FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended May 31, 19981999
------------
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
ENGLAND AND WALES CANANDAIGUA LIMITED -----
NEW YORK POLYPHENOLICS, INC. 16-1546354
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 (I.R.S. Employer
jurisdiction of specified in its charter) Identification
of incorporation No.)
incorporation
or organization)
300 WILLOWBROOK OFFICE PARK, FAIRPORT, NEW YORK 14450
------------------------------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(716) 393-4130
-------------------------------------------------------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 Canandaigua Brands, Inc., as of June 17, 1998,July 9, 1999, 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 15,481,48114,801,772
Class B Common Stock, Par Value $.01 Per Share 3,296,9763,189,599
- 1 -
PART I - FINANCIAL INFORMATION
ItemITEM 1. Financial Statements.
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
May 31, 1998 February 28, 1998
------------ -----------------
(unaudited)
ASSETS
------
CURRENT ASSETS:
Cash and cash investments $ 765 $ 1,232
Accounts receivable, net 169,592 142,615
Inventories, net 362,915 394,028
Prepaid expenses and other current assets 22,055 26,463
------------ ------------
Total current assets 555,327 564,338
PROPERTY, PLANT AND EQUIPMENT, net 243,663 244,035
OTHER ASSETS 264,457 264,786
------------ ------------
Total assets $ 1,063,447 $ 1,073,159
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 80,000 $ 91,900
Current maturities of long-term debt 24,118 24,118
Accounts payable 44,020 52,055
Accrued Federal and state excise taxes 21,342 17,498
Other accrued expenses and liabilities 95,795 97,763
------------ ------------
Total current liabilities 265,275 283,334
------------ ------------
LONG-TERM DEBT, less current maturities 303,311 309,218
------------ ------------
DEFERRED INCOME TAXES 59,237 59,237
------------ ------------
OTHER LIABILITIES 5,827 6,206
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value-
Authorized, 1,000,000 shares;
Issued, none at May 31, 1998, and
February 28, 1998 - -
Class A Common Stock, $.01 par value-
Authorized, 60,000,000 shares;
Issued, 17,653,316 shares at May 31, 1998,
and 17,604,784 shares at February 28, 1998 177 176
Class B Convertible Common Stock, $.01 par value-
Authorized, 20,000,000 shares;
Issued, 3,922,701 shares at May 31, 1998,
and 3,956,183 shares at February 28, 1998 39 40
Additional paid-in capital 232,638 231,687
Retained earnings 233,961 220,346
------------ ------------
466,815 452,249
------------ ------------
Less-Treasury stock-
Class A Common Stock, 2,180,625 shares at
May 31, 1998, and 2,199,320 shares at
February 28, 1998, at cost (34,811) (34,878)
Class B Convertible Common Stock, 625,725 shares
at May 31, 1998, and February 28, 1998, at cost (2,207) (2,207)
------------ ------------
(37,018) (37,085)
------------ ------------
Total stockholders' equity 429,797 415,164
------------ ------------
Total liabilities and stockholders' equity $ 1,063,447 $ 1,073,159
============ ============
FINANCIAL STATEMENTS
- ------- --------------------
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
May 31, February 28,
1999 1999
------------ ------------
(unaudited)
ASSETS
------
CURRENT ASSETS:
Cash and cash investments $ 1,930 $ 27,645
Accounts receivable, net 327,700 260,433
Inventories, net 547,835 508,571
Prepaid expenses and other current assets 56,197 59,090
----------- -----------
Total current assets 933,662 855,739
PROPERTY, PLANT AND EQUIPMENT, net 458,229 428,803
OTHER ASSETS 614,719 509,234
----------- -----------
Total assets $ 2,006,610 $ 1,793,776
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 17,306 $ 87,728
Current maturities of long-term debt 13,007 6,005
Accounts payable 134,339 122,746
Accrued excise taxes 41,223 49,342
Other accrued expenses and liabilities 173,378 149,451
----------- -----------
Total current liabilities 379,253 415,272
----------- -----------
LONG-TERM DEBT, less current maturities 1,073,140 831,689
----------- -----------
DEFERRED INCOME TAXES 83,870 88,179
----------- -----------
OTHER LIABILITIES 22,409 23,364
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value-
Authorized, 1,000,000 shares;
Issued, none at May 31, 1999,
and February 28, 1999 - -
Class A Common Stock, $.01 par value-
Authorized, 120,000,000 shares;
Issued, 17,965,173 shares at May 31, 1999,
and 17,915,359 shares at February 28, 1999 180 179
Class B Convertible Common Stock, $.01 par value-
Authorized, 20,000,000 shares;
Issued, 3,815,324 shares at May 31, 1999,
and 3,849,173 shares at February 28, 1999 38 39
Additional paid-in capital 240,882 239,912
Retained earnings 291,927 281,081
Accumulated other comprehensive income-
Cumulative translation adjustment (3,323) (4,173)
----------- -----------
529,704 517,038
----------- -----------
Less-Treasury stock-
Class A Common Stock, 3,168,306 shares at
May 31, 1999, and February 28, 1999,
at cost (79,559) (79,559)
Class B Convertible Common Stock, 625,725 shares
at May 31, 1999, and February 28, 1999, at cost (2,207) (2,207)
----------- -----------
(81,766) (81,766)
----------- -----------
Total stockholders' equity 447,938 435,272
----------- -----------
Total liabilities and stockholders' equity $ 2,006,610 $ 1,793,776
=========== ===========
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
- 2 -
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the Three Months Ended May 31,
-------------------------------------------------------------------------
1999 1998
1997
--------------- -------------------------- -----------
(unaudited) (unaudited)
GROSS SALES $ 422,869704,990 $ 411,038422,869
Less - Excise taxes (174,821) (109,941)
(105,027)
-------------- ------------------------ ----------
Net sales 530,169 312,928 306,011
COST OF PRODUCT SOLD (219,992) (225,279)
-------------- --------------(374,046) (220,867)
---------- ----------
Gross profit 92,936 80,732156,123 92,061
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (110,502) (61,332)
(55,225)
-------------- --------------NONRECURRING CHARGES (5,510) -
---------- ----------
Operating income 31,604 25,50740,111 30,729
INTEREST EXPENSE, net (22,034) (8,527)
(8,479)
-------------- ------------------------ ----------
Income before provision for Federal
and state income taxes 23,077 17,02818,077 22,202
PROVISION FOR FEDERAL AND
STATE INCOME TAXES (9,462) (6,982)
-------------- --------------(7,231) (9,103)
---------- ----------
NET INCOME $ 13,61510,846 $ 10,046
============== ==============13,099
========== ==========
SHARE DATA:
Earnings per common share:
Basic $ 0.730.60 $ 0.54
============== ==============0.70
========== ==========
Diluted $ 0.700.59 $ 0.53
============== ==============0.68
========== ==========
Weighted average common shares outstanding:
Basic 17,977 18,748
18,770
Diluted 18,447 19,328 19,045
The accompanying notes to consolidated financial statements
are an integral part of these statements.
- 3 -
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Three Months Ended May 31,
----------------------------------
1999 1998 1997
----------- -----------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,61510,846 $ 10,04613,099
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation of property, plant and equipment 9,399 6,000 6,411
Amortization of intangible assets 4,364 2,508
2,357Stock-based compensation expense 763 25
Loss on sale of assets 344 -
Amortization of discount on long-term debt 103 93 85
Stock-based compensation expense 25 66
Gain on sale of property, plant and equipment - (1,031)
Change in operating assets and liabilities:liabilities,
net of effects from purchase of business:
Accounts receivable, net (67,551) (26,957) (13,769)
Inventories, net 31,114 36,34012,819 31,989
Prepaid expenses and other current assets 2,885 4,628 2,791
Accounts payable 11,649 (8,035)
(10,101)
Accrued Federal and state excise taxes (8,084) 3,844 3,971
Other accrued expenses and liabilities (1,969) 10,49417,969 (2,328)
Other assets and liabilities, net (1,117) (2,097)
(491)
---------- ------------------- ---------
Total adjustments 9,154 37,123
---------- ----------(16,457) 9,670
--------- ---------
Net cash (used in) provided by operating
activities (5,611) 22,769
47,169
---------- ------------------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of business (185,500) -
Purchases of property, plant and equipment (11,321) (5,628)
(6,626)Proceeds from sale of assets 715 -
Purchase of joint venture minority interest - (706)
-
Proceeds from sale of property, plant and equipment - 5,818
---------- ------------------- ---------
Net cash used in investing activities (196,106) (6,334)
(808)
---------- ------------------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 264,080 -
Exercise of employee stock options 309 348
Net repayments of notes payable (70,396) (11,900) (35,500)
Principal payments of long-term debt (16,253) (6,000) (10,116)
Proceeds from employee stock purchases 650 204
Exercise of employee stock options 348 273
Purchase of treasury stock - (9,233)
Payment of issuance costs of long-term debt (3,230) -
(378)
---------- ----------Proceeds from employee stock purchases - 650
--------- ---------
Net cash used inprovided by (used in) financing
activities 174,510 (16,902)
(54,750)
---------- ------------------- ---------
Effect of exchange rate changes on cash and
cash investments 1,492 -
--------- ---------
NET DECREASE IN CASH AND CASH INVESTMENTS (25,715) (467) (8,389)
CASH AND CASH INVESTMENTS, beginning of period 27,645 1,232
10,010
---------- ------------------- ---------
CASH AND CASH INVESTMENTS, end of period $ 1,930 $ 765
========= =========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Fair value of assets acquired $ 1,621
========== ==========187,160 $ -
Liabilities assumed (1,660) -
--------- ---------
Cash paid for purchase of business $ 185,500 $ -
========= =========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
- 4 -
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 19981999
1) MANAGEMENT'S REPRESENTATIONS:
The condensed consolidated financial statements included herein have been
prepared by the Company,Canandaigua 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 Canandaigua Brands, Inc. and its
subsidiaries.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 28, 1998.1999.
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Certain May 1997 balancesACQUISITIONS:
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
Acquisition"). Other principal brands acquired in the transaction were Golden
Wedding, OFC, MacNaughton, McMaster's and Triple Crown. In connection with the
transaction, the Company also entered into multi-year agreements with Diageo to
provide packaging and distilling services for various brands retained by Diageo.
The purchase price was approximately $185.5 million and was financed by the
proceeds from the sale of the "$200 Million Notes" (as defined in Note 6).
The Black Velvet 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), $22.3 million, is being amortized
on a straight-line basis over 40 years. The results of operations of the Black
Velvet Acquisition have been reclassifiedincluded in the Consolidated Statements of Income
since the date of acquisition.
The following table sets forth the unaudited pro forma results of
operations of the Company for the three months ended May 31, 1999 and 1998,
which gives effect to conform with current
year presentation.the acquisition of Matthew Clark plc ("Matthew Clark") and
the Black Velvet Acquisition as if they occurred on March 1, 1998. The unaudited
pro forma results of operations are presented after giving effect to certain
adjustments for depreciation, amortization of goodwill, interest expense on the
acquisition financing and related income tax effects. The unaudited pro forma
results of operations are based upon currently available information and upon
certain assumptions that the Company believes are reasonable under the
circumstances. The unaudited pro forma results of operations do not purport to
present what the Company's results of operations would actually have been if the
aforementioned transactions had in fact occurred on such date or at the
beginning of the period indicated, nor do they project the Company's financial
position or results of operations at any future date or for any future period.
- 5 -
For the Three Months Ended May 31,
----------------------------------
1999 1998
---------- ----------
(in thousands, except per share data)
Net sales $ 538,433 $ 495,328
Income before income taxes $ 19,328 $ 24,931
Net income $ 11,596 $ 14,959
Earnings per common share:
Basic $ 0.65 $ 0.80
========== ==========
Diluted $ 0.63 $ 0.77
========== ==========
Weighted average common shares outstanding:
Basic 17,977 18,748
Diluted 18,447 19,328
3) INVENTORIES:
Inventories are valuedstated at the lower of cost (computed in accordance with
the last-in, first-out (LIFO) or first-in, first-out (FIFO) methods)method) or market.
Substantially all of the inventories are valued using the LIFO method. Elements of cost include materials,
labor and overhead and consist of the following:
May 31, February 28,
1998 1998
-----------1999 1999
---------- ------------
(in thousands)
Raw materials and supplies $ 14,22529,430 $ 14,43932,388
Wine and distilled spirits in process 269,108 304,037355,969 344,175
Finished case goods 96,102 92,948
--------- ---------
379,435 411,424162,436 132,008
---------- ------------
$ 547,835 $ 508,571
========== ============
4) OTHER ASSETS:
The major components of other assets are as follows:
May 31, February 28,
1999 1999
---------- ------------
(in thousands)
Goodwill $ 334,244 $ 311,908
Distribution rights, agency
license agreements and trademarks 269,612 179,077
Other 50,035 53,779
---------- ------------
653,891 544,764
Less - LIFO reserve (16,520) (17,396)
--------- ---------Accumulated amortization (39,172) (35,530)
---------- ------------
$ 362,915614,719 $ 394,028
========= =========
Information509,234
========== ============
- 6 -
5) OTHER ACCRUED EXPENSES AND LIABILITIES:
The major components of other accrued expenses and liabilities are as
follows:
May 31, February 28,
1999 1999
----------- ------------
(in thousands)
Accrued advertising and promotions $ 34,448 $ 38,604
Accrued interest 25,804 11,384
Accrued salaries and commissions 8,652 15,584
Other 104,474 83,879
----------- ------------
$ 173,378 $ 149,451
=========== ============
6) BORROWINGS:
On March 4, 1999, the Company issued $200.0 million aggregate principal
amount of 8 1/2% Senior Subordinated Notes due March 2009 (the "$200 Million
Notes"). The net proceeds of the offering (approximately $195.0 million) were
used to fund the Black Velvet Acquisition and to pay the fees and expenses
related thereto with the remainder of the net proceeds to be used for general
corporate purposes or to fund future acquisitions. Interest on the $200 Million
Notes is payable semiannually on March 1 and September 1 of each year, beginning
September 1, 1999. The $200 Million 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 $200 Million Notes using the proceeds
of certain equity offerings completed before March 1, 2002. The $200 Million
Notes are unsecured and subordinated to the FIFO methodprior payment in full of inventory valuation may be useful
in comparing operating results to those companies not usingall senior
indebtedness of the LIFO method of
inventory valuation. IfCompany, which includes the FIFO method had been used, reported net income would
have been $0.5 million, or $0.03 per sharebank credit agreement. The $200
Million Notes are guaranteed, on a dilutedsenior subordinated basis, lower forby certain of the
three months ended May 31, 1998, and reported net income would have been $1.4
million, or $0.07 per share on a diluted basis, higher for the three months
ended May 31, 1997.
- 5 -
4)Company's significant operating subsidiaries.
7) EARNINGS PER COMMON SHARE:
The 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 excludesexclude the effect of common stock
equivalents and isare 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 reflectsreflect 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 assumesassume the exercise of stock options
using the treasury stock method and assumesassume the conversion of convertible
securities, if any, using the "if converted" method.
Historical earnings per
common share have been restated to conform with the provisions of SFAS No. 128.
- 7 -
The computation of basic and diluted earnings per common share is as
follows:
For the Three Months Ended May 31,
------------------------------------------------------
1999 1998
1997
-------- ------------------ ----------
(in thousands, except per share data)
Income applicable to common shares $ 13,61510,846 $ 10,046
======== ========13,099
========== ==========
Weighted average common shares
outstanding - basic 17,977 18,748 18,770
Stock options 470 580
275
-------- ------------------ ----------
Weighted average common shares
outstanding - diluted 18,447 19,328
19,045
======== ================== ==========
EARNINGS PER COMMON SHARE - BASIC $ 0.730.60 $ 0.54
======== ========0.70
========== ==========
EARNINGS PER COMMON SHARE - DILUTED $ 0.700.59 $ 0.53
======== ========
5) RETIREMENT 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.
6)0.68
========== ==========
8) SUMMARIZED FINANCIAL INFORMATION - SUBSIDIARY GUARANTORS:
The subsidiary guarantorsfollowing table presents summarized financial information for the
Company, the parent company, the combined subsidiaries of the Company which
guarantee the Company's senior subordinated notes ("Subsidiary Guarantors") and
the combined subsidiaries of the Company which are not Subsidiary Guarantors,
primarily Matthew Clark ("Subsidiary Nonguarantors"). The Subsidiary Guarantors
are wholly owned and the guarantees are full, unconditional, joint and several
obligations of each of the subsidiary
guarantors. Summarized financial information for the subsidiary guarantors is
set forth below.Subsidiary Guarantors. Separate financial statements
for the subsidiary guarantorsSubsidiary Guarantors of
- 6 - the Company are not presented because the
Company has determined that such financial statements would not be material to
investors. The subsidiary
guarantorsSubsidiary Guarantors comprise all of the direct and indirect
subsidiaries of the Company, other than Matthew Clark, the nonguarantorCompany's Canadian
subsidiary, and certain other subsidiaries which individually, and in the
aggregate, are inconsequential. There are no restrictions on the ability of the
subsidiary guarantorsSubsidiary Guarantors to transfer funds to the Company in the form of cash
dividends, loans or loan repayments; however, except for limited amounts,advances.
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
----------- ----------- ------------- ------------ ------------
(in thousands)
Balance Sheet Data:
May 31, 1999
- ------------
Current assets $ 105,046 $ 548,134 $ 280,482 $ - $ 933,662
Noncurrent assets $ 648,682 $ 1,043,815 $ 453,590 $(1,073,139) $ 1,072,948
Current liabilities $ 94,923 $ 128,172 $ 156,158 $ - $ 379,253
Noncurrent liabilities $ 1,072,275 $ 69,292 $ 37,852 $ - $ 1,179,419
February 28, 1999
- -----------------
Current assets $ 114,243 $ 532,028 $ 209,468 $ - $ 855,739
Noncurrent assets $ 646,133 $ 396,125 $ 421,867 $ (526,088) $ 938,037
Current liabilities $ 157,648 $ 126,803 $ 130,821 $ - $ 415,272
Noncurrent liabilities $ 815,421 $ 73,178 $ 54,633 $ - $ 943,232
- 8 -
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
----------- ---------- ------------- ------------ ------------
(in thousands)
Income Statement Data:
For the three months
- --------------------
ended May 31, 1999
- ------------------
Net sales $ 154,623 $ 299,219 $ 168,210 $ (91,883) $ 530,169
Gross profit $ 39,431 $ 69,875 $ 46,817 $ - $ 156,123
(Loss) income before
income taxes $ (5,023) $ 15,537 $ 7,563 $ - $ 18,077
Net (loss) income $ (3,014) $ 9,322 $ 4,538 $ - $ 10,846
For the three months
- --------------------
ended May 31, 1998
- ------------------
Net sales $ 111,152 $ 262,578 $ 822 $ (61,624) $ 312,928
Gross profit $ 34,389 $ 57,337 $ 335 $ - $ 92,061
(Loss) income before
income taxes $ (107) $ 22,182 $ 127 $ - $ 22,202
Net (loss) income $ (63) $ 13,035 $ 127 $ - $ 13,099
9) BUSINESS SEGMENT INFORMATION:
The Company reports its operating results in four segments: Canandaigua
Wine (branded 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); and
Corporate Operations and Other (primarily corporate related items). Segment
selection was based upon internal organizational structure, the subsidiary guarantors may not loan funds toway in which
these operations are managed and their performance evaluated by management and
the Company.Company's Board of Directors, the availability of separate financial
results, and materiality considerations. The following table presents summarized financial information for
subsidiary guarantors in connection with allaccounting policies of the Company's 8.75% Senior
Subordinated Notes:
May 31, February 28,
1998 1998
--------- ------------
(in thousands)
Balance Sheet Data:
Current assets $ 453,925 $ 460,618
Noncurrent assets $ 395,382 $ 395,225
Current liabilities $ 104,497 $ 102,207
Noncurrent liabilities $ 61,899 $ 61,784segments
are the same as those described in the summary of significant accounting
policies. The Company evaluates performance based on profits of the respective
business units.
- 9 -
Segment information is as follows:
For the Three Months Ended May 31,
---------------------------------------------------------
1999 1998
1997
--------- ------------------- ----------
(in thousands)
Income Statement Data:Canandaigua Wine:
- -----------------
Net sales:
Branded:
External customers $ 142,641 $ 126,798
Intersegment 1,750 -
---------- -----------
Total Branded 144,391 126,798
---------- -----------
Other:
External customers 19,130 19,139
Intersegment 38 -
---------- -----------
Total Other 19,168 19,139
---------- -----------
Net sales $ 262,578163,559 $ 261,274
Gross145,937
Operating profit $ 58,2125,607 $ 53,332
Income before provision7,440
Long-lived assets $ 192,128 $ 185,416
Total assets $ 623,786 $ 604,537
Capital expenditures $ 5,638 $ 4,836
Depreciation and amortization $ 5,536 $ 5,591
Barton:
- -------
Net sales:
Beer $ 146,611 $ 118,796
Spirits 54,139 47,372
---------- -----------
Net sales $ 200,750 $ 166,168
Operating profit $ 31,497 $ 25,788
Long-lived assets $ 79,784 $ 51,220
Total assets $ 709,962 $ 468,297
Capital expenditures $ 916 $ 760
Depreciation and amortization $ 3,161 $ 2,692
Matthew Clark:
- --------------
Net sales:
Branded $ 74,375 $ -
Wholesale 92,422 -
---------- ------------
Net sales $ 166,797 $ -
Operating profit $ 7,330 $ -
Long-lived assets $ 169,393 $ -
Total assets $ 648,222 $ -
Capital expenditures $ 4,656 $ -
Depreciation and amortization $ 4,426 $ -
- 10 -
For the Three Months Ended May 31,
----------------------------------
1999 1998
------------ ------------
(in thousands)
Corporate Operations and Other:
- -------------------------------
Net sales $ 885 $ 823
Operating loss $ (4,323) $ (2,499)
Long-lived assets $ 16,924 $ 7,027
Total assets $ 24,640 $ 7,133
Capital expenditures $ 111 $ 32
Depreciation and amortization $ 640 $ 226
Intersegment eliminations:
- --------------------------
Net sales $ (1,822) $ -
Consolidated:
- -------------
Net sales $ 530,169 $ 312,928
Operating profit $ 40,111 $ 30,729
Long-lived assets $ 458,229 $ 243,663
Total assets $ 2,006,610 $ 1,079,967
Capital expenditures $ 11,321 $ 5,628
Depreciation and amortization $ 13,763 $ 8,509
10) COMPREHENSIVE INCOME:
Comprehensive income consists of net income and foreign currency
translation adjustments for Federal
and statethe three month period ended May 31, 1999. For the
three month period ended May 31, 1998, comprehensive income taxes $ 23,045 $ 21,215consisted of net
income, exclusively. The reconciliation of net income to comprehensive net
income is as follows:
For the Three Months Ended May 31,
----------------------------------
1999 1998
------------ ------------
(in thousands)
Net income $ 13,54510,846 $ 12,665
7) SUBSEQUENT EVENTS:
INCREASE IN NUMBER OF AUTHORIZED SHARES OF CLASS A COMMON STOCK13,099
Other comprehensive income:
Cumulative translation adjustment 850 -
------------ ------------
Total comprehensive income $ 11,696 $ 13,099
============ ============
- 11 -
11) ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Company'sFinancial Accounting Standards Board issued Statement of
Directors approved, subjectFinancial 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 approvalbalance 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 stockholdersEffective 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. The Company believes the effect of the adoption on its
financial statements will not be material based on the Company's current risk
management strategies.
12) SUBSEQUENT EVENTS:
On June 4, 1999, the Company an increasecompleted the purchase of all the outstanding
capital stock of Franciscan Vineyards, Inc. ("Franciscan"), and related
vineyards and assets. The purchase price was approximately $209.9 million in
cash and assumed debt, net of cash acquired, of approximately $28.9 million.
Also, on June 4, 1999, the numberCompany completed its purchase of authorized sharesall the outstanding
capital stock of Class A Common Stock to 120,000,000 sharesSimi Winery, Inc. ("Simi"). The cash purchase price was
approximately $55.8 million. The purchases will be accounted for using the
purchase method; accordingly, the acquired assets will be recorded at fair
market value at the date of acquisition. The Franciscan and the
aggregate number of authorized sharesSimi operations will
be managed together as a separate business segment of the Company to 141,000,000 shares.
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.Company.
- 712 -
BANK CREDIT AGREEMENT AMENDMENT -
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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- ------------------------------------------------------------------------
OF OPERATIONS.OPERATIONS
-------------
INTRODUCTION
- ------------
The following discussion and analysis summarizes the significant factors
affecting (i) consolidated results of operations of the Company for the three
months ended May 31, 19981999 ("First Quarter 1999"2000"), compared to the three months
ended May 31, 19971998 ("First Quarter 1998"1999"), and (ii) financial liquidity and
capital resources for First Quarter 1999.2000. 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, 1998.1999.
The Company is a leading producer and marketer ofoperates primarily in the beverage alcohol brands.industry in the
United States and the United Kingdom. The Company isreports its operating results
in four segments: Canandaigua Wine (branded 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); and Corporate Operations and Other (primarily
corporate related items).
RECENT ACQUISITIONS
On December 1, 1998, the Company acquired control of Matthew Clark plc
("Matthew Clark") and has since acquired all of Matthew Clark's outstanding
shares (the "Matthew Clark Acquisition"). Prior to the Matthew Clark
Acquisition, the Company was principally a producer and supplier of wine and an
importer and producer of beer and distilled spirits in the United States. The
Company'sMatthew Clark Acquisition established the Company as a leading British producer
of cider, wine and bottled water and as a leading beverage alcohol wholesaler in
the United Kingdom. The results of operations of Matthew Clark have been
included in the consolidated results of operations of the Company since the date
of acquisition, December 1, 1998.
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 Acquisition"). In connection with the transaction, the Company also
entered into multi-year agreements with Diageo to provide packaging and
distilling services for various brands retained by Diageo. The results of
operations from the Black Velvet Acquisition 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") and in related transactions
purchased vineyards, a winery, 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
includes the Simi winery, equipment, vineyards, inventory and worldwide
ownership of the Simi brand name.
The Matthew Clark, Black Velvet and Franciscan Acquisitions are marketed in three general categories: wine, beersignificant
and distilled spirits.the Company expects them to have a material impact on the Company's future
results of operations.
- 13 -
RESULTS OF OPERATIONS
- ---------------------
FIRST QUARTER 19992000 COMPARED TO FIRST QUARTER 19981999
NET SALES
The following table sets forth the net sales (in thousands of dollars) and
unit volume (in thousandsby
operating segment of cases), if applicable, for branded beverage alcohol
products and other products and services sold by the Company for First Quarter 19992000 and First Quarter 1998.1999.
First Quarter 19992000 Compared to First Quarter 1998
--------------------------------------------------------------1999
-------------------------------------------------
Net Sales
Unit Volume
------------------------------- ----------------------------------------------------------------------------
%Increase/
%Increase/2000 1999 1998 (Decrease)
1999 1998 (Decrease)
-------- -------- ---------- ------ ------ ---------- Wine $118,788 $125,439 (5.3%) 6,140 6,720 (8.6%)
Beer 118,796 97,614 21.7% 9,467 7,748 22.2%
Spirits 51,830 50,362 2.9% 2,606 2,549 2.2%
Other (a) 23,514 32,596 (27.9%)----------
Canandaigua Wine:
Branded:
External customers $ 142,641 $ 126,798 12.5 %
Intersegment 1,750 - N/A
---------- ----------
Total Branded 144,391 126,798 13.9 %
---------- ----------
Other:
External customers 19,130 19,139 (0.1)%
Intersegment 38 - N/A
---------- ----------
Total Other 19,168 19,139 0.2 %
---------- ----------
Canandaigua Wine net sales $ 163,559 $ 145,937 12.1 %
---------- ----------
Barton:
Beer $ 146,611 $ 118,796 23.4 %
Spirits 54,139 47,372 14.3 %
---------- ----------
Barton net sales $ 200,750 $ 166,168 20.8 %
---------- ----------
Matthew Clark:
Branded $ 74,375 $ - N/A
-------- -------- ------ ------ ------ -----
$312,928 $306,011 2.3% 18,213 17,017 7.0%
======== ======== ====== ====== ====== =====
(a)Wholesale 92,422 - N/A
---------- ----------
Matthew Clark net sales $ 166,797 $ - N/A
---------- ----------
Corporate Operations and 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.
$ 885 $ 823 7.5 %
---------- ----------
Intersegment eliminations $ (1,822) $ - 8 -N/A
---------- ----------
Consolidated Net Sales $ 530,169 $ 312,928 69.4 %
========== ==========
Net sales for First Quarter 19992000 increased to $312.9$530.2 million from $306.0$312.9
million for First Quarter 1998,1999, an increase of $6.9$217.2 million, or 2.3%69.4%.
CANANDAIGUA WINE
Net sales for Canandaigua Wine for First Quarter 2000 increased to $163.6
million from $145.9 million for First Quarter 1999, an increase of $17.6
million, or 12.1%. This increase resulted primarily from (i) $21.2 millionsales of additional beer sales,
largely Mexican beers,Arbor Mist
and Mystic Cliffs, which were introduced in the second quarter of fiscal 1999,
(ii) $1.5 million of additional spiritsgrowth in the Company's international business and (iii) an increase in the
Company's bulk wine sales. These increases were partially offset by (i) $9.1 million of lower nonbranded sales,
primarilydeclines in
other wine brands and in the Company's grape juice concentrate business.
- 14 -
BARTON
Net sales and (ii) $6.7for Barton for First Quarter 2000 increased to $200.8 million
of lower wine
sales, primarily the result of lower table wine volume. Unit volume for branded
beverage alcohol productsfrom $166.2 million for First Quarter 1999, increased 7.0% as compared to
First Quarter 1998. The unit volumean increase was the result of the increased$34.6 million, or
20.8%. This increase resulted primarily from an increase in sales of the Company's Mexicanimported
beer brands and its spirits brands. These
increases were partially offsetled by lower unit volume of the Company's wine
brands, primarily table wine. To address lower wine sales, the Company is
implementing various programs, such as addressing noncompetitive consumer prices
of its wine products on a market-by-market basisBarton's Mexican portfolio as well as increasing its
promotional activities where appropriate.from $7.2 million of
sales of products and services acquired in the Black Velvet Acquisition, which
was completed in April 1999.
MATTHEW CLARK
Net sales for Matthew Clark for First Quarter 2000 were $166.8 million.
GROSS PROFIT
The Company's gross profit increased to $92.9$156.1 million for First Quarter
2000 from $92.1 million for First Quarter 1999, from $80.7 million for First Quarter 1998, an increase of $12.2$64.1 million, or
15.1%69.6%. The dollar increase in gross profit was primarily related to sales from
the Matthew Clark and Black Velvet Acquisitions, both completed after First
Quarter 1999, as well as increased Barton beer and Canandaigua Wine wine sales.
As a percent of net sales, gross profit increased to 29.7%remained flat at 29.4% for both First
Quarter 2000 and First Quarter 1999, from 26.4% for First Quarter 1998. The dollar increase in gross
profit resulted primarily from cost structureas margin improvements and higher average
selling prices related to branded wine sales, and additional beer unit volume,
partiallywithin each product
line were offset by lower table wine unit volumeadditional sales of lower-margin products such as imported
beer and lower nonbranded unit
volume, primarily grape juice concentrate.
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 $0.9 million and
a reduction of $2.4 million in First Quarter 1999 and First Quarter 1998,
respectively, due to the Company's LIFO accounting method.U.K. wholesale sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $110.5 million
for First Quarter 2000 from $61.3 million for First Quarter 1999, from $55.2 million for First Quarter 1998, an increase of
$6.1$49.2 million, or 11.1%80.2%. The dollar increase in selling, general and
administrative expenses resulted principallyprimarily from higher advertisingthe addition of the Matthew
Clark business and promotionexpenses related to the brands acquired in the Black Velvet
Acquisition. The Company also increased its marketing and promotional costs associated with the increased unitto
generate additional sales volume, particularly of Canandaigua Wine wine and
Barton beer and spirits
products and the programs implemented to improve the Company's wine sales.brands. Selling, general and administrative expenses as a percent of
net sales increased to 20.8% for First Quarter 2000 as compared to 19.6% for
First Quarter 1999 as compared to 18.0% for First Quarter 1998.1999. The increase in percent of net sales resulted primarily from
(i) Canandaigua Wine's investment in brand building and efforts to increase
market share and (ii) the programs implemented to
improveMatthew Clark Acquisition, as Matthew Clark's selling,
general and administrative expenses as a percent of net sales is typically at
the high end of the range of the Company's wine sales and fromoperating segments' percentages.
NONRECURRING CHARGES
The Company incurred nonrecurring charges of $5.5 million in First Quarter
2000 related to the closure of a changeproduction facility within the Matthew Clark
operating segment in the sales mix drivenUnited Kingdom and to a management reorganization
within the Canandaigua Wine operating segment. No such charges were incurred in
First Quarter 1999.
- 15 -
OPERATING INCOME
The following table sets forth the operating profit/(loss) (in thousands of
dollars) by operating segment of the Company for First Quarter 2000 and First
Quarter 1999.
First Quarter 2000 Compared to First Quarter 1999
-------------------------------------------------
Operating Profit/(Loss)
-------------------------------------------------
%Increase/
2000 1999 (Decrease)
---------- ---------- ----------
Canandaigua Wine $ 5,607 $ 7,440 (24.6)%
Barton 31,497 25,788 22.1 %
Matthew Clark 7,330 - N/A
Corporate Operations and Other (4,323) (2,499) 73.0 %
---------- ----------
Consolidated Operating Profit $ 40,111 $ 30,729 30.5 %
========== ==========
As a result of the above factors, consolidated operating income increased
to $40.1 million for First Quarter 2000 from $30.7 million for First Quarter
1999, an increase of $9.4 million, or 30.5%. Operating income for the
Canandaigua Wine operating segment was down $1.8 million, or 24.6%, due to the
nonrecurring charge of $2.6 million related to the segment's management
reorganization, as well as additional marketing expenses associated with new
product introductions. Exclusive of the nonrecurring charge, operating income
increased by 9.8% to $8.2 million in net salesFirst Quarter 2000. Operating income for
the Matthew Clark operating segment, excluding nonrecurring charges of branded products (which have a higher percent$2.9
million, was $10.3 million.
INTEREST EXPENSE, NET
Net interest expense increased to $22.0 million for First Quarter 2000 from
$8.5 million for First Quarter 1999, an increase of marketing$13.5 million or 158.4%. The
increase resulted primarily from additional interest expense associated with the
borrowings related to the Matthew Clark and selling costs relative to sales), and a decrease in net sales of
nonbranded products (which have relatively little associated marketing and
selling costs).Black Velvet Acquisitions.
NET INCOME
As a result of the above factors, net income increaseddecreased to $13.6$10.8 million for
First Quarter 2000 from $13.1 million for First Quarter 1999, from $10.0 million for First Quarter 1998, an increasea decrease of $3.6$2.3
million, or 35.5%17.2%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for First Quarter 19992000
were $40.1$53.9 million, an increase of $5.8$14.6 million
- 9 - over EBITDA of $34.3$39.2 million
for First Quarter 1998.1999. EBITDA should not be construed as an alternative to
operating income or net cash flow from operating activities and should not be
construed as an indication of operating performance or as a measure of
liquidity.
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,
- 16 -
except during the annual fall grape harvests when the Company has relied on
short-term borrowings. The annual grape crush normally begins in August and runs
through October. The Company generally begins purchasing grapes in August with
payments for such grapes beginning to come due in September. The Company's
short-term borrowings to support such purchases generally reach their highest
levels in November or December. Historically, the Company has used cash flow
from operating activities to repay its short-term borrowings. The Company will
continue to use its short-term borrowings to support its working capital
requirements. The Company believes that cash provided by operating activities
and its financing activities, primarily short-term borrowings, will provide
adequate resources to satisfy its working capital, liquidity and anticipated
capital expenditure requirements for both its short-term and long-term capital
needs.
FIRST QUARTER 19992000 CASH FLOWS
OPERATING ACTIVITIES
Net cash provided byused in operating activities for First Quarter 19992000 was $22.8$5.6
million, which resulted from $22.3$25.8 million in net income adjusted for noncash
items, plus $0.5less $31.4 million representing the net change in the Company's operating
assets and liabilities. The net change in operating assets and liabilities
resulted primarily from a $31.1 million seasonal decrease in inventory levels, partially
offset by a $27.0 million increase in accounts receivable, principallypartially
offset by an increase in accrued interest due to higher debt outstanding related
to the result of increased beer sales.Matthew Clark and Black Velvet Acquisitions.
INVESTING ACTIVITIES AND FINANCING ACTIVITIES
Net cash used in investing activities for First Quarter 19992000 was $6.3
million, which resulted primarily from $5.6 million of capital expenditures,
including $2.7 million for vineyards.
Net cash used in financing activities for First Quarter 1999 was $16.9$196.1
million, which resulted primarily from net repaymentscash paid of $11.9$185.5 million for the
Black Velvet Acquisition and $11.3 million of capital expenditures, including
$1.3 million for vineyards.
Net cash provided by financing activities for First Quarter 2000 was $174.5
million, which resulted primarily from proceeds of $264.1 million from issuance
of long-term debt, including $200.0 million of long-term debt incurred in
connection with the Black Velvet Acquisition. This amount was partially offset
by repayment of $70.4 million of net revolving loan borrowings, under the Company's bank credit agreement plus
principal
payments of $6.0$16.3 million of long-term debt.
During June 1998, the Company's Boarddebt, and payment of Directors authorized the
repurchase of up to $100.0$3.2 million of
its Class A Common Stock and Class B
Common Stock. The repurchase of shares of common stock will be accomplished,
from time to time, 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. The
Company is currently in the process of seeking an increase in its capacity under
the bank credit agreement in order to increase its flexibility to make such
repurchases. The repurchased shares will become treasury shares and may be used
for general corporate purposes. No shares have been repurchased as of June 22,
1998.
- 10 -long-term debt issuance costs.
DEBT
Total debt outstanding as of May 31, 1998,1999, amounted to $407.4$1,103.5 million, a
decreasean
increase of $17.8$178.0 million from February 28, 1998, resulting primarily from the
net repayments of revolving loan borrowings and principal payments of long-term
debt.1999. The ratio of total debt to
total capitalization decreasedincreased to 48.7%71.1% as of May 31, 1998,1999, from 50.6%68.0% as of
February 28, 1998.1999.
THE COMPANY'S CREDIT AGREEMENT
As of May 31, 1998,1999, under its bank credit agreement, the Company had
outstanding term loans of $134.0$690.1 million bearing interest at 6.4%7.6%, $80.0$9.1 million
of revolving loans bearing interest at 6.3%7.6%, undrawn revolving letters of credit
of $3.4$3.8 million, and $101.6$287.1 million in revolving loans available to be drawn.
During June 1998, the bank credit agreement was amended to, among other things,
eliminate the requirement that1999, the Company, reducecertain of its principal operating
subsidiaries, and a syndicate of banks, for which The Chase Manhattan Bank acts
as administrative agent, entered into a Second
- 17 -
Amended and Restated Credit Agreement (the "Credit Agreement") which amends and
restates the outstanding balanceCompany's First Amended and Restated Credit Agreement. The Credit
Agreement recasts certain incremental revolving loans provided for under the
Company's First Amended and Restated Credit Agreement into amortizing term loans
which are known as "Incremental Facility Loans". The Credit Agreement also
amended the financial covenants for the debt coverage ratio and the interest
coverage ratio to reflect $200.0 million of Incremental Facility Loans which
were borrowed by the Company to finance the Franciscan Acquisition.
The Incremental Facility Loans have a final maturity on December 1, 2005
and, subject to certain mandatory prepayment requirements, shall be repaid in
quarterly installments, starting at $0.5 million in December 1999. The rate of
interest payable on the Incremental Facility Loans, at the Company's option, is
a function of the London interbank offering rate (LIBOR) plus a margin, federal
funds rate plus a margin, or the prime rate plus a margin. The margin is
adjustable based upon the Company's Debt Ratio (as defined in the Credit
Agreement). The initial margin on the Incremental Facility Loans will be 1.75%
(for prime rate based borrowings) and 2.75% (for LIBOR based borrowings).
The Company financed the purchase price for the Simi Acquisition with
revolving loan facility to less than $60,000,000 for thirty consecutive days
duringborrowings under the six months ending each August 31.Credit Agreement.
SENIOR SUBORDINATED NOTES
As of May 31, 1998,1999, the Company had outstanding $195.0 million aggregate
principal amount of 8 3/4% Senior Subordinated Notes due December 2003.2003 (the
"Notes"). The notesNotes are unsecuredcurrently redeemable, in whole or in part, at the option
of the Company.
On March 4, 1999, the Company issued $200.0 million aggregate principal
amount of 8 1/2% Senior Subordinated Notes due March 2009 (the "$200 Million
Notes"). The Company used the proceeds from the sale of the $200 Million Notes
to fund the Black Velvet Acquisition ($185.5 million) and subordinated to pay the prior payment in fullfees and
expenses related thereto with the remainder of all senior
indebtednessthe net proceeds to be used for
general corporate purposes or to fund future acquisitions. The $200 Million
Notes are redeemable at the option of the Company, whichin 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 $200 Million Notes using the proceeds of certain equity offerings
completed before March 1, 2002. A brief description of the $200 Million Notes is
contained in Note 6 to the Company's consolidated financial statements located
in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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.
- 18 -
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. The Company believes the effect of adoption on its
financial statements will not be material based on the Company's current risk
management strategies.
YEAR 2000 ISSUE
For purposes of the following Year 2000 discussion, the information
presented includes the bank credit agreement.effect of the Franciscan and Simi Acquisitions. The
notesCompany 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, have been inventoried and
assessed. In addition, plans have been developed for the required systems
modifications or replacements. With respect to its information technology
systems, the Company has completed the entire assessment phase and approximately
85% of the remediation phase. With respect to its non-information technology
systems, the Company has completed the entire assessment phase and approximately
80% of the remediation phase. Selected areas, both internal and external, are
guaranteed, on a senior subordinated basis, by substantially allbeing tested to assure the integrity of the Company's operating subsidiaries.remediation programs. The
testing is expected to be completed by September 1999. The Company plans to have
all internal mission-critical information technology and non-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 Company's
significant customers and suppliers are expected to be completed by September
1999. The Company's key financial institutions have been surveyed and it is the
Company's understanding that they are or will be Year 2000 compliant on or
before December 31, 1999.
The costs 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 material adverse impact on the Company's financial condition, results of
operations or cash flows.
The Company's readiness programs also include the development 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 inventory levels. Based upon the
Company's current
- 19 -
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 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, results
of operations or cash flows. For example, the Company would experience a
material adverse impact on its business if significant suppliers of beer, glass
or other raw materials, or utility systems fail to timely provide the Company
with necessary inventories or services due to Year 2000 systems failures.
The statements set forth herein concerning Year 2000 issues which are not
historical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements. In particular, the costs associated with the
Company's Year 2000 programs and 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 future
events. These estimates may be adversely affected by the continued availability
of personnel and system resources, and by the failure of significant third
parties to properly address Year 2000 issues. Therefore, there can be no
guarantee that any estimates, or other forward-looking statements will be
achieved, and actual results could differ significantly from those contemplated.
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 three months ended May 31, 1999,
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 28, 1999.
- 20 -
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) See Index to Exhibits located on Page 1526 of this Report.
(b) NoThe following Reports on Form 8-K were filed with the Securities and
Exchange Commission during the quarter ended May 31, 1999:
(i) Form 8-K dated February 25, 1999. This Form 8-K reported
information under Item 7 (Financial Statements and Exhibits).
(ii) Form 8-K dated April 9, 1999. This Form 8-K reported information
under Item 2 (Acquisition or Disposition of Assets) and Item 7
(Financial Statements and Exhibits).
(iii)Form 8-K dated April 12, 1999. This Form 8-K reported
information under Item 5 (Other Events).
(iv) Form 8-K dated April 15, 1999. This Form 8-K reported information
under Item 5 (Other Events) and included (i) the Company's
Condensed Consolidated Balance Sheets for the fiscal years ended
February 28, 1999 and February 28, 1998; (ii) the Company's
Condensed Consolidated Statements of Income for the three months
ended February 28, 1999 (unaudited) and February 28, 1998
(unaudited); and (iii) the Company's Condensed Consolidated
Statements of Income for the twelve months ended February 28,
1999 and the twelve months ended February 28, 1998.
(v) Form 8-K dated April 22, 1999. This Form 8-K reported information
under Item 5 (Other Events).
- 1121 -
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: June 22, 1998July 14, 1999 By: /s/ Thomas F. Howe
---------------------------------------------------------------------
Thomas F. Howe, Vice President,
Corporate Reporting and Controller
Dated: June 22, 1998July 14, 1999 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: June 22, 1998July 14, 1999 By: /s/ Thomas F. Howe
---------------------------------------------------------------------
Thomas F. Howe, Controller
Dated: June 22, 1998July 14, 1999 By: /s/ Thomas S. Summer
---------------------------------------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
CANANDAIGUA WINE COMPANY, INC.
Dated: June 22, 1998July 14, 1999 By: /s/ Thomas F. Howe
---------------------------------------------------------------------
Thomas F. Howe, Controller
Dated: June 22, 1998July 14, 1999 By: /s/ Thomas S. Summer
---------------------------------------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
- 1222 -
CANANDAIGUA EUROPE LIMITED
Dated: June 22, 1998July 14, 1999 By: /s/ Thomas F. Howe
---------------------------------------------------------------------
Thomas F. Howe, Controller
Dated: June 22, 1998July 14, 1999 By: /s/ Thomas S. Summer
---------------------------------------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
CANANDAIGUA LIMITED
Dated: July 14, 1999 By: /s/ Thomas F. Howe
----------------------------------
Thomas F. Howe, Authorized Officer
Dated: July 14, 1999 By: /s/ Thomas S.
----------------------------------
Thomas S. Summer, Finance Director
(Principal Financial Officer and
Principal Accounting Officer)
POLYPHENOLICS, INC.
Dated: July 14, 1999 By: /s/ Thomas F. Howe
----------------------------------
Thomas F. Howe, Vice President and
Controller
Dated: July 14, 1999 By: /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
ROBERTS TRADING CORP.
Dated: June 22, 1998July 14, 1999 By: /s/ Thomas F. Howe
---------------------------------------------------------------------
Thomas F. Howe, Controller
Dated: June 22, 1998July 14, 1999 By: /s/ Thomas S. Summer
-------------------------------------------------------------------
Thomas S. Summer, President and
Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
- 23 -
BARTON INCORPORATED
Dated: June 22, 1998July 14, 1999 By: /s/ Alexander L. Berk
---------------------------------------------------------------------
Alexander L. Berk, President and
Chief OperatingExecutive Officer
Dated: June 22, 1998July 14, 1999 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: June 22, 1998July 14, 1999 By: /s/ Alexander L. Berk
---------------------------------------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: June 22, 1998July 14, 1999 By: /s/ Raymond E. Powers
---------------------------------------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
- 13 -
BARTON BEERS, LTD.
Dated: June 22, 1998July 14, 1999 By: /s/ Alexander L. Berk
---------------------------------------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: June 22, 1998July 14, 1999 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: June 22, 1998July 14, 1999 By: /s/ Alexander L. Berk
---------------------------------------------------------------------
Alexander L. Berk, President
Dated: June 22, 1998July 14, 1999 By: /s/ Raymond E. Powers
---------------------------------------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
- 24 -
BARTON BRANDS OF GEORGIA, INC.
Dated: June 22, 1998July 14, 1999 By: /s/ Alexander L. Berk
---------------------------------------------------------------------
Alexander L. Berk, President
Dated: June 22, 1998July 14, 1999 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: June 22, 1998July 14, 1999 By: /s/ Alexander L. Berk
---------------------------------------------------------------------
Alexander L. Berk, President
Dated: June 22, 1998July 14, 1999 By: /s/ Raymond E. Powers
---------------------------------------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
BARTON FINANCIAL CORPORATION
Dated: July 14, 1999 By: /s/ Raymond E. Powers
----------------------------------
Raymond E. Powers, President and
Secretary
Dated: July 14, 1999 By: /s/ Charles T. Schlau
----------------------------------
Charles T. Schlau, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
STEVENS POINT BEVERAGE CO.
Dated: July 14, 1999 By: /s/ Alexander L. Berk
----------------------------------
Alexander L. Berk, Executive Vice
President
Dated: July 14, 1999 By: /s/ Raymond E. Powers
----------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
- 25 -
MONARCH IMPORT COMPANY
Dated: July 14, -
BARTON FINANCIAL CORPORATION1999 By: /s/ Alexander L. Berk
----------------------------------
Alexander L. Berk, President
Dated: June 22, 1998July 14, 1999 By: /s/ Raymond E. Powers
-----------------------------------
Raymond E. Powers, President and
Secretary
Dated: June 22, 1998 By: /s/ Charles T. Schlau
-----------------------------------
Charles T. Schlau, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
STEVENS POINT BEVERAGE CO.
Dated: June 22, 1998 By: /s/ Alexander L. Berk
-----------------------------------
Alexander L. Berk, Executive Vice
President
Dated: June 22, 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: June 22, 1998 By: /s/ Alexander L. Berk
-----------------------------------
Alexander L. Berk, President
Dated: June 22, 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: June 22, 1998July 14, 1999 By: /s/ Alexander L. Berk
---------------------------------------------------------------------
Alexander L. Berk, President
Dated: June 22, 1998July 14, 1999 By: /s/ Raymond E. Powers
---------------------------------------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
- 1526 -
INDEX TO EXHIBITS
(2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR
SUCCESSION.
Not applicable.2.1 Asset Purchase Agreement dated as of February 21, 1999 by and among Diageo
Inc., UDV Canada Inc., United Distillers Canada Inc. and the Company (filed
as Exhibit 2 to the Company's Current Report on Form 8-K dated April 9,
1999 and incorporated herein by reference).
2.2 Stock Purchase Agreement, dated April 21, 1999, between Franciscan
Vineyards, Inc., Agustin Huneeus, Agustin Francisco Huneeus, Jean-Michel
Valette, Heidrun Eckes-Chantre Und Kinder Beteiligungsverwaltung II, GbR,
Peter Eugen Eckes Und Kinder Beteiligungsverwaltung II, GbR, Harald
Eckes-Chantre, Christina Eckes-Chantre, Petra Eckes-Chantre and Canandaigua
Brands, Inc. (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 herewith). The Company will furnish
supplementally to the Commission, upon request, a copy of any omitted
schedule.
(3) ARTICLES OF INCORPORATION AND BY-LAWS.
3.1(a) Certificate of Amendment of the3.1 Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1(a)3.1
to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 1997 and incorporated
herein by reference).
3.1(b) Restated Certificate of Incorporation of the Company (filed as Exhibit
3.1 to the Company's Transition Report on Form 10-K for the Transition
Period from September 1, 1995 to February 29, 19961998 and incorporated herein by reference).
3.2 Amended and Restated By-Laws of the Company (filed as Exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August
31, 19971998 and incorporated herein by reference).
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES.
4.1 Indenture, dated as of December 27, 1993, among the Company, its
Subsidiaries and The Chase Manhattan Bank (as successor to Chemical Bank)
(filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended November 30, 1993 and incorporated herein by
reference).
4.2 First Supplemental Indenture, dated as of August 3, 1994, among the
Company, Canandaigua West, Inc. (a subsidiary of the Company now known as
Canandaigua Wine Company, Inc.) and The Chase Manhattan Bank (as successor
to Chemical Bank) (filed as Exhibit 4.5 to the Company's Registration
Statement on Form S-8 (Registration No. 33-56557) and incorporated herein
by reference).
4.3 Second Supplemental Indenture, dated August 25, 1995, among the Company, V
Acquisition Corp. (a subsidiary of the Company now known as The Viking
Distillery, Inc.) and The Chase Manhattan Bank (as successor to Chemical
Bank) (filed as Exhibit 4.5 to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1995 and incorporated herein by
reference).
- 27 -
4.4 Third Supplemental Indenture, dated as of December 19, 1997, among the
Company, Canandaigua Europe Limited, Roberts Trading Corp. and The Chase
Manhattan Bank (filed as Exhibit 4.4 to the Company's Annual Report on Form
10-K for the fiscal year ended February 28, 1998 and incorporated herein by
reference).
4.5 Fourth Supplemental Indenture, dated as of October 2, 1998, among the
Company, Polyphenolics, Inc. and The Chase Manhattan Bank (filed as Exhibit
4.5 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 30, 1998 and incorporated herein by reference).
4.6 Fifth Supplemental Indenture, dated as of December 11, 1998, among the
Company, Canandaigua B.V., Canandaigua Limited and The Chase Manhattan Bank
(filed as Exhibit 4.6 to the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 1999 and incorporated herein by reference).
4.7 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).
- 16 -
4.64.8 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).
4.74.9 Second Supplemental Indenture, dated as of October 2, 1998, among the
Company, Polyphenolics, Inc. and Harris Trust and Savings Bank (filed as
Exhibit 4.8 to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended November 30, 1998 and incorporated herein by reference).
4.10 Third Supplemental Indenture, dated as of December 11, 1998, among the
Company, Canandaigua B.V., Canandaigua Limited and Harris Trust and Savings
Bank (filed as Exhibit 4.10 to the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1999 and incorporated herein by
reference).
4.11 First Amended and Restated Credit Agreement, dated as of November 2, 1998,
between the Company, its principal operating subsidiaries, and certain
banks for which The Chase Manhattan Bank acts as Administrative Agent
(filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated
December 1, 1998 and incorporated herein by reference).
4.12 Second Amended and Restated Credit Agreement, dated as of December 19, 1997May 12, 1999,
between the Company, its principal operating subsidiaries, and certain
banks for which The Chase Manhattan Bank acts as Administrative Agent
(filed as Exhibit 4.74.2 to the Company's AnnualCurrent Report on Form 10-K8-K dated
June 4, 1999 and incorporated herein by reference).
4.13 Incremental Facility Loan Agreement, dated as of May 27, 1999, between the
Company, its principal operating subsidiaries, and certain banks for which
The Chase Manhattan Bank acts as Administrative Agent (filed as Exhibit 4.3
to the fiscal year endedCompany's Current Report on Form 8-K dated June 4, 1999 and
incorporated herein by reference).
- 28 -
4.14 Indenture with respect to 8 1/2% Senior Subordinated Notes due 2009, dated
as of February 28, 199825, 1999, among the Company, as issuer, its principal
operating subsidiaries, as Guarantors, and Harris Trust and Savings Bank,
as Trustee (filed as Exhibit 99.1 to the Company's Current Report on Form
8-K dated February 25, 1999 and incorporated herein by reference).
4.15 Supplemental Indenture No. 1, dated as of February 25, 1999, by and among
the Company, as Issuer, its principal operating subsidiaries, as
Guarantors, and Harris Trust and Savings Bank, as Trustee (filed as Exhibit
99.2 to the Company's Current Report on Form 8-K dated February 25, 1999
and incorporated herein by reference).
(10) MATERIAL CONTRACTS.
Not applicable.First Amendment to the Supplemental Executive Retirement Plan of the
Company (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.
(27) FINANCIAL DATA SCHEDULE.
Financial Data Schedule (filed herewith).
(99) ADDITIONAL EXHIBITS.
Not applicable.