
to the last day of SFAS No. 128 (see Notes 1 and 10 in the Notes to Consolidated
Financial Statements as of February 28, 1998, under Item 8 of this Report).February.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- ---------------------------------------------------------------
RESULTS-----------------------------------------------------------------------
OF OPERATIONS
----------------------------------
INTRODUCTION
- ------------
The following discussion and analysis summarizes the significant factors
affecting (i) consolidated results of operations of the Company for the year
ended February 28, 199829, 2000 ("Fiscal 1998"2000"), compared to the year ended February 28,
19971999 ("Fiscal 1997"1999"), and Fiscal 19971999 compared to the twelve months ended February
29, 1996 ("Pro Forma Fiscal 1996"), and the six month transition period ended
February 29, 1996 ("Transition Period"), compared to the six monthsyear ended February 28,
19951998 ("February 1995 Six Months"Fiscal 1998"), and (ii) financial liquidity and capital resources for
Fiscal 1998.2000. This discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and notes thereto included herein.
The Company operates primarily in the beverage alcohol industry.industry in North
America and the United Kingdom. The Company reports its operating results in
five segments: Canandaigua Wine (branded popularly-priced 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).
ACQUISITIONS IN FISCAL 2000 AND FISCAL 1999
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").
Also on June 4, 1999, the Company purchased all of the outstanding capital stock
of Simi Winery, Inc. ("Simi"). (The acquisition of the capital stock of Simi is
hereafter referred to as the "Simi Acquisition".) The Simi Acquisition included
the Simi winery, 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
operations of the Company since the date of acquisition. On February 29, 2000,
Simi was merged into Franciscan Estates.
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.
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 Company'sMatthew Clark Acquisition established the Company as a leading
British producer of cider, wine and bottled water and as a leading beverage
alcohol brands are marketedwholesaler in three general categories: wine, beer and
distilled spirits.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 19982000 COMPARED TO FISCAL 19971999
NET SALES
The following table sets forth the net sales (in thousands of dollars) and
unit volume (in thousandsby
operating segment of cases), if applicable, for branded beverage alcohol
products and other products and services sold by the Company for Fiscal 19982000 and Fiscal 1997.
Fiscal 1998 Compared to Fiscal 1997
---------------------------------------------------------------------
Net Sales Unit Volume
------------------------------------ ----------------------------
Branded Beverage %Increase/ %Increase/
Alcohol Products: 1998 1997 (Decrease) 1998 1997 (Decrease)
---------- ---------- ---------- ------ ------ ----------
Wine $ 533,257 $ 512,510 4.0% 27,793 27,393 1.5%
Beer 376,607 298,925 26.0% 30,016 23,848 25.9%
Spirits 200,276 183,843 8.9% 9,930 9,390 5.8%
Other (a) 102,648 139,735 (26.5%) N/A N/A N/A
---------- ---------- ---------- ------ ------ ----------
$1,212,788 $1,135,013 6.9% 67,739 60,631 11.7%
========== ========== ========== ====== ====== ==========
(a) Other consists primarily of nonbranded concentrate sales, contract
bottling and other production services and bulk product sales, none of
which are sold in case quantities.
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%
------------ ------------
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 19982000 increased to $1,212.8$2,340.5 million from $1,135.0$1,497.3
million for Fiscal 1997,1999, an increase of $77.8$843.1 million, or 6.9%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) $77.7 millionan increase in sales of additional beer sales, largely
Mexican beer,Arbor Mist, which
was introduced in the second quarter of Fiscal 1999, (ii) $22.5 million of additional tablean increase in the
Company's bulk wine sales, (iii) an increase in sparkling wine sales as a result
of millennium sales, and (iii) $16.4
million of additional spirits(iv) an increase in Almaden box wine sales. These
increases were partially offset by lowerdeclines 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 grape juice concentrate, bulk wine$173.6 million, or 26.1%. This
increase resulted primarily from volume growth and other branded wine
products. Although table wine sales have increased,selling price increases in
the Company has experienced
a market share decline of its wine products during Fiscal 1998, a trend which
has continued into fiscal 1999. The Company is implementing various programs to
address the decline, such as addressing noncompetitive consumer prices of its
wine products on a market-by-market basisMexican beer portfolio as well as increasing its promotional
activities where appropriate.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 $348.7$722.5 million for Fiscal 19982000 from
$290.8$448.0 million for Fiscal 1997,1999, an increase of $57.9$274.4 million, or 19.9%61.3%. The
dollar increase in gross profit was primarily related to sales from the
acquisitions of Matthew Clark, the Black Velvet Assets and Franciscan, 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 28.8%30.9% for Fiscal 19982000 from 25.6%29.9% for Fiscal 1997.1999. The dollar
increase in the gross profit margin resulted primarily from increased beerthe sales higher average selling pricesof
higher-margin spirits and cost structure
improvements related to brandedsuper-premium and ultra-premium wine sales, higher average selling pricesacquired in excessthe
acquisitions of cost increases related to grape juice concentrate salesthe Black Velvet Assets and higher
average selling prices and increased volume related to branded spirits sales.
These increases were partially offset by lower sales volume of grape juice
concentrate and bulk wine.
In general, the preferred method of accounting for inventory valuation is
the last-in, first-out method ("LIFO") because, in most circumstances, it
results in a better matching of costs and revenues. For comparison purposes to
companies using the first-in, first-out method of accounting for inventory
valuation ("FIFO") only, gross profit reflected an addition of $5.0 million in
Fiscal 1998 and a reduction of $31.4 million in Fiscal 1997 due to the Company's
LIFO accounting method.Franciscan, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $231.7$481.9 million
for Fiscal 19982000 from $209.0$299.5 million for Fiscal 1997,1999, an increase of $22.7$182.4
million, or 10.9%60.9%. The dollar increase in selling, general and administrative
expenses resulted principallyprimarily 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
sellingpromotional costs associated with
the Company's increased brandedto generate additional sales volume, particularly of certain
Canandaigua Wine brands and a one-time charge for
separation costs related to an organizational change within the Company.Barton beer brands. Selling, general and
administrative expenses as a percent of net sales increased to 19.1%20.6% for Fiscal
19982000 as compared to 18.4%20.0% for Fiscal 1997.1999. 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 one-time charge for separation costsacquisitions 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 an organizational changethe closure of a cider production facility within the Company and from a changeMatthew Clark
operating segment in the sales mix drivenUnited 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/(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
-------------------------------------
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 Profit $ 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 net salesFiscal 2000. Operating income for the Matthew Clark operating
segment, excluding nonrecurring charges of branded products, which have a
higher percent of marketing and selling cost relative to sales, partially offset
by a decrease in net sales of nonbranded products, which have relatively little
associated marketing and selling costs.$2.9 million, was $51.4 million.
INTEREST EXPENSE, NET
Net interest expense decreasedincreased to $32.2$106.1 million for Fiscal 19982000 from $34.1$41.5
million for Fiscal 1997, a decrease1999, an increase of $1.9$64.6 million, or 5.5%155.9%. The decrease wasincrease
resulted primarily duefrom additional interest expense associated with the
borrowings related to a decrease in the Company's average borrowings which was
partially offset by an increase inacquisitions of Matthew Clark, the average interest rate.
PROVISION FOR FEDERAL AND STATE INCOME TAXES
The Company's effective tax rate for Fiscal 1998 decreased to 41.0% from
42.1% for Fiscal 1997 as Fiscal 1997 reflected a higher effective tax rate in
California caused by statutory limitations on the Company's ability to utilize
certain deductions.Black Velvet Assets
and Franciscan.
NET INCOME
As a result of the above factors, net income increased to $50.1$77.4 million for
Fiscal 19982000 from $27.7$50.5 million for Fiscal 1997,1999, an increase of $22.4$26.9 million, or
80.9%53.3%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Fiscal 19982000 were
$150.2$299.8 million, an increase of $36.5 million$115.3 over EBITDA of $113.7$184.5 million for Fiscal
1997.1999. 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 19971999 COMPARED TO PRO FORMA FISCAL 19961998
NET SALES
Net sales for Fiscal 1997 increased to $1,135.0 million from $987.1 million
for Pro Forma Fiscal 1996, an increase of $147.9 million, or 15.0%. This
increase resulted primarily from (i) $59.1 million of additional imported beer
sales, primarily Mexican beer; (ii) the inclusion of $49.0 million of net sales
of products and services from the UDG Acquisition during the period from March
1, 1996, through August 31, 1996; (iii) $22.7 million of higher sales of grape
juice concentrate; (iv) $19.4 million of increased net sales of the Company's
varietal table wine products (wine named for the grape that comprises the
principal component of the wine) resulting from selling price increases
implemented between October 1995 and May 1996, as well as additional unit
volume; and (v) $5.8 million of additional sales of spirits brands; partially
offset by $5.2 million of decreased sales of the Company's nonvarietal table
wine brands (wine named after the European regions where similar types of wine
were originally produced [e.g., burgundy], niche products and proprietary
brands) and a decrease of $2.9 million in sales of other products and services.
For purposes of computing the net sales and unit volume comparative data
for the table below and for the remainder of the discussion of net sales, sales
of spirits acquired in the UDG Acquisition have been included for the period
from March 1, 1995, through August 31, 1995, which was prior to the UDG
Acquisition.
The following table sets forth the net sales (in thousands of dollars) and
unit volume (in thousandsby
operating segment of cases), if applicable, for branded beverage alcohol
products and other products and services sold by the Company for Fiscal 19971999 and Pro Forma Fiscal 1996.
Fiscal 1997 Compared to Pro Forma Fiscal 1996
---------------------------------------------------------------------
Net Sales Unit Volume
------------------------------------ ----------------------------
Branded Beverage %Increase/ %Increase/
Alcohol Products: 1997 1996 (Decrease) 1997 1996 (Decrease)
---------- ---------- ---------- ------ ------ ----------
Wine $ 512,510 $ 499,962 2.5% 27,393 28,232 (3.0%)
Beer 298,925 239,786 24.7% 23,848 19,344 23.3%
Spirits (a) 183,843 178,803 2.8% 9,390 9,223 1.8%
Other (b) 139,735 110,047 27.0% N/A N/A N/A
---------- ---------- ---------- ------ ------ ----------
$1,135,013 $1,028,598 10.3% 60,631 56,799 6.7%
========== ========== ========== ====== ====== ==========
(a) For comparison purposes only, net sales of $41,514 and unit volume of
2,001 cases of distilled spirits brands acquired in the September 1,
1995, UDG Acquisition have been included in the table for the twelve
months ended February 29, 1996. These amounts represent net sales and
unit volume of those brands for the period March 1, 1995, through
August 31, 1995, which was prior to the UDG Acquisition.
(b) Other consists primarily of nonbranded concentrate sales, contract
bottling and other production services and bulk product sales, none of
which are sold in case quantities.
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 and unit volume for Fiscal 19971999 increased 10.3% and 6.7%,
respectively, as compared to Pro Forma$1,497.3 million from $1,212.8
million for Fiscal 1996. The net1998, 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 higher imported beer sales, higher sales(i) the introduction of grape juice
concentrate, price increases on most of the Company's brandedtwo new products, Arbor
Mist and Mystic Cliffs, in Fiscal 1999, (ii) Paul Masson Grande Amber Brandy
growth, and (iii) Almaden boxed wine products,
particularly varietal table wine brands, and increased sales of the Company's
spirits brands. Unit volumegrowth. These increases were led by substantial growth in the
Company's imported beer brands and increases in its varietal table wine and
spirits brands, partially
offset by declines in unit volume of nonvarietal tableother wine dessert winebrands and sparkling wine. Excludingin the impact of the UDG
Acquisition, net sales and unit volume increased by 10.7% and 7.1%,
respectively.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 the$96.8 million, or 17.0%. This
increase resulted primarily from an increase in sales of beer brands acquiredled by
Barton's Mexican portfolio. This increase was partially offset by a decrease in
the UDG Acquisition decreased
by 1.2% and unit volume increased by 2.5% in Fiscal 1997.revenues from Barton's spirits contract bottling business.
Matthew Clark
-------------
Net sales declines
reflectedfor Matthew Clark for Fiscal 1999 since the impactdate of downward selling price adjustments to bring these brands
more in line with the pricing strategy of the rest of the Company's spirits
portfolio.acquisition,
December 1, 1998, were $158.8 million.
GROSS PROFIT
The Company's gross profit increased to $290.8$448.0 million infor Fiscal 19971999 from
$264.8$343.8 million in Pro Formafor Fiscal 1996,1998, an increase of $26.1$104.3 million, or 9.8%30.3%. This changeThe
dollar increase in gross profit resulted primarily from (i) $20.5 million of gross
profit fromthe sales generated duringby
the period from March 1, 1996, through August
31, 1996, fromMatthew Clark Acquisition completed in the business acquired from UDG; (ii) $19.0 millionfourth quarter of additional
gross profit fromFiscal 1999,
increased beer sales;sales and (iii) $13.4 millionthe combination of higher average selling prices and
lower gross
profit primarily due to increased cost of product sold, particularly higher
grapeaverage costs in the fall 1996 harvest and additional costs resulting from
inefficiencies in the production of wine and grape juice concentrate at the
Company's Mission Bell winery in California, partially offset by additional net
sales resulting primarily from selling price increases of the Company'sfor branded wine and grape juice concentrate products andsales. As a reduction of certain long-term
grape contracts to reflect current market prices and the renegotiation of
certain unfavorable contracts. The Company's increased production costs stemmed
from low bulk wine conversion rates and bottling inefficiencies. The Company
also experienced high imported concentrate and bulk freight costs. The Company
has instituted a series of steps to address these matters, including a
reengineering effort to redesign its work processes, organizational structure
and information systems.
Gross profit as a percentagepercent of net sales, was 25.6%gross
profit increased to 29.9% for Fiscal 1997 as
compared to 26.8% in Pro Forma1999 from 28.3% for Fiscal 1996.1998. The
declineincrease in the gross profit margin was largely due toresulted primarily from higher selling
prices and lower costs particularly grape costs, offor Canandaigua Wine's branded wine and
grape juice concentrate products,sales, partially
offset by increased selling prices
on most of the Company's branded wine and grape juice concentrate products. The
Company has experienced significant increases in its cost of grapes in both the
1995 and 1996 harvests. The Company believes that these increases in grape costs
were due to an imbalance in supply and demand in the varieties which the Company
purchases.
In general, the preferred method of accounting for inventory valuation is
the last-in, first-out method ("LIFO") because, in most circumstances, it
results in a better matching of costs and revenues. For comparison purposes to
companies using the first-in, first-out method of accounting for inventory
valuation ("FIFO") only, gross profit reflected a reduction of $31.4 million and
$3.9 million in Fiscal 1997 and Pro Forma Fiscal 1996, respectively,sales mix shift towards lower margin products, particularly due to
the Company's LIFO accounting method.growth in Barton's beer sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $299.5 million
for Fiscal 1997 were $209.01999 from $231.7 million for Fiscal 1998, an increase of $17.3$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 Pro Forma19.1% for Fiscal 1996. Of
this amount, $13.5 million was due1998. The increase in percent of net sales
resulted primarily from (i) Canandaigua Wine's investment in brand building and
efforts to increased personnelincrease market share and related(ii) the Matthew Clark Acquisition, as
Matthew Clark's selling, general and administrative expenses stemming fromas a percent of net
sales is typically higher than for the Company's reengineering efforts, including the
continued strengtheningother operating segments.
NONRECURRING CHARGES
The Company incurred nonrecurring charges of the Company's management, and other expenses
consistent with the Company's growth; and $11.3$2.6 million in Fiscal 1999
related to the UDG
Acquisition. These itemsclosure of a cider production facility in the United Kingdom. No
such charges were offset primarily by one-time costs incurred in advertisingFiscal 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 promotion expenses in Pro Forma Fiscal 1996 due1998.
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 change in
the Company's fiscal year-end.
NONRECURRING RESTRUCTURING EXPENSES
Pro Formaabove factors, operating income increased to $145.9
million for Fiscal 1996 included $4.01999 from $112.1 million for Fiscal 1998, an increase of
nonrecurring restructuring
expenses.$33.8 million, or 30.2%.
INTEREST EXPENSE, NET
Net interest expense totaled $34.1increased to $41.5 million infor Fiscal 1997,1999 from $32.2
million for Fiscal 1998, an increase of $5.3$9.3 million, as compared to Pro Forma Fiscal 1996,or 28.8%. The increase
resulted primarily due tofrom additional interest expense fromassociated with the
UDG Acquisition financing.
PROVISION FOR FEDERAL AND STATEborrowings related to the Matthew Clark Acquisition.
EXTRAORDINARY ITEM, NET OF INCOME TAXES
The Company's effective tax rate forCompany incurred an extraordinary charge of $11.4 million after taxes
in Fiscal 1997 was 42.1% as compared1999. This charge resulted from fees related to 40.5% for Pro Forma Fiscal 1996 due to a higher effective tax rate in California
caused by statutory limitations onthe replacement of the
Company's ability to utilize certain
deductions.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 1997 was $27.71999 from $47.1 million for Fiscal 1998, an increase of $3.7$3.3 million, as compared to Pro Forma Fiscal 1996.or
7.1%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Fiscal 19971999 were
$113.7$184.5 million, an increase of $22.6$39.3 million over EBITDA of $91.1$145.2 million in Pro
Formafor
Fiscal 1996.1998. 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.
TRANSITION PERIOD COMPARED TO FEBRUARY 1995 SIX MONTHS
NET SALES
Net sales for the Transition Period increased to $535.0 million from $454.5
million for the February 1995 Six Months, an increase of $80.5 million, or
17.7%. In addition to the net sales of $53.4 million of products and services
from the UDG Acquisition, the Company had additional net sales of $23.6 million
from its imported beer brands and $14.1 million from its varietal wine products,
partially offset by lower sales of bulk wine, nonvarietal wine, contract
bottling services, grape juice concentrate and dessert wine.
For purposes of computing the net sales and unit volume comparative data
below and for the remainder of the discussion of net sales, sales of products
acquired in the UDG Acquisition have been included in the Company's results for
the entire Transition Period and the entire February 1995 Six Months, which was
prior to the UDG Acquisition.
The following table sets forth the net sales (in thousands of dollars) and
unit volume (in thousands of cases), if applicable, for branded beverage alcohol
products and other products and services sold by the Company for the Transition
Period and the February 1995 Six Months.
Transition Period Compared to February 1995 Six Months
-----------------------------------------------------------------------------
Net Sales Unit Volume
------------------------------------ ------------------------------------
February February
Branded Beverage Transition 1995 %Increase/ Transition 1995 %Increase/
Alcohol Products: Period Six Months (Decrease) Period Six Months (Decrease)
---------- ---------- ---------- ---------- ---------- ----------
Wine $ 268,782 $ 255,881 5.0% 14,783 14,537 1.7%
Beer 115,757 92,131 25.6% 9,316 7,444 25.1%
Spirits (a) 91,219 96,547 (5.5%) 4,648 4,793 (3.0%)
Other (b) 59,266 60,548 (2.1%) N/A N/A N/A
---------- ---------- ---------- ---------- ---------- ----------
$ 535,024 $ 505,107 5.9% 28,747 26,774 7.4%
========== ========== ========== ========== ========== ==========
(a) For comparison purposes only, net sales of $50,622 and unit volume of
2,340 of distilled spirits have been included in the table for the six
months ended February 28, 1995, which was prior to the UDG
Acquisition.
(b) Other consists primarily of nonbranded concentrate sales, contract
bottling and other production services and bulk product sales, none of
which are sold in case quantities.
Net sales and unit volume for the Transition Period increased 5.9% and
7.4%, respectively, as compared to the February 1995 Six Months. These increases
were principally due to increased net sales and unit volume of the Company's
imported beer brands and varietal table wine brands. Excluding the impact of the
UDG Acquisition, net sales and unit volume grew by 6.0% and 9.2%, respectively,
in the Transition Period. Unit sales of the brands acquired in the UDG
Acquisition were 11.5% lower than in the February 1995 Six Months, accounting
for lower overall spirits sales. During the period from 1993 to 1995, the brands
acquired in the UDG Acquisition declined in excess of industry rates. The
Company believes that these declines resulted from noncompetitive retail pricing
and promotional activities.
GROSS PROFIT
Gross profit for the Transition Period was $138.8 million, an increase of
$12.0 million as compared to gross profit of $126.8 million for the February
1995 Six Months. This increase in gross profit resulted from $18.5 million of
additional gross profit from sales generated from the business acquired from UDG
and $1.0 million from ongoing operations, which was offset in part by $7.5
million of (i) overtime, freight and other expenses and restructuring charges
related to production and shipping delays associated with the relocation of West
Coast bottling operations to the Company's Mission Bell winery, employee bonuses
and certain nonrecurring expenses; and (ii) as a result of the change in the
Company's fiscal year end, increased cost of product sold due to the different
amount and composition of inventory levels at the end of February versus the end
of August, the Company's former fiscal year end. The $1.0 million increase in
gross profit from ongoing operations resulted from a $7.3 million increase in
gross profit, primarily due to increased sales and gross margins from the
Company's imported beer business, partially offset by $6.3 million of lower
gross profits in the Company's wine and grape juice concentrate businesses,
which was due primarily to higher grape costs which were only partially
recovered by selling price increases in the Transition Period.
Gross profit as a percentage of net sales declined from 27.9% to 25.9% in
the Transition Period. This decline was due primarily to the impact of higher
grape and other costs in the Transition Period, partially offset by the higher
gross profit sales of brands acquired from UDG and improved gross profit as a
percentage of net sales in the Company's imported beer business. The gross
profit percentage was positively impacted by the UDG Acquisition, as gross
profit as a percentage of net sales on the business acquired from UDG was 34.7%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses totaled $112.4 million for the
Transition Period, an increase of $32.5 million as compared to the February 1995
Six Months. Exclusive of $11.1 million of nonrecurring costs including, as a
result of the change in the Company's fiscal year end, the recognition of higher
than normal advertising and promotion expenses in the Transition Period due to
the seasonality of these expenses and employee bonuses and other nonrecurring
costs and $8.3 million related to the UDG Acquisition, selling, general and
administrative expenses increased by $13.1 million, or 16.3%, as compared to the
February 1995 Six Months. Advertising and promotion increases of $6.7 million
were related primarily to the Almaden/Inglenook Product Lines which were
acquired in August 1994 and which the Company did not advertise or promote at a
full level in the first several months after their acquisition. The Company also
incurred increased advertising and promotion expenses related to the increased
sales of its imported beer. Selling expenses increased by $5.4 million primarily
as a result of the Almaden/Inglenook Product Line acquisitions, with the
Transition Period including a full complement of sales and marketing personnel
to service the brands that were not in place for the entire period in the
February 1995 Six Months. The Transition Period also included additional sales
personnel in the Company's spirits and imported beer divisions. Other general
and administrative expenses increased by $1.0 million.
Excluding the nonrecurring costs referred to above and the UDG Acquisition,
selling, general and administrative expenses as a percent of net sales increased
to 19.3% from 17.6% in the February 1995 Six Months due to the inclusion of a
full complement of advertising, promotion and selling expense related to the
Almaden/Inglenook Product Lines.
NONRECURRING RESTRUCTURING EXPENSES
The Company incurred net restructuring charges of $2.4 million in the
Transition Period, as compared to restructuring charges of $0.7 million in the
February 1995 Six Months. The restructuring expenses in the Transition Period
represent $3.1 million of incremental, nonrecurring expenses such as overtime
and freight expense related to production and shipment delays associated with
the Restructuring Plan, offset by a net reduction of $0.7 million in accrued
liabilities associated with the Restructuring Plan to take into account lower
than expected expenses for severance and facility holding and closure costs. See
the Notes to the Company's Consolidated Financial Statements included herein.
INTEREST EXPENSE, NET
Net interest expense increased $4.2 million to $17.3 million in the
Transition Period as compared to the February 1995 Six Months. The increase
resulted from additional interest expense associated with the borrowings related
to the UDG Acquisition, amounting to $5.1 million, and increased working capital
requirements due primarily to higher grape costs and the UDG Acquisition,
partially offset by net reductions in the Company's term loans and revolving
loans using proceeds of the Company's November 18, 1994, public equity offering.
PROVISION FOR FEDERAL AND STATE INCOME TAXES
The Company's effective tax rate for the Transition Period increased to
50.4% from 38.5% for the February 1995 Six Months due to a higher effective tax
rate in California caused by statutory limitations on the Company's ability to
utilize certain deductions.
NET INCOME
As a result of the above factors, net income for the Transition Period was
$3.3 million, a decrease of $17.0 million as compared to the February 1995 Six
Months.
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 19982000 CASH FLOWS
OPERATING ACTIVITIES
Net cash provided by operating activities for Fiscal 19982000 was $28.8$148.1
million, which resulted from $88.7$139.9 million in net income adjusted for noncash
items, less $59.9plus $8.2 million representing athe net increasechange in the Company's operating
assets in excess of operatingand liabilities. The net increasechange in operating assets in excess of operatingand liabilities
resulted primarily from an increaseincreases in the
Company's inventory levels of $65.6 million related primarily to higher
purchases of grapes from the 1997 grape harvest.accrued income taxes, accrued interest
expense and accrued salaries and commissions, partially offset by decreases in
accounts payable and accrued excise taxes.
INVESTING ACTIVITIES AND FINANCING ACTIVITIES
Net cash used in investing activities for Fiscal 19982000 was $18.6$495.7 million,
which resulted primarily from $31.2net cash paid of $452.9 million for the
acquisitions of the Black Velvet Assets and Franciscan and $57.7 million of
capital expenditures, including $11.5$8.9 million for vineyards, partially offset by proceeds from the sale of property,
plant and equipment of $12.6 million.vineyards.
Net cash used inprovided by financing activities for Fiscal 19982000 was $18.9$355.6
million, which resulted primarily from the repurchaseproceeds of $9.2$1,486.2 million of the Company's
Class A Common Stock and principal payments of $186.4 millionfrom
issuance of long-term debt, which included $74.2including $400.0 million incurred in connection with
the acquisitions of scheduledthe Black Velvet Assets and required principal paymentsFranciscan and payment of $112.2$900.0 million
of principalincurred to repay amounts outstanding under the Company's Third Amended and
Restated Credit Agreement which was refinanced under the December 19, 1997,
Credit Agreement (see Note 6 to the Company's financial statements located in
Item 8 of this Report on Form 10-K).senior credit facility. This
amount was partially offset by proceedsprincipal payments of $140.0$1,060.2 million of
long-term debt as a resultand repayment of the refinancing and
proceeds of $34.9$60.4 million of net revolving loan borrowings under the Company's
Credit Agreement.borrowings.
As of February 28, 1998,29, 2000, under the 2000 Credit Agreement (as defined
below), the Company had outstanding term loans of $140.0$570.1 million bearing a
weighted average interest at 6.4%rate of 7.95%, $91.9$26.8 million of revolving loans
bearing a weighted average interest at 6.0%rate of 7.43%, undrawn revolving letters of
credit of $3.9$10.7 million, and $89.2$262.5 million in revolving loans available to be
drawn.
Total debt outstanding as of February 28, 1998,29, 2000, amounted to $425.2$1,317.9
million, a decreasean increase of $11.1$392.5 million from February 28, 1997.1999. The ratio of
total debt to total capitalization decreasedincreased to 50.6%71.7% as of February 29, 2000,
from 68.0% as of February 28, 1998, from 54.5% as
of February 28, 1997.1999.
During January 1996,June 1998, the Company's Board of Directors authorized the
repurchase of up to $30.0$100.0 million of its Class A Common Stock and Class B
Common Stock (the "Repurchase Program"). DuringStock. 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 1997,26, 2000, the Company completed the
Repurchase Program with the repurchase of 362,100 shares of its Class A Common
Stock at a cost of $9.2 million. With respect to the Repurchase Program, the
Company repurchased a total of 1,149,550had purchased 1,018,836 shares of Class
A Common Stock at an aggregate cost of $30.0$44.9 million, or at an average cost of
$26.10$44.05 per share.
THE COMPANY'SSENIOR CREDIT AGREEMENTFACILITY
During June 1999, the Company financed the purchase price for the
Franciscan Acquisition primarily through additional term loan borrowings under
the senior credit facility. The Company financed the purchase price for the Simi
Acquisition with revolving loan borrowings under the senior credit facility.
During August 1999, as discussed below, a portion of the Company's
borrowings under its senior credit facility were repaid with the net proceeds of
its Senior Notes (as defined below) offering.
On December 19, 1997,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,administrative agent, entered into a new $325.0 million senior
Credit Agreementcredit facility (the "Credit"2000 Credit Agreement"). The proceeds2000 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 Third Amendedprior senior credit facility, and Restatedare
available to fund permitted acquisitions and ongoing working capital needs of
the Company and its subsidiaries.
The 2000 Credit Agreement as amended. As
of February 28, 1998, the Credit Agreement providedprovides for (i) a $140.0$380.0 million term loanTranche I Term Loan
facility due in June 2003December 2004, a $320.0 million Tranche II Term Loan facility
available for borrowing in British pound sterling due in December 2004, and (ii) a
$185.0$300.0 million revolving loanRevolving Credit facility including(including letters of credit up to a
maximum of $20.0 million,million) which expires in June 2003. A brief descriptionDecember 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. The Tranche I Term Loan facility requires quarterly repayments,
starting at $12.0 million in March 2000 and increasing thereafter annually with
final payments of $23.0 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). After this repayment, the required
quarterly repayments of the Tranche II Term Loan facility were revised to
(pound)0.6 million ($1.0 million) for each quarter in 2000, (pound)1.2 million
($1.9 million) for each quarter in 2001 and 2002, (pound)1.5 million ($2.4
million) for each quarter in 2003, and (pound)25.6 million ($40.4 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 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
baskets, exceptions and thresholds which are generally more favorable to the
Company than those contained in its prior senior credit facility.
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, the margin
was 1.25% for Revolving Credit loans and 1.75% 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. 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 baskets, exceptions
and thresholds which are generally more favorable to the Company than those
contained in Note 6its prior senior credit facility. 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 senior debt coverage
ratio.
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 Notes"). The net
proceeds of the offering (approximately $196.0 million) were used to repay a
portion of the Company's borrowings under its senior credit facility. Interest
on the Senior Notes is payable semiannually on February 1 and August 1 of each
year, beginning February 1, 2000. The Senior Notes are redeemable at the option
of the Company, in whole or in part, at any time. The 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 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 million upon issuance and $118.4 million as of February 29, 2000)
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 the
Sterling Senior Notes. The terms of the Sterling Series B Senior Notes are
identical in all material respects to the Sterling Senior Notes.
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%) (the "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 financial statements locatedBritish 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 Item 82000, (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 this ReportMay 15, 2000.) Interest
on Form 10-K.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.
SENIOR SUBORDINATED NOTES
As of February 28, 1998,29, 2000, 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, in whole or in part, on or after December 15, 1998.Company. 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
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.
CAPITAL EXPENDITURES
During Fiscal 1998,2000, the Company expended $31.2incurred $57.7 million for capital
expenditures, including $11.5$8.9 million related to vineyards. The Company plans to
spend approximately $25.0$65.0 million for capital expenditures, exclusive of
vineyards, in fiscal 1999.2001. In addition, the Company continues to consider the
purchase, lease and development of vineyards.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 Report. The Company may
incur additional expenditures for vineyards if opportunities become available.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 and
blends of
which certain agreements are denominated in British pounds sterling.pound sterling and Canadian
dollars. The maximum future obligationsobligation under these agreements, based upon
exchange rates at February 28, 1998,29, 2000, aggregate approximately $23.4 million to $40.9$28.4 million for
contracts expiring through December 2005.
At February 28, 1998,29, 2000, the Company had no open currency forward contracts.contracts to
purchase various foreign currencies of $6.8 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 other than grape costs.
The Company has discussed the impact of increases in grape prices in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."prices. The Company has been
able, subject to normal competitive conditions, to pass along rising costs
through increased selling prices.
ACCOUNTING PRONOUNCEMENTS
In June 1997,1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130,
"Reporting Comprehensive Income,133 ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities." (SFASSFAS No. 130)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. 131, "Disclosures about Segments of an Enterprise and
Related Information," (SFAS No. 131) were issued. 137 ("SFAS No. 130 establishes
standards137"), "Accounting for
reportingDerivative Instruments and displayHedging Activities--Deferral of comprehensive income and its components
in a full setthe Effective Date of
financial statements. TheFASB 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. 130133 on a prospective basis for interim periods and fiscal years
beginning March 1, 1998.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required.2001. The Company believes the effect of the adoption on its
financial statements will not be significant. SFAS No. 131 establishes standards for reporting
information about operating segmentsmaterial based on the Company's current risk
management strategies.
YEAR 2000 ISSUE
Prior to January 1, 2000, the Company put into place detailed programs to
address Year 2000 readiness in annualits internal systems and 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.
The Company did not experience any interruptions in its business or
operations when the date changed from 1999 to 2000. Based upon operations since
January 1, 2000, the Company does not expect any significant impact on its
on-going business as a result of the Year 2000 issue.
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 statementstransactions 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 requires
reportingother currencies of selected information in interim financial statements.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 requiredexposed to adopt SFAS No. 131 for fiscal years beginning March 1, 1998,market risk associated with changes in interest
rates and for interim periods beginning March 1, 1999. Restatement of comparative
information for earlier years is required inforeign currency exchange rates. To manage the initial year of adoptionvolatility relating to
these risks, the Company periodically enters into derivative transactions
including foreign currency exchange contracts and comparative information for interim periods in the initial year of adoption is
to be reported for interim periods in the second year of application.interest rate swap agreements.
The Company has limited involvement with derivative financial instruments and
does not yet determineduse them for trading purposes. The Company uses derivative instruments
solely to reduce the financial impact of SFAS No. 131 on its financial
statements.
YEAR 2000 ISSUEthese risks.
The Companyfair value of long-term debt is currently workingsubject to resolveinterest rate risk.
Generally, the potential impactfair value of the
year 2000 on the processing of date-sensitive information by the Company's
computerized information systems (including both hardwarelong-term debt will increase as interest rates fall
and software
applications).decrease as interest rates rise. The year 2000 issue is the result of computer logic being written
using two digits rather than four to define the applicable year. Anyestimated fair value of the Company's
logic that processes date-sensitive information may recognize a date
using "00" as the year 1900 rather than the yeartotal long-term debt, including current maturities, was approximately $1,255.4
million at February 29, 2000. A hypothetical 1% increase from prevailing
interest rates at February 29, 2000, which couldwould result in miscalculations or system failures. Baseda decrease in fair value of
long-term debt by approximately $33.3 million.
Also, a hypothetical 1% increase from prevailing interest rates at February
29, 2000, would result in an approximate increase in cash required for interest
on preliminary information, costsvariable interest rate debt during the next five fiscal years as follows:
2001 $ 5.4 million
2002 $ 4.8 million
2003 $ 4.0 million
2004 $ 3.0 million
2005 $ 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, the Company had no interest rate swap agreements outstanding.
The Company has exposure to foreign currency risk as a result of addressing potential issues arehaving
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, management believes that a hypothetical
10% adverse change in foreign currency exchange rates would not currently expected to haveresult in a
material adverse impact on the Company's financial position, results of operationseither earnings or cash flows in future periods.flow. The Company and its customers and vendors have
been, and continuealso has
exposure to be, activeforeign currency risk as a result of contracts to purchase inventory
items that are denominated in identifying, assessing and resolving such
processing issues. However, ifvarious foreign currencies. In order to reduce the
risk of foreign currency exchange rate fluctuations resulting from these
contracts, the Company and its customers or vendors are
unable to resolve such processing issuesperiodically enters into foreign exchange hedging
agreements. At February 29, 2000, the potential loss on outstanding foreign
exchange hedging agreements from a hypothetical 10% adverse change in a timely manner, it could result in
a material financial risk. Accordingly, the Company plans to devote the
necessary resources to resolve all significant year 2000 issues in a timely
manner.
foreign
currency exchange rates would not be material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
-----------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
AND
---
SUPPLEMENTARY SCHEDULES
-----------------------
FEBRUARY 28, 199829, 2000
-----------------
Page
----
The following information is presented in this report:Annual Report on Form 10-K:
Report of Independent Public Accountants .............................. 30Accountants................................ 29
Consolidated Balance Sheets - February 29, 2000, and February 28, 1998 and 1997 .............. 311999.. 30
Consolidated Statements of Income for the years ended February 29, 2000,
February 28, 1998 and 1997, for the six months ended February 29, 19961999, and February 28, 1995 (unaudited), and for the year ended
August1998............................. 31 1995 .................................................. 32
Consolidated Statements of Changes in Stockholders' Equity for the years
ended February 29, 2000, February 28, 19981999, and 1997, for the six months ended
February 29, 1996, and for the year ended August 31, 1995 ........ 3328, 1998.... 32
Consolidated Statements of Cash Flows for the years ended
February 29, 2000, February 28, 1998 and 1997, for the six months ended February 29, 19961999, and February 28, 1995 (unaudited), and for the year ended
August 31, 1995 .................................................. 341998.......... 33
Notes to Consolidated Financial Statements ............................ 35
Selected Financial Data ............................................... 15Statements.............................. 34
Selected Quarterly Financial Information (unaudited) .................. 51.................... 53
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.
[LOGO]
ARTHUR ANDERSEN
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Canandaigua Brands, Inc.:
We have audited the accompanying consolidated balance sheets of Canandaigua
Brands, Inc. (a Delaware corporation) and subsidiaries as of February 29, 2000
and February 28, 1998
and 1997,1999, and the related consolidated statements of income,
changes in stockholders' equity and cash flows for each of the three years ended February 28, 1998 and
1997,in
the six monthsperiod ended February 29, 1996, and the year ended August 31,
1995.2000. 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
auditing
standards.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 Canandaigua Brands, Inc. and
subsidiaries as of February 29, 2000 and February 28, 1998 and 1997,1999, and the results of
their operations and their cash flows for each of the three years ended February 28, 1998 and 1997,in the six monthsperiod
ended February 29, 1996, and the year ended August 31, 1995,2000 in conformity with accounting principles generally
accepted accounting principles.
Rochester, New York,in the United States.
/s/ Arthur Andersen LLP
April 8, 1998
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
February 28, February 28,
1998 1997
------------ ------------
ASSETS
------
CURRENT ASSETS:
Cash and cash investments $ 1,232 $ 10,010
Accounts receivable, net 142,615 142,592
Inventories, net 394,028 326,626
Prepaid expenses and other current assets 26,463 21,787
------------ ------------
Total current assets 564,338 501,015
PROPERTY, PLANT AND EQUIPMENT, net 244,035 249,552
OTHER ASSETS 264,786 270,334
------------ ------------
Total assets $ 1,073,159 $ 1,020,901Rochester, New York
May 15, 2000
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
February 29, February 28,
2000 1999
------------ ------------
ASSETS
------
CURRENT ASSETS:
Cash and cash investments $ 34,308 $ 27,645
Accounts receivable, net 291,108 260,433
Inventories, net 615,700 508,571
Prepaid expenses and other current assets 54,881 59,090
------------ ------------
Total current assets 995,997 855,739
PROPERTY, PLANT AND EQUIPMENT, net 542,971 428,803
OTHER ASSETS 809,823 509,234
------------ ------------
Total assets $ 2,348,791 $ 1,793,776
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 26,800 $ 87,728
Current maturities of long-term debt 53,987 6,005
Accounts payable 122,213 122,746
Accrued excise taxes 30,446 49,342
Other accrued expenses and liabilities 204,771 149,451
------------ ------------
Total current liabilities 438,217 415,272
------------ ------------
LONG-TERM DEBT, less current maturities 1,237,135 831,689
------------ ------------
DEFERRED INCOME TAXES 116,447 88,179
------------ ------------
OTHER LIABILITIES 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, and
February 28, 1999 - -
Class A Common Stock, $.01 par value-
Authorized, 120,000,000 shares;
Issued, 18,206,662 shares at
February 29, 2000, and 17,915,359 shares
at February 28, 1999 182 179
Class B Convertible Common Stock,
$.01 par value-
Authorized, 20,000,000 shares;
Issued, 3,745,560 shares at
February 29, 2000, and 3,849,173 shares
at February 28, 1999 38 39
Additional paid-in capital 247,949 239,912
Retained earnings 358,456 281,081
Accumulated other comprehensive income-
Cumulative translation adjustment (4,149) (4,173)
------------ ------------
602,476 517,038
------------ ------------
Less-Treasury stock-
Class A Common Stock, 3,137,244 at
February 29, 2000, and 3,168,306 shares
at February 28, 1999, at cost (79,429) (79,559)
Class B Convertible Common Stock, 625,725
shares at February 29, 2000, and
February 28, 1999, at cost (2,207) (2,207)
------------ ------------
(81,636) (81,766)
------------ ------------
Total stockholders' equity 520,840 435,272
------------ ------------
Total liabilities and stockholders' equity $ 2,348,791 $ 1,793,776
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 91,900 $ 57,000
Current maturities of long-term debt 24,118 40,467
Accounts payable 52,055 55,892
Accrued Federal and state excise taxes 17,498 17,058
Other accrued expenses and liabilities 97,763 76,156
------------ ------------
Total current liabilities 283,334 246,573
------------ ------------
LONG-TERM DEBT, less current maturities 309,218 338,884
------------ ------------
DEFERRED INCOME TAXES 59,237 61,395
------------ ------------
OTHER LIABILITIES 6,206 9,316
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value-
Authorized, 1,000,000 shares;
Issued, none at February 28, 1998, and
February 28, 1997 - -
Class A Common Stock, $.01 par value-
Authorized, 60,000,000 shares;
Issued, 17,604,784 shares at February 28, 1998,
and 17,462,332 shares at February 28, 1997 176 174
Class B Convertible Common Stock, $.01 par value-
Authorized, 20,000,000 shares;
Issued, 3,956,183 shares at February 28, 1998, and
February 28, 1997 40 40
Additional paid-in capital 231,687 222,336
Retained earnings 220,346 170,275
------------ ------------
452,249 392,825
------------ ------------
Less-Treasury stock-
Class A Common Stock, 2,199,320 shares at
February 28, 1998, and 1,915,468 shares at
February 28, 1997, at cost (34,878) (25,885)
Class B Convertible Common Stock, 625,725 shares
at February 28, 1998, and February 28, 1997, at cost (2,207) (2,207)
------------ ------------
(37,085) (28,092)
------------ ------------
Total stockholders' equity 415,164 364,733
------------ ------------
Total liabilities and stockholders' equity $ 1,073,159 $ 1,020,901
============ ============
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the Year
Ended February 29, For the Years Ended For the Six Months Ended For the Year Ended
------------------------------- ---------------------------- --------------------
February 28,
February 28, February 29, February 28, August 31,------------------ --------------------------------
2000 1999 1998
1997 1996 1995 1995
----------- ----------- ------------ ------------ -----------
(unaudited)------------------ -------------- --------------
GROSS SALES $ 1,632,3573,088,699 $ 1,534,4521,984,801 $ 738,415 $ 592,305 $ 1,185,0741,632,357
Less - Excise taxes (748,230) (487,458) (419,569)
(399,439) (203,391) (137,820) (278,530)
------------ ------------ ---------- ---------- ---------------------------- -------------- --------------
Net sales 2,340,469 1,497,343 1,212,788 1,135,013 535,024 454,485 906,544
COST OF PRODUCT SOLD (864,053) (844,181) (396,208) (327,694) (653,811)
------------ ------------ ---------- ---------- ----------(1,618,009) (1,049,309) (869,038)
------------------ -------------- --------------
Gross profit 348,735 290,832 138,816 126,791 252,733722,460 448,034 343,750
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (481,909) (299,526) (231,680)
(208,991) (112,411) (79,925) (159,196)
NONRECURRING RESTRUCTURING EXPENSESCHARGES (5,510) (2,616) -
- (2,404) (685) (2,238)
------------ ------------ ---------- ---------- ---------------------------- -------------- --------------
Operating income 117,055 81,841 24,001 46,181 91,299235,041 145,892 112,070
INTEREST EXPENSE, net (106,082) (41,462) (32,189)
(34,050) (17,298) (13,141) (24,601)
------------ ------------ ---------- ---------- ---------------------------- -------------- --------------
Income before provision for Federaltaxes and state income taxes 84,866 47,791 6,703 33,040 66,698extraordinary item 128,959 104,430 79,881
PROVISION FOR FEDERAL AND
STATE INCOME TAXES (34,795) (20,116) (3,381) (12,720) (25,678)
------------ ------------ ---------- ---------- ----------(51,584) (42,521) (32,751)
------------------ -------------- --------------
Income before extraordinary item 77,375 61,909 47,130
EXTRAORDINARY ITEM, NET OF INCOME TAXES - (11,437) -
------------------ -------------- --------------
NET INCOME $ 50,07177,375 $ 27,67550,472 $ 3,322 $ 20,320 $ 41,020
============ ============ ========== ========== ==========47,130
================== ============== ==============
SHARE DATA:
Earnings per common share:
BasicBasic:
Income before extraordinary item $ 2.684.29 $ 1.433.38 $ 0.172.52
Extraordinary item - (0.62) -
------------------ -------------- --------------
Earnings per common share - basic $ 1.134.29 $ 2.18
============ ============ ========== =========== ==========
Diluted2.76 $ 2.622.52
================== ============== ==============
Diluted:
Income before extraordinary item $ 1.424.18 $ 0.173.30 $ 1.122.47
Extraordinary item - (0.61) -
------------------ -------------- --------------
Earnings per common share - diluted $ 2.16
============ ============ ========== =========== ==========4.18 $ 2.69 $ 2.47
================== ============== ==============
Weighted average common shares outstanding:
Basic 18,054 18,293 18,672
19,333 19,611 17,989 18,776
Diluted 18,499 18,754 19,105 19,521 19,807 18,179 19,005
The accompanying notes to consolidated financial statements are an integral part of these statements.
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except per share data)
Accumulated
Common Stock Additional ---------------- Paid-InOther
----------------- Paid-in Retained Comprehensive Treasury Restricted
Class A Class B Capital Earnings Income Stock Stock Total
------- ------- ---------- ---------- ------------- -------- --------- ---------- -----------------
BALANCE, August 31, 1994 $ 138 $ 40 $ 113,348 $ 98,258 $ (7,591) $ - $ 204,193
Conversion of 19,093 Class B Convertible Common
shares to Class A Common shares - - - - - - -
Issuance of 3,000,000 Class A Common shares 30 - 90,353 - - - 90,383
Exercise of 432,067 Class A stock options
related to the Vintners Acquisition 5 - 13,013 - - - 13,018
Employee stock purchases of 28,641 treasury shares - - 546 - 87 - 633
Exercise of 114,075 Class A stock options 1 - 1,324 - - - 1,325
Tax benefit on stock options exercised - - 1,251 - - - 1,251
Tax benefit on disposition of employee stock
purchases - - 59 - - - 59
Net income for fiscal 1995 - - - 41,020 - - 41,020
------ ------- --------- -------- -------- ---------- ---------
BALANCE, August 31, 1995 174 40 219,894 139,278 (7,504) - 351,882
Conversion of 5,000 Class B Convertible Common
shares to Class A Common shares - - - - - - -
Exercise of 18,000 Class A stock options - - 238 - - - 238
Employee stock purchases of 20,869 treasury shares - - 593 - 63 - 656
Issuance of 10,000 Class A stock options - - 134 - - - 134
Tax benefit on stock options exercised - - 198 - - - 198
Tax benefit on disposition of employee stock
purchases - - 76 - - - 76
Net income for Transition Period - - - 3,322 - - 3,322
------ ------- ---------- -------- -------- ---------- ---------
BALANCE, February 29, 1996 174 40 221,133 142,600 (7,441) - 356,506
Conversion of 35,500 Class B Convertible Common
shares to Class A Common shares - - - - - - -
Exercise of 3,750 Class A stock options - - 17 - - - 17
Employee stock purchases of 37,768 treasury shares - - 884 - 114 - 998
Repurchase of 787,450 Class A Common shares - - - - (20,765) - (20,765)
Acceleration of 18,500 Class A stock options - - 248 - - - 248
Tax benefit on stock options exercised - - 27 - - - 27
Tax benefit on disposition of employee stock
purchases - - 27 - - - 27
Net income for fiscal 1997 - - - 27,675 - - 27,675
------ ------- ---------- -------- -------- ---------- ---------
BALANCE, February 28, 1997 $ 174 $ 40 $ 222,336 170,275 (28,092)$ 183,479 $ - 364,733$(28,092) $ - $ 377,937
Net income and comprehensive
income for fiscal 1998 - - - 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
Net income for fiscal 1998 - - - 50,071 - - 50,071
------------- ------- ---------- ------------------ ------------ -------- ---------- ---------
BALANCE, February 28, 1998 176 40 231,687 230,609 - (37,085) - 425,427
Comprehensive income:
Net income for fiscal 1999 - - - 50,472 - - - 50,472
Cumulative translation adjustment - - - - (4,173) - - (4,173)
--------
Comprehensive income 46,299
Conversion of 107,010 Class B
Convertible Common shares to
Class A Common shares 1 (1) - - - - - -
Exercise of 203,565 Class A
stock options 2 - 4,085 - - - - 4,087
Employee stock purchases of
49,850 treasury shares - - 1,643 - - 197 - 1,840
Repurchase of 1,018,836 Class A
Common shares - - - - - (44,878) - (44,878)
Acceleration of 1,250 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 39 239,912 281,081 (4,173) (81,766) - 435,272
Comprehensive income:
Net income for fiscal 2000 - - - 77,375 - - - 77,375
Cumulative translation adjustment - - - - 24 - - 24
---------
Comprehensive income 77,399
Conversion of 103,613 Class B
Convertible Common shares to
Class A Common shares 1 (1) - - - - - -
Exercise of 187,690 Class A
stock options 2 - 3,361 - - - - 3,363
Employee stock purchases of 31,062
treasury shares - - 1,298 - - 130 - 1,428
Acceleration of 94,725 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 $ 176182 $ 4038 $ 231,687 $220,346 $(37,085)247,949 $ 358,456 $ (4,149) $(81,636) $ - $ 415,164
======520,840
======= ======= ========== ================== ============ ======== ========== =========
The accompanying notes to consolidated financial statements are an integral part of these statements.
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Year
Ended February 29, For the Years Ended For the Six Months Ended For the Year Ended
------------------- ------------------------ ------------------
February 28,
February 28, February 29, February 28, August 31,------------------ --------------------------------
2000 1999 1998
1997 1996 1995 1995
------------ ------------ ------------ ------------ ----------
(unaudited)------------------ -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 50,07177,375 $ 27,67550,472 $ 3,322 $ 20,320 $ 41,02047,130
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation of property, plant and equipment 40,892 27,282 23,847
22,359 9,521 9,786 15,568Extraordinary item, net of income taxes - 11,437 -
Amortization of intangible assets 23,831 11,308 9,314 9,480 4,437 2,865 5,144
Deferred tax provision 6,319 5,769 1,991 57 19,232
Stock-based compensation expense 856 144 1,747 275 - - -
Amortization of discount on long-term debt 427 388 352 112 - - -
(Gain) loss on sale of property, plant and
equipmentassets (2,003) 1,193 (3,001)
(3,371) 81 - (33)
Restructuring charges - fixed asset write-down - - 275 - (2,050)Deferred tax (benefit) provision (1,500) 10,053 4,275
Change in operating assets and liabilities:liabilities,
net of effects from purchases of businesses:
Accounts receivable, net (10,812) 44,081 749 3,523 (27,008) 1,586 7,392
Inventories, net (65,644) 16,232 (70,172) (18,783) 41,5281,926 1,190 (60,659)
Prepaid expenses and other current assets 4,663 (14,115) (4,354) 3,271 (2,350) 3,079 (3,884)
Accounts payable (17,070) (17,560) (3,288)
(431) (2,362) (30,068) (13,415)
Accrued Federal and state excise taxes (18,719) 17,124 440 (2,641) 4,066 6,907 (1,025)
Other accrued expenses and liabilities 44,184 (31,807) 14,655 24,617 (8,564) (28,175) (20,784)
Other assets and liabilities, net 4,005 (3,945) (2,452)
898 1,930 (3,817) (15,375)
--------- --------- ---------- --------- --------------------------- -------------- --------------
Total adjustments (21,316) 80,093 (88,155) (56,563) 32,298
--------- --------- ---------- --------- ---------70,680 56,773 (18,375)
------------------ -------------- --------------
Net cash provided by (used in) operating activities 148,055 107,245 28,755
107,768 (84,833) (36,243) 73,318
--------- --------- ---------- --------- --------------------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment,businesses, net of minor disposals (31,203) (31,649) (16,077) (11,342) (37,121)
Proceeds from salecash acquired (452,910) (332,216) -
Purchases of property, plant and equipment (57,747) (49,857) (31,203)
Proceeds from sale of assets 14,977 431 12,552
9,174 555Purchase of joint venture minority interest - 1,336
Payment of accrued earn-out amounts(716) -
(13,848) (11,307) - (28,300)
--------- --------- ---------- --------- --------------------------- -------------- --------------
Net cash used in investing activities (495,680) (382,358) (18,651)
(36,323) (26,829) (11,342) (64,085)
--------- --------- ---------- --------- --------------------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 1,486,240 635,090 140,000
Exercise of employee stock options 3,358 4,083 1,776
Proceeds from employee stock purchases 1,428 1,840 1,256
Principal payments of long-term debt (1,060,229) (264,101) (186,367)
(50,842) (14,579) (89,474) (139,906)
Purchases of treasury stock (9,233) (20,765) - - -Net (repayment of) proceeds from notes payable (60,352) (13,907) 34,900
Payment of issuance costs of long-term debt (14,888) (17,109) (1,214)
(1,550)Purchases of treasury stock - - -
Proceeds from issuance of long-term debt,
net of discount 140,000 61,668 13,220 47,000 47,000
Net proceeds from (repayment of) notes payable 34,900 (54,300) 111,300 (12,000) (19,000)
Exercise of employee stock options 1,776 17 224 341 1,325
Proceeds from employee stock purchases 1,256 998 656 - 633
Proceeds from equity offering, net - - - 103,313 103,400
--------- --------- ---------- --------- ---------(44,878) (9,233)
------------------ -------------- --------------
Net cash provided by (used in) provided by financing activities 355,557 301,018 (18,882)
(64,774) 110,821 49,180 (6,548)
--------- --------- ---------- --------- --------------------------- -------------- --------------
Effect of exchange rate changes on cash and cash investments (1,269) 508 -
------------------ -------------- --------------
NET INCREASE (DECREASE) INCREASE IN CASH AND CASH INVESTMENTS 6,663 26,413 (8,778) 6,671 (841) 1,595 2,685
CASH AND CASH INVESTMENTS, beginning of periodyear 27,645 1,232 10,010
3,339 4,180 1,495 1,495
--------- --------- ---------- --------- --------------------------- -------------- --------------
CASH AND CASH INVESTMENTS, end of periodyear $ 34,308 $ 27,645 $ 1,232
$ 10,010 $ 3,339 $ 3,090 $ 4,180
========= ========= ========== ========= =========================== ============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the periodyear for:
Interest $ 95,004 $ 35,869 $ 33,394
$ 32,615 $ 14,720 $ 14,068 $ 25,082
========= ========= ========== ========= =========================== ============== ==============
Income taxes $ 35,478 $ 40,714 $ 32,164
$ 4,411 $ 3,612 $ 9,454 $ 11,709
========= ========= ========== ========= =========================== ============== ==============
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Fair value of assets acquired, including cash acquired $ -562,204 $ - $ 144,927 $ -740,880 $ -
Liabilities assumed (106,805) (382,759) -
- (3,147) - -
--------- --------- ---------- --------- --------------------------- -------------- --------------
Cash paid - - 141,780 -455,399 358,121 -
Less - Amounts borrowedcash acquired (2,489) (25,905) -
- (141,780) - -
--------- --------- ---------- --------- --------------------------- -------------- --------------
Net cash paid for acquisitionpurchases of businesses $ 452,910 $ 332,216 $ -
$ - $ - $ - $ -
========= ========= ========== ========= =========
Goodwill reduction on settlement of disputed
final closing net current asset statement
for Vintners Acquisition $ - $ 5,894 $ - $ - $ -
========= ========= ========== ========= ==========
Accrued earn-out amounts $ - $ - $ 15,155 $ - $ 10,000
========= ========= ========== ========= ============================ ============== ==============
The accompanying notes to consolidated financial statements are an integral part of these statements.
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 199829, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS -
Canandaigua Brands, Inc. (formerly Canandaigua Wine Company, Inc.), and its subsidiaries (the Company)"Company") operate primarily
in the beverage alcohol industry. The Company is principally a leading producer and suppliermarketer
of winebranded beverage alcohol products in North America and an importer and
producer of beer and distilled spirits in the United States.Kingdom. It
maintains a portfolio of over 130 national185 premier branded products in North America and
regional brands of beverage alcohol whichthe United Kingdom. The Company's products are distributed by over 850more than 1,000
wholesalers throughoutin North America. In the United StatesKingdom, the Company distributes its
own brands of cider, wine and selected
international markets. Itsbottled water and is a leading independent
beverage alcohol brands are marketed in three general
categories: wine, beer and distilled spirits.
YEAR-END CHANGE -
The Company changed its fiscal year end from August 31supplier to the last dayon-premise trade, distributing its own branded products
and those of February. The period from September 1, 1995, through February 29, 1996, is
hereinafter referredother companies to asmore than 16,000 on-premise establishments in
the "Transition Period."U.K.
PRINCIPLES OF CONSOLIDATION -
The consolidated financial statements of the Company include the accounts of
Canandaigua Brands, Inc., and all of its subsidiaries. All intercompany accounts
and transactions have been eliminated.
UNAUDITED FINANCIAL STATEMENTS -
The consolidated statements of income and cash flows for the six month period
ended February 28, 1995, have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission
applicable to interim reporting and reflect, in the opinion of the Company, all
adjustments necessary to present fairly the financial information for
Canandaigua Brands, Inc., and its subsidiaries. All such adjustments are of a
normal recurring nature.
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. The amounts at February 29, 2000, and February 28,
1998 and 1997,1999, are 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:
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 balancebalance.
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.
INTEREST RATE HEDGING AGREEMENTS: The fair value of interest rate hedging
instruments is the estimated amount that the Company would receive or be
required to pay to terminate the derivative agreements at year end. The fair
value includes consideration of current interest rates and the creditworthiness
of the counterparties to the agreements.
LETTERS OF CREDIT: At February 29, 2000, and February 28, 1998 and 1997,1999, the Company
had letters of credit outstanding totaling approximately $3,865,000$10.8 million and $8,622,000,$4.0 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, 199829, 2000 February 28, 1997
------------------------ ------------------------1999
----------------------------------------- --------------------------------------
Notional Carrying Fair Notional Carrying Fair
Amount Amount Value Amount Amount Value
--------- --------- --------- ------------------- ----------- ----------- ---------- ---------- ----------
(in thousands)
Liabilities:
- ------------
Liabilities:
- ------------
Notes payable $ 91,900- $ 91,90026,800 $ 57,00026,800 $ 57,000- $ 87,728 $ 87,728
Long-term debt, including
current portion $ 333,336- $ 340,9341,291,122 $ 379,3511,255,424 $ 374,628- $ 837,694 $ 844,568
Derivative Instruments:
- -----------------------
Foreign exchange hedging
agreements:
Currency forward contracts $ -6,895 $ - $ 374(125) $ 407
Interest rate hedging agreements:
Interest rate cap agreement12,444 $ - $ - $ - $ -
Interest rate collar agreement $ - $ - $ - $ -(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, hedge purchase commitments denominated in
foreign currencies and mature within twelve months.
INVENTORIES -
Inventories are valuedstated at the lower of cost (computed in accordance with the
last-in, first-out (LIFO) or first-in, first-out (FIFO) methods)method) or market. The
percentageElements of inventories valued usingcost include materials, labor
and overhead and consist of the LIFO method is 92% and 94% atfollowing:
February 29, 2000 February 28, 19981999
----------------- -----------------
(in thousands)
Raw materials and 1997, respectively. Replacement cost of thesupplies $ 29,417 $ 32,388
In-process inventories determined on a FIFO basis is approximately $411,424,000 at February 28, 1998,
and $349,006,000 at February 28, 1997.419,558 344,175
Finished case goods 166,725 132,008
----------------- -----------------
$ 615,700 $ 508,571
================= =================
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 work in processin-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.
Elements of cost include materials, labor and overhead and consist of the
following:
February 28, February 28,
1998 1997
------------ ------------
(in thousands)
Raw materials and supplies $ 14,439 $ 14,191
Wine and distilled spirits in process 304,037 262,289
Finished case goods 92,948 72,526
---------- ----------
411,424 349,006
Less - LIFO reserve (17,396) (22,380)
---------- ----------
$ 394,028 $ 326,626
========== ==========
If the FIFO method of inventory valuation had been used, reported net income
would have been approximately $2,941,000, or $0.15 per share on a diluted basis,
lower for the year ended February 28, 1998, and reported net income would have
been approximately $18,163,000, or $0.93 per share on a diluted basis, higher
for the year ended February 28, 1997.
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 28, 1998,29, 2000, the weighted average remaining useful life of these assets
is approximately 3636.4 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 $2,852,000$2.9 million at both February 28, 1998 and 1997.1999.
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
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 1998.2000.
ADVERTISING AND PROMOTION COSTS -
The Company generally expenses advertising and promotion costs as incurred,
shown or distributed. Prepaid advertising costs at February 29, 2000, and
February 28, 1998 and 1997,
are1999, were not material. Advertising and promotion expense for the
years ended February 29, 2000, February 28, 1999, and February 28, 1998, were
$279.6 million, $173.1 million, and 1997, the Transition Period, the six months ended February 28, 1995
(unaudited), and the year ended August 31, 1995, were approximately
$111,685,000, $101,319,000, $60,187,000, $41,658,000 (unaudited) and
$84,246,000,$111.7 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, and
February 28, 1998 and
1997.
EARNINGS PER COMMON SHARE1999.
COMPREHENSIVE INCOME -
TheDuring fiscal 1999, the Company adopted the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," (SFAS130, "Reporting Comprehensive Income" ("SFAS No. 128) effective February 28,
1998.130"). 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.
Historical earnings per
common share have been restated to conform with the provisions of SFAS No. 128.
OTHER -
Certain fiscal 1997, Transition Period and fiscal 19951999 balances have been reclassified to conform withto current year
presentation.
2. ACQUISITIONS:
UDGMATTHEW CLARK ACQUISITION -
On SeptemberDecember 1, 1995,1998, the Company through its wholly-owned subsidiary, Barton
Incorporated (Barton), acquired certaincontrol 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 assetsacquisition of United Distillers
Glenmore, Inc.,Matthew Clark
shares was $484.8 million, net of cash acquired. Matthew Clark, founded in 1810,
is a leading U.K.-based producer and certaindistributor of its North American affiliates (collectively, UDG)
(the UDG Acquisition).own brands of cider,
wine and bottled water and a leading independent drinks wholesaler in the U.K.
The acquisition was made pursuant to an Asset Purchase
Agreement dated August 29, 1995 (the Purchase Agreement), entered into between
Barton and UDG. The acquisition included all of UDG's rights to the
Fleischmann's, Skol, Mr. Boston, Canadian LTD, Old Thompson, Kentucky Tavern,
Chi-Chi's, Glenmore and di Amore distilled spirits brands; the U.S. rights to
Inver House, Schenley and El Toro distilled spirits brands; and related
inventories and other assets. The acquisition also included two of UDG's
production facilities; one located in Owensboro, Kentucky, and the other located
in Albany, Georgia. In addition, pursuant to the Purchase Agreement, the parties
entered into multiyear agreements under which Barton (i) purchases various bulk
distilled spirits brands from UDG and (ii) provides packaging services for
certain of UDG's distilled spirits brands as well as warehousing services.
The aggregate considerationpurchase price for the acquired brands and other assets consisted
of $141,780,000 in cash and assumption of certain current liabilities. The
source of the cash payment made at closing, togetherMatthew Clark shares was funded with payment of other costs
and expenses required by the UDG Acquisition, was financing provided by the
Company pursuant to a term loanproceeds from
loans under the Company's then existing bankprior senior credit agreement.facility. The UDGMatthew Clark
Acquisition was accounted for using the purchase method; accordingly, the
UDGMatthew 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.
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 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), $86,348,000,$35.5 million, is being amortized
on a straight-line basis over 40 years. The results of operations of the UDG AcquisitionBlack
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
million and $8.3 million, respectively, is being amortized on a straight-line
basis over 40 years. The Franciscan Estates 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.
The following table sets forth unaudited pro forma results of operations of the
Company for the fiscal years ended February 29, 2000, and February 28, 1999. 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. 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 fiscal 2000 (shown in the table
below), reflect total nonrecurring charges of $12.4 million ($0.40 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 29, February 28,
2000 1999
----------- -----------
(in thousands, except per share data)
Net sales $ 2,367,833 $ 2,154,992
Income before extraordinary item $ 68,277 $ 45,793
Extraordinary item, net of income taxes $ - $ (11,437)
Net income $ 68,277 $ 34,356
Earnings per common share:
Basic:
Income before extraordinary item $ 3.78 $ 2.50
Extraordinary item - (0.62)
----------- -----------
Earnings per common share - basic $ 3.78 $ 1.88
=========== ===========
Diluted:
Income before extraordinary item $ 3.69 $ 2.44
Extraordinary item - (0.61)
---------- -----------
Earnings per common share - diluted $ 3.69 $ 1.83
========== ===========
Weighted average common shares outstanding:
Basic 18,054 18,293
Diluted 18,499 18,754
3. PROPERTY, PLANT AND EQUIPMENT:
The major components of property, plant and equipment are as follows:
February 28,29, 2000 February 28, 1998 1997
------------ ------------1999
----------------- -----------------
(in thousands)
Land $ 15,10362,871 $ 16,96125,434
Vineyards 37,756 266
Buildings and improvements 74,706 76,379131,588 104,152
Machinery and equipment 244,204 243,274440,008 380,069
Motor vehicles 5,316 5,3557,241 20,191
Construction in progress 17,485 13,999
------------ ------------
356,814 355,96827,874 35,468
----------------- -----------------
707,338 565,580
Less - Accumulated depreciation (112,779) (106,416)
------------ ------------(164,367) (136,777)
----------------- -----------------
$ 244,035542,971 $ 249,552
============ ============428,803
================= =================
4. OTHER ASSETS:
The major components of other assets are as follows:
February 28,29, February 28,
1998 1997
------------ ------------2000 1999
----------- -----------
(in thousands)
Goodwill $ 150,595463,577 $ 150,595311,908
Trademarks 253,148 102,183
Distribution rights and agency
license agreements and trademarks 119,346 119,31687,052 76,894
Other 23,686 22,936
------------ ------------
293,627 292,84764,504 53,779
----------- -----------
868,281 544,764
Less - Accumulated amortization (28,841) (22,513)
------------ ------------(58,458) (35,530)
----------- -----------
$ 264,786809,823 $ 270,334
============ ============509,234
=========== ===========
5. OTHER ACCRUED EXPENSES AND LIABILITIES:
The major components of other accrued expenses and liabilities are as follows:
February 28,29, February 28,
1998 1997
------------ ------------2000 1999
----------- -----------
(in thousands)
Accrued advertising and promotions $ 37,083 $ 38,604
Accrued interest 24,757 11,384
Accrued income taxes payable 24,093 9,347
Accrued salaries and commissions 23,850 15,584
Other 94,988 74,532
----------- -----------
$ 23,704204,771 $ 12,109
Other 74,059 64,047
------------ ------------
$ 97,763 $ 76,156
============ ============149,451
=========== ===========
6. BORROWINGS:BORROWINGS :
Borrowings consist of the following:
February 28,
1998 February 28, 1997
------------------------------------------ -------------------29, 2000 1999
----------------------------------------- -----------
Current Long-term Total Total
----------- ------------- ---------- -------------------
(in thousands) Notes Payable:
- ------------------------- ----------- ----------- -----------
Notes Payable:
- --------------
Senior Credit Facility:
Revolving Credit Loans $ 91,90026,800 $ - $ 91,90026,800 $ 57,000
==========83,075
Other - - - 4,653
----------- ----------- ----------- -----------
$ 26,800 $ - $ 26,800 $ 87,728
=========== ========== ===================== =========== ===========
Long-term Debt:
- ---------------
Senior Credit Facility:Facility - Term Loan, variable rate, aggregate
proceeds of $140,000, due in
installments through June 2003Loans $ 24,00051,801 $ 116,000518,249 $ 140,000570,050 $ 185,900625,630
Senior Notes - 318,433 318,433 -
Senior Subordinated Notes:
8.75% redeemable after December 15, 1998,
due 2003Notes - 130,000 130,000 130,000
8.75% Series C redeemable after December 15,
1998, due 2003 (less unamortized discount of
$2,868 - effective rate 9.76%) - 62,132 62,132 61,780
Capitalized Lease Agreements:
Capitalized facility lease bearing interest
at 9%, due in monthly installments through
fiscal 1998 - - - 348
Industrial Development Agencies:
7.50% 1980 issue, original proceeds $2,370,
due in annual installments of $119 through
fiscal 2000 118 119 237 356392,947 392,947 192,520
Other Long-term Debt:
Loans payable bearing interest at 5%, secured
by cash surrender value of officers' life
insurance policies - 967 967 967
----------Debt 2,186 7,506 9,692 19,544
----------- ---------- --------------------- ----------- -----------
$ 24,11853,987 $ 309,2181,237,135 $ 333,3361,291,122 $ 379,351
==========837,694
=========== ========== ===================== =========== ===========
SENIOR CREDIT FACILITY -
On December 19, 1997,October 6, 1999, the Company, certain of its principal operating subsidiaries
and a syndicate of banks (the Syndicate Banks)"Syndicate Banks"), for which The Chase Manhattan
Bank acts as administrative agent, entered into a new $325,000,000 senior credit facility
(the "2000 Credit Agreement"). The 2000 Credit Agreement (the Credit Agreement).
The proceedsincludes 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 Third Amendedprior senior credit facility, and Restated Credit Agreement, as amended. As comparedare available to fund permitted
acquisitions and ongoing working capital needs of the previous bank
credit agreement, the Credit Agreement includes, among other things, lower
interest rates, lower quarterly loan amortizationCompany and greater flexibility with
respect to effecting acquisitions, incurring indebtedness and repurchasing the
Company's capital stock.its
subsidiaries.
The 2000 Credit Agreement provides for a $140,000,000 term
loan$380.0 million Tranche I Term Loan
facility due in June 2003December 2004, a $320.0 million Tranche II Term Loan facility
available for borrowing in British pound sterling due in December 2004, and a
$185,000,000 revolving loan$300.0 million Revolving Credit facility including(including letters of credit up to a
maximum of $20,000,000,$20.0 million) which expires in June 2003.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. The Tranche I Term Loan facility requires quarterly repayments,
starting at $12.0 million in March 2000 and increasing thereafter annually with
final payments of $23.0 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). After this repayment, the required
quarterly repayments of the Tranche II Term Loan facility were revised to
(pound)0.6 million ($1.0 million) for each quarter in 2000, (pound)1.2 million
($1.9 million) for each quarter in 2001 and 2002, (pound)1.5 million ($2.4
million) for each quarter in 2003, and (pound)25.6 million ($40.4 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). 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 baskets, exceptions and thresholds which are generally more favorable
to the Company than those contained in its prior senior credit facility.
The rate of interest payable, at the Company's option, is a function of the
London interbank offeredoffering rate (LIBOR)("LIBOR") plus a margin, federal funds rate plus
a margin, or the prime rate.rate plus a margin. The margin is adjustable based upon
the Company's Debt Ratio (as defined in the 2000 Credit Agreement). The and, with
respect to LIBOR borrowings, ranges between 0.75% and 1.25% for Revolving Credit
Agreement
also providesloans and 1.00% and 1.75% for certain mandatory term loan prepayments.
The term loan facility requires quarterly repaymentsTerm Loans. As of $6,000,000 beginning
March 1998 through December 2002, and payments of $10,000,000 in March 2003 and
June 2003. At February 28, 1998,29, 2000, the margin
on the term loan facility borrowings
was 0.75%1.25% for Revolving Credit loans and may be decreased by up to 0.35% and increased by up to 0.5%
depending on the Company's Debt Ratio.
The revolving loan facility is utilized to finance working capital requirements.
The Credit Agreement requires that the Company reduce the outstanding balance of
the revolving loan facility to less than $60,000,0001.75% for thirty consecutive days
during the six months ending each August 31. The margin on the revolving loan
facility was 0.5% at February 28, 1998, and may be decreased by up to 0.25% and
increased by up to 0.4% depending on the Company's Debt Ratio.Term Loans. In addition to
interest, the Company pays a facility fee on the total revolving loan facility. AtRevolving Credit commitments at
0.50% per annum as of February 28, 1998, the facility29, 2000. This fee was 0.25% and may be reduced or increased by 0.1%
subject tois based upon the Company's
quarterly Debt Ratio.
EachRatio and can range from 0.25% to 0.50%.
Certain of the Company's principal operating subsidiaries hashave guaranteed jointly
and severally, the
Company's obligations under the 2000 Credit Agreement. The Syndicate Banks have been given security interests in substantially2000 Credit Agreement
is secured by (i) first priority pledges of 100% of the capital stock of
Canandaigua Limited and all of the assetsCompany's domestic operating subsidiaries and
(ii) first priority pledges of 65% of the Company including mortgage liens oncapital stock of Matthew Clark and
certain real property.other foreign subsidiaries.
The Company isand its subsidiaries are subject to customary secured lending covenants
including those restricting additional liens, the incurrence ofincurring additional indebtedness,
the sale of assets, the payment of dividends, transactions with affiliates and
the making of certain investments.investments, in each case subject to baskets, exceptions
and thresholds which are generally more favorable to the Company than those
contained in its prior senior credit facility. The primary financial covenants
require the maintenance of a Debt Ratio,debt coverage ratio, a senior debt coverage ratio,
a fixed chargecharges ratio and an interest coverage ratio. Among the most restrictive
covenants contained in the 2000 Credit Agreement is the requirement to maintainsenior debt coverage
ratio.
As of February 29, 2000, under the 2000 Credit Agreement, the Company had
outstanding term loans of $570.1 million bearing a fixed charge ratioweighted average interest
rate of not less than 1.0 at the last day7.95% and $26.8 million of each fiscal quarter for the most recent
four quarters.revolving loans bearing a weighted average
interest rate of 7.43%. The Company had average outstanding Revolving Credit
Loans of approximately $59,892,000$73.0 million, $75.5 million, and $88,825,000$59.9 million for the
years ended February 29, 2000, February 28, 1999, and February 28, 1998, and 1997,
respectively. Amounts available to be drawn down under the Revolving Credit
Loans were $89,235,000$262.5 million and $119,378,000$212.9 million at February 29, 2000, and February
28, 1998 and 1997,1999, respectively. The average interest rate on the Revolving Credit Loans
was 6.57%7.31%, 6.58%6.23%, 6.76% and 7.16%,6.57% for fiscal 2000, fiscal 1999, and fiscal 1998,
and 1997,respectively.
SENIOR NOTES -
On August 4, 1999, the Transition Period and for
fiscal 1995, respectively. Facility fees onCompany issued $200.0 million aggregate principal amount
of 8 5/8% Senior Notes due August 2006 ("Senior Notes"). The net proceeds of the
new Credit Agreement are due
based upon the total revolving loan facility, whereas commitment fees under the
prior agreementoffering (approximately $196.0 million) were based upon the unusedused to repay a portion of the
revolving loanCompany's borrowings under its senior credit facility. These feesInterest on the Senior
Notes is payable semiannually on February 1 and August 1 of each year, beginning
February 1, 2000. The Senior Notes are based uponredeemable at the option of the Company,
in whole or in part, at any time. The 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 Senior Notes are guaranteed,
on a senior basis, by certain of the Company's Debt Ratiosignificant operating
subsidiaries.
On November 17, 1999, the Company issued (pound)75.0 million (approximately
$121.7 million upon issuance and can range from
0.15% to 0.35%. At$118.4 million as of February 28, 1998, the facility fee percentage was 0.25%29, 2000)
aggregate principal amount of 8 1/2% Senior Notes due November 2009 ("Sterling
Senior Notes"). The commitment fee percentagenet 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 February 28, 1997, was 0.325%.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 the
Sterling Senior Notes. The terms of the Sterling Series B Senior Notes are
identical in all material respects to the Sterling Senior Notes.
SENIOR SUBORDINATED NOTES -
On December 27, 1993,March 4, 1999, the Company issued $130,000,000$200.0 million aggregate principal amount
of 8.75%8 1/2% Senior Subordinated Notes due in December 2003 (the Notes)March 2009 ("Senior Subordinated
Notes"). The net proceeds of the offering (approximately $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 June 15March 1 and December 15September 1 of each year.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 Credit Agreement.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.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 IndentureIndentures relating to the Notes containssenior notes and senior
subordinated notes contain certain covenants, including, but not limited to,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.
On October 29, 1996, the Company issued $65,000,000 aggregate principal amount
of 8.75% Series B Senior Subordinated Notes due in December 2003 (the Series B
Notes). The Company used the net proceeds of approximately $61,700,000 to repay
$50,000,000 of Revolving Credit Loans and to prepay and permanently reduce
$9,600,000 of the Term Loan. The remaining proceeds were used to pay various
fees and expenses associated with the offering. The terms of the Series B Notes
were substantially identical to those of the Notes. In February 1997, the
Company exchanged $65,000,000 aggregate principal amount of 8.75% 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 identical in all material
respects to the Series B Notes.
LOANS PAYABLE -
Loans payable, secured by officers' life insurance policies, carry an interest
rate of 5%. The notes carry no due dates and it is management's intention not to
repay the notes during the next fiscal year.
CAPITALIZED LEASE AGREEMENTS - INDUSTRIAL DEVELOPMENT AGENCIES -
Certain capitalized lease agreements require the Company to make lease payments
equal to the principal and interest on certain bonds issued by Industrial
Development Agencies. The bonds are secured by the leases and the related
facilities. These transactions have been treated as capital leases with the
related assets included in property, plant and equipment and the lease
commitments included in long-term debt. Among the provisions under the debenture
and lease agreements are covenants that define minimum levels of working capital
and tangible net worth and the maintenance of certain financial ratios as
defined in the agreements.
DEBT PAYMENTS -
Principal payments required under long-term debt obligations (excluding
unamortized discount) during the next five fiscal years and thereafter are as
follows:
February 28, 1998
-----------------
(in thousands)
19992001 $ 24,118
2000 24,119
2001 24,00053,987
2002 24,00083,575
2003 24,00088,469
2004 294,753
2005 253,705
Thereafter 215,967
---------
$336,204
=========
518,686
-----------
$ 1,293,175
===========
7. INCOME TAXES:
The provision for Federal and state(benefit from) income taxes consists of the following:
For the For the For the Six For the
Year Ended Year Ended Months Ended Year Ended
February 28, 1998 February 28, February 29, August 31,
--------------------------------- ------------ ------------ ------------
State and
Federal Local Total 1997 1996 1995
--------- ----------- -------- ------------ ------------ ------------
(in thousands)
Current income tax provision $ 21,032 $ 7,444 $ 28,476 $ 14,347 $ 1,390 $ 6,446
Deferred income tax provision 5,935 384 6,319 5,769 1,991 19,232
--------- ----------- --------- ----------- ----------- ------------
$ 26,967 $ 7,828 $ 34,795 $ 20,116 $ 3,381 $ 25,678
========= =========== ========= =========== =========== ============
For the Years Ended
February 28,
-------------------
For the Year Ended February 29, 2000 1999 1998
----------------------------------------- -------- --------
State and
Federal Local Foreign Total Total Total
-------- -------- -------- -------- -------- --------
(in thousands)
Current $ 38,588 $ 6,091 $ 8,405 $ 53,084 $ 32,468 $ 28,476
Deferred (10,804) 2,874 6,430 (1,500) 10,053 4,275
-------- -------- -------- -------- -------- --------
$ 27,784 $ 8,965 $ 14,835 $ 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 expectedstatutory U.S. Federal income tax rate to income before provision for Federal
and state income
taxes is as follows:
For the Year Ended
February 29, For the Year Ended For the Six Months For the YearYears Ended February 28,
February 28, Ended February 29, August 31,-------------------- --------------------------------------------
2000 1999 1998
1997 1996 1995
------------------ ------------------ ------------------ ------------------
% of-------------------- -------------------- --------------------
% of % of % of
Pretax Pretax Pretax
Pretax
Amount Income Amount Income Amount Income
Amount Income
------ ------ ------ ------ ------ ------ ------ -------------- -------- -------- -------- -------- --------
(in thousands)
(in thousands)
Computed "expected"Income tax provision at statutory rate $ 29,70345,136 35.0 $ 16,72736,551 35.0 $ 2,346 35.0 $ 23,34427,958 35.0
State and local income taxes, net of
Federal income tax benefit 5,0893,077 2.4 6,977 6.7 4,793 6.0
3,304 6.9 827 12.3 2,395 3.6
Nondeductible meals
and entertainment
expenses 294 0.3 310 0.6 205 3.1 290 0.4Earnings of subsidiaries taxed at
other than U.S. statutory rate 1,294 1.0 227 0.2 - -
Miscellaneous items, net (291) (0.3) (225) (0.4) 3 -- (351) (0.5)2,077 1.6 (1,234) (1.2) - -
-------- ---- -------- ---- ------- ---- -------- ------------ -------- --------
$ 34,79551,584 40.0 $ 42,521 40.7 $ 32,751 41.0
$ 20,116 42.1 $ 3,381 50.4 $ 25,678 38.5
======== ==== ======== ==== ======= ==== ======== ============ ======== ========
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) are comprisedconsist of the
following:
February 28,29, February 28,
1998 1997
------------ ------------2000 1999
----------- -----------
(in thousands)
Depreciation and amortization $ 70,303127,436 $ 68,155
LIFO reserve 13,601 2,01989,447
Effect of change in accounting method 11,200 16,546
Inventory reserves 6,974 9,4184,542 6,975
Restructuring (6,824) (3,244)
Insurance accruals (3,868) (3,112)
Other accruals (18,193) (13,191)
-------- --------(11,136) (8,653)
----------- -----------
$ 72,685121,350 $ 66,991
======== ========97,959
=========== ===========
At February 28, 1998,29, 2000, the Company has state and U.S. Federal net operating loss
(NOL) carryforwards of $16,213,000 and $3,654,000, respectively,$1.8 million to offset future taxable income that, if not
otherwise utilized, will expire as follows:
state NOLs of $6,945,000, $6,828,000 and $2,440,000 at February 28, 2001, 2002
and 2003, respectively, and Federal NOL of $3,654,000 at February 28,during fiscal 2011.
8. PROFIT SHARING RETIREMENT PLANS AND RETIREMENT SAVINGS PLAN:PLANS:
The Company's retirement and profit sharing retirement plans, which coverplan, the Canandaigua Brands, Inc.
401(k) and Profit Sharing Plan (the "Plan"), covers substantially all employees,
provide for contributionsexcluding those employees covered by the Company in such amounts as the Board
of Directors may annually determinecollective bargaining agreements and
for voluntary contributions byMatthew Clark employees. The plans are qualified as tax-exempt under the Internal Revenue Code
and conform with the Employee Retirement Income Security Act of 1974. The
Company's provisions for the plans, including the Barton plan described below,
were $5,571,000 and $4,999,000 for the years ended February 28, 1998 and 1997,
respectively, $2,579,000 in the Transition Period and $3,830,000 for fiscal
1995.
The Company's retirement savings plan, established pursuant to Section 401(k) portion of the Internal Revenue Code,Plan permits substantially all full-timeeligible
employees of the
Company (excluding Barton employees, who are covered by a separate plan
described below) to defer a portion of their compensation (as defined in the Plan) on a
pretax basis. Participants may defer subject to a maximum contribution limitation, up to 10%
of their compensation for the year. The Company makes a matching contribution of
25% of the first 4% of compensation an employee defers. Company contributions to
this plan were $367,000 and $700,000 for the years ended February 28, 1998 and
1997, respectively, $325,000 in the Transition Period and $281,000 in fiscal
1995.
The Barton profit sharing and 401(k) plan covers all salaried employees of
Barton. The amount of Barton's contribution under the profit sharing portion of
the plan is at the discretion of its Board of Directors, subject to limitations
of the plan. Contribution expense was $2,799,000 and $2,504,000 for the years
ended February 28, 1998 and 1997, respectively, $1,095,000 in the Transition
Period and $1,430,000 in fiscal 1995. Pursuant to the 401(k) portion of the
plan, participants may defer up to 8%12% of their compensation for the
year, subject to limitations of the plan, and receive noPlan. 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 $7.3
million, $6.8 million, and $5.9 million for the years ended February 29, 2000,
February 28, 1999, and February 28, 1998, respectively.
On December 31, 1999, the 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 is a defined benefit plan with assets held by a Trustee who
administers funds separately from Barton.the Company's finances. As part of the
acquisition of the Black Velvet Assets, the Company's subsidiary, Barton,
acquired pension plans, which cover certain Canadian employees.
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 28,
February 29, 2000 1999
--------------------------------------------- -----------
Matthew Clark Barton Total Total
------------- ------------ ----------- -----------
(in thousands)
Change in benefit obligation:
Benefit obligation at 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
============= ============ =========== ===========
Change in plan assets:
Fair value of plan assets at 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
============= ============ =========== ===========
Funded status of the plan as of last day of February:
Funded status $ 24,362 $ (330) $ 24,032 $ 30,927
Unrecognized actuarial gain/(loss) 2,945 (2,369) 576 (3,950)
------------- ------------ ----------- -----------
Prepaid (accrued) benefit cost $ 27,307 $ (2,699) $ 24,608 $ 26,977
============= ============ =========== ===========
Assumptions as of last day of February:
Rate of return on plan assets 8.00% 8.50% 8.00%
Discount rate 6.00% 7.25% 6.50%
Increase in compensation levels 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
============= ============ =========== ===========
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:
(in thousands)
Change in benefit obligation:
Benefit obligation at April 9, 1999 $ 698
Service cost 14
Interest cost 32
Benefits paid (10)
Actuarial gain (110)
Foreign currency exchange rate changes 23
-----------
Benefit obligation at February 29, 2000 $ 647
===========
Funded status as of February 29, 2000:
Funded status $ (647)
Unrecognized net gain (111)
-----------
Accrued benefit liability $ (758)
===========
Assumptions as of February 29, 2000:
Discount rate 7.25%
Increase in compensation levels 4.00%
Components of net periodic benefit cost for the
period ended February 29, 2000:
Service cost $ 14
Interest cost 32
-----------
Net periodic benefit cost $ 46
===========
At February 29, 2000, a 9.2% 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% 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 $ 72 $ (73)
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 to a cash dividend premium.
If the Company pays a cash dividend on 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 28, 1998,29, 2000, there were 15,405,46415,069,418 shares of Class A Common Stock and
3,330,4583,119,835 shares of Class B Convertible Common Stock outstanding, net of
treasury stock.
STOCK REPURCHASE AUTHORIZATION -
OnIn January 11, 1996, the Company's Board of Directors authorized the repurchase of
up to $30,000,000$30.0 million of its Class A Common Stock and Class B Convertible Common
stock.Stock. The Company was permitted to finance such purchases, which became
treasury shares, through cash generated from operations or through the Credit Agreement.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 $9,233,000. Throughout$9.2 million.
In June 1998, the year ended February 28, 1997,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 fiscal 1999, the Company repurchased 787,4501,018,836 shares of Class
A Common Stock totaling $20,765,000.for $44.9 million. No repurchases were made during fiscal 2000.
LONG-TERM STOCK INCENTIVE PLAN -
In July 1997, the stockholders approved the amendment and restatement ofUnder the Company's Stock Option and Stock Appreciation Right Plan (the Original Stock
Plan) as the Long-Term Stock Incentive Plan (the Long-Term Stock Plan). Options
granted under the Original Stock Plan remain outstanding and in full force in
accordance with their terms.
Under the Long-Term Stock 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. Grants, inAt 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 may
not exceed 4,000,000number of shares of the Company's Class A Common Stock.Stock available for awards
under the plan from 4,000,000 shares to 7,000,000 shares. The exercise price,
vesting period and term of nonqualified stock options granted are established by
the committee administering the plan (the Committee)"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 fiscal 1998,2000 and fiscal 1999, no stock appreciation rights and 25,000
shares ofor
restricted Class A Common Stockstock were granted. At February 28, 1998,29, 2000, there were 1,840,2583,557,568 shares
available for future grant.
A summary of nonqualified stock option activity is as follows:
Weighted Weighted
Avg. Avg.
Shares Under Exercise Options Exercise
Option Price Exercisable Price
------------ -------- ----------- --------
Balance, August 31, 1994 563,500 $ 15.65
Options granted 289,000 $ 40.29
Options exercised (114,075) $ 7.02
Options forfeited/canceled (4,500) $ 19.22
---------
Balance, August 31, 1995 733,925 $ 26.68 39,675 $ 4.44
Options granted 571,050 $ 36.01
Options exercised (18,000) $ 13.23
Options forfeited/canceled (193,250) $ 44.06
---------
Balance, February 29, 1996 1,093,725 $ 28.70 28,675 $ 4.44
Options granted 1,647,700 $ 22.77
Options exercised (3,750) $ 4.44
Options forfeited/canceled (1,304,700) $ 32.09
---------
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
=========
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 28, 1998:29, 2000:
Options Outstanding Options Exercisable
------------------------------------- --------------------------------------------------------- ----------------------
Weighted
Avg.Average Weighted Weighted
Remaining Avg. Avg.Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
- --------------- ----------- ----------- -------- ----------- --------
$ 4.44 - $11.50 38,675 3.512,150 2.3 years $ 9.15 38,67511.50 12,150 $ 9.1511.50
$17.00 - $25.63 998,540 7.3633,420 5.4 years $ 17.37 134,28017.28 365,280 $ 17.0017.42
$26.75 - $31.25 351,800335,180 6.5 years $ 28.45 145,300 $ 27.50
$35.38 - $50.00 940,600 8.5 years $ 28.46 80,20045.41 185,325 $ 27.30
$35.3842.76
$51.00 - $56.75 457,800 9.6$59.56 816,900 8.9 years $ 41.25 107,47552.57 29,400 $ 40.53
--------- -------
1,846,815 8.051.74
----------- -----------
2,738,250 7.6 years $ 25.23 360,63038.81 737,455 $ 25.46
========= =======27.04
=========== ===========
The weighted average fair value of options granted during fiscal 2000, fiscal
1999, and fiscal 1998 fiscal
1997was $26.28, $26.21, and the Transition Period was $20.81, $10.27 and $15.90, 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, 6.6%1998; volatility of 40.0% for fiscal 19972000, 40.6% for fiscal 1999, and 5.5% for the
Transition Period; volatility of 41.3% for
fiscal 1998, 42.7% for fiscal 1997
and 39.6% for the Transition Period;1998; expected option life of 7.0 years for fiscal 2000 and fiscal 1999,
and 6.9 years for fiscal 1998, 4.7 years for fiscal 1997 and 5.4 years for the Transition Period.1998. The dividend yield was 0% for fiscal 1998,2000, fiscal
19971999, and the Transition
Period.fiscal 1998. Forfeitures are recognized as they occur.
INCENTIVE STOCK OPTION PLAN -
The ability to grant incentive stock options underUnder the Original Stock Plan was
eliminated when it was amended and restated as the Long-Term Stock Plan. In July
1997, stockholders approved the adoption of the Company's Incentive Stock Option
Plan. Under the Incentive Stock Option Plan, incentive stock options may be
granted to employees, including officers, of the Company. Grants, in the
aggregate, may not exceed 1,000,000 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 1998,2000 and fiscal 1999, no incentive stock options were granted.
EMPLOYEE STOCK PURCHASE PLAN - In fiscal 1989, theThe Company approvedhas a stock purchase plan under which
1,125,000 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 fiscal 19982000, fiscal 1999, and fiscal 1997, the Transition Period and fiscal 1995,1998, employees purchased 78,248, 37,768, 20,86931,062
shares, 49,850 shares, and 28,64178,248 shares, respectively.
The weighted average fair value of purchase rights granted during fiscal 19982000,
fiscal 1999, and fiscal 19971998 was $11.90$12.18, $12.35, and $8.41,$11.90, respectively. The
fair value of purchase rights 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 5.4% for fiscal 2000, 4.7% for fiscal
1999, and 5.3% for fiscal 1998 and 5.6%1998; volatility of 33.6% for fiscal 1997; volatility of2000, 33.5% for
fiscal 1999, and 35.1% for fiscal 1998 and 65.4% for fiscal 1997;1998; expected purchase right life of 0.5
years for fiscal 19982000, fiscal 1999, and 0.8 years for fiscal 1997.1998. The dividend yield was 0%
for both
fiscal 19982000, fiscal 1999, and fiscal 1997. No purchase rights were granted in the Transition
Period.1998.
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. In fiscal 1997, theThe Company elected to adoptadopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," (SFAS("SFAS No. 123)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 Year Ended
February 29, For the YearYears Ended For the Six Months February 28,
-------------------- --------------------------------------------
2000 1999 1998 February 28, 1997 Ended February 29, 1996
-------------------- -------------------- -------------------------------------------
As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma
-------- -------- -------- -------- -------- ---------------
(in thousands, except per share data)
(in thousands, except per
share data)
Net income $ 50,07177,375 $ 46,17171,474 $ 27,67550,472 $ 25,03846,942 $ 3,32247,130 $ 3,17843,230
======== ======== ======== ======== ======== ========
Earnings per common share:
Basic $ 2.684.29 $ 3.96 $ 2.76 $ 2.57 $ 2.52 $ 2.32
Diluted $ 4.18 $ 3.86 $ 2.69 $ 2.50 $ 2.47 $ 1.43 $ 1.30 $ 0.17 $ 0.16
Diluted $ 2.62 $ 2.42 $ 1.42 $ 1.28 $ 0.17 $ 0.162.26
The provisions of SFAS No. 123 have not been applied to options or purchase
rights granted prior to September 1, 1995. Therefore, the resulting pro forma effect on net income may not be representative of that to be
expected in future years.
STOCK OFFERING -
During November 1994, the Company completed a public offering and sold 3,000,000
shares of its Class A Common Stock, resulting in net proceeds to the Company of
approximately $95,515,000 after underwriters' discounts and commissions and
expenses. In connection with the offering, 432,067 of the Vintners option shares
were exercised and the Company received proceeds of $7,885,000. Under the terms
of the then existing bank credit agreement, approximately $82,000,000 was used
to repay a portion of the Term Loan under the bank credit agreement. The balance
of net proceeds was used to repay Revolving Credit Loans under the bank credit
agreement.
10.11. EARNINGS PER COMMON SHARE:
The following table presents historical earnings per common share restatedas follows:
For the Year
Ended For the Years Ended
February 29, February 28,
------------ -------------------
2000 1999 1998
----------- -------- --------
(in thousands, except per share data)
Income before extraordinary item $ 77,375 $ 61,909 $ 47,130
Extraordinary item, net of income taxes - (11,437) -
----------- -------- --------
Income applicable to conform with the provisions of SFAS No. 128.
For the
For the Years Ended For the Six Months Ended Year Ended
-------------------------- -------------------------- ----------
February 28, February 28, February 29, February 28, August 31,
1998 1997 1996 1995 1995
------------ ------------ ------------ ------------ ----------
(in thousands, except per share data) (unaudited)
BASIC EARNINGS PER COMMON SHARE:
- --------------------------------
Income applicable to common shares $ 50,071 $ 27,675 $ 3,322 $ 20,320 $ 41,020
Weighted average common shares
outstanding 18,672 19,333 19,611 17,989 18,776
BASIC EARNINGS PER COMMON SHARE $ 2.68 $ 1.43 $ 0.17 $ 1.13 $ 2.18
======== ======== ======== ======== ========
DILUTED EARNINGS PER COMMON SHARE:
- ----------------------------------
Income applicable to common shares $ 50,071 $ 27,675 $ 3,322 $ 20,320 $ 41,020
-------- -------- -------- -------- --------
Weighted average common shares
outstanding 18,672 19,333 19,611 17,989 18,776
Incentive stock options 423 179 129 152 155
Options/employee stock purchases 10 9 67 38 74
-------- -------- -------- -------- --------
Adjusted weighted average common
shares outstanding 19,105 19,521 19,807 18,179 19,005
-------- -------- -------- -------- --------
DILUTED EARNINGS PER COMMON SHARE $ 2.62 $ 1.42 $ 0.17 $ 1.12 $ 2.16
======== ======== ========common shares $ 77,375 $ 50,472 $ 47,130
=========== ======== ========
11.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:
February 28, 1998
-----------------follows during the next five fiscal years and
thereafter:
(in thousands)
19992001 $ 3,506
2000 2,627
2001 1,94716,312
2002 1,51314,867
2003 1,29113,827
2004 12,936
2005 12,067
Thereafter 8,590
--------96,301
---------
$ 19,474
========166,310
=========
Rental expense was approximately $5,554,000$17.4 million, $8.2 million, and $4,716,000$5.6 million for fiscal
19982000, fiscal 1999, and fiscal 1997, respectively, $2,382,000 in the Transition Period and $4,193,000
for fiscal 1995.1998, respectively.
PURCHASE COMMITMENTS AND CONTINGENCIES -
The Company has agreements with three suppliers to purchase blended Scotch
whisky through December 2001. The purchase prices under thevarious spirits of which
certain agreements are denominated in British pounds sterling. Basedpound sterling and Canadian
dollars. The maximum future obligation under these agreements, based upon
exchange rates at February 28, 1998, the Company's29, 2000, aggregate future obligation ranges from approximately
$10,758,000 to $22,835,000$28.4 million for the contracts
expiring through December 2001.
The Company has an agreement to purchase Canadian blended whisky through
September 1, 1999, with a maximum obligation of approximately $4,453,000. The
Company also has two agreements to purchase Canadian new distillation whisky
(including dumping charges) through December 2005 at purchase prices of
approximately $12,521,000 to $13,536,000. In addition, the Company has an
agreement to purchase corn whiskey through April 1999 at a purchase price of
approximately $90,000.2005.
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 was renewed effective November 22, 1996, and
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 June 2003.December 2007. Prior to their expiration, these
agreements may be terminated if the Company fails to meet certain performance
criteria. At February 28, 1998,29, 2000, 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 the Vintners Acquisition and the Almaden/Inglenook
Acquisition,previous acquisitions, the Company assumed purchase contracts
with certain growers and suppliers. In addition, the Company has entered into
other 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 20eighteen 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 $154,909,000$126.8 million of grapes under these contracts
during fiscal 1998.2000. 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 $915,651,000. During fiscal 1994, in
connection with the Vintners Acquisition and the Almaden/Inglenook Acquisition,
the Company established a reserve for the estimated loss on these firm purchase
commitments of approximately $62,664,000, which was subsequently reduced during
fiscal 1995 to reflect the effects of the termination payments to cancel
contracts with certain growers. The remaining reserve for the estimated loss on
the remaining contracts is approximately $771,000 at February 28, 1998.$800.5 million.
The Company's aggregate obligations under bulk wine purchase contracts will be
approximately $32,502,000$8.3 million over the remaining term of the contracts which expire
through fiscal 2001.
EMPLOYMENT CONTRACTS -
The Company has employment contracts with certain of its executive officers and
certain other management personnel with remaining terms ranging up to three
years.of one year. 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 severance payments in the event
of specified termination of employment. The aggregate commitment for future
compensation and severance, excluding incentive bonuses, was approximately $7,903,000$4.2 million as of
February 28, 1998,29, 2000, of which approximately
$1,436,000$2.0 million is accrued in other liabilities as of
February 28, 1998.
29, 2000.
EMPLOYEES COVERED BY COLLECTIVE BARGAINING AGREEMENTS -
Approximately 42%31% of the Company's full-time employees are covered by collective
bargaining agreements at February 28, 1998.29, 2000. Agreements expiring within one year
cover approximately 7%18% 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, or results of
operations.
12.operations or cash flows.
13. SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK:
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. Gross sales to the five largest wholesalerscustomers of the Company represented 26.4%17.1%,
22.9%25.2%, 16.9% and 21.6% of the Company's gross sales
for the fiscal years ending February 28, 1998 and 1997, the Transition Period
and for the fiscal year ended August 31, 1995, respectively. Gross sales to the
Company's largest wholesaler, Southern Wine and Spirits, represented 12.1%,
10.5% and 10.6%26.4% of the Company's gross sales for the fiscal years ended
February 29, 2000, February 28, 1999, and February 28, 1998, respectively. Gross
sales to the Company's largest customer, Southern Wine and 1997,Spirits, represented
8.0%, 10.9%, and 12.1% of the Company's gross sales for the fiscal yearyears ended
August 31, 1995,February 29, 2000, February 28, 1999, and February 28, 1998, respectively.
Accounts receivable from the Company's largest wholesalercustomer represented 14.1%8.6%, 8.5%,
and 11.3%14.1% of the Company's total accounts receivable as of February 29, 2000,
February 28, 1999, and February 28, 1998, and
1997, respectively. No single wholesaler was responsible for greater than 10% of
gross sales during the Transition Period. Gross sales to the
Company's five largest wholesalerscustomers are expected to continue to represent a
significant portion of the Company's revenues. The Company's arrangements with
certain of its wholesalerscustomers 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.
13. RESTRUCTURING PLAN:
The Company provided for costs to restructure the operations of its California
wineries (the Restructuring Plan) in the fourth quarter of fiscal 1994. Under
the Restructuring Plan, all bottling operations at the Central Cellars winery in
Lodi, California, and the branded wine bottling operations at the Monterey
Cellars winery in Gonzales, California, were moved to the Mission Bell winery
located in Madera, California. The Monterey Cellars winery will continue to be
used as a crushing, winemaking and contract bottling facility. The Central
Cellars winery was closed in the fourth quarter of fiscal 1995 and was sold for
its approximate net book value during fiscal 1997. In fiscal 1994, the
Restructuring Plan reduced income before taxes and net income by approximately
$24,005,000 and $14,883,000, respectively, or $0.92 per share on a diluted
basis. Of the total pretax charge in fiscal 1994, approximately $16,481,000 was
to recognize estimated losses associated with the revaluation of land, buildings
and equipment related to facilities described above to their estimated net
realizable value; and approximately $7,524,000 related to severance and other
benefits associated with the elimination of 260 jobs. In fiscal 1995, the
Restructuring Plan reduced income before income taxes and net income by
approximately $2,238,000 and $1,376,000, respectively, or $0.07 per share on a
diluted basis. Of the total pretax charge in fiscal 1995, $4,288,000 relates to
equipment relocation and employee hiring and relocation costs, offset by a
decrease of $2,050,000 in the valuation reserve as compared to fiscal 1994,
primarily related to the land, buildings and equipment at the Central Cellars
winery. The Company also expended approximately $19,071,000 in fiscal 1995 for
capital expenditures to expand storage capacity and install certain relocated
equipment. In the Transition Period, the expense incurred in connection with the
Restructuring Plan reduced income before taxes and net income by approximately
$2,404,000 and $1,192,000, respectively, or $0.06 per share on a diluted basis.
These charges represented incremental, nonrecurring expenses of $3,982,000
primarily incurred for overtime and freight expenses resulting from
inefficiencies related to the Restructuring Plan, offset by a reduction in the
accrual for restructuring expenses of $1,578,000, primarily for severance and
facility holding and closure costs. The Company completed the Restructuring Plan
at February 29, 1996, with a total employment reduction of 177 jobs. The Company
expended approximately $2,125,000 in fiscal 1997 and $6,644,000 during the
Transition Period for capital expenditures to expand storage capacity. As of
February 28, 1997, the Company had accrued liabilities of approximately $402,000
relating to the Restructuring Plan. As of February 28, 1998, the Company had no
accrued liabilities relating to the Restructuring Plan.
14. SUMMARIZED FINANCIAL INFORMATION - SUBSIDIARY GUARANTORS:
The subsidiary guarantorsfollowing table presents summarized financial information 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. Summarized financial information for the subsidiary guarantors is
set forth below.Subsidiary Guarantors. Separate financial
statements for the subsidiary guarantorsSubsidiary Guarantors of the Company are not presented
because the Company has determined that such financial statements would not be
material to investors. The subsidiary
guarantorsSubsidiary Guarantors comprise all of the direct and
indirect subsidiaries of the Company, other than Matthew Clark, the nonguarantorCompany's
Canadian subsidiary, and certain other subsidiaries which individually, and in
the aggregate, are inconsequential. There are no restrictions on the ability of
the subsidiary guarantorsSubsidiary Guarantors to transfer funds to the Company in the form of cash
dividends, loans or loan repayments; however, except for limited amounts, the
subsidiary guarantors may not loan funds to the Company.
The following table presents summarized financial information for subsidiary
guarantors in connection with all of the Company's 8.75% Senior Subordinated
Notes:
February 28, February 28,
1998 1997advances.
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
----------- ------------ ------------- ------------ ------------
(in thousands)
Balance Sheet Data:
Current assets $ 460,618 $ 401,870
Noncurrent assets $ 395,225 $ 403,068
Current liabilities $ 102,207 $ 100,009
Noncurrent liabilities $ 61,784 $ 65,300
For the Year
For the Years Ended For the Six Months Ended Ended
-------------------------- -------------------------- ------------
February 28, February 28, February 29, February 28, August 31,
1998 1997 1996 1995 1995
------------ ------------ ------------ ------------ ----------
(in thousands)
Income Statement Data:BALANCE SHEET DATA:
February 29, 2000
- -----------------
Current assets $ 105,884 $ 611,646 $ 278,467 $ - $ 995,997
Noncurrent assets $ 913,026 $ 1,695,790 $ 25,628 $ (1,281,650) $ 1,352,794
Current liabilities $ 150,507 $ 84,860 $ 202,850 $ - $ 438,217
Noncurrent liabilities $ 1,230,139 $ 97,410 $ 62,185 $ - $ 1,389,734
February 28, 1999
- -----------------
Current assets $ 114,243 $ 532,028 $ 209,468 $ - $ 855,739
Noncurrent assets $ 646,133 $ 396,125 $ 421,867 $ (526,088) $ 938,037
Current liabilities $ 157,648 $ 126,803 $ 130,821 $ - $ 415,272
Noncurrent liabilities $ 815,421 $ 73,178 $ 54,633 $ - $ 943,232
INCOME STATEMENT DATA:
For the year ended February 29, 2000
- ------------------------------------
Net sales $ 985,757620,631 $ 907,3871,305,032 $ 416,839761,762 $ 334,885(346,956) $ 716,9692,340,469
Gross profit $ 196,642174,231 $ 164,471332,641 $ 73,843215,588 $ 62,883- $ 131,489
Income722,460
(Loss) income before provision for
Federal and state income taxes $ 64,270(192) $ 47,30392,433 $ 17,08336,718 $ 22,690- $ 52,756128,959
Net (loss) income $ (115) $ 55,460 $ 22,030 $ - $ 77,375
For the year ended February 28, 1999
- ------------------------------------
Net sales $ 615,270 $ 1,080,466 $ 158,761 $ (357,154) $ 1,497,343
Gross profit $ 168,575 $ 237,437 $ 42,022 $ - $ 448,034
Income before income taxes
and extraordinary item $ 4,849 $ 96,935 $ 2,646 $ - $ 104,430
Net income $ 38,0942,861 $ 27,39245,781 $ 8,4661,830 $ 13,954- $ 32,44550,472
For the year ended February 28, 1998
- ------------------------------------
Net sales $ 562,760 $ 985,757 $ 2,197 $ (337,926) $ 1,212,788
Gross profit $ 151,092 $ 191,658 $ 1,000 $ - $ 343,750
Income (loss) before income taxes $ 21,024 $ 59,285 $ (428) $ - $ 79,881
Net income (loss) $ 12,404 $ 35,154 $ (428) $ - $ 47,130
15. ACCOUNTING PRONOUNCEMENTS:
In June 1997,1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting
Comprehensive Income,133 ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities." (SFASSFAS No. 130)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. 131, "Disclosures about Segments of an Enterprise and Related
Information," (SFAS No. 131) were issued. 137 ("SFAS No. 130 establishes standards137"), "Accounting for
reportingDerivative Instruments and displayHedging Activities--Deferral of comprehensive income and its components in a full setthe Effective Date of
financial statements. TheFASB 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. 130133 on a prospective basis for interim periods and fiscal years
beginning March 1, 1998. Reclassification of
financial statements for earlier periods provided for comparative purposes is
required.2001. The Company believes the effect of the adoption on its
financial statements will not be significant.
SFAS No. 131 establishes standards for reporting information about operating
segments in annual financial statements and requires reporting of selected
information in interim financial statements.material based on the Company's current risk
management strategies.
16. BUSINESS SEGMENT INFORMATION:
The Company is required to adopt
SFAS No. 131 for fiscal years beginning March 1, 1998,reports its operating results in five segments: Canandaigua Wine
(branded popularly-priced wine and for interim periods
beginning March 1, 1999. Restatementbrandy, 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 comparative information for earlier
years is requiredDirectors, the availability of separate financial
results, and materiality considerations. The accounting policies of the segments
are the same as those described in the initial yearsummary of adoption and comparativesignificant accounting
policies. The Company evaluates performance based on operating profits of the
respective business units.
Segment information for interim periodsis 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 initial yearUnited States.
Operations outside the United States consist of adoption is to be reported for
interim periodsMatthew Clark's operations,
which are primarily in the second year of application. The Company has not yet
determinedUnited Kingdom. No other single foreign country or
geographic area is significant to the impact of SFAS No. 131 on its financial statements.
16.consolidated operations.
17. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
A summary of selected quarterly financial information is as follows:
QUARTER ENDED
----------------------------------------------------------------------------------------------------------------
May 31, August 31, November 30, February 28,29,
Fiscal 1998 1997 1997 1997 19982000 1999 1999 1999 2000 Full Year
- -------------------------- --------------------------------------------------- ---------- ---------- ------------ ------------ -----------
(in thousands, except per share data)
Net sales $ 306,011530,169 $ 301,524621,580 $ 322,703661,520 $ 282,550527,200 $ 1,212,7882,340,469
Gross profit $ 80,732156,123 $ 84,759189,128 $ 98,000209,687 $ 85,244167,522 $ 348,735722,460
Net income $ 10,04610,846 $ 12,36521,101 $ 17,61129,900 $ 10,04915,528 $ 50,07177,375
Earnings per common share: (1)
Basic $ 0.540.60 $ 0.671.17 $ 0.941.65 $ 0.540.86 $ 2.684.29
Diluted $ 0.530.59 $ 0.651.14 $ 0.921.60 $ 0.530.84 $ 2.624.18
QUARTER ENDED
----------------------------------------------------------------------------------------------------------------
May 31, August 31, November 30, February 28,
Fiscal 1997 1996 1996 1996 19971999 1998 1998 1998 1999 Full Year
- -------------------------- --------------------------------------------------- ---------- ---------- ------------ ------------ -----------
(in thousands, except per share data)
Net sales $ 276,493312,928 $ 279,218349,386 $ 317,733375,586 $ 261,569459,443 $ 1,135,0131,497,343
Gross profit $ 72,90792,061 $ 69,835103,236 $ 81,683115,695 $ 66,407137,042 $ 290,832448,034
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 $ 8,50113,099 $ 4,94116,731 $ 8,31120,161 $ 5,922481 $ 27,67550,472
Earnings per common share: Basic(1)
Basic:
Income before extraordinary item $ 0.430.70 $ 0.250.90 $ 0.431.13 $ 0.310.67 $ 1.43
Diluted3.38
Extraordinary item - - - (0.64) (0.62)
---------- ---------- ------------ ------------ -----------
Earnings per common share - basic $ 0.430.70 $ 0.250.90 $ 0.431.13 $ 0.310.03 $ 1.422.76
========== ========== ============ ============ ===========
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
=========== ========== ============ ============ ===========
(1) The sum of the quarterly earnings per common share in 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.
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 21,
1998,18,
2000, 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 21, 1998,18, 2000, 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 21, 1998,18, 2000, 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 21, 1998,18, 2000, 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.
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, and February 28,
1998 and 19971999
Consolidated Statements of Income for the years ended February
29, 2000, February 28, 1998 and 1997, for the six months ended February 29, 19961999, and February 28, 1995 (unaudited), and for the year ended August 31,
19951998
Consolidated Statements of Changes in Stockholders' Equity for
the years ended February 29, 2000, February 28, 1999, and
February 28, 1998 and 1997, for the six months
ended February 29, 1996, and for the year ended August 31, 1995
Consolidated Statements of Cash Flows for the years ended
February 29, 2000, February 28, 1998 and 1997, for the six months ended February 29,
19961999, and February 28, 1995 (unaudited), and for the year ended
August 31, 19951998
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
The following consolidated financial information is submitted
herewith:
Selected Financial Data
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
The followingFor the exhibits that are filed herewith or incorporated herein by
reference, as indicated:
2.1 Stock Purchase Agreement dated April 27, 1993 amongsee the Company, Barton Incorporated and the stockholdersIndex to Exhibits located on Page 81 of Barton
Incorporated, Amendment No. 1 to Stock Purchase Agreement
dated May 3, 1993, and Amendment No. 2 to Stock Purchase
Agreement dated June 29, 1993 (filed as Exhibit 2(a) to the
Company's Currentthis
Report.
(b) Reports on Form 8-K
The following Report on Form 8-K dated June 29, 1993 and
incorporated hereinwas filed by reference).
2.2 Asset Sale Agreement dated September 14, 1993 between the Company and Vintners International Company, Inc. (filed as
Exhibit 2(a) to the Company's Current Report on Form 8-K
dated October 15, 1993 and incorporated herein by
reference).
2.3 Amendment dated as of October 14, 1993 to Asset Sale
Agreement dated as of September 14, 1993 by and between
Vintners International Company, Inc. and the Company (filed
as Exhibit 2(b) to the Company's Current Report on Form 8-K
dated October 15, 1993 and incorporated herein by
reference).
2.4 Amendment No. 2 dated as of January 18, 1994 to Asset Sale
Agreement dated as of September 14, 1993 by and between
Vintners International Company, Inc. and the Company (filed
as Exhibit 2.1 to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended February 28, 1994 and
incorporated herein by reference).
2.5 Asset Purchase Agreement dated August 3, 1994 between the
Company and Heublein, Inc. (filed as Exhibit 2(a) to the
Company's Current Report on Form 8-K dated August 5, 1994
and incorporated herein by reference).
2.6 Amendment dated November 8, 1994 to Asset Purchase Agreement
between Heublein, Inc. and the Company (filed as Exhibit 2.2
to the Company's Registration Statement on Form S-3
(Amendment No. 2) (Registration No. 33-55997) filed with the
Securities and Exchange Commission on November 8, 1994 and
incorporated herein by reference).
2.7 Amendment dated November 18, 1994 to Asset Purchase
Agreement between Heublein, Inc. andduring the Company (filed as
Exhibit 2.8 to the Company's Annual Report on Form 10-K forfourth quarter of the fiscal
year ended August 31, 1994February 29, 2000:
Form 8-K dated January 4, 2000. This Form 8-K reported information under
Item 5 (Other Events) and incorporated
herein by reference).
2.8 Amendment datedincluded (i) the Company's Condensed Consolidated
Balance Sheets as of November 30, 1994 to Asset Purchase
Agreement between Heublein, Inc.1999 (unaudited) and the Company (filed as
Exhibit 2.9 toFebruary 28, 1999
(audited); (ii) the Company's Quarterly Report on Form 10-QCondensed Consolidated Statements of Income
for the fiscal quarterthree months ended November 30, 19941999 (unaudited) and incorporated hereinNovember 30,
1998 (unaudited); and (iii) the Company's Condensed Consolidated Statements
of Income for the nine months ended November 30, 1999 (unaudited) and
November 30, 1998 (unaudited).
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 reference).
2.9the undersigned, thereunto duly authorized.
Dated: May 30, 2000 CANANDAIGUA 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, 2000 Officer)
Dated: May 30, 2000
/s/ Robert Sands /s/ George Bresler
- ---------------------------------- ----------------------------------
Robert Sands, Director George Bresler, Director
Dated: May 30, 2000 Dated: May 30, 2000
/s/ James A. Locke /s/ Thomas C. McDermott
- ---------------------------------- ----------------------------------
James A. Locke, III, Director Thomas C. McDermott, Director
Dated: May 30, 2000 Dated: May 30, 2000
/s/ Paul L. Smith
- ----------------------------------
Paul L. Smith, Director
Dated: May 30, 2000
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.
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, 2000 /s/ Ned Cooper
----------------------------------
Ned Cooper, President
(Principal Executive Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, 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 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, 2000 /s/ Jon Moramarco
----------------------------------
Jon Moramarco, President and Chief
Executive Officer (Principal
Executive Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, 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 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, 2000 /s/ Douglas Kahle
----------------------------------
Douglas Kahle, President
(Principal Executive Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Richard Sands
----------------------------------
Richard 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 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, 2000 /s/ Robert Sands
---------------------------------
Robert Sands, Chief Executive
Officer and Director (Principal
Executive Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Finance
Director (Principal Financial
Officer and Principal Accounting
Officer)
Dated: May 30, 2000 /s/ Peter Aikens
---------------------------------
Peter Aikens, Director
Dated: May 30, 2000 /s/ Anne Colquhoun
---------------------------------
Anne Colquhoun, Director
Dated: May 30, 2000 /s/ Hugh Etheridge
---------------------------------
Hugh Etheridge, 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 POLYPHENOLICS, INC.
By: /s/ Howard Jacobson
---------------------------------
Howard Jacobson, 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/ Howard Jacobson
---------------------------------
Howard Jacobson, President and
Director (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President,
Treasurer and Director (Principal
Financial Officer and Principal
Accounting Officer)
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.
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, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, President and
Treasurer (Principal Executive
Officer, 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 CANANDAIGUA B.V.
By: /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Authorized
Representative
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/ G.A.L.R. Diepenhorst
---------------------------------
G.A.L.R. Diepenhorst, Managing
Director (Principal Executive
Officer)
Dated: May 30, 2000 /s/ E.F. Switters
---------------------------------
E.F. Switters, Managing Director
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Authorized
Representative in the United
States
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.
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 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 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, 2000 /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, President,
Chief Executive Officer and
Director (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Troy Christensen
---------------------------------
Troy Christensen, Director
Dated: May 30, 2000 /s/ Edward L. Golden
---------------------------------
Edward L. Golden, Director
Dated: May 30, 2000 /s/ William F. Hackett
---------------------------------
William F. Hackett, Director
Dated: May 30, 2000 /s/ Elizabeth Kutyla
---------------------------------
Elizabeth Kutyla, Director
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 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, 2000 /s/ Edward L. Golden
---------------------------------
Edward L. Golden, President and
Director (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, Director
Dated: May 30, 2000 /s/ Troy J. Christensen
---------------------------------
Troy J. Christensen, Director
Dated: May 30, 2000 /s/ Elizabeth Kutyla
---------------------------------
Elizabeth Kutyla, 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 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, 2000 /s/ Richard Sands
---------------------------------
Richard Sands, Chief Executive
Officer and Director (Principal
Executive Officer)
Dated: May 30, 2000 /s/ Thomas S.Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, Director
Dated: May 30, 2000 /s/ Troy J. Christensen
---------------------------------
Troy J. Christensen, Director
Dated: May 30, 2000 /s/ William F. Hackett
---------------------------------
William F. Hackett, Director
Dated: May 30, 2000 /s/ Elizabeth Kutyla
---------------------------------
Elizabeth Kutyla, 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 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, 2000 /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, President and
Director (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Troy J. Christensen
---------------------------------
Troy J. Christensen, Director
Dated: May 30, 2000 /s/ Edward L. Golden
---------------------------------
Edward L. Golden, Director
Dated: May 30, 2000 /s/ Elizabeth Kutyla
---------------------------------
Elizabeth Kutyla, 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 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, 2000 /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, President and
Director (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Troy J. Christensen
---------------------------------
Troy J. Christensen, Director
Dated: May 30, 2000 /s/ Edward L. Golden
---------------------------------
Edward L. Golden, Director
Dated: May 30, 2000 /s/ Elizabeth Kutyla
---------------------------------
Elizabeth Kutyla, 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 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, 2000 /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, President and
Director (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Troy J. Christensen
---------------------------------
Troy J. Christensen, Director
Dated: May 30, 2000 /s/ Edward L. Golden
---------------------------------
Edward L. Golden, Director
Dated: May 30, 2000 /s/ Elizabeth Kutyla
---------------------------------
Elizabeth Kutyla, 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 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, 2000 /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, President and
Director (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Troy J. Christensen
---------------------------------
Troy J. Christensen, Director
Dated: May 30, 2000 /s/ Edward L. Golden
---------------------------------
Edward L. Golden, Director
Dated: May 30, 2000 /s/ Elizabeth Kutyla
---------------------------------
Elizabeth Kutyla, 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 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, 2000 /s/ Troy J. Christensen
---------------------------------
Troy J. Christensen, President,
Secretary and Director (Principal
Executive Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Charles T. Schlau
---------------------------------
Charles T. Schlau, 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 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, 2000 /s/ James P. Ryan
---------------------------------
James P. Ryan, President, Chief
Executive Officer and Director
(Principal Executive Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, Director
Dated: May 30, 2000 /s/ Troy J. Christensen
---------------------------------
Troy J. Christensen, Director
Dated: May 30, 2000 /s/ William F. Hackett
---------------------------------
William F. Hackett, Director
Dated: May 30, 2000 /s/ Elizabeth Kutyla
---------------------------------
Elizabeth Kutyla, 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 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, 2000 /s/ James P. Ryan
---------------------------------
James P. Ryan, Chief Executive
Officer (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, Director
Dated: May 30, 2000 /s/ Troy J. Christensen
---------------------------------
Troy J. Christensen, Director
Dated: May 30, 2000 /s/ William F. Hackett
---------------------------------
William F. Hackett, Director
Dated: May 30, 2000 /s/ Elizabeth Kutyla
---------------------------------
Elizabeth Kutyla, Director
INDEX TO EXHIBITS
Exhibit No.
- -----------
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).
3.1(a) Certificate2.2 Recommended Cash Offer, by Schroders on behalf of AmendmentCanandaigua
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).
2.3 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).
2.4 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.
(filed as Exhibit 2.1 to the Company's Current Report on Form
8-K dated June 4, 1999 and incorporated herein by reference).
2.5 Stock Purchase Agreement by and between Canandaigua Wine
Company, Inc. (a wholly-owned subsidiary of the Company) and
Moet Hennessy, Inc. dated April 1, 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).
3.1 Restated Certificate of Incorporation of the Company (filed as
Exhibit 3.1(a)3.1 to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended August 31, 1997 and incorporated herein by reference).
3.1(b) Restated Certificate of Incorporation of the Company (filed
as Exhibit 3.1 to the Company's Transition Report on Form
10-K for the Transition Period from September 1, 1995 to
February 29, 19961998 and incorporated herein
by reference).
3.2 Amended and Restated By-lawsBy-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, 19971998 and incorporated herein by
reference).
4.1 Indenture, 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).
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 herewith)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).
4.64.9 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 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, its 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, dated as of February 25, 1999, by
and among the Company, as Issuer, its 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, dated as of August 4, 1999, by and
among the Company, as Issuer, its 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, dated as of May 15, 2000 by and
among the Company, as Issuer, its principal operating
subsidiaries, as Guarantors, and Harris Trust and Savings Bank,
as Trustee (filed herewith).
4.74.18 Credit Agreement, dated as of October 6, 1999, between the
Company, itscertain principal
operating subsidiaries, and certain banks for
which The Chase Manhattan Bank acts as Administrative Agent, datedThe
Bank of Nova Scotia acts as of December 19, 1997 (including a list briefly identifying
the contents of all omitted schedulesSyndication Agent, and exhibits thereto)
(filed herewith). The Registrant will furnish supplementally
to the Commission, upon request, a copy of any omitted
schedule or exhibit.
10.1 Employment Agreement between Barton IncorporatedCredit Suisse
First Boston and Ellis
M. Goodman datedCiticorp USA, Inc. acts as of October 1, 1991 as amended by
Amendment to Employment Agreement between Barton
Incorporated and Ellis M. Goodman dated as of June 29, 1993Co-Documentation
Agents (filed as Exhibit 10.54.1 to the Company's AnnualQuarterly Report
on Form 10-K10-Q for the fiscal yearquarter ended August 31, 1993November 30, 1999 and
incorporated herein by reference).
10.24.19 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) 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).
10.3 Ellis M. Goodman Split Dollar Insurance Agreement (filed as
Exhibit 10.7 to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1993 and incorporated
herein by reference).
10.4 Barton Brands, Ltd. Deferred Compensation Plan (filed as
Exhibit 10.8 to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1993 and incorporated
herein by reference).
10.510.2 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).
10.6 Letter agreement, effective as of October 7, 1995, as
amended, addressing compensation, between the Company and
Daniel Barnett (filed as Exhibit 10.23 to the Company's
Transition Report on Form 10-K for the Transition Period
from September 1, 1995 to February 29, 1996 and incorporated
herein by reference).
10.710.3 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 herewith)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).
10.8 Credit10.4 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, its principal
operating subsidiaries,Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1999 and certain banks for which The
Chase Manhattan Bank acts as Administrative Agent, dated as
of December 19, 1997 (including a list briefly identifying
the contents of all omitted schedules and exhibits thereto)
(incorporatedincorporated herein
by reference to Exhibit 4.7, filed herewith)reference).
10.910.5 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).
10.1010.6 Amendment Number One to the Company's Long-Term Stock Incentive
Plan
of the Company (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).
10.1110.7 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 Incentive Stock Option Plan of the Company (filed as Exhibit
10.2 ofto the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended August 31, 1997 and incorporated herein by
reference).
10.1210.9 Amendment Number One to the Incentive Stock Option Plan of the
Company (filed as Exhibit 10.3 ofto the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended August 31, 1997 and
incorporated herein by reference).
10.1310.10 Annual Management Incentive Plan of the Company (filed as
Exhibit 10.4 ofto the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended August 31, 1997 and incorporated herein
by reference).
10.1410.11 Amendment Number One to the 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).
10.12 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).
10.13 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).
10.14 First Amendment to the 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).
10.15 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).
10.16 Letter Agreement between the Company and Thomas S. Summer, dated
March 10, 1997, addressing compensation (filed herewith).
10.17 Service Agreement, as amended, between Matthew Clark plc and
Peter Aikens, dated September 27, 1991 (filed herewith).
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 fiscal year ended February 28,
1998 (filed herewith).
27.2 Restated Financial Data Schedule for the fiscal quarter
ended November 30, 1997 (filed herewith).
27.3 Restated Financial Data Schedule for the fiscal quarter
ended August 31, 1997 (filed herewith).
27.4 Restated Financial Data Schedule for the fiscal quarter
ended May 31, 1997 (filed herewith).
27.5 Restated Financial Data Schedule for the fiscal year ended February 28, 1997 (filed herewith).
27.6 Restated Financial Data Schedule for the fiscal quarter
ended November 30, 1996 (filed herewith).
27.7 Restated Financial Data Schedule for the fiscal quarter
ended August 31, 1996 (filed herewith).
27.8 Restated Financial Data Schedule for the fiscal quarter
ended May 31, 1996 (filed herewith).
27.9 Restated Financial Data Schedule for the Transition Period
from September 1, 1995 to February 29,
1996 (filed
herewith).
27.10 Restated Financial Data Schedule for the fiscal year ended
August 31, 19952000 (filed herewith).
99.1 1989 Employee Stock Purchase Plan of the Company, as amended by
Amendment Number 1 through Amendment Number 5 (filed herewith).
(b) Reports on Form 8-K
No Reports on Form 8-K were filed by the Company with the Securities and
Exchange Commission during the fourth quarter of the fiscal year ended
February 28, 1998.
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, 1998 CANANDAIGUA BRANDS, INC.
By: /s/ Richard Sands
-----------------
Richard Sands, 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, President, Chief Thomas S. Summer, Senior Vice President
Executive Officer and Director and Chief Financial Officer (Principal
(Principal Executive Officer) Financial Officer and Principal
Dated: May 29, 1998 Accounting Officer)
Dated: May 29, 1998
/s/ Marvin Sands /s/ Robert Sands
- ---------------- ----------------
Marvin Sands, Chairman of Robert Sands, Director
the Board Dated: May 29, 1998
Dated: May 29, 1998
/s/ George Bresler /s/ James A. Locke
- ------------------ ------------------
George Bresler, Director James A. Locke, III, Director
Dated: May 29, 1998 Dated: May 29, 1998
/s/ Thomas C. McDermott /s/ Bertram E. Silk
- ----------------------- -------------------
Thomas C. McDermott, Director Bertram E. Silk, Director
Dated: May 29, 1998 Dated: May 29, 1998
/s/ Paul L. Smith
- -----------------
Paul L. Smith, Director
Dated: May 29, 1998
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, 1998 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 29, 1998 /s/ Ned Cooper
--------------
Ned Cooper, President
(Principal Executive Officer)
Dated: May 29, 1998 /s/ Thomas S. Summer
--------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 29, 1998 /s/ Richard Sands
-----------------
Richard Sands, Director
Dated: May 29, 1998 /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 29, 1998 CANANDAIGUA WINE COMPANY, INC.
By: /s/ Daniel C. Barnett
---------------------
Daniel C. Barnett, 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, 1998 /s/ Daniel C. Barnett
---------------------
Daniel C. Barnett, President
(Principal Executive Officer)
Dated: May 29, 1998 /s/ Thomas S. Summer
--------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 29, 1998 /s/ Richard Sands
-----------------
Richard Sands, Director
Dated: May 29, 1998 /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 29, 1998 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 29, 1998 /s/ Douglas Kahle
-----------------
Douglas Kahle, President
(Principal Executive Officer)
Dated: May 29, 1998 /s/ Thomas S. Summer
--------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 29, 1998 /s/ Richard Sands
-----------------
Richard 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 29, 1998 ROBERTS TRADING CORP.
By: /s/ Daniel C. Barnett
---------------------
Daniel C. Barnett, 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, 1998 /s/ Daniel C. Barnett
---------------------
Daniel C. Barnett, President
(Principal Executive Officer)
Dated: May 29, 1998 /s/ Thomas S. Summer
--------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 29, 1998 /s/ Richard Sands
-----------------
Richard Sands, Director
Dated: May 29, 1998 /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 29, 1998 BARTON INCORPORATED
By: /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President and
Chief Operating 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 29, 1998 /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President, Chief
Operating Officer and Director
(Principal Executive Officer)
Dated: May 29, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 29, 1998 /s/ Edward L. Golden
--------------------
Edward L. Golden, Director
Dated: May 29, 1998 /s/ William F. Hackett
----------------------
William F. Hackett, Director
Dated: May 29, 1998 /s/ Richard Sands
-----------------
Richard Sands, Director
Dated: May 29, 1998 /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 29, 1998 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 29, 1998 /s/ Edward L. Golden
--------------------
Edward L. Golden, President and Director
(Principal Executive Officer)
Dated: May 29, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 29, 1998 /s/ Alexander L. Berk
---------------------
Alexander L. Berk, 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 29, 1998 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 29, 1998 /s/ Richard Sands
-----------------
Richard Sands, Chief Executive Officer
and Director (Principal Executive
Officer)
Dated: May 29, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 29, 1998 /s/ Alexander L. Berk
---------------------
Alexander L. Berk, Director
Dated: May 29, 1998 /s/ William F. Hackett
----------------------
William F. Hackett, 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 29, 1998 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 29, 1998 /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President and
Director (Principal Executive Officer)
Dated: May 29, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 29, 1998 /s/ Edward L. Golden
--------------------
Edward L. Golden, 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 29, 1998 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 29, 1998 /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President and
Director (Principal Executive Officer)
Dated: May 29, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 29, 1998 /s/ Edward L. Golden
--------------------
Edward L. Golden, 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 29, 1998 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 29, 1998 /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President and
Director (Principal Executive Officer)
Dated: May 29, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 29, 1998 /s/ Edward L. Golden
--------------------
Edward L. Golden, 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 29, 1998 BARTON FINANCIAL CORPORATION
By: /s/ Raymond E. Powers
---------------------
Raymond E. Powers, 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, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, President, Secretary
and Director (Principal Executive
Officer)
Dated: May 29, 1998 /s/ Charles T. Schlau
---------------------
Charles T. Schlau, Treasurer and
Director (Principal Financial Officer
and Principal Accounting Officer)
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, 1998 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 29, 1998 /s/ James P. Ryan
-----------------
James P. Ryan, President, Chief
Executive Officer and Director
(Principal Executive Officer)
Dated: May 29, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 29, 1998 /s/ Alexander L. Berk
---------------------
Alexander L. Berk, Director
Dated: May 29, 1998 /s/ William F. Hackett
----------------------
William F. Hackett, 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 29, 1998 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 29, 1998 /s/ James P. Ryan
-----------------
James P. Ryan, Chief Executive Officer
(Principal Executive Officer)
Dated: May 29, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 29, 1998 /s/ Alexander L. Berk
---------------------
Alexander L. Berk, Director
Dated: May 29, 1998 /s/ William F. Hackett
----------------------
William F. Hackett, 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 29, 1998 THE VIKING DISTILLERY, 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 29, 1998 /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President and
Director (Principal Executive Officer)
Dated: May 29, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 29, 1998 /s/ Edward L. Golden
--------------------
Edward L. Golden, Director
INDEX TO EXHIBITS
EXHIBIT NO.
2.1 Stock Purchase Agreement dated April 27, 1993 among the Company,
Barton Incorporated and the stockholders of Barton Incorporated,
Amendment No. 1 to Stock Purchase Agreement dated May 3, 1993, and
Amendment No. 2 to Stock Purchase Agreement dated June 29, 1993
(filed as Exhibit
2(a) to the Company's Current Report on Form 8-K
dated June 29, 1993 and incorporated herein by reference).
2.2 Asset Sale Agreement dated September 14, 1993 between the Company
and Vintners International Company, Inc. (filed as Exhibit 2(a) to
the Company's Current Report on Form 8-K dated October 15, 1993
and incorporated herein by reference).
2.3 Amendment dated as of October 14, 1993 to Asset Sale Agreement
dated as of September 14, 1993 by and between Vintners
International Company, Inc. and the Company (filed as Exhibit 2(b)
to the Company's Current Report on Form 8-K dated October 15, 1993
and incorporated herein by reference).
2.4 Amendment No. 2 dated as of January 18, 1994 to Asset Sale
Agreement dated as of September 14, 1993 by and between Vintners
International Company, Inc. and the Company (filed as Exhibit 2.1
to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended February 28, 1994 and incorporated herein by
reference).
2.5 Asset Purchase Agreement dated August 3, 1994 between the Company
and Heublein, Inc. (filed as Exhibit 2(a) to the Company's Current
Report on Form 8-K dated August 5, 1994 and incorporated herein by
reference).
2.6 Amendment dated November 8, 1994 to Asset Purchase Agreement
between Heublein, Inc. and the Company (filed as Exhibit 2.2 to
the Company's Registration Statement on Form S-3 (Amendment No. 2)
(Registration No. 33-55997) filed with the Securities and Exchange
Commission on November 8, 1994 and incorporated herein by
reference).
2.7 Amendment dated November 18, 1994 to Asset Purchase Agreement
between Heublein, Inc. and the Company (filed as Exhibit 2.899.1 to the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1994February 28, 1998 and incorporated herein by
reference).
2.899.2 Amendment dated November 30, 1994 to Asset Purchase Agreement
between Heublein, Inc. and the Company (filed as Exhibit 2.9Number 6 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 30, 1994 and incorporated herein by reference).
2.9 Asset1989 Employee Stock 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).
3.1(a) Certificate of Amendment of the Certificate of IncorporationPlan of
the Company (filed as Exhibit 3.1(a) to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended August 31, 1997
and incorporated herein by reference).
3.1(b) Restated Certificate of Incorporation of the Company (filed as
Exhibit 3.1 to the Company's Transition Report on Form 10-K for
the Transition Period from September 1, 1995 to February 29, 1996
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, 1997 and incorporated herein by
reference).
4.1 Indenture 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. 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).
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 4.599.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended August 31, 1995February 28, 1999
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 herewith).
4.5 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).
4.6 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 herewith).
4.7 Credit Agreement between the Company, its principal operating
subsidiaries, and certain banks for which The Chase Manhattan Bank
acts as Administrative Agent, dated as of December 19, 1997
(including a list briefly identifying the contents of all omitted
schedules and exhibits thereto) (filed herewith). The Registrant
will furnish supplementally to the Commission, upon request, a
copy of any omitted schedule or exhibit.
10.1 Employment Agreement between Barton Incorporated and Ellis M.
Goodman dated as of October 1, 1991 as amended by Amendment to
Employment Agreement between Barton Incorporated and Ellis M.
Goodman dated as of June 29, 1993 (filed as Exhibit 10.5 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 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).
10.3 Ellis M. Goodman Split Dollar Insurance Agreement (filed as
Exhibit 10.7 to the Company's Annual Report on Form 10-K for the
fiscal year ended August 31, 1993 and incorporated herein by
reference).
10.4 Barton Brands, Ltd. Deferred Compensation Plan (filed as Exhibit
10.8 to the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1993 and incorporated herein by reference).
10.5 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).
10.6 Letter agreement, effective as of October 7, 1995, as amended,
addressing compensation, between the Company and Daniel Barnett
(filed as Exhibit 10.23 to the Company's Transition Report on Form
10-K for the Transition Period from September 1, 1995 to February
29, 1996 and incorporated herein by reference).
10.7 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 herewith).
10.8 Credit Agreement between the Company, its principal operating
subsidiaries, and certain banks for which The Chase Manhattan Bank
acts as Administrative Agent, dated as of December 19, 1997
(including a list briefly identifying the contents of all omitted
schedules and exhibits thereto) (incorporated by reference to
Exhibit 4.7, filed herewith).
10.9 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).
10.10 Amendment Number One to the Long-Term Stock Incentive Plan of the
Company (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).
10.11 Incentive Stock Option Plan of the Company (filed as Exhibit 10.2
of the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended August 31, 1997 and incorporated herein by
reference).
10.12 Amendment Number One to the Incentive Stock Option Plan of the
Company (filed as Exhibit 10.3 of the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended August 31, 1997 and
incorporated herein by reference).
10.13 Annual Management Incentive Plan of the Company (filed as Exhibit
10.4 of the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended August 31, 1997 and incorporated herein by
reference).
10.14 Amendment Number One to the Annual Management Incentive Plan of
the Company (filed herewith).
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 fiscal year ended February 28, 1998
(filed herewith).
27.2 Restated Financial Data Schedule for the fiscal quarter ended
November 30, 1997 (filed herewith).
27.3 Restated Financial Data Schedule for the fiscal quarter ended
August 31, 1997 (filed herewith).
27.4 Restated Financial Data Schedule for the fiscal quarter ended May
31, 1997 (filed herewith).
27.5 Restated Financial Data Schedule for the fiscal year ended
February 28, 1997 (filed herewith).
27.6 Restated Financial Data Schedule for the fiscal quarter ended
November 30, 1996 (filed herewith).
27.7 Restated Financial Data Schedule for the fiscal quarter ended
August 31, 1996 (filed herewith).
27.8 Restated Financial Data Schedule for the fiscal quarter ended May
31, 1996 (filed herewith).
27.9 Restated Financial Data Schedule for the Transition Period from
September 1, 1995 to February 29, 1996 (filed herewith).
27.10 Restated Financial Data Schedule for the fiscal year ended August
31, 1995 (filed herewith).
99.1 1989 Employee Stock Purchase Plan of the Company, as amended by
Amendment Number 1 through Amendment Number 5 (filed herewith).