FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended May 31,November 30, 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 Number 0-7570
Delaware CANANDAIGUACONSTELLATION BRANDS, INC. 16-0716709
and its subsidiaries:
New York Batavia Wine Cellars, Inc. 16-1222994
New York Canandaigua Wine Company, Inc. 16-1462887
New York Canandaigua Europe Limited 16-1195581
England and Wales Canandaigua Limited 98-0198402
New York Polyphenolics, Inc. 16-1546354
New York Roberts Trading Corp. 16-0865491
Netherlands Canandaigua B.V. 98-0205132
Delaware Franciscan Vineyards, Inc. 94-2602962
California Allberry, Inc. 68-0324763
California Cloud Peak Corporation 68-0324762
California M.J. Lewis Corp. 94-3065450
California Mt. Veeder Corporation 94-2862667
Delaware Barton Incorporated 36-3500366
Delaware Barton Brands, Ltd. 36-3185921
Maryland Barton Beers, Ltd. 36-2855879
Connecticut Barton Brands of California, Inc. 06-1048198
Georgia Barton Brands of Georgia, Inc. 58-1215938
Illinois Barton Canada, Ltd. 36-4283446
New York Barton Distillers Import Corp. 13-1794441
Delaware Barton Financial Corporation 51-0311795
Wisconsin Stevens Point Beverage Co. 39-0638900
Illinois Monarch Import Company 36-3539106
(State or other (Exact name of registrant as (I.R.S. Employer
jurisdiction of specified in its charter) Identification No.)
incorporation or
organization)
300 WILLOWBROOK OFFICE PARK, FAIRPORT, NEW YORK 14450
-----------------------------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(716) 218-2169
-----------------------------------------------------------------------------------------------------------
(Registrants' telephone number, including area code)
-----------------------------------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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
--- ---
The number of shares outstanding with respect to each of the classes of common
stock of CanandaiguaConstellation Brands, Inc., as of June 30,December 31, 2000, is set forth below
(all of the Registrants, other than CanandaiguaConstellation Brands, Inc., are direct or
indirect wholly-owned subsidiaries of CanandaiguaConstellation Brands, Inc.):
CLASS NUMBER OF SHARES OUTSTANDING
----- ----------------------------
Class A Common Stock, Par Value $.01 Per Share 15,204,26115,366,763
Class B Common Stock, Par Value $.01 Per Share 3,089,2723,084,372
- 1 -
PART I - FINANCIAL INFORMATION
ItemITEM 1. Financial StatementsFINANCIAL STATEMENTS
- ------- --------------------
CANANDAIGUACONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
May 31,November 30, February 29,
2000 2000
------------ ------------
(unaudited)
ASSETS
------
CURRENT ASSETS:
Cash and cash investments $ 14,0241,871 $ 34,308
Accounts receivable, net 334,731386,908 291,108
Inventories, net 601,733699,885 615,700
Prepaid expenses and other current assets 52,10670,140 54,881
------------ ------------
Total current assets 1,002,5941,158,804 995,997
PROPERTY, PLANT AND EQUIPMENT, net 530,991536,300 542,971
OTHER ASSETS 793,515770,686 809,823
------------ ------------
Total assets $ 2,327,1002,465,790 $ 2,348,791
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 10,000121,000 $ 26,800
Current maturities of long-term debt 56,50837,544 53,987
Accounts payable 129,376163,195 122,213
Accrued excise taxes 41,21244,853 30,446
Other accrued expenses and liabilities 207,052245,538 204,771
------------ ------------
Total current liabilities 444,148612,130 438,217
------------ ------------
LONG-TERM DEBT, less current maturities 1,205,7051,123,929 1,237,135
------------ ------------
DEFERRED INCOME TAXES 115,337116,523 116,447
------------ ------------
OTHER LIABILITIES 32,36630,337 36,152
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value-
Authorized, 1,000,000 shares;
Issued, none at May 31,November 30, 2000,
and February 29, 2000 - -
Class A Common Stock, $.01 par value-
Authorized, 120,000,000 shares;
Issued, 18,315,62518,459,875 shares at
May 31,November 30, 2000, and 18,206,662
shares at February 29, 2000 183185 182
Class B Convertible Common Stock,
$.01 par value-
Authorized, 20,000,000 shares;
Issued, 3,717,9973,711,097 shares at
May 31,November 30, 2000, and 3,745,560 shares
at February 29, 2000 37 38
Additional paid-in capital 250,017254,595 247,949
Retained earnings 376,358437,421 358,456
Accumulated other comprehensive income-
Cumulative translation adjustment (15,415)(27,632) (4,149)
------------ ------------
611,180664,606 602,476
------------ ------------
Less-Treasury stock-
Class A Common Stock, 3,119,112 shares at
November 30, 2000, and 3,137,244 shares at May 31, 2000, and
February 29, 2000, at cost (79,429)(79,353) (79,429)
Class B Convertible Common Stock, 625,725
shares at May 31,November 30, 2000, and
February 29, 2000, at cost (2,207) (2,207)
------------ ------------
(81,560) (81,636)
(81,636)------------ ------------
Less-Unearned compensation-restricted
stock awards (175) -
------------ ------------
Total stockholders' equity 529,544582,871 520,840
------------ ------------
Total liabilities and stockholders' equity $ 2,327,1002,465,790 $ 2,348,791
============ ============
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
- 2 -
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the Three Months Ended May 31,
----------------------------------
2000 1999
-------------- --------------
(unaudited) (unaudited)
GROSS SALES $ 774,522 $ 704,990
Less - Excise taxes (188,942) (174,821)
-------------- --------------
Net sales 585,580 530,169
COST OF PRODUCT SOLD (401,707) (374,046)
-------------- --------------
Gross profit 183,873 156,123
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (126,409) (110,502)
NONRECURRING CHARGES - (5,510)
-------------- --------------
Operating income 57,464 40,111
INTEREST EXPENSE, net (27,627) (22,034)
-------------- --------------
Income before income taxes 29,837 18,077
PROVISION FOR INCOME TAXES (11,935) (7,231)
-------------- --------------
NET INCOME $ 17,902 $ 10,846
============== ==============
SHARE DATA:
Earnings per common share:
Basic $ 0.98 $ 0.60
============== ===============
Diluted $ 0.96 $ 0.59
============== ===============
Weighted average common shares outstanding:
Basic 18,230 17,977
Diluted 18,598 18,447
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the Nine Months Ended November 30, For the Three Months Ended November 30,
-------------------------------------- ---------------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
(unaudited) (unaudited) (unaudited) (unaudited)
GROSS SALES $ 2,436,637 $ 2,383,909 $ 833,447 $ 864,075
Less - Excise taxes (583,990) (579,191) (203,870) (211,106)
--------------- --------------- --------------- ---------------
Net sales 1,852,647 1,804,718 629,577 652,969
COST OF PRODUCT SOLD (1,260,082) (1,249,781) (421,524) (443,282)
--------------- --------------- --------------- ---------------
Gross profit 592,565 554,937 208,053 209,687
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (379,159) (368,130) (122,815) (132,309)
NONRECURRING CHARGES - (5,510) - -
--------------- --------------- --------------- ---------------
Operating income 213,406 181,297 85,238 77,378
INTEREST EXPENSE, net (81,797) (78,219) (26,983) (27,544)
--------------- --------------- --------------- ---------------
Income before income taxes 131,609 103,078 58,255 49,834
PROVISION FOR INCOME TAXES (52,644) (41,231) (23,302) (19,934)
--------------- --------------- --------------- ---------------
NET INCOME $ 78,965 $ 61,847 $ 34,953 $ 29,900
=============== =============== =============== ===============
SHARE DATA:
Earnings per common share:
Basic $ 4.31 $ 3.43 $ 1.90 $ 1.65
=============== =============== =============== ===============
Diluted $ 4.24 $ 3.34 $ 1.87 $ 1.60
=============== =============== =============== ===============
Weighted average common shares
outstanding:
Basic 18,308 18,023 18,394 18,083
Diluted 18,642 18,502 18,734 18,651
The accompanying notes to consolidated financial statements are an integral part of these statements.
- 3 -
CANANDAIGUACONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the ThreeNine Months Ended May 31,
----------------------------------November 30,
--------------------------------------
2000 1999
-------------- ----------------------------- ---------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 17,90278,965 $ 10,84661,847
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation of property, plant and equipment 11,797 9,39935,826 33,938
Amortization of intangible assets 6,549 4,364
Deferred tax provision 3,571 -19,285 16,904
Loss (gain) on sale of assets 767 3441,904 (778)
Amortization of discount on long-term debt 116 103370 316
Stock-based compensation expense 255 776
Deferred tax benefit - 763(3,860)
Change in operating assets and liabilities,
net of effects from purchasepurchases of business:businesses:
Accounts receivable, net (50,394) (67,551)(104,496) (123,109)
Inventories, net 8,747 12,819(88,726) (55,602)
Prepaid expenses and other current assets 2,129 2,885(15,738) (5,432)
Accounts payable 10,603 11,64939,087 44,292
Accrued excise taxes 11,462 (8,084)15,975 (3,191)
Other accrued expenses and liabilities 1,200 17,96939,067 88,960
Other assets and liabilities, net (4,478) (1,117)
-------------- --------------(5,683) 1,201
--------------- ---------------
Total adjustments 2,069 (16,457)
--------------(62,874) (5,585)
--------------- ---------------
Net cash provided by (used in) operating activities 19,971 (5,611)
--------------16,091 56,262
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (10,265) (11,321)(47,806) (46,657)
Proceeds from sale of assets 317 715
Purchase1,379 1,276
Purchases of businessbusinesses, net of cash acquired - (185,500)
-------------- --------------(452,526)
--------------- ---------------
Net cash used in investing activities (9,948) (196,106)
-------------- --------------(46,427) (497,907)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt (133,329) (16,253)
Net repayments of notes payable (16,800) (70,396)(221,557) (1,059,406)
Payment of issuance costs of long-term debt (1,301) (3,230)(1,668) (14,494)
Proceeds from issuance of long-term debt, net of discount 119,400 264,0801,486,240
Net proceeds from notes payable 96,922 25,995
Exercise of employee stock options 1,973 309
-------------- --------------5,530 2,386
Proceeds from employee stock purchases 761 601
--------------- ---------------
Net cash (used in) provided by
financing activities (30,057) 174,510
-------------- --------------(612) 441,322
--------------- ---------------
Effect of exchange rate changes on cash and
cash investments (250) 1,492
-------------- --------------(1,489) (2,655)
--------------- ---------------
NET DECREASE IN CASH AND CASH INVESTMENTS (20,284) (25,715)(32,437) (2,978)
CASH AND CASH INVESTMENTS, beginning of period 34,308 27,645
-------------- ----------------------------- ---------------
CASH AND CASH INVESTMENTS, end of period $ 14,0241,871 $ 1,930
============== ==============24,667
=============== ===============
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Fair value of assets acquired, including cash acquired $ 15,115 $ 559,541
Liabilities assumed (10,628) (104,526)
--------------- ---------------
Cash paid 4,487 455,015
Less - amounts borrowed (4,487) -
Less - cash acquired - (2,489)
--------------- ---------------
Net cash paid for purchases of businesses $ - $ 187,160
Liabilities assumed - (1,660)
-------------- --------------
Cash paid for purchase of business $ - $ 185,500
============== ==============452,526
=============== ===============
The accompanying notes to consolidated financial statements
are an integral part of these statements.
- 4 -
CANANDAIGUACONSTELLATION BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31,NOVEMBER 30, 2000
1) MANAGEMENT'S REPRESENTATIONS:
The condensed consolidated financial statements included herein have been prepared by
CanandaiguaConstellation Brands, Inc. and its subsidiaries (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission
applicable to quarterly reporting on Form 10-Q and reflect, in the opinion of
the Company, all adjustments necessary to present fairly the financial
information for the Company. All such adjustments are of a normal recurring
nature. Certain information and footnote disclosures normally included in
financial statements, prepared in accordance with generally accepted accounting
principles, have been condensed or omitted as permitted by such rules and
regulations. These consolidated financial statements and related notes should be
read in conjunction with the consolidated financial statements and related notes
included in the Company's Annual Report on Form 10-K for the fiscal year ended
February 29, 2000. Results of operations for interim periods are not necessarily
indicative of annual results.
Certain February 29, 2000, and November 30, 1999, balances have been
reclassified to conform to current year presentation.
2) ACQUISITIONS:
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 $183.6 million and was financed by the proceeds from the
sale of the Senior Subordinated Notes.
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), $36.0 million, is being
amortized on a straight-line basis over 40 years. The results of operations of
the Black Velvet Assets acquisition have been included in the Consolidated
Statements of Income since the date of acquisition.
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, $118.3$94.5 million and $8.3$5.8 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").
- 5 -
The results of operations of Franciscan have been included in the Consolidated
Statements of Income since the date of acquisition.
On October 27, 2000, the Company purchased all of the issued Ordinary
Shares and Preference Shares of Forth Wines Limited ("Forth Wines"). The
purchase price was $4.5 million and was accounted for using the purchase method;
accordingly, the acquired assets were recorded at fair market value at the date
of acquisition. The excess of the purchase price over the estimated fair market
value of the net assets acquired (goodwill), $2.2 million, is being amortized on
a straight-line basis over 40 years. The results of operations of Forth Wines
have been included in the Consolidated Statements of Income since the date of
acquisition.
The following table sets forth the unaudited historical and unaudited pro
forma results of operations of the Company for the threenine months ended May 31,November
30, 2000 and 1999.1999, respectively. The unaudited historical and unaudited pro
forma results of operations for the nine months ended November 30, 2000 and
1999, respectively, do not give pro forma effect to the acquisition of Forth
Wines as if it occurred on March 1, 1999, as it is not significant. The
unaudited pro forma results of operations for the threenine months ended May 31,November 30,
1999, gives effect to the acquisitions of the Black Velvet Assets and Franciscan
as if they occurred on March 1, 1999. The unaudited pro forma results of
operations are presented after giving effect to certain adjustments for
depreciation, amortization of goodwill, interest expense on the acquisition
financing and related income tax effects. 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 for the threenine months ended May 31,November
30, 1999, reflect total pretax 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 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.
For the ThreeNine Months Ended May 31,
----------------------------------November 30,
--------------------------------------
2000 1999
--------------- ----------------------------- --------------
(in thousands, except per share data)
Net sales $ 585,5801,852,647 $ 557,5331,832,082
Income before income taxes $ 29,837131,609 $ 2,91187,912
Net income $ 17,90278,965 $ 1,74652,747
Earnings per common share:
Basic $ 0.984.31 $ 0.10
=============== ===============2.93
============== ==============
Diluted $ 0.964.24 $ 0.09
=============== ===============2.85
============== ==============
Weighted average common shares
outstanding:
Basic 18,230 17,97718,308 18,023
Diluted 18,598 18,44718,642 18,502
3) INVENTORIES:
Inventories are stated at the lower of cost (computed in accordance with
the first-in, first-out method) or market. Elements of cost include materials,
labor and overhead and consist of the following:
May 31,November 30, February 29,
2000 2000
-------------- -------------------------- ------------
(in thousands)
Raw materials and supplies $ 30,23037,254 $ 29,417
In-process inventories 379,691460,145 419,558
Finished case goods 191,812202,486 166,725
-------------- -------------------------- ------------
$ 601,733699,885 $ 615,700
============== ========================== ============
- 6 -
4) BORROWINGS:
SENIOR NOTES -
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.
- 6 -
In May 2000, the Company issued (pound)80.0 million (approximately $120.0
million)million upon issuance and $114.0 million as of November 30, 2000) aggregate
principal amount of 8 1/2% Series C Senior Notes due November 2009 at an
issuance price of (pound)79.6 million (approximately $119.4 million upon
issuance, net of $0.6 million unamortized discount, and $113.5 million as of
November 30, 2000, net of $0.5 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 $118.2 million) were used to
repay a portion of the Company's British pound sterling borrowings under its
senior credit facility.
After this repayment, the required quarterly repayments of the Tranche II Term
Loan facility were revised to (pound)0.2 million ($0.3 million) for the
remaining three quarters in 2000, (pound)0.4 million ($0.6 million) for each
quarter in 2001 and 2002, (pound)0.5 million ($0.7 million) for each quarter in
2003, and (pound)8.5 million ($12.7 million) for each quarter in 2004. (The
foregoing U.S. dollar equivalents are as of May 31, 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.
In October 2000, the Company exchanged (pound)74.0 million aggregate
principal amount of the Sterling Series B Senior Notes for Sterling Series C
Senior Notes. The terms of the Sterling Series C Senior Notes are identical in
all material respects to the Sterling Series B Senior Notes.
5) EARNINGS PER COMMON SHARE:
Basic earnings per common share exclude the effect of common stock
equivalents and are 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 reflect 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 assume the exercise of stock options
using the treasury stock method and assume the conversion of convertible
securities, if any, using the "if converted" method.
The computation of basic and diluted earnings per common share is as
follows:
For the Three Months Ended May 31,
------------------------------------
2000 1999
---------------- ----------------
(in thousands, except per share data)
Income applicable to common shares $ 17,902 $ 10,846
================ ================
Weighted average common shares
outstanding - basic 18,230 17,977
Stock options 368 470
---------------- ----------------
Weighted average common shares
outstanding - diluted 18,598 18,447
================ ================
EARNINGS PER COMMON SHARE - BASIC $ 0.98 $ 0.60
================ ================
EARNINGS PER COMMON SHARE - DILUTED $ 0.96 $ 0.59
================ ================
For the Nine Months For the Three Months
Ended November 30, Ended November 30,
------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
(in thousands, except per share data)
Income applicable to common shares $ 78,965 $ 61,847 $ 34,953 $ 29,900
======== ======== ======== ========
Weighted average common shares
outstanding - basic 18,308 18,023 18,394 18,083
Stock options 334 479 340 568
-------- -------- -------- --------
Weighted average common shares
outstanding - diluted 18,642 18,502 18,734 18,651
======== ======== ======== ========
EARNINGS PER COMMON SHARE - BASIC $ 4.31 $ 3.43 $ 1.90 $ 1.65
======== ======== ======== ========
EARNINGS PER COMMON SHARE - DILUTED $ 4.24 $ 3.34 $ 1.87 $ 1.60
======== ======== ======== ========
Stock options to purchase 1.61.7 million and 0.8 million84 thousand shares of Class A
Common Stock at a weighted average price per share of $52.06$52.31 and $51.86$59.28 were
outstanding during the nine months ended November 30, 2000 and 1999,
respectively, but were not included in the computation of the diluted
- 7 -
earnings per common share because the stock options' exercise price was greater
than the average market price of the Class A Common Stock for the respective
periods. Stock options to purchase 1.7 million and 75 thousand shares of Class A
Common Stock at a weighted average price per share of $52.32 and $59.56 were
outstanding during the three months ended May 31,November 30, 2000 and 1999,
respectively, but were not included in the computation of the diluted earnings
per common share because the stock options' exercise price was greater than the
average market price of the Class A Common Stock.
- 7 -Stock for the respective periods.
6) SUMMARIZED FINANCIAL INFORMATION - SUBSIDIARY GUARANTORS:
The following 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 (the
"Subsidiary Guarantors") and the combined subsidiaries of the Company which are
not Subsidiary Guarantors, primarily Matthew Clark (the "Subsidiary
Nonguarantors"). The Subsidiary Guarantors are wholly owned and the guarantees
are full, unconditional, joint and several obligations of each of the Subsidiary
Guarantors. Separate financial statements for the Subsidiary Guarantors of the
Company are not presented because the Company has determined that such financial
statements would not be material to investors. The Subsidiary Guarantors
comprise all of the direct and indirect subsidiaries of the Company, other than
Matthew Clark, the Company's Canadian subsidiary and certain other subsidiaries
which individually, and in the aggregate, are inconsequential. There are no
restrictions on the ability of the Subsidiary Guarantors to transfer funds to
the Company in the form of cash dividends, loans or advances.
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
----------------------- ------------ ------------- ------------ ------------
(in thousands)
(in thousands)
Balance Sheet Data:
May 31,November 30, 2000
- -----------------------------
Current assets $ 85,411121,413 $ 622,505707,370 $ 294,678330,021 $ - $ 1,002,5941,158,804
Noncurrent assets $ 912,239910,185 $ 1,231,1221,239,188 $ 462,795439,263 $ (1,281,650) $ 1,324,5061,306,986
Current liabilities $ 148,381273,307 $ 123,750120,613 $ 172,017218,210 $ - $ 444,148612,130
Noncurrent liabilities $ 1,198,8881,114,232 $ 55,058104,076 $ 99,46252,481 $ - $ 1,353,4081,270,789
February 29, 2000
- -----------------
Current assets $ 105,864105,705 $ 611,646611,805 $ 278,487 $ - $ 995,997
Noncurrent assets $ 913,026846,693 $ 1,232,1321,298,465 $ 489,286 $ (1,281,650) $ 1,352,794
Current liabilities $ 150,507174,816 $ 84,722110,368 $ 202,988153,033 $ - $ 438,217
Noncurrent liabilities $ 1,230,1391,226,329 $ 97,410101,220 $ 62,185 $ - $ 1,389,734
Income Statement Data:
For the ThreeNine Months Ended
- --------------------
Ended May 31,-------------------------
November 30, 2000
- -----------------------------------
Net sales $ 134,718436,925 $ 344,2411,069,711 $ 178,758567,195 $ (72,137)(221,184) $ 585,5801,852,647
Gross profit $ 40,420102,791 $ 93,301320,376 $ 50,152169,398 $ - $ 183,873592,565
(Loss) income before
income taxes $ (4,541)(28,494) $ 23,186111,120 $ 11,19248,983 $ - $ 29,837131,609
Net (loss) income $ (2,725)(17,096) $ 13,91263,196 $ 6,71532,865 $ - $ 17,90278,965
For the ThreeNine Months Ended
- --------------------
Ended May 31,-------------------------
November 30, 1999
- -----------------------------------
Net sales $ 154,623455,401 $ 299,2191,056,200 $ 168,210565,800 $ (91,883)(272,683) $ 530,1691,804,718
Gross profit $ 39,431121,099 $ 69,875270,451 $ 46,817163,387 $ - $ 156,123554,937
(Loss) income before
income taxes $ (5,023)(4,421) $ 15,53770,166 $ 7,56337,333 $ - $ 18,077103,078
Net (loss) income $ (3,014)(2,652) $ 9,32242,099 $ 4,53822,400 $ - $ 10,84661,847
- 8 -
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
------------ ------------ ------------- ------------ ------------
(in thousands)
Income Statement Data (continued):
For the Three Months Ended
- --------------------------
November 30, 2000
- -----------------
Net sales $ 155,957 $ 355,450 $ 195,952 $ (77,782) $ 629,577
Gross profit $ 31,455 $ 116,319 $ 60,279 $ - $ 208,053
(Loss) income before
income taxes $ (10,368) $ 48,442 $ 20,181 $ - $ 58,255
Net (loss) income $ (6,221) $ 27,471 $ 13,703 $ - $ 34,953
For the Three Months Ended
- --------------------------
November 30, 1999
- -----------------
Net sales $ 174,703 $ 365,987 $ 209,332 $ (97,053) $ 652,969
Gross profit $ 47,709 $ 101,134 $ 60,844 $ - $ 209,687
Income before
income taxes $ 2,728 $ 29,801 $ 17,305 $ - $ 49,834
Net income $ 1,637 $ 17,881 $ 10,382 $ - $ 29,900
7) BUSINESS SEGMENT INFORMATION:
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
- 8 -
Corporate Operations and Other (primarily corporate related items). Segment
selection was based upon internal organizational structure, the way in which
these operations are managed and their performance evaluated by management and
the Company's Board of Directors, the availability of separate financial
results, and materiality considerations. The accounting policies of the segments
are the same as those described in the summary of significant accounting
policies. The Company evaluates performance based on operating profitsincome of the
respective business units.
Segment information is as follows:
For the Three Months Ended May 31,
----------------------------------
2000 1999
-------------- --------------
(in thousands)
Canandaigua Wine:
- -----------------
Net sales:
Branded:
External customers $ 143,330 $ 142,641
Intersegment 1,236 1,750
-------------- --------------
Total Branded 144,566 144,391
-------------- --------------
Other:
External customers 14,183 19,130
Intersegment 3,629 38
-------------- --------------
Total Other 17,812 19,168
-------------- --------------
Net sales $ 162,378 $ 163,559
Operating profit $ 7,981 $ 5,607
Long-lived assets $ 190,104 $ 192,128
Total assets $ 590,367 $ 623,786
Capital expenditures $ 2,645 $ 5,638
Depreciation and amortization $ 5,868 $ 5,536
Barton:
- -------
Net sales:
Beer $ 163,134 $ 146,611
Spirits 72,546 54,139
-------------- --------------
Net sales $ 235,680 $ 200,750
Operating profit $ 38,835 $ 31,497
Long-lived assets $ 77,956 $ 79,784
Total assets $ 716,633 $ 709,962
Capital expenditures $ 1,336 $ 916
Depreciation and amortization $ 3,955 $ 3,161
Matthew Clark:
- --------------
Net sales:
Branded $ 69,615 $ 74,375
Wholesale 99,923 92,422
-------------- --------------
Net sales $ 169,538 $ 166,797
Operating profit $ 10,374 $ 7,330
Long-lived assets $ 148,103 $ 169,393
Total assets $ 629,030 $ 648,222
Capital expenditures $ 2,409 $ 4,656
Depreciation and amortization $ 5,213 $ 4,426
For the Nine Months For the Three Months
Ended November 30, Ended November 30,
--------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(in thousands)
Canandaigua Wine:
- -----------------
Net sales:
Branded:
External customers $ 450,927 $ 472,087 $ 160,221 $ 179,905
Intersegment 5,023 5,274 1,891 2,285
------------ ------------ ------------ ------------
Total Branded 455,950 477,361 162,112 182,190
------------ ------------ ------------ ------------
Other:
External customers 46,632 63,081 18,389 24,502
Intersegment 11,450 460 3,095 423
------------ ------------ ------------ ------------
Total Other 58,082 63,541 21,484 24,925
------------ ------------ ------------ ------------
Net sales $ 514,032 $ 540,902 $ 183,596 $ 207,115
Operating income $ 34,849 $ 34,869 $ 16,453 $ 18,850
Long-lived assets $ 188,595 $ 194,199 $ 188,595 $ 194,199
Total assets $ 681,156 $ 698,209 $ 681,156 $ 698,209
Capital expenditures $ 11,894 $ 17,909 $ 4,229 $ 5,201
Depreciation and amortization $ 17,601 $ 16,681 $ 5,867 $ 5,032
- 9 -
For the Nine Months For the Three Months
Ended November 30, Ended November 30,
--------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(in thousands)
Barton:
- -------
Net sales:
Beer $ 538,585 $ 457,961 $ 163,292 $ 134,155
Spirits 224,203 207,697 79,096 80,548
------------ ------------ ------------ ------------
Net sales $ 762,788 $ 665,658 $ 242,388 $ 214,703
Operating income $ 135,818 $ 114,839 $ 46,370 $ 41,380
Long-lived assets $ 76,885 $ 77,022 $ 76,885 $ 77,022
Total assets $ 717,071 $ 699,954 $ 717,071 $ 699,954
Capital expenditures $ 4,646 $ 4,532 $ 1,660 $ 1,864
Depreciation and amortization $ 11,982 $ 10,573 $ 4,078 $ 4,175
Matthew Clark:
- --------------
Net sales:
Branded:
External customers $ 224,734 $ 248,358 $ 79,248 $ 93,104
Intersegment 604 53 107 53
------------ ------------ ------------ ------------
Total Branded 225,338 248,411 79,355 93,157
Wholesale 293,958 306,802 100,725 112,049
------------ ------------ ------------ ------------
Net sales $ 519,296 $ 555,213 $ 180,080 $ 205,206
Operating income $ 41,027 $ 34,503 $ 18,431 $ 15,193
Long-lived assets $ 139,655 $ 171,537 $ 139,655 $ 171,537
Total assets $ 644,396 $ 728,167 $ 644,396 $ 728,167
Capital expenditures $ 9,639 $ 16,459 $ 3,538 $ 5,344
Depreciation and amortization $ 15,400 $ 17,133 $ 5,363 $ 4,317
Franciscan:
- -----------
Net sales:
External customers $ 70,923 $ 44,610 $ 27,779 $ 27,473
Intersegment 177 - 39 -
------------ ------------ ------------ ------------
Net sales $ 71,100 $ 44,610 $ 27,818 $ 27,473
Operating income $ 18,659 $ 7,562 $ 9,001 $ 5,991
Long-lived assets $ 125,280 $ 101,143 $ 125,280 $ 101,143
Total assets $ 394,197 $ 361,378 $ 394,197 $ 361,378
Capital expenditures $ 21,407 $ 6,448 $ 13,074 $ 2,728
Depreciation and amortization $ 7,328 $ 3,990 $ 2,798 $ 2,181
Corporate Operations and Other:
- -------------------------------
Net sales $ 2,685 $ 4,122 $ 826 $ 1,233
Operating loss $ (16,947) $ (10,476) $ (5,017) $ (4,036)
Long-lived assets $ 5,885 $ 17,496 $ 5,885 $ 17,496
Total assets $ 28,970 $ 45,287 $ 28,970 $ 45,287
Capital expenditures $ 220 $ 1,309 $ 56 $ 761
Depreciation and amortization $ 2,800 $ 2,465 $ 940 $ 994
Intersegment Eliminations:
- --------------------------
Net sales $ (17,254) $ (5,787) $ (5,131) $ (2,761)
Consolidated:
- -------------
Net sales $ 1,852,647 $ 1,804,718 $ 629,577 $ 652,969
Operating income $ 213,406 $ 181,297 $ 85,238 $ 77,378
Long-lived assets $ 536,300 $ 561,397 $ 536,300 $ 561,397
Total assets $ 2,465,790 $ 2,532,995 $ 2,465,790 $ 2,532,995
Capital expenditures $ 47,806 $ 46,657 $ 22,557 $ 15,898
Depreciation and amortization $ 55,111 $ 50,842 $ 19,046 $ 16,699
- 910 -
For the Three Months Ended May 31,
----------------------------------
2000 1999
-------------- --------------
(in thousands)
Franciscan:
- -----------
Net sales:
External customers $ 21,785 $ -
Intersegment 104 -
-------------- --------------
Net sales $ 21,889 $ -
Operating profit $ 5,416 $ -
Long-lived assets $ 108,694 $ -
Total assets $ 361,036 $ -
Capital expenditures $ 3,780 $ -
Depreciation and amortization $ 2,392 $ -
Corporate Operations and Other:
- -------------------------------
Net sales $ 1,085 $ 885
Operating loss $ (5,142) $ (4,323)
Long-lived assets $ 6,134 $ 16,924
Total assets $ 30,034 $ 24,640
Capital expenditures $ 95 $ 111
Depreciation and amortization $ 918 $ 640
Intersegment eliminations:
- --------------------------
Net sales $ (4,990) $ (1,822)
Consolidated:
- -------------
Net sales $ 585,580 $ 530,169
Operating profit $ 57,464 $ 40,111
Long-lived assets $ 530,991 $ 458,229
Total assets $ 2,327,100 $ 2,006,610
Capital expenditures $ 10,265 $ 11,321
Depreciation and amortization $ 18,346 $ 13,763
8) COMPREHENSIVE INCOME:
Comprehensive income consists of net income and foreign currency
translation adjustments for the nine months and three months ended May 31,November 30,
2000 and 1999. The reconciliation of net income to comprehensive income is as
follows:
For the Three Months Ended May 31,
----------------------------------
2000 1999
-------------- --------------
(in thousands)
Net income $ 17,902 $ 10,846
Other comprehensive income:
Cumulative translation adjustment (11,266) 850
-------------- --------------
Total comprehensive income $ 6,636 $ 11,696
============== ==============
For the Nine Months For the Three Months
Ended November 30, Ended November 30,
----------------------- ------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
(in thousands)
Net income $ 78,965 $ 61,847 $ 34,953 $ 29,900
Other comprehensive income:
Cumulative translation adjustment $ (23,483) $ (3,504) $ (4,370) $ (2,770)
---------- ---------- ---------- ----------
Total comprehensive income $ 55,482 $ 58,343 $ 30,583 $ 27,130
========== ========== ========== ==========
9) ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. SFAS No. 133 requires that every
derivative be recorded as either an asset or liability in the balance sheet and
measured at its fair value. SFAS No. 133 also requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset
- 10 - related results on the hedged
item in the income statement, and requires that a company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting.
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137 ("SFAS No. 137"), "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
FASB Statement No. 133." SFAS No. 137 delays the effective date of SFAS No. 133
for one year. With the issuance of SFAS No. 137, the Company is required to
adopt SFAS No. 133 on a prospective basis for interim periods and fiscal years
beginning March 1, 2001.
In June 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 138 ("SFAS No. 138"), "Accounting for Certain
Derivative Instruments and Certain Hedging Activities--an amendment of FASB
Statement No. 133." SFAS No. 138 amends the accounting and reporting standards
of SFAS No. 133 for certain derivative instruments and certain hedging
activities. The Company is required to adopt SFAS No. 138 concurrently with SFAS
No. 133. The Company believes the effect of the adoption of these statements on
its financial statements will not be material based on the Company's current
risk management strategies.
- 11 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------------------------------------------------------------------------------
OF OPERATIONS
-------------
INTRODUCTION
- ------------
The following discussion and analysis summarizes the significant factors
affecting (i) consolidated results of operations of the Company for the three
months ended May 31,November 30, 2000 ("FirstThird Quarter 2001"), compared to the three
months ended May 31,November 30, 1999 ("FirstThird Quarter 2000"), and for the nine months
ended November 30, 2000 ("Nine Months 2001"), compared to the nine months ended
November 30, 1999 ("Nine Months 2000"), and (ii) financial liquidity and capital
resources for First QuarterNine Months 2001. This discussion and analysis should be read in
conjunction with the Company's consolidated financial statements and notes
thereto included herein and in the Company's Annual Report on Form 10-K for the
fiscal year ended February 29, 2000 ("Fiscal 2000").
The Company operates primarily in the beverage alcohol industry in North
America and the United Kingdom. The Company reports its operating results in
five segments: Canandaigua Wine (branded popularly-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 2001
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 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,October 27, 2000, the Company acquired several
well-known Canadian whisky brands, including Black Velvet, production facilities
located in Albertapurchased all of the issued Ordinary
Shares and Quebec, Canada, case goods and bulk whisky inventories
and other related assets from affiliatesPreference Shares of Diageo plc (collectively, the "Black
Velvet Assets"Forth Wines Limited ("Forth Wines"). 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 AssetsForth Wines acquisition are reported in the BartonMatthew Clark
segment and have been included in the consolidated results of operations of the
Company since the date of acquisition.
- 12 -
RESULTS OF OPERATIONS
- ---------------------
FIRSTTHIRD QUARTER 2001 COMPARED TO FIRSTTHIRD QUARTER 2000
NET SALES
The following table sets forth the net sales (in thousands of dollars) by
operating segment of the Company for FirstThird Quarter 2001 and FirstThird Quarter 2000.
FirstThird Quarter 2001 Compared to FirstThird Quarter 2000
-------------------------------------------------
Net Sales
-------------------------------------------------
%Increase/
2001 2000 (Decrease)
------------ ------------ --------------------- ---------- ----------
Canandaigua Wine:
Branded:
External customers $ 143,330160,221 $ 142,641 0.5 179,905 (10.9)%
Intersegment 1,236 1,750 (29.4)1,891 2,285 (17.2)%
------------ ---------------------- ----------
Total Branded 144,566 144,391 0.1 162,112 182,190 (11.0)%
------------ ---------------------- ----------
Other:
External customers 14,183 19,130 (25.9)18,389 24,502 (24.9)%
Intersegment 3,629 38 9,450.03,095 423 631.7 %
------------ ---------------------- ----------
Total Other 17,812 19,168 (7.1)21,484 24,925 (13.8)%
------------ ---------------------- ----------
Canandaigua Wine net sales $ 162,378183,596 $ 163,559 (0.7)207,115 (11.4)%
------------ ---------------------- ----------
Barton:
Beer $ 163,134163,292 $ 146,611 11.3134,155 21.7 %
Spirits 72,546 54,139 34.0 79,096 80,548 (1.8)%
------------ ---------------------- ----------
Barton net sales $ 235,680242,388 $ 200,750 17.4214,703 12.9 %
------------ ---------------------- ----------
Matthew Clark:
Branded:
External customers $ 69,59479,248 $ 74,375 (6.4)93,104 (14.9)%
Intersegment 21 - N/A
------------ ------------107 53 101.9 %
---------- ----------
Total Branded 69,615 74,375 (6.4)79,355 93,157 (14.8)%
Wholesale 99,923 92,422 8.1 100,725 112,049 (10.1)%
------------ ---------------------- ----------
Matthew Clark net sales $ 169,538180,080 $ 166,797 1.6 205,206 (12.2)%
------------ ---------------------- ----------
Franciscan:
External customers $ 21,78527,779 $ 27,473 1.1 %
Intersegment 39 - N/A
Intersegment 104 - N/A
------------ ---------------------- ----------
Franciscan net sales $ 21,88927,818 $ - N/A
------------ ------------27,473 1.3 %
---------- ----------
Corporate Operations and Other $ 1,085826 $ 885 22.6 1,233 (33.0)%
------------ ---------------------- ----------
Intersegment eliminations $ (4,990)(5,131) $ (1,822) 173.9(2,761) 85.8 %
------------ ---------------------- ----------
Consolidated Net Sales $ 585,580629,577 $ 530,169 10.5 652,969 (3.6)%
============ ====================== ==========
Net sales for FirstThird Quarter 2001 increaseddecreased to $585.6$629.6 million from $530.2$653.0
million for FirstThird Quarter 2000, an increasea decrease of $55.4$23.4 million, or 10.5%(3.6)%.
- 13 -
Canandaigua Wine
----------------
Net sales for Canandaigua Wine for FirstThird Quarter 2001 decreased to $162.4$183.6
million from $163.6$207.1 million for FirstThird Quarter 2000, a decrease of $1.2$23.5 million,
or (0.7)(11.4)%. The decline resulted primarily from a decrease in table wine sales,
a decrease in sparkling wine sales as Third Quarter 2000 included the impact of
sales associated with Millennium activities, and a decrease in grape juice
concentrate and bulk wine sales. These decreases were partially offset by
increases in sales while branded wine sales were unchanged against the
comparable quarter last year.of Arbor Mist and Paul Masson Grande Amber.
Barton
------
Net sales for Barton for FirstThird Quarter 2001 increased to $235.7$242.4 million
from $200.8$214.7 million for FirstThird Quarter 2000, an increase of $34.9$27.7 million, or
17.4%12.9%. This increase resulted primarily from volume growth in the Mexican beer
portfolio. Spirits sales decreased slightly due to the loss of contract
production sales. Excluding contract production sales, branded spirits sales
increased 5.8% primarily as a result of price increases on tequila products.
Matthew Clark
-------------
Net sales for Matthew Clark for Third Quarter 2001 decreased to $180.1
million from $205.2 million for Third Quarter 2000, a decrease of $25.1 million,
or (12.2)%. This decrease resulted primarily from an adverse foreign currency
impact of $24.7 million. On a local currency basis, net sales were virtually
unchanged with an increase in branded table wine sales, an increase in packaged
cider sales, and wholesale sales from the recent Forth Wines acquisition being
offset by decreases in draft cider and private label cider sales.
Franciscan
----------
Net sales for Franciscan for Third Quarter 2001 increased to $27.8 million
from $27.5 million for Third Quarter 2000, an increase of $0.3 million, or 1.3%.
This increase resulted primarily from selling price increases more than
offsetting a volume decline of 11.3% when compared to the prior year, as Third
Quarter 2000 included the impact of sales associated with Millennium activities.
GROSS PROFIT
The Company's gross profit decreased to $208.1 million for Third Quarter
2001 from $209.7 million for Third Quarter 2000, a decrease of $1.6 million, or
(0.8)%. The dollar decrease in gross profit resulted primarily from a decrease
in Canandaigua Wine's net sales and an adverse foreign currency impact. These
decreases were partially offset by volume growth in the Company's Mexican beer
portfolio, selling price increases in the Franciscan fine wine portfolio and
cost improvements in Matthew Clark's cider and wholesale businesses. As a
percent of net sales, gross profit increased to 33.0% for Third Quarter 2001
from 32.1% in Third Quarter 2000, resulting primarily from selling price
increases in the Franciscan fine wine portfolio and cost improvements in Matthew
Clark's cider and wholesale businesses.
- 14 -
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased to $122.8 million
for Third Quarter 2001 from $132.3 million for Third Quarter 2000, a decrease of
$9.5 million, or (7.2)%. The dollar decrease in selling, general and
administrative expenses resulted primarily from a decrease in advertising and
promotion expenses as Third Quarter 2000 included advertising and promotion
expenses associated with Millennium activities. Selling, general and
administrative expenses as a percent of net sales decreased to 19.5% for Third
Quarter 2001 as compared to 20.3% for Third Quarter 2000. This decrease in
percent of net sales resulted primarily from the decrease in advertising and
promotion expenses.
OPERATING INCOME
The following table sets forth the operating income/(loss) (in thousands of
dollars) by operating segment of the Company for Third Quarter 2001 and Third
Quarter 2000.
Third Quarter 2001 Compared to Third Quarter 2000
-------------------------------------------------
Operating Income/(Loss)
-------------------------------------------------
%Increase/
2001 2000 (Decrease)
-------- -------- ----------
Canandaigua Wine $ 16,453 $ 18,850 (12.7)%
Barton 46,370 41,380 12.1 %
Matthew Clark 18,431 15,193 21.3 %
Franciscan 9,001 5,991 50.2 %
Corporate Operations and Other (5,017) (4,036) 24.3 %
-------- --------
Consolidated Operating Income $ 85,238 $ 77,378 10.2 %
======== ========
As a result of the above factors, consolidated operating income increased
to $85.2 million for Third Quarter 2001 from $77.4 million for Third Quarter
2000, an increase of $7.9 million, or 10.2%.
INTEREST EXPENSE, NET
Net interest expense decreased to $27.0 million for Third Quarter 2001 from
$27.5 million for Third Quarter 2000, a decrease of $0.6 million, or (2.0)%. The
decrease resulted primarily from a decrease in average borrowings which was
partially offset by an increase in the average interest rate.
NET INCOME
As a result of the above factors, net income increased to $35.0 million for
Third Quarter 2001 from $29.9 million for Third Quarter 2000, an increase of
$5.1 million, or 16.9%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Third Quarter 2001
were $104.3 million, an increase of $10.2 million over EBITDA of $94.1 million
for Third Quarter 2000. EBITDA should not be construed as an alternative to
operating income or net cash flow from operating activities and should not be
construed as an indication of operating performance or as a measure of
liquidity.
- 15 -
NINE MONTHS 2001 COMPARED TO NINE MONTHS 2000
NET SALES
The following table sets forth the net sales (in thousands of dollars) by
operating segment of the Company for Nine Months 2001 and Nine Months 2000.
Nine Months 2001 Compared to Nine Months 2000
---------------------------------------------
Net Sales
---------------------------------------------
%Increase/
2001 2000 (Decrease)
------------ ------------ ----------
Canandaigua Wine:
Branded:
External customers $ 450,927 $ 472,087 (4.5)%
Intersegment 5,023 5,274 (4.8)%
------------ ------------
Total Branded 455,950 477,361 (4.5)%
------------ ------------
Other:
External customers 46,632 63,081 (26.1)%
Intersegment 11,450 460 2,389.1 %
------------ ------------
Total Other 58,082 63,541 (8.6)%
------------ ------------
Canandaigua Wine net sales $ 514,032 $ 540,902 (5.0)%
------------ ------------
Barton:
Beer $ 538,585 $ 457,961 17.6 %
Spirits 224,203 207,697 7.9 %
------------ ------------
Barton net sales $ 762,788 $ 665,658 14.6 %
------------ ------------
Matthew Clark:
Branded:
External customers $ 224,734 $ 248,358 (9.5)%
Intersegment 604 53 1,039.6 %
------------ ------------
Total Branded 225,338 248,411 (9.3)%
Wholesale 293,958 306,802 (4.2)%
------------ ------------
Matthew Clark net sales $ 519,296 $ 555,213 (6.5)%
------------ ------------
Franciscan:
External customers $ 70,923 $ 44,610 59.0 %
Intersegment 177 - N/A
------------ ------------
Franciscan net sales $ 71,100 $ 44,610 59.4 %
------------ ------------
Corporate Operations and Other $ 2,685 $ 4,122 (34.9)%
------------ ------------
Intersegment eliminations $ (17,254) $ (5,787) 198.2 %
------------ ------------
Consolidated Net Sales $ 1,852,647 $ 1,804,718 2.7 %
============ ============
Net sales for Nine Months 2001 increased to $1,852.6 million from $1,804.7
million for Nine Months 2000, an increase of $47.9 million, or 2.7%.
Canandaigua Wine
----------------
Net sales for Canandaigua Wine for Nine Months 2001 decreased to $514.0
million from $540.9 million for Nine Months 2000, a decrease of $26.9 million,
or (5.0)%. The decline resulted primarily from a decrease in table wine sales, a
decrease in sparkling wine sales as Third Quarter 2000 included the impact of
sales associated with Millennium activities, and a decrease in grape juice
concentrate sales. These decreases were partially offset by increases in sales
of Paul Masson Grande Amber and Arbor Mist.
- 16 -
Barton
------
Net sales for Barton for Nine Months 2001 increased to $762.8 million from
$665.7 million for Nine Months 2000, an increase of $97.1 million, or 14.6%.
This increase resulted primarily from volume growth and selling price increases
in the Mexican beer portfolio as well as from an increasethe inclusion of $11.3 million of
incremental net sales during the first quarter of fiscal 2001 from the Canadian
whisky brands acquired as part of the newly acquired Canadian whisky brands,Black Velvet Assets acquisition, which was
completed in April 1999.
Matthew Clark
-------------
Net sales for Matthew Clark for First QuarterNine Months 2001 increaseddecreased to $169.5$519.3
million from $166.8$555.2 million for First QuarterNine Months 2000, an increasea decrease of $2.7$35.9 million,
or 1.6%(6.5)%. This increasedecrease resulted primarily from an adverse foreign currency
impact of $41.6 million. On a local currency basis, net sales increased 1.0%
primarily due to an increase in wholesale sales, including sales from the recent
Forth Wines acquisition, an increase in branded table wine sales, and an
increase in packaged cider sales. These increases in Matthew Clark's
wholesale business, partiallywere virtually offset by
declinesdecreases in Matthew Clark's branded
business.draft cider and private label cider sales.
Franciscan
----------
Net sales for Franciscan for First QuarterNine Months 2001 wereincreased to $71.1 million
from $44.6 million for Nine Months 2000, an increase of $26.5 million, or 59.4%.
As the acquisition of Franciscan was completed in June 1999, this increase
resulted primarily from the inclusion of $21.9 million.million of net sales from the
first quarter of fiscal 2001 and from selling price increases instituted during
the second quarter of fiscal 2001.
GROSS PROFIT
The Company's gross profit increased to $183.9$592.6 million for First QuarterNine Months 2001
from $156.1$554.9 million for First QuarterNine Months 2000, an increase of $27.8$37.6 million, or 17.8%6.8%.
The dollar increase in gross profit was primarily related to volume growth and
selling price increases in the Company's Mexican beer portfolio and sales from
the acquisitions of Franciscan (completed in June 1999) and the Black Velvet
Assets (completed in April 1999) and
Franciscan (completed in June 1999), as well as increased beer sales.partially offset by an adverse foreign
currency impact. As a percent of net sales, gross profit increased to 31.4%32.0% for
First QuarterNine Months 2001 from 29.4% in First Quarter30.7% for Nine Months 2000, resulting primarily from sales
of higher-margin spirits and super-premium and ultra-premium wine acquired in
the acquisitions of the Black Velvet Assets and Franciscan, respectively, and
from improved margins resulting from selling price increases in the Company's
imported beer business.business and the Franciscan fine wine portfolio, as well as cost
improvements in Matthew Clark's cider and wholesale businesses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $126.4$379.2 million
for First QuarterNine Months 2001 from $110.5$368.1 million for First QuarterNine Months 2000, an increase of
$15.9$11.0 million, or 14.4%3.0%. The dollar increase in selling, general and
administrative expenses resulted primarily from the additioninclusion of the Franciscan
business and expenses related to the brands acquired in the Black Velvet Assets
acquisition.acquisition for a full nine months in fiscal 2001, and an increase in expenses
in Corporate Operations. Selling, general and administrative expenses as a
percent of net sales increased to 21.6%remained virtually unchanged at 20.5% for First QuarterNine Months 2001
as compared to 20.8%20.4% for First
QuarterNine Months 2000. The increase in percent of net sales resulted primarily from the
acquisition of Franciscan, as 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.
- 1417 -
NONRECURRING CHARGES
The Company incurred nonrecurring charges of $5.5 million in First QuarterNine Months
2000 related to the closure of a cider production facility within the Matthew
Clark operating segment in the United Kingdom ($2.9 million) and to a management
reorganization within the Canandaigua Wine operating segment ($2.6 million). No
such charges were incurred in First QuarterNine Months 2001.
OPERATING INCOME
The following table sets forth the operating profit/income/(loss) (in thousands of
dollars) by operating segment of the Company for First QuarterNine Months 2001 and First
QuarterNine
Months 2000.
First QuarterNine Months 2001 Compared to First QuarterNine Months 2000
----------------------------------------------------------------------------------------------
Operating Profit/Income/(Loss)
----------------------------------------------------------------------------------------------
%Increase/
2001 2000 %Increase
------------- ------------- -------------(Decrease)
------------ ------------ ----------
Canandaigua Wine $ 7,98134,849 $ 5,607 42.3%34,869 (0.1)%
Barton 38,835 31,497 23.3%135,818 114,839 18.3 %
Matthew Clark 10,374 7,330 41.5%41,027 34,503 18.9 %
Franciscan 5,416 - N/A18,659 7,562 146.7 %
Corporate Operations and Other (5,142) (4,323) 19.0%
------------- -------------(16,947) (10,476) 61.8 %
------------ ------------
Consolidated Operating ProfitIncome $ 57,464213,406 $ 40,111 43.3%
============= =============181,297 17.7 %
============ ============
As a result of the above factors, consolidated operating income increased
to $57.5$213.4 million for First QuarterNine Months 2001 from $40.1$181.3 million for First QuarterNine Months 2000,
an increase of $17.4$32.1 million, or 43.3%17.7%. Exclusive of the aforementioned $2.6
million in nonrecurring charges, operating income for the Canandaigua Wine
operating segment decreased 2.3%6.9% in First QuarterNine Months 2001 from $8.2$37.4 million in First QuarterNine
Months 2000. Operating income for the Matthew Clark operating segment, excluding
the aforementioned nonrecurring charges of $2.9 million, increased 1.0%9.6% in the First QuarterNine
Months 2001 from $10.3$37.4 million in the First QuarterNine Months 2000.
INTEREST EXPENSE, NET
Net interest expense increased to $27.6$81.8 million for First QuarterNine Months 2001 from
$22.0$78.2 million for First QuarterNine Months 2000, an increase of $5.6$3.6 million, or 25.4%4.6%. The
increase resulted primarily from additionalan increase in the average interest expense associated with
borrowings related to the acquisition of Franciscan.rate on
virtually unchanged average borrowings.
NET INCOME
As a result of the above factors, net income increased to $17.9$79.0 million for
First QuarterNine Months 2001 from $10.8$61.8 million for First QuarterNine Months 2000, an increase of $7.1$17.1
million, or 65.1%27.7%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for First QuarterNine Months 2001
were $75.8$268.5 million, an increase of $21.9$36.4 million over EBITDA of $53.9$232.1 million
for First QuarterNine Months 2000. EBITDA should not be construed as an alternative to
operating income or net cash flow from operating activities and should not be
construed as an indication of operating performance or as a measure of
liquidity.
- 1518 -
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.
FIRST QUARTERNINE MONTHS 2001 CASH FLOWS
OPERATING ACTIVITIES
Net cash provided by operating activities for First QuarterNine Months 2001 was $20.0$16.1
million, which resulted from $40.7$136.6 million in net income adjusted for noncash
items, less $20.7$120.5 million representing the net change in the Company's
operating assets and liabilities. The net change in operating assets and
liabilities resulted primarily from ana seasonal increase in accounts receivable
as a result of a
seasonal increase in sales,and inventories, partially offset by an increaseincreases in accounts payable, and an increase in accrued
excise taxes, resulting from the increase in sales.accrued income taxes, accrued advertising and promotion expenses,
and accrued grape purchases.
INVESTING ACTIVITIES AND FINANCING ACTIVITIES
Net cash used in investing activities for First QuarterNine Months 2001 was $9.9$46.4
million, which resulted primarily from capital expenditures of $10.3$47.8 million.
Net cash used in financing activities for First QuarterNine Months 2001 was $30.1$0.6 million
resulting primarily from principal payments of $133.3long-term debt of $221.6 million,
and
repayment of $16.8which included $27.2 million of net revolving loan borrowings. These amounts werescheduled and required principal payments and
$75.0 million of principal prepayments. This amount was partially offset by net
proceeds of $118.2 million from the issuance of (pound)80.0 million of 8 1/2%
Sterling Series C Senior Notes used to repay a portion of the Company's British
pound sterling borrowings under its senior credit facility and proceeds from
$94.2 million of net revolving loan borrowings under the senior credit facility.
DEBT
Total debt outstanding as of May 31,November 30, 2000, amounted to $1,272.2$1,282.5
million, a decrease of $45.7$35.4 million from February 29, 2000. The ratio of total
debt to total capitalization decreased to 70.6%68.8% as of May 31,November 30, 2000, from
71.7% as of February 29, 2000.
- 1619 -
SENIOR CREDIT FACILITY
As of May 31,November 30, 2000, under its senior credit facility, the Company had
outstanding term loans of $427.7$337.1 million bearing a weighted average interest
rate of 8.3%, $10.0$121.0 million of revolving loans bearing a weighted average
interest at 8.6%rate of 7.9%, undrawn revolving letters of credit of $10.5$12.2 million, and
$279.5$166.8 million in revolving loans available to be drawn.
SENIOR NOTES
As of May 31,November 30, 2000, the Company had outstanding $200.0 million
aggregate principal amount of 8 5/8% Senior Notes due August 2006 (the "Senior
Notes"). The Senior Notes are currently redeemable, in whole or in part, at the
option of the Company.
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.
In May 2000, the Company issued (pound)80.0 million (approximately $120.0
million)million upon issuance and $114.0 million as of November 30, 2000) aggregate
principal amount of 8 1/2% Series C Senior Notes due November 2009 at an
issuance price of (pound)79.6 million (approximately $119.4 million upon
issuance, net of $0.6 million unamortized discount, and $113.5 million as of
November 30, 2000, net of $0.5 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 $118.2 million) were used to
repay a portion of the Company's British pound sterling borrowings under its
senior credit facility.
After this repayment, the required quarterly repayments of the Tranche II Term
Loan facility were revised to (pound)0.2 million ($0.3 million) for the
remaining three quarters in 2000, (pound)0.4 million ($0.6 million) for each
quarter in 2001 and 2002, (pound)0.5 million ($0.7 million) for each quarter in
2003, and (pound)8.5 million ($12.7 million) for each quarter in 2004. (The
foregoing U.S. dollar equivalents are as of May 31, 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.
In October 2000, the Company exchanged (pound)74.0 million aggregate
principal amount of the Sterling Series B Senior Notes for Sterling Series C
Senior Notes. The terms of the Sterling Series C Senior Notes are identical in
all material respects to the Sterling Series B Senior Notes.
SENIOR SUBORDINATED NOTES
As of May 31,November 30, 2000, the Company had outstanding $195.0 million
aggregate principal amount of 8 3/4% Senior Subordinated Notes due December 2003
(the "Original Notes"). The Original Notes are currently redeemable, in whole or
in part, at the option of the Company.
Also, as of May 31,November 30, 2000, the Company had outstanding $200.0 million
aggregate principal amount of 8 1/2% Senior Subordinated Notes due March 2009
(the "Senior Subordinated Notes"). 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.
- 1720 -
ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. SFAS No. 133 requires that every
derivative be recorded as either an asset or liability in the balance sheet and
measured at its fair value. SFAS No. 133 also requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting.
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137 ("SFAS No. 137"), "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
FASB Statement No. 133." SFAS No. 137 delays the effective date of SFAS No. 133
for one year. With the issuance of SFAS No. 137, the Company is required to
adopt SFAS No. 133 on a prospective basis for interim periods and fiscal years
beginning March 1, 2001.
In June 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 138 ("SFAS No. 138"), "Accounting for Certain
Derivative Instruments and Certain Hedging Activities--an amendment of FASB
Statement No. 133." SFAS No. 138 amends the accounting and reporting standards
of SFAS No. 133 for certain derivative instruments and certain hedging
activities. The Company is required to adopt SFAS No. 138 concurrently with SFAS
No. 133. The Company believes the effect of the adoption of these statements on
its financial statements will not be material based on the Company's current
risk management strategies.
EURO CONVERSION ISSUES
Effective January 1, 1999, eleven of the fifteen member countries of the
European Union (the "Participating Countries") established fixed conversion
rates between their existing sovereign currencies and the euro. For three years
after the introduction of the euro, the Participating Countries can perform
financial transactions in either the euro or their original local currencies.
This will result in a fixed exchange rate among the Participating Countries,
whereas the euro (and the Participating Countries' currency in tandem) will
continue to float freely against the U.S. dollar and other currencies of the
non-participating countries. The Company does not believe that the effects of
the conversion will have a material adverse effect on the Company's business and
operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ------- ----------------------------------------------------------
Information about market risks for the threenine months ended May 31,November 30, 2000,
does not differ materially from that discussed under Item 7A in the Company's
Annual Report on Form 10-K for the fiscal year ended February 29, 2000.
- 1821 -
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
At a Special Meeting of Stockholders of Constellation Brands, Inc. (f/k/a
Canandaigua Brands, Inc.) held on September 18, 2000 (the "Special Meeting"),
the holders of the Company's Class A Common Stock and the holders of the
Company's Class B Common Stock, voting together as a single class, voted upon
the proposal to amend and restate the Company's Restated Certificate of
Incorporation to change the name of the Company to Constellation Brands, Inc.
Set forth below is the number of votes cast for, against or withheld, as
well as the number of abstentions and broker nonvotes with respect to the
proposal to change the name of the Company:
For: 43,064,153
Against: 165,731
Abstain: 50,272
Broker Nonvotes: 0
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) See Index to Exhibits located on Page 2528 of this Report.
(b) The following ReportReports on Form 8-K waswere filed with the Securities and
Exchange Commission during the quarter ended May 31,November 30, 2000:
(i) Form 8-K dated April 11,September 18, 2000. This Form 8-K reported
information under Item 5 (Other Events).
(ii) Form 8-K dated September 27, 2000. This Form 8-K reported
information under Item 5 (Other Events) and included (i) the
Company's Condensed Consolidated Balance Sheets for the fiscal years endedas of August 31,
2000 (unaudited) and February 29, 2000 and February 28, 1999;(audited); (ii) the
Company's Condensed Consolidated Statements of Income for the
three months ended February 29,August 31, 2000 (unaudited) and February 28, 1999;August 31,
1999 (unaudited); and (iii) the Company's Condensed Consolidated
Statements of Income for the twelvesix months ended February 29,August 31, 2000
(unaudited) and February 28, 1999.August 31, 1999 (unaudited).
- 1922 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CANANDAIGUACONSTELLATION BRANDS, INC.
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Vice President,
Corporate Reporting and Controller
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Executive Vice
President and Chief Financial
Officer (Principal Financial Officer
and Principal Accounting Officer)
SUBSIDIARIES
BATAVIA WINE CELLARS, INC.
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Controller
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
CANANDAIGUA WINE COMPANY, INC.
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Controller
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
- 2023 -
CANANDAIGUA EUROPE LIMITED
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Controller
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
CANANDAIGUA LIMITED
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Authorized Officer
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Finance Director
(Principal Financial Officer and
Principal Accounting Officer)
POLYPHENOLICS, INC.
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Vice President and
Controller
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
ROBERTS TRADING CORP.
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Controller
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, President and
Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
- 2124 -
CANANDAIGUA B.V.
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Chief Financial
Officer (On behalf of the Registrant
and as Principal Financial Officer
and Principal Accounting Officer)
FRANCISCAN VINEYARDS, INC.
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Vice President and
Controller
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
ALLBERRY, INC.
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Vice President and
Controller
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President and
Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
CLOUD PEAK CORPORATION
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Vice President and
Controller
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President and
Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
- 2225 -
M.J. LEWIS CORP.
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Vice President and
Controller
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President and
Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
MT. VEEDER CORPORATION
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Vice President and
Controller
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President and
Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
BARTON INCORPORATED
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Alexander L. Berk
-------------------------------------------------------------------------
Alexander L. Berk, President and
Chief Executive Officer
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
BARTON BRANDS, LTD.
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Alexander L. Berk
-------------------------------------------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
- 2326 -
BARTON BEERS, LTD.
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Alexander L. Berk
-------------------------------------------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
BARTON BRANDS OF CALIFORNIA, INC.
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Alexander L. Berk
-------------------------------------------------------------------------
Alexander L. Berk, President
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
BARTON BRANDS OF GEORGIA, INC.
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Alexander L. Berk
-------------------------------------------------------------------------
Alexander L. Berk, President
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
BARTON CANADA, LTD.
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Alexander L. Berk
-------------------------------------------------------------------------
Alexander L. Berk, President
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
- 2427 -
BARTON DISTILLERS IMPORT CORP.
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Alexander L. Berk
-------------------------------------------------------------------------
Alexander L. Berk, President
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
BARTON FINANCIAL CORPORATION
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Troy J. Christensen
-------------------------------------------------------------------------
Troy J. Christensen, President and
Secretary
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
STEVENS POINT BEVERAGE CO.
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Alexander L. Berk
-------------------------------------------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
MONARCH IMPORT COMPANY
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Alexander L. Berk
-------------------------------------------------------------------------
Alexander L. Berk, President
Dated: July 13, 2000January 16, 2001 By:/s/ /s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
- 2528 -
INDEX TO EXHIBITS
(2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR
SUCCESSION.
2.1 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).
2.2 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.the Company
(filed as Exhibit 2.1 on the Company's Current Report on Form 8-K dated
June 4, 1999 and incorporated herein by reference).
2.3 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 (including a list briefly identifying the contents of all omitted
schedules thereto) (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) ARTICLES OF INCORPORATION AND BY-LAWS.
3.1 Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 19982000 and incorporated herein by reference).
3.2 Amended and Restated By-Laws of the Company (filed as Exhibit 3.2 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended August 31, 19982000 and
incorporated herein by reference).
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES.
4.1 Supplemental Indenture No. 4,5, dated as of May 15,September 14, 2000, by and among
the Company, as Issuer, its principal operating subsidiaries, as
Guarantors, and Harris Trust and SavingsThe Bank of New York, as Trustee (filed as Exhibit 4.174.1 to
the Company's AnnualQuarterly Report on Form 10-K10-Q for the fiscal yearquarter ended
February 29,August 31, 2000 and incorporated herein by reference).
(10) MATERIAL CONTRACTS.
Not applicable.10.1 Supplemental Indenture No. 5, dated as of September 14, 2000, by and among
the Company, as Issuer, its principal operating subsidiaries, as
Guarantors, and The Bank of New York, as Trustee (filed as Exhibit 4.1 to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 2000 and incorporated herein by reference).
(11) STATEMENT RE COMPUTATION OF PER SHARE EARNINGS.
Computation of per share earnings (filed herewith).
(15) LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION.
Not applicable.
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(18) LETTER RE CHANGE IN ACCOUNTING PRINCIPLES.
Not applicable.
(19) REPORT FURNISHED TO SECURITY HOLDERS.
Not applicable.
(22) PUBLISHED REPORT REGARDING MATTERS SUBMITTED TO A VOTE OF SECURITY HOLDERS.
Not applicable.
(23) CONSENTS OF EXPERTS AND COUNSEL.
Not applicable.
(24) POWER OF ATTORNEY.
Not applicable.
(27) FINANCIAL DATA SCHEDULE.
Financial Data Schedule (filed herewith).
(99) ADDITIONAL EXHIBITS.
Not applicable.