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 August 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            CONSTELLATION 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 Constellation Brands, Inc., as of September  30,December 31, 2000, is set forth below
(all of the Registrants,  other than Constellation  Brands,  Inc., are direct or
indirect wholly-owned subsidiaries of Constellation Brands, Inc.):

               CLASS                                NUMBER OF SHARES OUTSTANDING
               -----                                ----------------------------

Class A Common Stock, Par Value $.01 Per Share               15,276,80915,366,763
Class B Common Stock, Par Value $.01 Per Share                3,088,5723,084,372



                                      - 1 -

                         PART I - FINANCIAL INFORMATION

ItemITEM 1.  Financial StatementsFINANCIAL STATEMENTS
- -------  --------------------

                  CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                       (in thousands, except share data)

                                                  August 31,November 30,    February 29,
                                                      2000            2000
                                                  ------------    ------------
                                                   (unaudited)
                     ASSETS
                     ------
CURRENT ASSETS:
  Cash and cash investments                       $      4,1501,871    $     34,308
  Accounts receivable, net                             358,297386,908         291,108
  Inventories, net                                     604,346699,885         615,700
  Prepaid expenses and other current assets             64,72370,140          54,881
                                                  ------------    ------------
    Total current assets                             1,031,5161,158,804         995,997
PROPERTY, PLANT AND EQUIPMENT, net                     530,069536,300         542,971
OTHER ASSETS                                           778,474770,686         809,823
                                                  ------------    ------------
  Total assets                                    $  2,340,0592,465,790    $  2,348,791
                                                  ============    ============

      LIABILITIES AND STOCKHOLDERS' EQUITY
      ------------------------------------
CURRENT LIABILITIES:
  Notes payable                                   $    43,300121,000    $     26,800
  Current maturities of long-term debt                  20,77537,544          53,987
  Accounts payable                                     137,717163,195         122,213
  Accrued excise taxes                                  43,53044,853          30,446
  Other accrued expenses and liabilities               250,964245,538         204,771
                                                  ------------    ------------
    Total current liabilities                          496,286612,130         438,217
                                                  ------------    ------------
LONG-TERM DEBT, less current maturities              1,144,9841,123,929       1,237,135
                                                  ------------    ------------
DEFERRED INCOME TAXES                                  116,918116,523         116,447
                                                  ------------    ------------
OTHER LIABILITIES                                       31,83630,337          36,152
                                                  ------------    ------------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Preferred Stock, $.01 par value-
    Authorized, 1,000,000 shares;
    Issued, none at August 31,November 30, 2000,
    and February 29, 2000                                 -               -
  Class A Common Stock, $.01 par value-
    Authorized, 120,000,000 shares;
    Issued, 18,378,47518,459,875 shares at
    August 31,November 30, 2000, and 18,206,662
    shares at February 29, 2000                            184185             182
  Class B Convertible Common Stock,
    $.01 par value-
    Authorized, 20,000,000 shares;
    Issued, 3,714,2973,711,097 shares at
    August 31,November 30, 2000, and 3,745,560 shares
    at February 29, 2000                                    37              38
  Additional paid-in capital                           252,168254,595         247,949
  Retained earnings                                    402,468437,421         358,456
  Accumulated other comprehensive income-
    Cumulative translation adjustment                  (23,262)(27,632)         (4,149)
                                                  ------------    ------------
                                                       631,595664,606         602,476
                                                  ------------    ------------
  Less-Treasury stock-
  Class A Common Stock, 3,119,112 shares at
    August 31,November 30, 2000, and 3,137,244 shares at
    February 29, 2000, at cost                         (79,353)        (79,429)
  Class B Convertible Common Stock, 625,725
    shares at August 31,November 30, 2000, and
    February 29, 2000, at cost                          (2,207)         (2,207)
                                                  ------------    ------------
                                                       (81,560)        (81,636)
                                                  ------------    ------------
  Less-Unearned compensation-restricted
    stock awards                                          (175)           -
                                                  ------------    ------------
    Total stockholders' equity                         550,035582,871         520,840
                                                  ------------    ------------
  Total liabilities and stockholders' equity      $  2,340,0592,465,790    $  2,348,791
                                                  ============    ============

          The accompanying notes to consolidated financial statements
                 are an integral part of these balance sheets.


                                      - 2 -

                                            CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
                                                CONSOLIDATED STATEMENTS OF INCOME
                                              (in thousands, except per share data)
For the SixNine Months Ended August 31,November 30, For the Three Months Ended August 31, ----------------------------------- -------------------------------------November 30, -------------------------------------- --------------------------------------- 2000 1999 2000 1999 -------------- -------------- -------------- ----------------------------- --------------- --------------- --------------- (unaudited) (unaudited) (unaudited) (unaudited) GROSS SALES $ 1,603,1902,436,637 $ 1,519,8342,383,909 $ 828,668833,447 $ 814,845864,075 Less - Excise taxes (380,120) (368,085) (191,178) (193,265) -------------- -------------- -------------- --------------(583,990) (579,191) (203,870) (211,106) --------------- --------------- --------------- --------------- Net sales 1,223,070 1,151,749 637,490 621,5801,852,647 1,804,718 629,577 652,969 COST OF PRODUCT SOLD (838,558) (806,499) (436,851) (432,452) -------------- -------------- -------------- --------------(1,260,082) (1,249,781) (421,524) (443,282) --------------- --------------- --------------- --------------- Gross profit 384,512 345,250 200,639 189,128592,565 554,937 208,053 209,687 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (256,344) (235,821) (129,935) (125,320)(379,159) (368,130) (122,815) (132,309) NONRECURRING CHARGES - (5,510) - - -------------- -------------- -------------- ----------------------------- --------------- --------------- --------------- Operating income 128,168 103,919 70,704 63,808213,406 181,297 85,238 77,378 INTEREST EXPENSE, net (54,814) (50,675) (27,187) (28,640) -------------- -------------- -------------- --------------(81,797) (78,219) (26,983) (27,544) --------------- --------------- --------------- --------------- Income before income taxes 73,354 53,244 43,517 35,168131,609 103,078 58,255 49,834 PROVISION FOR INCOME TAXES (29,342) (21,297) (17,407) (14,067) -------------- -------------- -------------- --------------(52,644) (41,231) (23,302) (19,934) --------------- --------------- --------------- --------------- NET INCOME $ 44,01278,965 $ 31,94761,847 $ 26,11034,953 $ 21,101 ============== ============== ============== ==============29,900 =============== =============== =============== =============== SHARE DATA: Earnings per common share: Basic $ 2.414.31 $ 1.783.43 $ 1.431.90 $ 1.17 ============== ============== ============== ==============1.65 =============== =============== =============== =============== Diluted $ 2.364.24 $ 1.733.34 $ 1.401.87 $ 1.14 ============== ============== ============== ==============1.60 =============== =============== =============== =============== Weighted average common shares outstanding: Basic 18,265 17,994 18,300 18,01018,308 18,023 18,394 18,083 Diluted 18,621 18,459 18,664 18,49918,642 18,502 18,734 18,651 The accompanying notes to consolidated financial statements are an integral part of these statements.
- 3 - CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
For the SixNine Months Ended August 31, -----------------------------------November 30, -------------------------------------- 2000 1999 ------------ --------------------------- --------------- (unaudited) (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 44,01278,965 $ 31,94761,847 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property, plant and equipment 23,240 23,73335,826 33,938 Amortization of intangible assets 12,825 10,41019,285 16,904 Loss (gain) on sale of assets 1,513 (1,486)1,904 (778) Amortization of discount on long-term debt 241 208370 316 Stock-based compensation expense 255 776 Deferred tax benefit - (1,697) Stock-based compensation expense - 769(3,860) Change in operating assets and liabilities, net of effects from purchases of businesses: Accounts receivable, net (77,926) (64,766)(104,496) (123,109) Inventories, net 4,575 20,585(88,726) (55,602) Prepaid expenses and other current assets (10,177) (12,559)(15,738) (5,432) Accounts payable 20,655 9,38339,087 44,292 Accrued excise taxes 14,286 (8,076)15,975 (3,191) Other accrued expenses and liabilities 48,542 48,41739,067 88,960 Other assets and liabilities, net (3,813) 2,230 ------------ ------------(5,683) 1,201 --------------- --------------- Total adjustments 33,961 27,151 ------------ ------------(62,874) (5,585) --------------- --------------- Net cash provided by operating activities 77,973 59,098 ------------ ------------16,091 56,262 --------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (25,249) (30,759)(47,806) (46,657) Proceeds from sale of assets 912 1,0711,379 1,276 Purchases of businesses, net of cash acquired - (452,491) ------------ ------------(452,526) --------------- --------------- Net cash used in investing activities (24,337) (482,179) ------------ ------------(46,427) (497,907) --------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments of long-term debt (220,509) (242,529)(221,557) (1,059,406) Payment of issuance costs of long-term debt (1,547) (10,751)(1,668) (14,494) Proceeds from issuance of long-term debt, net of discount 119,400 664,0801,486,240 Net proceeds from (repayments of) notes payable 18,212 (12,676)96,922 25,995 Exercise of employee stock options 3,178 1,1945,530 2,386 Proceeds from employee stock purchases 761 601 ------------ --------------------------- --------------- Net cash (used in) provided by financing activities (80,505) 399,919 ------------ ------------(612) 441,322 --------------- --------------- Effect of exchange rate changes on cash and cash investments (3,289) (143) ------------ ------------(1,489) (2,655) --------------- --------------- NET DECREASE IN CASH AND CASH INVESTMENTS (30,158) (23,305)(32,437) (2,978) CASH AND CASH INVESTMENTS, beginning of period 34,308 27,645 ------------ --------------------------- --------------- CASH AND CASH INVESTMENTS, end of period $ 4,1501,871 $ 4,340 ============ ============24,667 =============== =============== SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES: Fair value of assets acquired, including cash acquired $ -15,115 $ 554,235559,541 Liabilities assumed - (99,255) ------------ ------------(10,628) (104,526) --------------- --------------- Cash paid 4,487 455,015 Less - 454,980amounts borrowed (4,487) - Less - cash acquired - (2,489) ------------ --------------------------- --------------- Net cash paid for purchases of businesses $ - $ 452,491 ============ ============452,526 =============== =============== The accompanying notes to consolidated financial statements are an integral part of these statements.
- 4 - CONSTELLATION BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31,NOVEMBER 30, 2000 1) MANAGEMENT'S REPRESENTATIONS: The condensed consolidated financial statements included herein have been prepared by Constellation 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, $94.5 million and $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 sixnine months ended August 31,November 30, 2000 and 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 sixnine months ended August 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 sixnine months ended August 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 SixNine Months Ended August 31, -----------------------------------November 30, -------------------------------------- 2000 1999 -------------- -------------- (in thousands, except per share data) Net sales $ 1,223,0701,852,647 $ 1,179,1131,832,082 Income before income taxes $ 73,354131,609 $ 38,07887,912 Net income $ 44,01278,965 $ 22,84752,747 Earnings per common share: Basic $ 2.414.31 $ 1.272.93 ============== ============== Diluted $ 2.364.24 $ 1.242.85 ============== ============== Weighted average common shares outstanding: Basic 18,265 17,99418,308 18,023 Diluted 18,621 18,45918,642 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: August 31,November 30, February 29, 2000 2000 ------------ ------------ (in thousands) Raw materials and supplies $ 31,71337,254 $ 29,417 In-process inventories 363,615460,145 419,558 Finished case goods 209,018202,486 166,725 ------------ ------------ $ 604,346699,885 $ 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 $115.8 million)$120.0 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 $115.2$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 $114.0$118.2 million) were used to repay a portion of the Company's British pound sterling borrowings under its senior credit facility. Interest on the Sterling Series C Senior Notes is payable semiannually on May 15 and November 15 of each year, beginning on November 15, 2000. The Sterling Series C Senior Notes are redeemable at the option of the Company, in whole or in part, at any time. The Sterling Series C Senior Notes are unsecured senior obligations and rank equally in right of payment to all existing and future unsecured senior indebtedness of the Company. The Sterling Series C Senior Notes are guaranteed, on a senior basis, by certain of the Company's significant operating subsidiaries. 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 SixNine Months For the Three Months Ended August 31,November 30, Ended August 31, ------------------------ ------------------------November 30, ------------------- -------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ------------------ -------- -------- -------- (in thousands, except per share data) Income applicable to common shares $ 44,01278,965 $ 31,94761,847 $ 26,11034,953 $ 21,101 ========== ========== ========== ==========29,900 ======== ======== ======== ======== Weighted average common shares outstanding - basic 18,265 17,994 18,300 18,01018,308 18,023 18,394 18,083 Stock options 356 465 364 489 ---------- ---------- ---------- ----------334 479 340 568 -------- -------- -------- -------- Weighted average common shares outstanding - diluted 18,621 18,459 18,664 18,499 ========== ========== ========== ==========18,642 18,502 18,734 18,651 ======== ======== ======== ======== EARNINGS PER COMMON SHARE - BASIC $ 2.414.31 $ 1.783.43 $ 1.431.90 $ 1.17 ========== ========== ========== ==========1.65 ======== ======== ======== ======== EARNINGS PER COMMON SHARE - DILUTED $ 2.364.24 $ 1.733.34 $ 1.401.87 $ 1.14 ========== ========== ========== ==========1.60 ======== ======== ======== ========
Stock options to purchase 1.7 million and 0.4 million84 thousand shares of Class A Common Stock at a weighted average price per share of $52.28$52.31 and $52.05$59.28 were outstanding during the sixnine months ended August 31,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 875 thousand shares of Class A Common Stock at a weighted average price per share of $52.28$52.32 and $54.83$59.56 were outstanding during the three months ended August 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 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 - 7 - 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) Balance Sheet Data: August 31,November 30, 2000 - -------------------------------- Current assets $ 96,069121,413 $ 652,962707,370 $ 282,485330,021 $ - $ 1,031,5161,158,804 Noncurrent assets $ 911,499910,185 $ 1,232,4411,239,188 $ 446,253439,263 $ (1,281,650) $ 1,308,5431,306,986 Current liabilities $ 201,362273,307 $ 121,698120,613 $ 173,226218,210 $ - $ 496,286612,130 Noncurrent liabilities $ 1,138,3691,114,232 $ 107,524104,076 $ 47,84552,481 $ - $ 1,293,7381,270,789 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 $ 134,677110,368 $ 153,033 $ - $ 438,217 Noncurrent liabilities $ 1,230,1391,226,329 $ 97,410101,220 $ 62,185 $ - $ 1,389,734 Income Statement Data: For the SixNine Months Ended - ------------------ Ended August 31,------------------------- November 30, 2000 - -------------------------------------- Net sales $ 268,630436,925 $ 726,5991,069,711 $ 371,243567,195 $ (143,402)(221,184) $ 1,223,0701,852,647 Gross profit $ 78,102102,791 $ 197,291320,376 $ 109,119169,398 $ - $ 384,512592,565 (Loss) income before income taxes $ (10,274)(28,494) $ 54,826111,120 $ 28,80248,983 $ - $ 73,354131,609 Net (loss) income $ (6,164)(17,096) $ 31,01463,196 $ 19,16232,865 $ - $ 44,01278,965 For the SixNine Months Ended - ------------------ Ended August 31,------------------------- November 30, 1999 - -------------------------------------- Net sales $ 276,053455,401 $ 694,8581,056,200 $ 356,468565,800 $ (175,630)(272,683) $ 1,151,7491,804,718 Gross profit $ 89,328121,099 $ 153,379270,451 $ 102,543163,387 $ - $ 345,250 Income before income taxes $ 6,592 $ 26,624 $ 20,028 $ - $ 53,244 Net income $ 3,955 $ 15,974 $ 12,018 $ - $ 31,947 For the Three Months - --------------------- Ended August 31, 2000 - --------------------- Net sales $ 133,912 $ 382,358 $ 192,485 $ (71,265) $ 637,490 Gross profit $ 37,682 $ 103,990 $ 58,967 $ - $ 200,639554,937 (Loss) income before income taxes $ (5,733)(4,421) $ 31,64070,166 $ 17,61037,333 $ - $ 43,517103,078 Net (loss) income $ (3,439)(2,652) $ 17,10242,099 $ 12,44722,400 $ - $ 26,11061,847 - 8 - Parent Subsidiary Subsidiary Company Guarantors Nonguarantors Eliminations Consolidated ------------ ------------ ------------- ------------ ------------ (in thousands) Income Statement Data (continued): For the Three Months Ended - -------------------- Ended August 31, 1999-------------------------- November 30, 2000 - -------------------------------------- Net sales $ 121,430155,957 $ 395,639355,450 $ 188,258195,952 $ (83,747)(77,782) $ 621,580629,577 Gross profit $ 49,89831,455 $ 83,504116,319 $ 55,72660,279 $ - $ 189,128208,053 (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 $ 11,6162,728 $ 11,08629,801 $ 12,46617,305 $ - $ 35,16849,834 Net income $ 6,9691,637 $ 6,65217,881 $ 7,48010,382 $ - $ 21,10129,900
- 8 - 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 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 SixNine Months For the Three Months Ended August 31,November 30, Ended August 31,November 30, --------------------------- ---------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ (in thousands) Canandaigua Wine: - ----------------- Net sales: Branded: External customers $ 290,706450,927 $ 292,182472,087 $ 147,376160,221 $ 149,540179,905 Intersegment 3,132 2,989 1,896 1,2395,023 5,274 1,891 2,285 ------------ ------------ ----------- ----------------------- ------------ Total Branded 293,838 295,171 149,272 150,779455,950 477,361 162,112 182,190 ------------ ------------ ----------- ----------------------- ------------ Other: External customers 28,243 38,579 14,060 19,44946,632 63,081 18,389 24,502 Intersegment 8,355 37 4,726 -11,450 460 3,095 423 ------------ ------------ ----------- ----------------------- ------------ Total Other 36,598 38,616 18,786 19,44958,082 63,541 21,484 24,925 ------------ ------------ ----------- ----------------------- ------------ Net sales $ 330,436514,032 $ 333,787540,902 $ 168,058183,596 $ 170,228207,115 Operating profitincome $ 18,39634,849 $ 16,01934,869 $ 10,41516,453 $ 10,41218,850 Long-lived assets $ 189,758188,595 $ 194,114194,199 $ 189,758188,595 $ 194,114194,199 Total assets $ 593,560681,156 $ 597,832698,209 $ 593,560681,156 $ 597,832698,209 Capital expenditures $ 7,66511,894 $ 12,70817,909 $ 5,0204,229 $ 7,0705,201 Depreciation and amortization $ 11,73417,601 $ 11,64916,681 $ 5,8665,867 $ 6,1135,032 - 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 $ 375,293538,585 $ 323,806457,961 $ 212,159163,292 $ 177,195134,155 Spirits 145,107 127,149 72,561 73,010224,203 207,697 79,096 80,548 ------------ ------------ ----------- ----------------------- ------------ Net sales $ 520,400762,788 $ 450,955665,658 $ 284,720242,388 $ 250,205214,703 Operating profitincome $ 89,448135,818 $ 73,459114,839 $ 50,61346,370 $ 41,96241,380 Long-lived assets $ 78,27176,885 $ 76,84977,022 $ 78,27176,885 $ 76,84977,022 Total assets $ 749,585717,071 $ 714,677699,954 $ 749,585717,071 $ 714,677699,954 Capital expenditures $ 2,9864,646 $ 2,6684,532 $ 1,6501,660 $ 1,7521,864 Depreciation and amortization $ 7,90411,982 $ 6,39810,573 $ 3,9494,078 $ 3,2374,175 Matthew Clark: - -------------- Net sales: Branded: External customers $ 145,486224,734 $ 155,254248,358 $ 75,89279,248 $ 80,87993,104 Intersegment 497 - 476 -604 53 107 53 ------------ ------------ ----------- ----------------------- ------------ Total Branded 145,983 155,254 76,368 80,879225,338 248,411 79,355 93,157 Wholesale 193,233 194,753 93,310 102,331293,958 306,802 100,725 112,049 ------------ ------------ ----------- ----------------------- ------------ Net sales $ 339,216519,296 $ 350,007555,213 $ 169,678180,080 $ 183,210205,206 Operating profitincome $ 22,59641,027 $ 19,31034,503 $ 12,22218,431 $ 11,98015,193 Long-lived assets $ 141,830139,655 $ 170,703171,537 $ 141,830139,655 $ 170,703171,537 Total assets $ 599,396644,396 $ 678,498728,167 $ 599,396644,396 $ 678,498728,167 Capital expenditures $ 6,1019,639 $ 11,11516,459 $ 3,6923,538 $ 6,4595,344 Depreciation and amortization $ 10,03715,400 $ 12,81617,133 $ 4,8245,363 $ 8,390 - 9 - For the Six Months For the Three Months Ended August 31, Ended August 31, --------------------------- ---------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ 4,317 Franciscan: - ----------- Net sales: External customers $ 43,14470,923 $ 17,13744,610 $ 21,35927,779 $ 17,13727,473 Intersegment 138177 - 3439 - ------------ ------------ ----------- ----------------------- ------------ Net sales $ 43,28271,100 $ 17,13744,610 $ 21,39327,818 $ 17,13727,473 Operating profitincome $ 9,65818,659 $ 1,5717,562 $ 4,2429,001 $ 1,5715,991 Long-lived assets $ 114,230125,280 $ 94,716101,143 $ 114,230125,280 $ 94,716101,143 Total assets $ 369,087394,197 $ 352,790361,378 $ 369,087394,197 $ 352,790361,378 Capital expenditures $ 8,33321,407 $ 3,7206,448 $ 4,55313,074 $ 3,7202,728 Depreciation and amortization $ 4,5307,328 $ 1,8093,990 $ 2,1382,798 $ 1,8092,181 Corporate Operations and Other: - ------------------------------- Net sales $ 1,8592,685 $ 2,8894,122 $ 774826 $ 2,0041,233 Operating loss $ (11,930)(16,947) $ (6,440)(10,476) $ (6,788)(5,017) $ (2,117)(4,036) Long-lived assets $ 5,9805,885 $ 17,06017,496 $ 5,9805,885 $ 17,06017,496 Total assets $ 28,43128,970 $ 36,49145,287 $ 28,43128,970 $ 36,49145,287 Capital expenditures $ 164220 $ 5481,309 $ 6956 $ 437761 Depreciation and amortization $ 1,8602,800 $ 1,4712,465 $ 942940 $ 831994 Intersegment eliminations:Eliminations: - -------------------------- Net sales $ (12,123)(17,254) $ (3,026)(5,787) $ (7,133)(5,131) $ (1,204)(2,761) Consolidated: - ------------- Net sales $ 1,223,0701,852,647 $ 1,151,7491,804,718 $ 637,490629,577 $ 621,580652,969 Operating profitincome $ 128,168213,406 $ 103,919181,297 $ 70,70485,238 $ 63,80877,378 Long-lived assets $ 530,069536,300 $ 553,442561,397 $ 530,069536,300 $ 553,442561,397 Total assets $ 2,340,0592,465,790 $ 2,380,2882,532,995 $ 2,340,0592,465,790 $ 2,380,2882,532,995 Capital expenditures $ 25,24947,806 $ 30,75946,657 $ 14,98422,557 $ 19,43815,898 Depreciation and amortization $ 36,06555,111 $ 34,14350,842 $ 17,71919,046 $ 20,38016,699
- 10 - 8) COMPREHENSIVE INCOME: Comprehensive income consists of net income and foreign currency translation adjustments for the sixnine months and three months ended August 31,November 30, 2000 and 1999. The reconciliation of net income to comprehensive income is as follows:
For the SixNine Months For the Three Months Ended August 31,November 30, Ended August 31, ---------------------------- ------------------------------November 30, ----------------------- ------------------------ 2000 1999 2000 1999 ------------ ------------ ------------ ---------------------- ---------- ---------- ---------- (in thousands) Net income $ 44,01278,965 $ 31,94761,847 $ 26,11034,953 $ 21,10129,900 Other comprehensive income: Cumulative translation adjustment (19,113) (734) (7,847) (1,584) ------------ ------------ ------------ ------------$ (23,483) $ (3,504) $ (4,370) $ (2,770) ---------- ---------- ---------- ---------- Total comprehensive income $ 24,89955,482 $ 31,21358,343 $ 18,26330,583 $ 19,517 ============ ============ ============ ============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 August 31,November 30, 2000 ("SecondThird Quarter 2001"), compared to the three months ended August 31,November 30, 1999 ("SecondThird Quarter 2000"), and for the sixnine months ended August 31,November 30, 2000 ("SixNine Months 2001"), compared to the sixnine months ended August 31,November 30, 1999 ("SixNine Months 2000"), and (ii) financial liquidity and capital resources for SixNine 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 October 27, 2000, the Company purchased all of the issued Ordinary Shares and Preference Shares of Forth Wines Limited ("Forth Wines"). The results of operations from the Forth Wines acquisition are reported in the Matthew Clark segment and have been included in the consolidated results of operations of the Company since the date of acquisition. - 12 - RESULTS OF OPERATIONS - --------------------- SECONDTHIRD QUARTER 2001 COMPARED TO SECONDTHIRD QUARTER 2000 NET SALES The following table sets forth the net sales (in thousands of dollars) by operating segment of the Company for SecondThird Quarter 2001 and SecondThird Quarter 2000. SecondThird Quarter 2001 Compared to SecondThird Quarter 2000 ---------------------------------------------------------------------------------------------------- Net Sales ---------------------------------------------------------------------------------------------------- %Increase/ 2001 2000 (Decrease) ---------- ---------- ---------- Canandaigua Wine: Branded: External customers $ 147,376160,221 $ 149,540 (1.4)179,905 (10.9)% Intersegment 1,896 1,239 53.0 1,891 2,285 (17.2)% ---------- ---------- Total Branded 149,272 150,779 (1.0)162,112 182,190 (11.0)% ---------- ---------- Other: External customers 14,060 19,449 (27.7)18,389 24,502 (24.9)% Intersegment 4,726 - N/A3,095 423 631.7 % ---------- ---------- Total Other 18,786 19,449 (3.4)21,484 24,925 (13.8)% ---------- ---------- Canandaigua Wine net sales $ 168,058183,596 $ 170,228 (1.3)207,115 (11.4)% ---------- ---------- Barton: Beer $ 212,159163,292 $ 177,195 19.7134,155 21.7 % Spirits 72,561 73,010 (0.6)79,096 80,548 (1.8)% ---------- ---------- Barton net sales $ 284,720242,388 $ 250,205 13.8214,703 12.9 % ---------- ---------- Matthew Clark: Branded: External customers $ 75,89279,248 $ 80,879 (6.2)93,104 (14.9)% Intersegment 476 - N/A107 53 101.9 % ---------- ---------- Total Branded 76,368 80,879 (5.6)79,355 93,157 (14.8)% Wholesale 93,310 102,331 (8.8)100,725 112,049 (10.1)% ---------- ---------- Matthew Clark net sales $ 169,678180,080 $ 183,210 (7.4)205,206 (12.2)% ---------- ---------- Franciscan: External customers $ 21,35927,779 $ 17,137 24.627,473 1.1 % Intersegment 3439 - N/A ---------- ---------- Franciscan net sales $ 21,39327,818 $ 17,137 24.827,473 1.3 % ---------- ---------- Corporate Operations and Other $ 774826 $ 2,004 (61.4)1,233 (33.0)% ---------- ---------- Intersegment eliminations $ (7,133)(5,131) $ (1,204) 492.4(2,761) 85.8 % ---------- ---------- Consolidated Net Sales $ 637,490629,577 $ 621,580 2.6 652,969 (3.6)% ========== ========== Net sales for SecondThird Quarter 2001 increaseddecreased to $637.5$629.6 million from $621.6$653.0 million for SecondThird Quarter 2000, an increasea decrease of $15.9$23.4 million, or 2.6%(3.6)%. - 13 - Canandaigua Wine ---------------- Net sales for Canandaigua Wine for SecondThird Quarter 2001 decreased to $168.1$183.6 million from $170.2$207.1 million for SecondThird Quarter 2000, a decrease of $2.2$23.5 million, or (1.3)(11.4)%. The decline resulted primarily from a decrease in grape juice concentratetable 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 internationalgrape juice concentrate and bulk wine sales. These decreases were partially offset by increases in sales of Arbor Mist and Paul Masson Grande Amber. Barton ------ Net sales for Barton for SecondThird Quarter 2001 increased to $284.7$242.4 million from $250.2$214.7 million for SecondThird Quarter 2000, an increase of $34.5$27.7 million, or 13.8%12.9%. This increase resulted primarily from volume growth and selling price increases 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 4.8%,5.8% primarily as a result of price increases on tequila products. Matthew Clark ------------- Net sales for Matthew Clark for SecondThird Quarter 2001 decreased to $169.7$180.1 million from $183.2$205.2 million for SecondThird Quarter 2000, a decrease of $13.5$25.1 million, or (7.4)(12.2)%. This decrease resulted primarily from an adverse foreign currency impact of $10.3 million$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 a decreasewholesale sales from the recent Forth Wines acquisition being offset by decreases in draft cider sales, partially offset by growth in wine and packaged cider.private label cider sales. Franciscan ---------- Net sales for Franciscan for SecondThird Quarter 2001 increased to $21.4$27.8 million from $17.1$27.5 million for SecondThird Quarter 2000, an increase of $4.3$0.3 million, or 24.8%1.3%. This increase resulted primarily from selling price increases andmore than offsetting a volume growth.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 increaseddecreased to $200.6$208.1 million for SecondThird Quarter 2001 from $189.1$209.7 million for SecondThird Quarter 2000, an increasea decrease of $11.5$1.6 million, or 6.1%(0.8)%. The dollar increasedecrease in gross profit wasresulted primarily related to thefrom a decrease in Canandaigua Wine's net sales and an adverse foreign currency impact. These decreases were partially offset by volume growth andin the Company's Mexican beer portfolio, selling price increases in the Company's imported beer business and the Franciscan fine wine portfolio.portfolio and cost improvements in Matthew Clark's cider and wholesale businesses. As a percent of net sales, gross profit increased to 31.5%33.0% for SecondThird Quarter 2001 from 30.4%32.1% in SecondThird Quarter 2000, resulting primarily from selling price increases in the Company's imported beer business and the Franciscan fine wine portfolio.portfolio and cost improvements in Matthew Clark's cider and wholesale businesses. - 14 - SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses increaseddecreased to $129.9$122.8 million for SecondThird Quarter 2001 from $125.3$132.3 million for SecondThird Quarter 2000, an increasea decrease of $4.6$9.5 million, or 3.7%(7.2)%. The dollar increasedecrease in selling, general and administrative expenses resulted primarily from an increasea decrease in advertising and promotion expenses in Corporate Operations.as Third Quarter 2000 included advertising and promotion expenses associated with Millennium activities. Selling, general and administrative expenses as a percent of net sales increaseddecreased to 20.4%19.5% for SecondThird Quarter 2001 as compared to 20.2%20.3% for SecondThird Quarter 2000. The increaseThis decrease in percent of net sales resulted primarily from the increasedecrease in expenses in Corporate Operations. - 14 -advertising and promotion expenses. OPERATING INCOME The following table sets forth the operating profit/income/(loss) (in thousands of dollars) by operating segment of the Company for SecondThird Quarter 2001 and SecondThird Quarter 2000. SecondThird Quarter 2001 Compared to SecondThird Quarter 2000 ---------------------------------------------------------------------------------------------------- Operating Profit/Income/(Loss) ---------------------------------------------------------------------------------------------------- %Increase/ 2001 2000 %Increase(Decrease) -------- -------- ---------- ---------- --------- Canandaigua Wine $ 10,41516,453 $ 10,412 0.0%18,850 (12.7)% Barton 50,613 41,962 20.6%46,370 41,380 12.1 % Matthew Clark 12,222 11,980 2.0%18,431 15,193 21.3 % Franciscan 4,242 1,571 170.0%9,001 5,991 50.2 % Corporate Operations and Other (6,788) (2,117) 220.6% ---------- ----------(5,017) (4,036) 24.3 % -------- -------- Consolidated Operating ProfitIncome $ 70,70485,238 $ 63,808 10.8% ========== ==========77,378 10.2 % ======== ======== As a result of the above factors, consolidated operating income increased to $70.7$85.2 million for SecondThird Quarter 2001 from $63.8$77.4 million for SecondThird Quarter 2000, an increase of $6.9$7.9 million, or 10.8%10.2%. INTEREST EXPENSE, NET Net interest expense decreased to $27.2$27.0 million for SecondThird Quarter 2001 from $28.6$27.5 million for SecondThird Quarter 2000, a decrease of $1.5$0.6 million, or (5.1)(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 $26.1$35.0 million for SecondThird Quarter 2001 from $21.1$29.9 million for SecondThird Quarter 2000, an increase of $5.0$5.1 million, or 23.7%16.9%. For financial analysis purposes only, the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") for SecondThird Quarter 2001 were $88.4$104.3 million, an increase of $4.2$10.2 million over EBITDA of $84.2$94.1 million for SecondThird 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 - SIXNINE MONTHS 2001 COMPARED TO SIXNINE MONTHS 2000 NET SALES The following table sets forth the net sales (in thousands of dollars) by operating segment of the Company for SixNine Months 2001 and SixNine Months 2000. SixNine Months 2001 Compared to SixNine Months 2000 ---------------------------------------------------------------------------------------- Net Sales ------------------------------------------- % Increase/--------------------------------------------- %Increase/ 2001 2000 (Decrease) ------------ ------------ ---------- ---------- ----------- Canandaigua Wine: Branded: External customers $ 290,706450,927 $ 292,182 (0.5)472,087 (4.5)% Intersegment 3,132 2,989 4.8 5,023 5,274 (4.8)% ---------- ---------------------- ------------ Total Branded 293,838 295,171 (0.5)455,950 477,361 (4.5)% ---------- ---------------------- ------------ Other: External customers 28,243 38,579 (26.8)46,632 63,081 (26.1)% Intersegment 8,355 37 22,481.111,450 460 2,389.1 % ---------- ---------------------- ------------ Total Other 36,598 38,616 (5.2)58,082 63,541 (8.6)% ---------- ---------------------- ------------ Canandaigua Wine net sales $ 330,436514,032 $ 333,787 (1.0)540,902 (5.0)% ---------- ---------------------- ------------ Barton: Beer $ 375,293538,585 $ 323,806 15.9457,961 17.6 % Spirits 145,107 127,149 14.1224,203 207,697 7.9 % ---------- ---------------------- ------------ Barton net sales $ 520,400762,788 $ 450,955 15.4665,658 14.6 % ---------- ---------------------- ------------ Matthew Clark: Branded: External customers $ 145,486224,734 $ 155,254 (6.3)248,358 (9.5)% Intersegment 497 - N/A ---------- ----------604 53 1,039.6 % ------------ ------------ Total Branded 145,983 155,254 (6.0)225,338 248,411 (9.3)% Wholesale 193,233 194,753 (0.8)293,958 306,802 (4.2)% ---------- ---------------------- ------------ Matthew Clark net sales $ 339,216519,296 $ 350,007 (3.1)555,213 (6.5)% ---------- ---------------------- ------------ Franciscan: External customers $ 43,14470,923 $ 17,137 151.844,610 59.0 % Intersegment 138177 - N/A ---------- ---------------------- ------------ Franciscan net sales $ 43,28271,100 $ 17,137 152.644,610 59.4 % ---------- ---------------------- ------------ Corporate Operations and Other $ 1,8592,685 $ 2,889 (35.7)4,122 (34.9)% ---------- ---------------------- ------------ Intersegment eliminations $ (12,123)(17,254) $ (3,026) 300.6(5,787) 198.2 % ---------- ---------------------- ------------ Consolidated Net Sales $1,223,070 $1,151,749 6.2$ 1,852,647 $ 1,804,718 2.7 % ========== ====================== ============ Net sales for SixNine Months 2001 increased to $1,223.1$1,852.6 million from $1,151.7$1,804.7 million for SixNine Months 2000, an increase of $71.3$47.9 million, or 6.2%2.7%. Canandaigua Wine ---------------- Net sales for Canandaigua Wine for SixNine Months 2001 decreased to $330.4$514.0 million from $333.8$540.9 million for SixNine Months 2000, a decrease of $3.4$26.9 million, or (1.0)(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 while branded wine sales were virtually unchanged against the comparable period last year.of Paul Masson Grande Amber and Arbor Mist. - 16 - Barton ------ Net sales for Barton for SixNine Months 2001 increased to $520.4$762.8 million from $451.0$665.7 million for SixNine Months 2000, an increase of $69.4$97.1 million, or 15.4%14.6%. This increase resulted primarily from volume growth and selling price increases in the Mexican beer portfolio as well as from the inclusion of $11.3 million of incremental net sales during the first quarter of fiscal 2001 from the Canadian whisky brands acquired as part of the Black Velvet Assets acquisition, which was completed in April 1999. Matthew Clark ------------- Net sales for Matthew Clark for SixNine Months 2001 decreased to $339.2$519.3 million from $350.0$555.2 million for SixNine Months 2000, a decrease of $10.8$35.9 million, or (3.1)(6.5)%. This decrease resulted primarily from an adverse foreign currency impact of $16.8 million$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 a decreasean increase in packaged cider sales. These increases were virtually offset by decreases in draft cider sales, partially offset by growth in wine, packagedand private label cider and wholesale sales. Franciscan ---------- Net sales for Franciscan for SixNine Months 2001 increased to $43.3$71.1 million from $17.1$44.6 million for SixNine Months 2000, an increase of $26.1$26.5 million, or 152.6%59.4%. As the acquisition of Franciscan was completed in June 1999, this increase resulted primarily from the inclusion of $21.9 million of net sales from the first quarter of fiscal 2001 and from selling price increases and volume growthinstituted during Second Quarterthe second quarter of fiscal 2001. GROSS PROFIT The Company's gross profit increased to $384.5$592.6 million for SixNine Months 2001 from $345.3$554.9 million for SixNine Months 2000, an increase of $39.3$37.6 million, or 11.4%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 SixNine Months 2001 from 30.0% in Six30.7% 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 and the Franciscan fine wine portfolio.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 $256.3$379.2 million for SixNine Months 2001 from $235.8$368.1 million for SixNine Months 2000, an increase of $20.5$11.0 million, or 8.7%3.0%. The dollar increase in selling, general and administrative expenses resulted primarily from the inclusion of the Franciscan business and expenses related to the brands acquired in the Black Velvet Assets acquisition for a full sixnine 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 21.0%remained virtually unchanged at 20.5% for SixNine Months 2001 as compared to 20.5%20.4% for SixNine 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, and from the increase in expenses in Corporate Operations. - 17 - NONRECURRING CHARGES The Company incurred nonrecurring charges of $5.5 million in SixNine 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 SixNine 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 SixNine Months 2001 and SixNine Months 2000. SixNine Months 2001 Compared to SixNine Months 2000 ---------------------------------------------------------------------------------------- Operating Profit/Income/(Loss) ---------------------------------------------------------------------------------------- %Increase/ 2001 2000 %Increase -----------(Decrease) ------------ ------------ ---------- --------- Canandaigua Wine $ 18,39634,849 $ 16,019 14.8%34,869 (0.1)% Barton 89,448 73,459 21.8%135,818 114,839 18.3 % Matthew Clark 22,596 19,310 17.0%41,027 34,503 18.9 % Franciscan 9,658 1,571 514.8%18,659 7,562 146.7 % Corporate Operations and Other (11,930) (6,440) 85.2% ----------- ----------(16,947) (10,476) 61.8 % ------------ ------------ Consolidated Operating ProfitIncome $ 128,168213,406 $ 103,919 23.3% =========== ==========181,297 17.7 % ============ ============ As a result of the above factors, consolidated operating income increased to $128.2$213.4 million for SixNine Months 2001 from $103.9$181.3 million for SixNine Months 2000, an increase of $24.2$32.1 million, or 23.3%17.7%. Exclusive of the aforementioned $2.6 million in nonrecurring charges, operating income for the Canandaigua Wine operating segment decreased 1.0%6.9% in SixNine Months 2001 from $18.6$37.4 million in SixNine Months 2000. Operating income for the Matthew Clark operating segment, excluding the aforementioned nonrecurring charges of $2.9 million, increased 1.5%9.6% in the SixNine Months 2001 from $22.3$37.4 million in the SixNine Months 2000. INTEREST EXPENSE, NET Net interest expense increased to $54.8$81.8 million for SixNine Months 2001 from $50.7$78.2 million for SixNine Months 2000, an increase of $4.1$3.6 million, or 8.2%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 $44.0$79.0 million for SixNine Months 2001 from $31.9$61.8 million for SixNine Months 2000, an increase of $12.1$17.1 million, or 37.8%27.7%. For financial analysis purposes only, the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") for SixNine Months 2001 were $164.2$268.5 million, an increase of $26.2$36.4 million over EBITDA of $138.1$232.1 million for SixNine 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. - 18 - 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. SIXNINE MONTHS 2001 CASH FLOWS OPERATING ACTIVITIES Net cash provided by operating activities for SixNine Months 2001 was $78.0$16.1 million, which resulted from $81.8$136.6 million in net income adjusted for noncash items, less $3.9$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 increases in accrued grape purchases, accounts payable, accrued excise taxes, accrued income taxes, accrued advertising and promotion expenses, accrued income taxes and accrued excise taxes.grape purchases. INVESTING ACTIVITIES AND FINANCING ACTIVITIES Net cash used in investing activities for SixNine Months 2001 was $24.3$46.4 million, which resulted primarily from capital expenditures of $25.2$47.8 million. Net cash used in financing activities for SixNine Months 2001 was $80.5$0.6 million resulting primarily from principal payments of long-term debt of $220.5$221.6 million, which included $25.5$27.2 million of scheduled 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 $16.5$94.2 million of net revolving loan borrowings.borrowings under the senior credit facility. DEBT Total debt outstanding as of August 31,November 30, 2000, amounted to $1,209.1$1,282.5 million, a decrease of $108.9$35.4 million from February 29, 2000. The ratio of total debt to total capitalization decreased to 68.7%68.8% as of August 31,November 30, 2000, from 71.7% as of February 29, 2000. - 19 - SENIOR CREDIT FACILITY As of August 31,November 30, 2000, under its senior credit facility, the Company had outstanding term loans of $338.2$337.1 million bearing a weighted average interest rate of 8.4%8.3%, $43.3$121.0 million of revolving loans bearing a weighted average interest rate of 7.9%, undrawn revolving letters of credit of $11.9$12.2 million, and $244.8$166.8 million in revolving loans available to be drawn. SENIOR NOTES As of August 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. 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 August 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 August 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. - 20 - 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 sixnine months ended August 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. - 21 - PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------- --------------------------------------------------- At the Annuala Special Meeting of Stockholders of Constellation Brands, Inc. (f/k/a Canandaigua Brands, Inc.) held on JulySeptember 18, 2000 (the "Annual"Special Meeting"), the holders of the Company's Class A Common Stock (the "Class A Stock"), voting as a separate class, elected the Company's slate of director nominees designated to be elected by the holders of the Class A Stock, and the holders of the Company's Class B Common Stock (the "Class B Stock"), voting as a separate class, elected the Company's slate of director nominees designated to be elected by the holders of the Class B Stock. In addition, at the Annual Meeting, the holders of Class A Stock and the holders of Class B Stock, voting together as a single class, voted upon the proposal to ratify the selection of Arthur Andersen LLP, Certified Public Accountants, asamend and restate the Company's independent auditors forRestated Certificate of Incorporation to change the fiscal year ending February 28, 2001.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 as applicable, aswith respect to eachthe proposal to change the name of the foregoing matters. I. The results of the voting for the election of Directors of the Company are as follows: Directors Elected By the Holders of Class A Stock: -------------------------------------------------- Nominee For Withheld ------------------- ---------- -------- Thomas C. McDermott 11,253,547 471,002 Paul L. Smith 11,255,184 469,365 Directors Elected By the Holders of Class B Stock: -------------------------------------------------- Nominee For Withheld -------------------- ---------- -------- George Bresler 30,552,860 3,980 Jeananne K. Hauswald 30,552,590 4,250 James A. Locke, III 30,554,590 2,250 Richard Sands 30,554,590 2,250 Robert Sands 30,552,920 3,920 II. The selection of Arthur Andersen LLP was ratified with the following votes:Company: For: 42,133,63243,064,153 Against: 88,537165,731 Abstain: 59,22050,272 Broker Nonvotes: 0 - 22 - ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------- -------------------------------- (a) See Index to Exhibits located on Page 2928 of this Report. (b) The following ReportReports on Form 8-K waswere filed with the Securities and Exchange Commission during the quarter ended August 31,November 30, 2000: (i) Form 8-K dated June 22,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 as of MayAugust 31, 2000 (unaudited) and February 29, 2000 (audited); and (ii) the Company's Condensed Consolidated Statements of Income for the three months ended MayAugust 31, 2000 (unaudited) and MayAugust 31, 1999 (unaudited); and (iii) the Company's Condensed Consolidated Statements of Income for the six months ended August 31, 2000 (unaudited) and August 31, 1999 (unaudited). - 2322 - 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. CONSTELLATION BRANDS, INC. Dated: October 13, 2000January 16, 2001 By: /s/ Thomas F. Howe ------------------------------------ Thomas F. Howe, Vice President, Corporate Reporting and Controller Dated: October 13, 2000January 16, 2001 By: /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: October 13, 2000January 16, 2001 By: /s/ Thomas F. Howe ------------------------------------ Thomas F. Howe, Controller Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Treasurer (Principal Financial Officer and Principal Accounting Officer) CANANDAIGUA WINE COMPANY, INC. Dated: October 13, 2000January 16, 2001 By: /s/ Thomas F. Howe ------------------------------------ Thomas F. Howe, Controller Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Treasurer (Principal Financial Officer and Principal Accounting Officer) - 2423 - CANANDAIGUA EUROPE LIMITED Dated: October 13, 2000January 16, 2001 By: /s/ Thomas F. Howe ------------------------------------ Thomas F. Howe, Controller Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Treasurer (Principal Financial Officer and Principal Accounting Officer) CANANDAIGUA LIMITED Dated: October 13, 2000January 16, 2001 By: /s/ Thomas F. Howe ------------------------------------ Thomas F. Howe, Authorized Officer Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Finance Director (Principal Financial Officer and Principal Accounting Officer) POLYPHENOLICS, INC. Dated: October 13, 2000January 16, 2001 By: /s/ Thomas F. Howe ------------------------------------ Thomas F. Howe, Vice President and Controller Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Vice President and Treasurer (Principal Financial Officer and Principal Accounting Officer) ROBERTS TRADING CORP. Dated: October 13, 2000January 16, 2001 By: /s/ Thomas F. Howe ------------------------------------ Thomas F. Howe, Controller Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, President and Treasurer (Principal Financial Officer and Principal Accounting Officer) - 2524 - CANANDAIGUA B.V. Dated: October 13, 2000January 16, 2001 By: /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: October 13, 2000January 16, 2001 By: /s/ Thomas F. Howe ------------------------------------ Thomas F. Howe, Vice President and Controller Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Vice President and Treasurer (Principal Financial Officer and Principal Accounting Officer) ALLBERRY, INC. Dated: October 13, 2000January 16, 2001 By: /s/ Thomas F. Howe ------------------------------------ Thomas F. Howe, Vice President and Controller Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Vice President and Treasurer (Principal Financial Officer and Principal Accounting Officer) CLOUD PEAK CORPORATION Dated: October 13, 2000January 16, 2001 By: /s/ Thomas F. Howe ---------------------------------------------------------------------- Thomas F. Howe, Vice President and Controller Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Vice President and Treasurer (Principal Financial Officer and Principal Accounting Officer) - 2625 - M.J. LEWIS CORP. Dated: October 13, 2000January 16, 2001 By: /s/ Thomas F. Howe ------------------------------------ Thomas F. Howe, Vice President and Controller Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Vice President and Treasurer (Principal Financial Officer and Principal Accounting Officer) MT. VEEDER CORPORATION Dated: October 13, 2000January 16, 2001 By: /s/ Thomas F. Howe ------------------------------------ Thomas F. Howe, Vice President and Controller Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Vice President and Treasurer (Principal Financial Officer and Principal Accounting Officer) BARTON INCORPORATED Dated: October 13, 2000January 16, 2001 By: /s/ Alexander L. Berk ------------------------------------ Alexander L. Berk, President and Chief Executive Officer Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Vice President (Principal Financial Officer and Principal Accounting Officer) BARTON BRANDS, LTD. Dated: October 13, 2000January 16, 2001 By: /s/ Alexander L. Berk ------------------------------------ Alexander L. Berk, Executive Vice President Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Vice President (Principal Financial Officer and Principal Accounting Officer) - 2726 - BARTON BEERS, LTD. Dated: October 13, 2000January 16, 2001 By: /s/ Alexander L. Berk ------------------------------------ Alexander L. Berk, Executive Vice President Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Vice President (Principal Financial Officer and Principal Accounting Officer) BARTON BRANDS OF CALIFORNIA, INC. Dated: October 13, 2000January 16, 2001 By: /s/ Alexander L. Berk ------------------------------------ Alexander L. Berk, President Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Vice President (Principal Financial Officer and Principal Accounting Officer) BARTON BRANDS OF GEORGIA, INC. Dated: October 13, 2000January 16, 2001 By: /s/ Alexander L. Berk ------------------------------------ Alexander L. Berk, President Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Vice President (Principal Financial Officer and Principal Accounting Officer) BARTON CANADA, LTD. Dated: October 13, 2000January 16, 2001 By: /s/ Alexander L. Berk ------------------------------------ Alexander L. Berk, President Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Vice President (Principal Financial Officer and Principal Accounting Officer) - 2827 - BARTON DISTILLERS IMPORT CORP. Dated: October 13, 2000January 16, 2001 By: /s/ Alexander L. Berk ------------------------------------ Alexander L. Berk, President Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Vice President (Principal Financial Officer and Principal Accounting Officer) BARTON FINANCIAL CORPORATION Dated: October 13, 2000January 16, 2001 By: /s/ Troy J. Christensen ------------------------------------ Troy J. Christensen, President and Secretary Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Vice President (Principal Financial Officer and Principal Accounting Officer) STEVENS POINT BEVERAGE CO. Dated: October 13, 2000January 16, 2001 By: /s/ Alexander L. Berk ------------------------------------ Alexander L. Berk, Executive Vice President Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Vice President (Principal Financial Officer and Principal Accounting Officer) MONARCH IMPORT COMPANY Dated: October 13, 2000January 16, 2001 By: /s/ Alexander L. Berk ------------------------------------ Alexander L. Berk, President Dated: October 13, 2000January 16, 2001 By: /s/ Thomas S. Summer ------------------------------------ Thomas S. Summer, Vice President (Principal Financial Officer and Principal Accounting Officer) - 2928 - 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 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 herewith)as Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 2000 and incorporated herein by reference). 3.2 By-Laws of the Company (filed herewith; filedas Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the purpose of reflecting the Company's new name, Constellation Brands, Inc., in the title of the By-Laws)fiscal quarter ended August 31, 2000 and incorporated herein by reference). (4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES. 4.1 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 herewith)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). (10) MATERIAL CONTRACTS. 10.1 Amendment Number Three to the Company's Long-Term Stock Incentive Plan (filed herewith). 10.2 Amendment Number Two to the Company's Incentive Stock Option Plan (filed herewith). 10.3 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 hereto)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. - 3029 - (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.