FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X][x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended November 30, 1997
-----------------August 31, 1998
---------------
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 CANANDAIGUA 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
NEW YORK ROBERTS TRADING CORP. 16-0865491
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
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
GEORGIA THE VIKING DISTILLERY, INC. 58-2183528
(State or other (Exact name of registrant as specified (I.R.S. Employer
jurisdiction of specified in its charter) Identification No.)
incorporation or
No.)
organization)
235 NORTH BLOOMFIELD ROAD, CANANDAIGUA,300 WILLOWBROOK OFFICE PARK, FAIRPORT, NEW YORK 14424
------------------------------------------------------14450
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
(716) 393-4130
--------------
(Registrant's-----------------------------------------------------
(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 Canandaigua Brands, Inc., as of December 16, 1997,September 23, 1998, is set forth below
(all of the Registrants, other than Canandaigua Brands, Inc., are direct or
indirect wholly-owned subsidiaries of Canandaigua Brands, Inc.):
CLASS NUMBER OF SHARES OUTSTANDING
----- ----------------------------
Class A Common Stock, Par Value $.01 Per Share 15,377,36714,626,510
Class B Common Stock, Par Value $.01 Per Share 3,330,4583,248,187
Page- 1 -
PART I - FINANCIAL INFORMATION
ITEMItem 1. FINANCIAL STATEMENTS.Financial Statements.
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
November 30, 1997August 31, 1998 February 28, 1997
-----------------1998
--------------- -----------------
(unaudited)
ASSETS
------
ASSETS
------
CURRENT ASSETS:
Cash and cash investments $ 2,2981,473 $ 10,0101,232
Accounts receivable, net 184,992 142,592154,550 142,615
Inventories, net 419,392 326,626345,972 394,028
Prepaid expenses and other current assets 19,295 21,78737,550 26,463
----------- -----------
Total current assets 625,977 501,015539,545 564,338
PROPERTY, PLANT AND EQUIPMENT, net 241,381 249,552246,157 244,035
OTHER ASSETS 264,155 270,334262,004 264,786
----------- -----------
Total assets $ 1,131,5131,047,706 $ 1,020,9011,073,159
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 161,00063,000 $ 57,00091,900
Current maturities of long-term debt 40,119 40,46724,118 24,118
Accounts payable 69,838 63,49265,624 52,055
Accrued Federal and state excise taxes 20,218 17,05821,561 17,498
Other accrued expenses and liabilities 93,803 68,556101,569 97,763
----------- -----------
Total current liabilities 384,978 246,573275,872 283,334
----------- -----------
LONG-TERM DEBT, less current maturities 275,300 338,884297,407 309,218
----------- -----------
DEFERRED INCOME TAXES 64,695 61,39559,237 59,237
----------- -----------
OTHER LIABILITIES 7,862 9,3165,445 6,206
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value-
Authorized, 1,000,000 shares;
Issued, none at November 30, 1997,August 31, 1998, and
February 28, 19971998 -- --
Class A Common Stock, $.01 par value-
Authorized, 60,000,000120,000,000 shares;
Issued, 17,576,50717,802,475 shares at November 30, 1997,August 31, 1998,
and 17,462,33217,604,784 shares at February 28, 1997 175 1741998 178 176
Class B Convertible Common Stock, $.01 par value-
Authorized, 20,000,000 shares;
Issued, 3,873,912 shares at August 31, 1998,
and 3,956,183 shares at November 30, 1997, and
February 28, 1997 401998 39 40
Additional paid-in capital 226,242 222,336234,992 231,687
Retained earnings 210,297 170,275249,733 220,346
----------- -----------
436,754 392,825484,942 452,249
----------- -----------
Less-Treasury stock-
Class A Common Stock, 2,199,3203,029,505 shares at
November 30, 1997,August 31, 1998, and 1,915,4682,199,320 shares at
February 28, 1997,1998, at cost (72,990) (34,878) (25,885)
Class B Convertible Common Stock, 625,725 shares
at November 30, 1997,August 31, 1998, and February 28, 1997,1998, at cost (2,207) (2,207)
----------- -----------
(75,197) (37,085) (28,092)
----------- -----------
Less-Unearned compensation-restricted stock award (991) --
----------- -----------
Total stockholders' equity 398,678 364,733409,745 415,164
----------- -----------
Total liabilities and stockholders' equity $ 1,131,5131,047,706 $ 1,020,9011,073,159
=========== ===========
The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
Page- 2 -
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the NineSix Months Ended November 30,August 31, For the Three Months Ended November 30,
-------------------------------------- ---------------------------------------August 31,
----------------------------------- -------------------------------------
1998 1997 19961998 1997
1996
------------ ------------ ------------ ----------------------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
GROSS SALES $ 1,252,372880,150 $ 1,180,849820,326 $ 432,046457,281 $ 425,983409,288
Less - Excise taxes (322,134) (307,405) (109,343) (108,250)
------------ ------------ ------------ ------------(217,836) (212,791) (107,895) (107,764)
--------- --------- --------- ---------
Net sales 930,238 873,444 322,703 317,733662,314 607,535 349,386 301,524
COST OF PRODUCT SOLD (666,747) (649,019) (224,703) (236,050)
------------ ------------ ------------ ------------(467,767) (442,044) (247,775) (216,765)
--------- --------- --------- ---------
Gross profit 263,491 224,425 98,000 81,683194,547 165,491 101,611 84,759
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (171,772) (161,139) (60,289) (58,269)
------------ ------------ ------------ ------------(128,786) (111,483) (67,454) (56,258)
--------- --------- --------- ---------
Operating income 91,719 63,286 37,711 23,41465,761 54,008 34,157 28,501
INTEREST EXPENSE, net (23,885) (25,468) (7,861) (8,665)
------------ ------------ ------------ ------------(15,952) (16,024) (7,425) (7,545)
--------- --------- --------- ---------
Income before provision for
Federal and state income taxes 67,834 37,818 29,850 14,74949,809 37,984 26,732 20,956
PROVISION FOR FEDERAL AND STATE
INCOME TAXES (27,812) (16,065) (12,239) (6,438)
------------ ------------ ------------ ------------(20,422) (15,573) (10,960) (8,591)
--------- --------- --------- ---------
NET INCOME $ 40,02229,387 $ 21,75322,411 $ 17,61115,772 $ 8,311
============ ============ ============ ============12,365
========= ========= ========= =========
SHARE DATA:
Net incomeEarnings per common and common
equivalent share:
PrimaryBasic $ 2.071.57 $ 1.101.20 $ 0.900.85 $ 0.42
============ ============ ============ ============
Fully diluted0.67
========= ========= ========= =========
Diluted $ 2.051.53 $ 1.101.18 $ 0.900.83 $ 0.42
============ ============ ============ ============0.65
========= ========= ========= =========
Weighted average common and common
equivalent shares
outstanding:
Primary 19,324,073 19,864,901 19,544,459 19,617,854
Fully diluted 19,512,046 19,864,901 19,563,020 19,778,993Basic 18,669 18,665 18,589 18,559
Diluted 19,168 19,002 19,051 18,962
The accompanying notes to consolidated financial statements are an integral part of these statements.
Page- 3 -
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the NineSix Months Ended November 30,
--------------------------------------August 31,
-----------------------------------
1998 1997 1996
----------- -----------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 40,02229,387 $ 21,75322,411
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation of property, plant and equipment 18,806 18,66211,952 12,625
Amortization of intangible assets 6,987 7,1555,015 4,699
Deferred tax provision 6,900 10,000
Stock-based compensation expense 529 20900 4,900
Amortization of discount on long-term debt 261 29
(Gain) loss189 172
Stock-based compensation expense 51 350
Gain on sale of property, plant and equipment (3,036) 201(3) (883)
Change in operating assets and liabilities:
Accounts receivable, net (42,192) (55,635)(11,935) (17,518)
Inventories, net (91,008) (31,793)48,056 (8,131)
Prepaid expenses and other current assets 2,552 9,176(10,867) 1,285
Accounts payable 6,896 18,51011,339 57,408
Accrued Federal and state excise taxes 3,161 3,1504,063 2,669
Other accrued expenses and liabilities 21,649 17,9512,906 1,584
Other assets and liabilities, net (1,043) (3,815)
--------- ---------(2,549) (717)
-------- --------
Total adjustments (69,538) (6,389)
--------- ---------59,117 58,443
-------- --------
Net cash (used in) provided by operating activities (29,516) 15,364
--------- ---------88,504 80,854
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment net(14,098) (18,213)
Purchase of minor disposals (23,206) (25,318)joint venture minority interest (716) --
Proceeds from sale of property, plant and equipment 12,547 5,171
Payment of accrued earn-out amounts -- (13,848)
--------- ---------27 8,512
-------- --------
Net cash used in investing activities (10,659) (33,995)
--------- ---------(14,787) (9,701)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of treasury stock (36,014) (9,233)
Net proceeds fromrepayments of notes payable 104,000 18,700(28,900) (27,800)
Principal payments of long-term debt (12,000) (40,409)
Exercise of employee stock options 2,154 741
Proceeds from employee stock purchases 1,256 998
Exercise of employee stock options 1,194 10
Principal payments of long-term debt (64,193) (39,612)
Purchases of treasury stock (9,233) (19,997)1,284 204
Payment of issuance costs of long-term debt (561) (1,478)
Proceeds from issuance of long-term debt, net of discount -- 61,668
--------- ---------(388)
-------- --------
Net cash provided byused in financing activities 32,463 20,289
--------- ---------(73,476) (76,885)
-------- --------
NET INCREASE (DECREASE) INCREASE IN CASH AND CASH INVESTMENTS (7,712) 1,658241 (5,732)
CASH AND CASH INVESTMENTS, beginning of period 1,232 10,010
3,339
--------- ----------------- --------
CASH AND CASH INVESTMENTS, end of period $ 2,2981,473 $ 4,997
========= =========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Goodwill reduction on settlement of disputed final closing net
current asset statement for Vintners Acquisition $ -- $ 5,894
========= =========4,278
======== ========
The accompanying notes to consolidated financial statements are an integral part of these statements.
Page- 4 -
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1997AUGUST 31, 1998
1) MANAGEMENT'S REPRESENTATIONS:
The condensed consolidated financial statements included herein have been
prepared by 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 Canandaigua Brands, Inc. and its
subsidiaries. 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 28, 1997.1998.
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Certain November 1996 balances have been reclassified to conform with
current year presentation.
3) INVENTORIES:
Inventories are valued at the lower of cost (computed in accordance with
the last-in, first-out (LIFO) or first-in, first-out (FIFO) methods) or market.
Substantially all of the inventories are valued using the LIFO method. Elements
of cost include materials, labor and overhead and consist of the following:
November 30,August 31, February 28,
1997 1997
------------1998 1998
---------- ------------
(in thousands)
Raw materials and supplies $ 13,20314,395 $ 14,191
Wines14,439
Wine and distilled spirits in process 330,987 262,289231,442 304,037
Finished case goods 98,707 72,526
--------- ---------
442,897 349,006118,280 92,948
---------- ----------
364,117 411,424
Less - LIFO reserve (23,505) (22,380)
--------- ---------(18,145) (17,396)
---------- ----------
$ 419,392345,972 $ 326,626
========= =========394,028
========== ==========
Information related to the FIFO method of inventory valuation may be useful
in comparing operating results to those companies not using the LIFO method of
inventory valuation. If the FIFO method had been used, reported net income would
have been $0.7$0.4 million, or $0.03$0.02 per share on a fully diluted basis, higher for the
ninesix months ended November 30, 1997,August 31, 1998, and reported net income would have been $12.5$1.7
million, or $0.63$0.09 per share on a fully diluted basis, higher for the ninesix months ended
November 30, 1996.August 31, 1997.
Page- 5 -
3) BORROWINGS:
BANK CREDIT AGREEMENT -
In June 1998, the bank credit agreement was amended to, among other things,
eliminate the requirement that the Company reduce the outstanding balance of the
revolving loan facility to less than $60,000,000 for thirty consecutive days
during the six months ending each August 31. In July 1998, the revolving loan
facility under the bank credit agreement was increased by $100.0 million to
$285.0 million.
4) NET INCOMERETIREMENT SAVINGS AND PROFIT SHARING RETIREMENT PLAN:
Effective March 1, 1998, the Company's existing retirement savings and
profit sharing retirement plans and the Barton profit sharing and 401(k) plan
were merged into the Canandaigua Brands, Inc. 401(k) and Profit Sharing Plan
(the Plan). The Plan covers substantially all employees, excluding those
employees covered by collective bargaining agreements. The 401(k) portion of the
Plan permits eligible employees to defer a portion of their compensation (as
defined in the Plan) on a pretax basis. Participants may defer up to 10% of
their compensation for the year, subject to limitations of the Plan. The Company
makes a matching contribution of 50% of the first 6% of compensation a
participant defers. The amount of the Company's contribution under the profit
sharing portion of the Plan is in such discretionary amount as the Board of
Directors may annually determine, subject to limitations of the Plan.
5) STOCKHOLDERS' EQUITY:
STOCK REPURCHASE AUTHORIZATION -
In June 1998, the Company's Board of Directors authorized the repurchase of
up to $100,000,000 of its Class A Common Stock and Class B Convertible Common
Stock. The Company may finance such purchases, which will become treasury
shares, through cash generated from operations or through the bank credit
agreement.
INCREASE IN NUMBER OF AUTHORIZED SHARES OF CLASS A COMMON STOCK -
In July 1998, the stockholders of the Company approved an increase in the
number of authorized shares of Class A Common Stock from 60,000,000 shares to
120,000,000 shares, thereby increasing the aggregate number of authorized shares
of the Company to 141,000,000 shares.
6) EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE:
Net incomeThe Company adopted the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," (SFAS No. 128) effective February 28,
1998. Basic earnings per common share excludes the effect of common stock
equivalents and is computed by dividing income available to common equivalent share is based onstockholders
by the weighted average number of common and dilutive common equivalent shares outstanding during each period. Dilutive common equivalent shares consist of stock options.
5) STOCK INCENTIVE PLANS:
At the Company's Annual Meeting of Stockholders held on July 22, 1997,
stockholders approved the amendment and restatement of the Company's Stock
Option and Stock Appreciation Right Plan as the Long-Term Stock Incentive Plan
and the adoption of the Company's Incentive Stock Option Plan.
Under the Long-Term Stock Incentive Plan, non-qualified stock options,
stock appreciation rights, restricted stock and other stock-based awards may be
granted to employees, officers and directors of the Company. Grants, in the
aggregate, may not exceed 4,000,000 shares of the Company'speriod
for Class A Common Stock and Class B Convertible Common Stock. UnderDiluted earnings
per common share reflects the Incentive Stock Option Plan, incentivepotential dilution that could result if securities
or other contracts to issue common stock were exercised or converted into common
stock. Diluted earnings per common share assumes the exercise of stock options
may be
grantedusing the treasury stock method and assumes the conversion of convertible
- 6 -
securities, if any, using the "if converted" method. Historical earnings per
common share have been restated to employees, including officers,conform with the provisions of SFAS No. 128.
The computation of basic and diluted earnings per common share is as
follows:
For the Company. Grants, inSix Months For the aggregate, may not exceed 1,000,000Three Months
Ended August 31, Ended August 31,
------------------ --------------------
1998 1997 1998 1997
------- ------- ------- -------
(in thousands, except per share data)
Income applicable to common shares of the Company's Class A Common
Stock. The exercise price of any incentive stock option may not be less than the
fair market value of the$29,387 $22,411 $15,772 $12,365
======= ======= ======= =======
Weighted average common shares
on the date of grant.
6)outstanding - basic 18,669 18,665 18,589 18,559
Stock options 499 337 462 403
------- ------- ------- -------
Weighted average common shares
outstanding - diluted 19,168 19,002 19,051 18,962
======= ======= ======= =======
EARNINGS PER COMMON SHARE - BASIC $ 1.57 $ 1.20 $ 0.85 $ 0.67
======= ======= ======= =======
EARNINGS PER COMMON SHARE - DILUTED $ 1.53 $ 1.18 $ 0.83 $ 0.65
======= ======= ======= =======
7) SUMMARIZED FINANCIAL INFORMATION - SUBSIDIARY GUARANTORS:
The subsidiary guarantors are wholly owned and the guarantees are full,
unconditional, joint and several obligations of each of the subsidiary
guarantors. Summarized financial information for the subsidiary guarantors is
set forth below. 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 the non-guarantornonguarantor 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 or loan repayments. Therepayments; however, except for limited amounts, the
subsidiary guarantors may not loan funds to the Company.
The following table presents summarized financial information for
subsidiary guarantors in connection with all of the Company's 8.75% Senior
Subordinated Notes:
November 30,August 31, February 28,
1997 19971998 1998
---------- ------------ -----------
(in thousands)
Balance Sheet Data:
Current assets $ 501,384 $ 401,870$440,223 $460,618
Noncurrent assets $ 390,495 $ 403,068$394,917 $395,225
Current liabilities $ 104,699 $ 100,009$121,729 $102,207
Noncurrent liabilities $ 64,48062,010 $ 65,30061,784
Page 6- 7 -
For the NineSix Months For the Three Months
Ended November 30,August 31, Ended November 30,August 31,
-------------------- --------------------
1998 1997 19961998 1997 1996
-------- -------- -------- --------
(in thousands)
Income Statement Data:
Net sales $764,457 $718,676 $250,119 $264,883$552,352 $514,338 $289,774 $253,064
Gross profit $153,590 $127,306$122,885 $106,425 $ 47,16564,673 $ 48,59953,093
Income before provision for
Federal and state income
taxes $ 58,65850,451 $ 34,60241,448 $ 17,21027,406 $ 18,04320,233
Net income $ 34,88629,766 $ 19,90324,768 $ 10,11816,221 $ 10,466
7)12,103
8) ACCOUNTING PRONOUNCEMENTS:PRONOUNCEMENT:
In February 1997,June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128,
"Earnings per Share,"133 (SFAS No. 128)133), "Accounting for
Derivative Instruments and Statement of Financial Accounting
Standards No. 129, "Disclosure of Information about Capital Structure,Hedging Activities." (SFAS
No. 129) were issued. SFAS No. 128133 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 the Company to present basic and
diluted earnings per sharethat every
derivative be recorded as either an asset or liability in the financial statements.balance sheet
measured at its fair value. SFAS No. 133 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. The Company is required to adopt SFAS No. 128 for the year ending February 28, 1998, and restate
previously reported earnings per share. Early adoption is not permitted. The
Company believes the effect of adoption will not be material. SFAS No. 129
consolidates specific existing disclosure requirements and establishes standards
for disclosing information about an entity's capital structure. The Company is
required to adopt SFAS No. 129 for the year ending February 28, 1998. The
Company believes the effect of adoption will not be material.
In June 1997, Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," (SFAS No. 130) and Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information," (SFAS No. 131) were issued. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components
in133 on a full set of financial statements. The Company is required to adopt SFAS No.
130prospective basis
for interim periods and fiscal years beginning March 1, 1998.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required.2000. The Company
believes the effect of adoption on its financial statements will not be
material. SFAS No. 131 establishes standards for reporting
information about operating segments in annual financial statements and requires
reporting of selected information in interim financial statements. The Company
is required to adopt SFAS No. 131 for fiscal years beginning March 1, 1998, and
for interim periods beginning March 1, 1999. Restatement of comparative
information for earlier years is required in the initial year of adoption and
comparative information for interim periods in the initial year of adoption is
to be reported for interim periods in the second year of application. The
Company has not yet determined the impact of SFAS No. 131 on its financial
statements.
8) SUBSEQUENT EVENT - NEW CREDIT AGREEMENT:
Senior credit facility:
On December 19, 1997, the Company and a syndicate of banks (the Syndicate
Banks) entered into a new $325.0 million senior Credit Agreement (the Credit
Agreement). The proceeds of the Credit Agreement were used to repay all
outstanding principal and accrued interest on all loans under the Company's
Third Amended and Restated Credit Agreement, as amended. As compared to the
previous bank credit agreement, the Credit Agreement includes, among other
things, lower interest rates, lower
Page 7
quarterly loan amortization and greater flexibility with respect to effecting
acquisitions, incurring indebtedness and repurchasing the Company's capital
stock.
The Credit Agreement provides for a $140.0 million term loan facility due
in June 2003 and a $185.0 million revolving loan facility, including letters of
credit up to a maximum of $20.0 million, which expires in June 2003. The rate of
interest payable, at the Company's option, is a function of the London interbank
offered rate (LIBOR) plus a margin, federal funds rate plus a margin or the
prime rate. The margin is adjustable based upon the Company's Debt Ratio (as
defined in the Credit Agreement). There are certain mandatory term loan
prepayments including, if the proceeds of which are not used to finance an
acquisition, aggregate net proceeds received in excess of $50.0 million from any
Debt Incurrence (as defined in the Credit Agreement) and 50% of any net proceeds
from the sale of equity, and net proceeds from the sale of assets not reinvested
in like assets.
The term loan facility requires quarterly repayments of $6.0 million
beginning March 1998 through December 2002, and payments of $10.0 million in
March 2003 and June 2003. Currently, the margin on the term loan facility
borrowings is 0.75% and may be decreased by up to 0.35% and increased by up to
0.5% depending on the Company's Debt Ratio.
The revolving loan facility is utilized to finance working capital
requirements. The Credit Agreement requires that the Company reduce the
outstanding balance of the revolving loan facility to less than $60.0 million
for thirty consecutive days during the six months ending each August 31.
Currently, the margin on the revolving loan facility is 0.5% and may be
decreased by up to 0.25% and increased by up to 0.4% depending on the Company's
Debt Ratio. In addition, the Company pays a facility fee on the revolving loan
commitments. Currently, the facility fee is 0.25% and may be reduced or
increased by 0.1% subject to the Company's Debt Ratio.
The Syndicate Banks have been given security interests in substantially all
of the assets of the Company including mortgage liens on certain real property.
The Company is subject to customary secured lending covenants including those
restricting additional liens, the incurrence of additional indebtedness, the
sale of assets, the payment of dividends, transactions with affiliates and the
making of certain investments. The primary financial covenants require the
maintenance of a Debt Ratio, a senior debt coverage ratio, a fixed charge ratio
and an interest coverage ratio. Among the most restrictive covenants contained
in the Credit Agreement is the requirement to maintain a fixed charge ratio of
not less than 1.0 at the last day of each fiscal quarter for the most recent
four quarters.
Page 8
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 November 30, 1997August 31, 1998 ("ThirdSecond Quarter 1998"1999"), compared to the three
months ended November 30, 1996August 31, 1997 ("ThirdSecond Quarter 1997"1998"), and for the ninesix months
ended November 30, 1997August 31, 1998 ("NineSix Months 1998"1999"), compared to the ninesix months ended
November 30, 1996August 31, 1997 ("NineSix Months 1997"1998"), and (ii) financial liquidity and capital
resources for the nine months ended November 30, 1997.Six Months 1999. 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 28, 1997.1998.
The Company operates primarily in theis a leading producer and marketer of beverage alcohol industry.brands.
The Company is principally a producer and supplier of wineswine and an importer and
producer of beersbeer and distilled spirits in the United States. The Company's
beverage alcohol brands are marketed in three general categories: wine, beer and
distilled spirits.
The Company's branded products and its
other products and services are marketed by three operating divisions:
Canandaigua Wine Company, Barton Beers and Barton Brands.
- 8 -
RESULTS OF OPERATIONS
- ---------------------
THIRDSECOND QUARTER 19981999 COMPARED TO THIRDSECOND QUARTER 19971998
NET SALES
The following table sets forth the net sales (in thousands of dollars) and
unit volumesvolume (in thousands of cases), if applicable, for branded beverage alcohol
products and other products and services sold by the Company for ThirdSecond Quarter
1999 and Second Quarter 1998.
Second Quarter 1999 Compared to Second Quarter 1998
and Third Quarter 1997.
Third Quarter 1998 Compared to Third Quarter 1997
--------------------------------------------------------------------------------------------------------------------------------
Net Sales Unit Volume
------------------------------- ---------------------------
Branded Beverage--------------------------------- -----------------------------
%Increase/ %Increase/
Alcohol Products:1999 1998 1997 (Decrease) 1999 1998 1997 (Decrease)
-------- -------- ---------- ------ ------ ----------
Wine $153,353 $152,224 0.7% 7,799 7,943 (1.8%$132,064 $122,099 8.2% 6,654 6,442 3.3%
Beer 141,133 108,383 30.2% 11,177 8,691 28.6%
Spirits 50,183 51,372 (2.3%) Beer 92,605 74,314 24.6% 7,357 5,892 24.9%
Spirits 51,359 51,045 0.6% 2,520 2,476 1.8%2,488 2,575 (3.4%)
Other (a) 25,386 40,150 (36.8%)26,006 19,670 32.2% N/A N/A N/A
-------- -------- ----- ------ ------ -----
$322,703 $317,733 1.6% 17,676 16,311 8.4%$349,386 $301,524 15.9% 20,319 17,708 14.7%
======== ======== ===== ====== ====== =====
(a) Other consists primarily of non-brandednonbranded concentrate sales, contract
bottling and other production services and bulk product sales, none of
which are sold in case quantities.
Net sales for ThirdSecond Quarter 19981999 increased to $322.7$349.4 million from $317.7$301.5
million for ThirdSecond Quarter 1997,1998, an increase of $5.0$47.9 million, or 1.6%15.9%. This
increase resulted primarily from (i) $18.3$32.8 million of additional beer sales,
largely Mexican beers, and (ii) $2.6$10.0 million of additional table wine sales.
These increases were partially offset by lower sales, resulting
primarily from the introduction of new wine brands and (iii) $6.3 million of
additional nonbranded sales, primarily grape juice concentrate bulk wine and other branded wine products.sales. Unit
volume for branded beverage alcohol products for ThirdSecond Quarter 19981999 increased
8.4%14.7% as compared to ThirdSecond Quarter 1997.1998. The unit volume increase was the
result of the increased sales of the Company's beer brands, primarily Mexican
beer, brands and its spiritsthe introduction of new wine brands. UnitNotwithstanding an overall
increase in net sales and unit volume of the
Company'sits wine brands decreased slightlyprimarily due to the
introduction of new products, the Company has experienced a decline in many of
its other wine brands. The Company is addressing this through implementation of
various programs, such as compared to Third Quarter 1997.
Page 9addressing noncompetitive consumer prices of its wine
products on a market-by-market basis as well as increasing its promotional
activities where appropriate.
GROSS PROFIT
The Company's gross profit increased to $98.0$101.6 million for ThirdSecond Quarter
19981999 from $81.7$84.8 million for ThirdSecond Quarter 1997,1998, an increase of $16.3$16.8 million,
or 20.0%19.9%. As a percent of net sales, gross profit increased to 30.4%29.1% for ThirdSecond
Quarter 19981999 from 25.7%28.1% for ThirdSecond Quarter 1997.1998. The dollar increase in gross
profit resulted primarily from additional beer unit volume, introduction of new
wine brands and unit cost structure improvements in wine and spirits brands.
In general, the preferred method of accounting for inventory valuation is
the last-in, first-out method ("LIFO") because, in most circumstances, it
results in a better matching of costs and revenues. For comparison purposes to
companies using the first-in, first-out method of accounting for inventory
- 9 -
valuation ("FIFO") only, gross profit reflected a reduction of $1.6 million and
$0.6 million in Second Quarter 1999 and Second Quarter 1998, respectively, due
to the Company's LIFO accounting method.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $67.5 million for
Second Quarter 1999 from $56.3 million for Second Quarter 1998, an increase of
$11.2 million, or 19.9%. The dollar increase in selling, general and
administrative expenses resulted principally from higher advertising costs
associated with the introduction of new wine brands and increased beer sales,
and higher promotion costs related to the growth in beer sales as well as
programs implemented to improve the Company's wine sales. Selling, general and
administrative expenses as a percent of net sales increased to 19.3% for Second
Quarter 1999 as compared to 18.7% for Second Quarter 1998. The increase in
percent of net sales resulted primarily from advertising costs associated with
the introduction of new wine brands and promotion costs related to programs
implemented to improve the Company's wine sales.
NET INCOME
As a result of the above factors, net income increased to $15.8 million for
Second Quarter 1999 from $12.4 million for Second Quarter 1998, an increase of
$3.4 million, or 27.6%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Second Quarter
1999 were $42.6 million, an increase of $5.6 million over EBITDA of $37.0
million for Second Quarter 1998. EBITDA should not be construed as an
alternative to operating income or net cash flow from operating activities and
should not be construed as an indication of operating performance or as a
measure of liquidity.
SIX MONTHS 1999 COMPARED TO SIX MONTHS 1998
NET SALES
The following table sets forth the net sales (in thousands of dollars) and
unit volume (in thousands of cases), if applicable, for branded beverage alcohol
products and other products and services sold by the Company for Six Months 1999
and Six Months 1998.
Six Months 1999 Compared to Six Months 1998
-------------------------------------------------------------------
Net Sales Unit Volume
--------------------------------- -----------------------------
%Increase/ %Increase/
1999 1998 (Decrease) 1999 1998 (Decrease)
-------- -------- ---------- ------ ------ ----------
Wine $250,852 $247,538 1.3% 12,794 13,162 (2.8%)
Beer 259,929 205,996 26.2% 20,644 16,439 25.6%
Spirits 102,013 101,734 0.3% 5,094 5,124 (0.6%)
Other (a) 49,520 52,267 (5.3%) N/A N/A N/A
-------- -------- ----- ------ ------ -----
$662,314 $607,535 9.0% 38,532 34,725 11.0%
======== ======== ===== ====== ====== =====
(a) Other consists primarily of nonbranded concentrate sales, contract
bottling and other production services and bulk product sales, none of
which are sold in case quantities.
- 10 -
Net sales for Six Months 1999 increased to $662.3 million from $607.5
million for Six Months 1998, an increase of $54.8 million, or 9.0%. This
increase resulted primarily from (i) $53.9 million of additional beer sales,
largely Mexican beers, and (ii) $3.3 million of additional wine sales, resulting
primarily from the introduction of new wine brands. Unit volume for branded
beverage alcohol products for Six Months 1999 increased 11.0% as compared to Six
Months 1998. The unit volume increase was the result of the increased sales of
the Company's beer brands, primarily Mexican beer.
GROSS PROFIT
The Company's gross profit increased to $194.5 million for Six Months 1999
from $165.5 million for Six Months 1998, an increase of $29.1 million, or 17.6%.
As a percent of net sales, gross profit increased to 29.4% for Six Months 1999
from 27.2% for Six Months 1998. The dollar increase in gross profit resulted
primarily from additional beer unit volume, unit cost improvements in wine and
spirits brands, introduction of new wine brands and higher average selling
prices related to branded wine sales, and additional beer sales volume.sales.
In general, the preferred method of accounting for inventory valuation is
the last-in, first-out method ("LIFO") because, in most circumstances, it
results in a better matching of costs and revenues. For comparison purposes to
companies using the first-in, first-out method of accounting for inventory
valuation ("FIFO") only, gross profit reflected an addition of $1.8 million and
a reduction of $8.0$0.7 million and
$2.9 million in Third Quarter 1998Six Months 1999 and Third Quarter 1997,
respectively, due to the Company's LIFO accounting method. The Company's gross
profit for Third Quarter 1998 reflects the cumulative effect of revised cost
estimates, including more favorable grape costs than had been estimated through
the first six months of 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $60.3 million for
Third Quarter 1998 from $58.3 million for Third Quarter 1997, an increase of
$2.0 million, or 3.5%. The dollar increase in selling, general and
administrative expenses resulted principally from selling and other expenses
related to the Company's increased beer sales volume and overall growth.
Selling, general and administrative expenses as a percent of net sales increased
to 18.7% for Third Quarter 1998 as compared to 18.3% for Third Quarter 1997. The
increase in percent of net sales resulted from a change in the sales mix driven
by an increase in net sales of branded products, which have a higher percent of
marketing and selling costs relative to sales, partially offset by a decrease in
net sales of nonbranded products which have relatively little associated
marketing and selling costs.
INTEREST EXPENSE, NET
Net interest expense decreased to $7.9 million for Third Quarter 1998 from
$8.7 million for Third Quarter 1997, a decrease of $0.8 million, or 9.3%. The
decrease was primarily due to a decrease in the Company's average borrowings.
PROVISION FOR FEDERAL AND STATE INCOME TAXES
The Company's effective tax rate for Third Quarter 1998 decreased to 41.0%
from 43.7% for Third Quarter 1997 as Third Quarter 1997 reflected a higher
effective tax rate in California caused by statutory limitations on the
Company's ability to utilize certain deductions.
NET INCOME
As a result of the above factors, net income increased to $17.6 million for
Third Quarter 1998 from $8.3 million for Third Quarter 1997, an increase of $9.3
million, or 111.9%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Third Quarter 1998
were $46.2 million, an increase of $14.2 million over EBITDA of $32.0 million
for Third Quarter 1997. EBITDA should not be construed as an alternative to
Page 10
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.
NINE MONTHS 1998 COMPARED TO NINE MONTHS 1997
NET SALES
The following table sets forth the net sales (in thousands of dollars) and
unit volumes (in thousands of cases), if applicable, for branded beverage
alcohol products and other products and services sold by the Company for NineSix Months 1998, and Nine Months 1997.
Nine Months 1998 Compared to Nine Months 1997
-------------------------------------------------------------
Net Sales Unit Volume
------------------------------- ---------------------------
Branded Beverage %Increase/ %Increase/
Alcohol Products: 1998 1997 (Decrease) 1998 1997 (Decrease)
-------- -------- ---------- ------ ------ ----------
Wine $400,891 $392,629 2.1% 20,961 20,809 0.7%
Beer 298,601 237,628 25.7% 23,796 18,964 25.5%
Spirits 153,093 141,266 8.4% 7,644 7,235 5.7%
Other (a) 77,653 101,921 (23.8%) N/A N/A N/A
-------- -------- ----- ------ ------ -----
$930,238 $873,444 6.5% 52,401 47,008 11.5%
======== ======== ===== ====== ====== =====
(a) Other consists primarily of non-branded concentrate sales, contract
bottling and other production services and bulk product sales, none of
which are sold in case quantities.
Net sales for Nine Months 1998 increased to $930.2 million from $873.4
million for Nine Months 1997, an increase of $56.8 million, or 6.5%. This
increase resulted primarily from (i) $61.0 million of additional beer sales,
largely Mexican beers, (ii) $13.3 million of additional table wine sales and
(iii) $11.8 million of additional spirits sales. These increases were partially
offset by lower sales of grape juice concentrate, bulk wine and other branded
wine products. Unit volume for branded beverage alcohol products for Nine Months
1998 increased 11.5% as compared to Nine Months 1997. The unit volume increase
was largely the result of increased sales of the Company's Mexican beer brands
and its spirits brands. The increase in table wine brands unit volume was
partially offset by a decrease in unit volume of dessert wine brands and
sparkling wine brands.
GROSS PROFIT
The Company's gross profit increased to $263.5 million for Nine Months 1998
from $224.4 million for Nine Months 1997, an increase of $39.1 million, or
17.4%. As a percent of net sales, gross profit increased to 28.3% for Nine
Months 1998 from 25.7% for Nine Months 1997. The dollar increase in gross profit
resulted primarily from increased beer sales, higher average selling prices and
cost structure improvements related to branded wine sales, higher average
selling prices in excess of cost increases related to grape juice concentrate
sales and higher average selling prices and increased volume related to branded
spirits sales. These increases were partially offset by lower sales volume of
grape juice concentrate and bulk wine.
In general, the preferred method of accounting for inventory valuation is
the last-in, first-out method ("LIFO") because, in most circumstances, it
results in a better matching of costs and revenues. For comparison purposes to
companies using the first-in, first-out method of accounting for inventory
Page 11
valuation ("FIFO") only, gross profit reflected a reduction of $1.1 million and
$21.8 million in Nine Months 1998 and Nine Months 1997, respectively, due to the
Company's LIFO accounting method.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $171.8$128.8 million
for NineSix Months 19981999 from $161.1$111.5 million for NineSix Months 1997,1998, an increase of
$10.6$17.3 million, or 6.6%15.5%. The dollar increase in selling, general and
administrative expenses resulted principally from sellinghigher advertising costs
associated with the Company's wine sales, primarily the introduction of new wine
brands, and other expensesincreased beer sales, and higher promotion costs related to both
programs implemented to improve the Company's increasedwine sales volume and overall growth.the growth in beer
sales. Selling, general and administrative expenses as a percent of net sales
increased to 18.5%19.4% for NineSix Months 19981999 as compared to 18.4% for NineSix Months 1997.1998.
The increase in percent of net sales resulted primarily from a change inadvertising costs
associated with the sales mix driven by an
increase in net salesintroduction of branded products, which have a higher percent of
marketingnew wine brands and sellingpromotion costs relativerelated
to sales, partially offset by a decrease in
net sales of nonbranded products which have relatively little associated
marketing and selling costs.
INTEREST EXPENSE, NET
Net interest expense decreasedprograms implemented to $23.9 million for Nine Months 1998 from
$25.5 million for Nine Months 1997, a decrease of $1.6 million, or 6.2%. The
decrease was primarily due to a decrease inimprove the Company's average borrowings
which was partially offset by an increase in the average interest rate.
PROVISION FOR FEDERAL AND STATE INCOME TAXES
The Company's effective tax rate for Nine Months 1998 decreased to 41.0%
from 42.5% for Nine Months 1997 as Nine Months 1997 reflected a higher effective
tax rate in California caused by statutory limitations on the Company's ability
to utilize certain deductions.wine sales.
NET INCOME
As a result of the above factors, net income increased to $40.0$29.4 million for
NineSix Months 19981999 from $21.8$22.4 million for NineSix Months 1997,1998, an increase of $18.3$7.0
million, or 84.0%31.1%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for NineSix Months 19981999
were $117.5$82.7 million, an increase of $28.4$11.4 million over EBITDA of $89.1$71.3 million
for NineSix Months 1997.1998. EBITDA should not be construed as an alternative to
operating income or net cash flow from operating activities and should not be
construed as an indication of operating performance or as a measure of
liquidity.
- 11 -
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
Page 12
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.
NINESIX MONTHS 19981999 CASH FLOWS
OPERATING ACTIVITIES
Net cash used inprovided by operating activities for NineSix Months 19981999 was $29.5$88.5
million, which resulted from a net increase of $130.7 million in operating
assets, partially offset by a net increase of $70.5$47.5 million in net income adjusted for noncash
items, plus a$41.0 million representing the net increase of $30.7 millionchange in operating assets and
liabilities. The net increase of $130.7 millionchange in operating assets and liabilities resulted
principallyprimarily from a $91.0$48.1 million net increasedecrease in inventory levels, primarily the
result of the purchase of grapes from the 1997 grape harvest, and a $42.2
million increase in accounts receivable primarily due to higher seasonal sales
of products. The net increase of $30.7 million in operating liabilities was
primarily due to a $21.6 million increase in other accrued expenses and
liabilities, including advertising and promotion accruals associated with the
Company's unit volume increase, accrued income taxes and accrued interest.levels.
INVESTING ACTIVITIES AND FINANCING ACTIVITIES
Net cash used in investing activities for NineSix Months 19981999 was $10.7$14.8
million, which resulted primarily from $23.2$14.1 million of capital expenditures,
including $8.7$4.4 million for vineyards, partially offset by proceeds from the sale of
property, plant and equipment of $12.5 million.vineyards.
Net cash provided byused in financing activities for NineSix Months 19981999 was $32.5$73.5
million, which resulted primarily from repurchases of $36.0 million of the
Company's Class A Common Stock, net proceedsrepayments of $104.0$28.9 million of revolving
loan borrowings under the Company's bank credit agreement partially
offset byand principal payments
of $64.2$12.0 million of long-term debt and repurchase
of $9.2 million of the Company's Class A Common Stock.debt.
During January 1996,June 1998, the Company's Board of Directors authorized the
repurchase of up to $30.0$100.0 million of its Class A Common Stock and Class B
Common Stock (the "Repurchase Program")Stock. The repurchase of shares of common stock will be accomplished,
from time to time, depending upon market conditions, through open market or
privately negotiated transactions. The Company may finance such repurchases
through cash generated from operations or through the bank credit agreement. In
July 1998, the revolving loan facility under the bank credit agreement was
increased by $100.0 million to $285.0 million in order to increase its
flexibility to make such purchases . During May 1997,The repurchased shares will become treasury
shares and may be used for general corporate purposes. As of September 28, 1998,
the Company completed the
Repurchase Program with the repurchase of 362,100 shares of its Class A Common
Stock at a cost of $9.2 million. With respect to the Repurchase Program, the
Company repurchased a total of 1,149,550had purchased 1,018,836 shares of Class A Common Stock at an
aggregate cost of $30.0$44.9 million, or at an average cost of $26.10$44.05 per share.
- 12 -
DEBT
Total debt outstanding as of November 30, 1997,August 31, 1998, amounted to $476.4$384.5 million, an increasea
decrease of $40.1$40.7 million from February 28, 1997,1998, resulting primarily from the
net proceedsrepayments of revolving loan borrowings partially offset byand principal payments of long-term
debt. The ratio of total debt to total capitalization decreased to 54.4%48.4% as of
November 30, 1997,August 31, 1998, from 54.5%50.6% as of February 28, 1997.1998.
As of November 30, 1997,August 31, 1998, under its bank credit agreement, the Company had
outstanding term loans of $122.2$128.0 million bearing interest at 6.5%6.3%, $161.0$63.0 million
of revolving loans bearing interest at 6.5%6.3%, undrawn revolving letters of credit
of $7.9$8.4 million, and $16.1$213.6 million in revolving loans available to be drawn indrawn.
During June 1998, the bank credit agreement was amended to, among other things,
eliminate the requirement that the Company reduce the outstanding balance of the
revolving loans.
Page 13loan facility to less than $60,000,000 for thirty consecutive days
during the six months ending each August 31.
As of November 30, 1997,August 31, 1998, the Company had outstanding $195.0 million aggregate
principal amount of 8 3/4% Senior Subordinated Notes due December 2003. The
notes are unsecured and subordinated to the prior payment in full of all senior
indebtedness of the Company, which includes the bank credit agreement. The notes
are guaranteed, on a senior subordinated basis, by substantially all of the
Company's operating subsidiaries.
On December 19, 1997,ACCOUNTING PRONOUNCEMENT
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
measured at its fair value. SFAS No. 133 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. The Company is required to adopt SFAS No. 133 on a prospective basis
for interim periods and fiscal years beginning March 1, 2000. The Company
believes the effect of adoption on its financial statements will not be
material.
YEAR 2000 ISSUE
The Company has in place detailed programs to address Year 2000 readiness
in its internal systems and with its key customers and suppliers. The Year 2000
issue is the result of computer logic that was written using two digits rather
than four to define the applicable year. Any computer logic that processes
date-sensitive information may recognize the date using "00" as the year 1900
rather than the year 2000, which could result in miscalculations or system
failures.
Pursuant to the Company's readiness programs, all major categories of
information technology systems and non-information technology systems (i.e.,
equipment with embedded microprocessors) in use by the Company, including
manufacturing, sales, financial and human resources, are being inventoried and
assessed. In addition, plans are being developed for the required systems
modifications or replacements. With respect to its principal operating subsidiaries,information technology
systems, the Company has completed the
- 13 -
entire assessment phase and a syndicate of banks (the "Syndicate Banks"), for which The Chase Manhattan
Bank acts as Administrative Agent, entered into a new $325.0 million senior
Credit Agreement (the "Credit Agreement"). The proceedsapproximately 50% of the Credit Agreement
were usedremediation phase. With
respect to repay all outstanding principalits non-information technology systems, the Company has completed
approximately 80% of the assessment phase and accrued interest on all loans
underapproximately 40% of the
remediation phase. Selected areas, both internal and external, will be tested to
assure the integrity of the Company's Third Amendedremediation programs. The testing is
expected to be completed by September 1999. The Company plans to have all
internal mission-critical information technology and Restated Credit Agreement, as amended. As
comparednon-information technology
systems Year 2000 compliant by September 1999.
The Company is also communicating with its major customers, suppliers and
financial institutions to assess the potential impact on the Company's
operations if those third parties fail to become Year 2000 compliant in a timely
manner. While this process is not yet complete, based upon responses to date, it
appears that many of those customers and suppliers have only indicated that they
have in place Year 2000 readiness programs, without specifically confirming that
they will be Year 2000 compliant in a timely manner. Risk assessment, readiness
evaluation, action plans and contingency plans related to the previous bank credit agreement, the Credit Agreement includes,
among other things, lower interest rates, lower quarterly loan amortizationCompany's
significant customers and greater flexibility with respectsuppliers are expected to effecting acquisitions, incurring
indebtednessbe completed by September
1999. The Company's key financial institutions have been surveyed and repurchasingit is the
Company's capital stock.understanding that they are or will be Year 2000 compliant on or
before December 31, 1999.
The Credit Agreement provides forcosts incurred to date related to its Year 2000 activities have not
been material to the Company, and, based upon current estimates, the Company
does not believe that the total cost of its Year 2000 readiness programs will
have a $140.0 million term loan facility due
in June 2003 and a $185.0 million revolving loan facility, including letters of
credit up to a maximum of $20.0 million, which expires in June 2003. The rate of
interest payable, atmaterial adverse impact on the Company's option, is a functionresults of operations or
financial condition.
The Company's readiness programs also include the London interbank
offered rate (LIBOR) plus a margin, federal funds rate plus a margin or the
prime rate. The margin is adjustable baseddevelopment of
contingency plans to protect its business and operations from Year 2000-related
interruptions. These plans should be complete by September 1999 and, by way of
examples, will include back-up procedures, identification of alternate
suppliers, where possible, and increases in safety inventory levels. Based upon
the Company's Debt Ratio (as
definedcurrent assessment of its non-information technology systems, the
Company does not believe it necessary to develop an extensive contingency plan
for those systems. There can be no assurances, however, that any of the
Company's contingency plans will be sufficient to handle all problems or issues
which may arise.
The Company believes that it is taking reasonable steps to identify and
address those matters that could cause serious interruptions in its business and
operations due to Year 2000 issues. However, delays in the Credit Agreement). There are certain mandatory term loan
prepayments including,implementation of new
systems, a failure to fully identify all Year 2000 dependencies in the Company's
systems and in the systems of its suppliers, customers and financial
institutions, a failure of such third parties to adequately address their
respective Year 2000 issues, or a failure of a contingency plan could have a
material adverse effect on the Company's business, financial condition and
results of operations. For example, the Company would experience a material
adverse impact on its business if significant suppliers of beer, glass or
telecommunications systems fail to timely provide the proceeds ofCompany with necessary
inventories or services due to Year 2000 systems failures.
The statements set forth herein concerning Year 2000 issues which are not
usedhistorical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to finance an
acquisition, aggregate net proceeds received in excess of $50.0 milliondiffer materially from any
Debt Incurrence (as definedthose in
the Credit Agreement)forward-looking statements. In particular, the costs associated with the
Company's Year 2000 programs and 50%the time-frame in which the Company plans to
complete Year 2000 modifications are based upon management's best estimates.
These estimates were derived from internal assessments and assumptions of any net proceeds
from the sale of equity, and net proceeds from the sale of assets not reinvested
in like assets.
The term loan facility requires quarterly repayments of $6.0 million
beginning March 1998 through December 2002, and payments of $10.0 million in
March 2003 and June 2003. Currently, the margin on the term loan facility
borrowings is 0.75% andfuture
events. These estimates may be decreasedadversely affected by upthe continued availability
of personnel and system resources, and by the failure of significant third
parties to 0.35%properly address Year 2000 issues. Therefore, there can be no
guarantee that any estimates, or other
- 14 -
forward-looking statements will be achieved, and increased by up to
0.5% depending on the Company's Debt Ratio.
The revolving loan facility is utilized to finance working capital
requirements. The Credit Agreement requires that the Company reduce the
outstanding balance of the revolving loan facility to less than $60.0 million
for thirty consecutive days during the six months ending each August 31.
Currently, the margin on the revolving loan facility is 0.5% and may be
decreased by up to 0.25% and increased by up to 0.4% depending on the Company's
Debt Ratio. In addition, the Company pays a facility fee on the revolving loan
commitments. Currently, the facility fee is 0.25% and may be reduced or
increased by 0.1% subject to the Company's Debt Ratio.
Each of the Company's principal operating subsidiaries has guaranteed,
jointly and severally, the Company's obligations under the Credit Agreement. The
Syndicate Banks have been given security interests in substantially all of the
assets of the Company and its subsidiaries. The Company and its subsidiaries are
subject to customary secured lending covenants includingactual results could differ
significantly from those restricting
additional liens, the incurrence of additional indebtedness, the sale of assets,
the payment of dividends, transactions with affiliates and the making of certain
investments. The primary financial covenants require the maintenance of a Debt
Ratio, a senior debt coverage ratio, a fixed charge ratio and an interest
coverage ratio. Among the most restrictive covenants contained in the Credit
Agreement is the requirement to maintain a fixed charge ratio of not less than
1.0 at the last day of each fiscal quarter for the most recent four quarters.
Page 14
As of December 22, 1997, under the Credit Agreement, the Company had
outstanding term loans of $140.0 million bearing interest at 6.7%, $116.0
million of revolving loans bearing interest at 6.4%, undrawn revolving letters
of credit of $7.2 million and $61.8 million available to be drawn in revolving
loans.contemplated.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
As previously reported under Item 3 in4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Stockholders of Canandaigua Brands, Inc., held on
July 21, 1998 (the "Annual Meeting"), the holders of the Company's Class A
Common Stock (the "Class A Stock"), voting as a separate class, elected
management'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 management's slate of
director nominees designated to be elected by the holders of the Class B Stock.
In addition, at the Annual Report on Form
10-KMeeting, the holders of Class A Stock and the
holders of Class B Stock, voting together as a single class, voted upon the
following proposals:
(i) Proposal to amend and restate the Company's Restated Certificate
of Incorporation, as presently amended, to incorporate a prior
amendment and to increase the number of authorized shares of the
Class A Common Stock of the Company from 60,000,000 to
120,000,000, thereby increasing the aggregate number of
authorized shares of the Company to 141,000,000.
(ii) Proposal to ratify the selection of Arthur Andersen LLP,
Certified Public Accountants, as the Company's independent
auditors for the fiscal year endedending February 28, 1997, which1999.
Set forth below is incorporated herein
by reference,the number of votes cast for, against or withheld, as
well as the number of abstentions and broker nonvotes, as applicable, as to each
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 13,248,797 128,410
Paul L. Smith 13,249,427 127,780
- 15 -
Directors Elected By the Holders of Class B Stock:
--------------------------------------------------
Nominee For Withheld
------- --- --------
George Bresler 31,515,390 10,540
James A. Locke, III 31,516,410 9,520
Marvin Sands 31,516,410 9,520
Richard Sands 31,511,310 14,620
Robert Sands 31,511,310 14,620
Bertram E. Silk 31,516,410 9,520
II. The proposal to amend and restate the Company's Restated Certificate
of Incorporation, as amended, was involved in an investigation inapproved with the Statefollowing votes:
For: 43,046,325
Against: 1,804,141
Abstain: 52,671
Broker Nonvotes: 0
III. The selection of New
JerseyArthur Andersen LLP was ratified with respectthe following
votes:
For: 44,799,615
Against: 11,230
Abstain: 92,292
Broker Nonvotes: 0
ITEM 5. OTHER INFORMATION.
Any notice of a proposal that is submitted outside the processes of Rule
14a-8 promulgated under the Securities Exchange Act of 1934, as amended (the
"Act"), and which a stockholder intends to regulatory trade practices inbring forth at the beverage alcohol
industry. Effective October 14, 1997,Company's 1999
Annual Meeting of Stockholders will be untimely for purposes of Rule 14a-4 of
the Act, if received by the Company entered into a Consent Order
with the State of New Jersey to conclude the investigation with respect to the
Company. The Company's Consent Order fully resolves the matter without any
material effect on the Company.after February 16, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) See Index to Exhibits located on Page 1920 of this Report.
(b) No Reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended November 30, 1997.August 31, 1998.
Page 15- 16 -
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.
CANANDAIGUA BRANDS, INC.
Dated: December 22, 1997September 28, 1998 By: /s/ Thomas F. Howe
----------------------------------------------------------------------
Thomas F. Howe, Vice President,
Corporate Reporting and Controller
Dated: December 22, 1997September 28, 1998 By: /s/ Thomas S. Summer
----------------------------------------------------------------------
Thomas S. Summer, Senior Vice
President and Chief Financial
Officer (Principal Financial Officer
and Principal Accounting Officer)
SUBSIDIARIES
BATAVIA WINE CELLARS, INC.
Dated: December 22, 1997September 28, 1998 By: /s/ Thomas F. Howe
----------------------------------------------------------------------
Thomas F. Howe, Controller
Dated: December 22, 1997September 28, 1998 By: /s/ Thomas S. Summer
----------------------------------------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
CANANDAIGUA WINE COMPANY, INC.
Dated: December 22, 1997September 28, 1998 By: /s/ Thomas F. Howe
----------------------------------------------------------------------
Thomas F. Howe, Controller
Dated: December 22, 1997September 28, 1998 By: /s/ Thomas S. Summer
----------------------------------------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Page 16- 17 -
CANANDAIGUA EUROPE LIMITED
Dated: December 22, 1997September 28, 1998 By: /s/ Thomas F. Howe
----------------------------------------------------------------------
Thomas F. Howe, Controller
Dated: December 22, 1997September 28, 1998 By: /s/ Thomas S. Summer
----------------------------------------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
ROBERTS TRADING CORP.
Dated: December 22, 1997September 28, 1998 By: /s/ Thomas F. Howe
----------------------------------------------------------------------
Thomas F. Howe, Controller
Dated: December 22, 1997September 28, 1998 By: /s/ Thomas S. Summer
----------------------------------------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
BARTON INCORPORATED
Dated: December 22, 1997September 28, 1998 By: /s/ Alexander L. Berk
----------------------------------------------------------------------
Alexander L. Berk, President and
Chief OperatingExecutive Officer
Dated: December 22, 1997September 28, 1998 By: /s/ Raymond E. Powers
----------------------------------------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
BARTON BRANDS, LTD.
Dated: December 22, 1997September 28, 1998 By: /s/ Alexander L. Berk
----------------------------------------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: December 22, 1997September 28, 1998 By: /s/ Raymond E. Powers
----------------------------------------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
Page 17- 18 -
BARTON BEERS, LTD.
Dated: December 22, 1997September 28, 1998 By: /s/ Alexander L. Berk
----------------------------------------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: December 22, 1997September 28, 1998 By: /s/ Raymond E. Powers
----------------------------------------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
BARTON BRANDS OF CALIFORNIA, INC.
Dated: December 22, 1997September 28, 1998 By: /s/ Alexander L. Berk
----------------------------------------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: December 22, 1997September 28, 1998 By: /s/ Raymond E. Powers
----------------------------------------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
BARTON BRANDS OF GEORGIA, INC.
Dated: December 22, 1997September 28, 1998 By: /s/ Alexander L. Berk
----------------------------------------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: December 22, 1997September 28, 1998 By: /s/ Raymond E. Powers
----------------------------------------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
BARTON DISTILLERS IMPORT CORP.
Dated: December 22, 1997September 28, 1998 By: /s/ Alexander L. Berk
----------------------------------------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: December 22, 1997September 28, 1998 By: /s/ Raymond E. Powers
----------------------------------------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
Page 18- 19 -
BARTON FINANCIAL CORPORATION
Dated: December 22, 1997September 28, 1998 By: /s/ Raymond E. Powers
----------------------------------------------------------------------
Raymond E. Powers, President and
Secretary
Dated: December 22, 1997September 28, 1998 By: /s/ Charles T. Schlau
----------------------------------------------------------------------
Charles T. Schlau, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
STEVENS POINT BEVERAGE CO.
Dated: December 22, 1997September 28, 1998 By: /s/ Alexander L. Berk
----------------------------------------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: December 22, 1997September 28, 1998 By: /s/ Raymond E. Powers
----------------------------------------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
MONARCH IMPORT COMPANY
Dated: December 22, 1997September 28, 1998 By: /s/ Alexander L. Berk
----------------------------------------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: December 22, 1997September 28, 1998 By: /s/ Raymond E. Powers
----------------------------------------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
THE VIKING DISTILLERY, INC.
Dated: December 22, 1997September 28, 1998 By: /s/ Alexander L. Berk
----------------------------------------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: December 22, 1997September 28, 1998 By: /s/ Raymond E. Powers
----------------------------------------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
Page 19- 20 -
INDEX TO EXHIBITS
(2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR
SUCCESSION.
Not applicable.
(3) ARTICLES OF INCORPORATION AND BY-LAWS.
3.1(a) Certificate of Amendment of the Certificate of Incorporation of
Canandaigua Wine Company, Inc. (now known as Canandaigua Brands, Inc.,
hereinafter in this Index to Exhibits, the "Company") (filed as Exhibit
3.1(a) to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended August 31, 1997 and incorporated herein by reference).
3.1(b)3.1 Restated Certificate of Incorporation of the Company (filed as Exhibit
3.1 to the Company's Transition Report on Form 10-K for the Transition
Period from September 1, 1995 to February 29, 1996 and incorporated
herein by reference)herewith).
3.2 Amended and Restated By-Laws of the Company (filed as Exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 1997 and incorporated herein by reference)herewith).
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES.
4.1 Specimen of Certificate of Class A Common Stock of the Company (filed as
Exhibit 1.1 to the Company's Registration Statement on Form 8-A dated
April 28, 1992 and incorporated herein by reference).
4.2 Specimen of Certificate of Class B Common Stock of the Company (filed as
Exhibit 1.2 to the Company's Registration Statement on Form 8-A dated
April 28, 1992 and incorporated herein by reference).
4.3 Indenture, dated as of December 27, 1993, among the Company, its
Subsidiaries and The Chase Manhattan Bank (as successor to Chemical Bank)
(filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended November 30, 1993 and incorporated herein by
reference).
4.44.2 First Supplemental Indenture, dated as of August 3, 1994, among the
Company, Canandaigua West, Inc. and The Chase Manhattan Bank (as successor
to Chemical Bank) (filed as Exhibit 4.5 to the Company's Registration
Statement on Form S-8 (Registration No. 33-56557) and incorporated herein
by reference).
4.54.3 Second Supplemental Indenture, dated August 25, 1995, among the Company, V
Acquisition Corp. (a subsidiary of the Company now known as The Viking
Distillery, Inc.) and The Chase Manhattan Bank (as successor to Chemical
Bank )Bank) (filed as Exhibit 4.5 to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1995 and incorporated herein by
reference).
Page 20
4.64.4 Third Supplemental Indenture, dated as of December 19, 1997, among the
Company, Canandaigua Europe Limited, Roberts Trading Corp. and The Chase
Manhattan Bank (filed as Exhibit 4.4 to the Company's Annual Report on Form
10-K for the fiscal year ended February 28, 1998 and incorporated herein by
reference).
4.5 Indenture with respect to the 8 3/4% Series C Senior Subordinated Notes Due
2003, dated as of October 29, 1996, among the Company, its Subsidiaries and
Harris Trust and Savings Bank (filed as Exhibit 4.2 to the Company's
Registration Statement on Form S-4 (Registration No. 333-17673) and
incorporated herein by reference).
4.6 First Supplemental Indenture, dated as of December 19, 1997, among the
Company, Canandaigua Europe Limited, Roberts Trading Corp. and Harris Trust
and Savings Bank (filed as Exhibit 4.6 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1998 and incorporated
herein by reference).
4.7 Credit Agreement between the Company, its principal operating subsidiaries,
and certain banks for which The Chase Manhattan Bank acts as Administrative
Agent, dated as of December 19, 1997 (filed as Exhibit 4.7 to the Company's
Annual Report on Form 10-K for the fiscal year ended February 28, 1998 and
incorporated herein by reference).
- 21 -
4.8 Amendment No. 1 to Credit Agreement, dated as of June 19, 1998, between the
Company, its principal operating subsidiaries, and certain banks for which
The Chase Manhattan Bank acts as Administrative Agent (filed herewith).
4.9 Tranche II Revolving Agreement (Series A), dated as of July 15, 1998,
between the Company, its principal operating subsidiaries, and certain
banks for which The Chase Manhattan Bank acts as Administrative Agent
(including identification of the omitted annex thereto) (filed herewith).
(10) MATERIAL CONTRACTS.
10.1 Amendment Number 5No. 1 to Credit Agreement, dated as of June 19, 1998, between the
1989 Employee Stock Purchase PlanCompany, its principal operating subsidiaries, and certain banks for which
The Chase Manhattan Bank acts as Administrative Agent (incorporated by
reference to Exhibit 4.8, filed herewith).
10.2 Tranche II Revolving Agreement (Series A), dated as of July 15, 1998,
between the Company, its principal operating subsidiaries, and certain
banks for which The Chase Manhattan Bank acts as Administrative Agent
(including identification of the Company (filedomitted annex thereto) (incorporated by
reference to Exhibit 4.9, filed herewith).
(11) STATEMENT RE COMPUTATION OF PER SHARE EARNINGS.
Computation of per share earnings (filed herewith).
(15) LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION.
Not applicable.
(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.
- 22 -
(27) FINANCIAL DATA SCHEDULE.
Financial Data Schedule (filed herewith).
(99) ADDITIONAL EXHIBITS.
Not applicable.