UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended February 28, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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COMMISSION FILE NO. 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 (I.R.S. Employer
jurisdiction of specified in its charter) Identification No.)
incorporation or
organization)
300 WILLOWBROOK OFFICE PARK, FAIRPORT, NEW YORK 14450
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(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code (716) 393-4130
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which registered
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None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g)OF THE ACT:
Class A Common Stock (Par Value $.01 Per Share) of Canandaigua Brands, Inc.
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(Title of Class)
Class B Common Stock (Par Value $.01 Per Share) of Canandaigua Brands, Inc.
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(Title of Class)
Indicate by check mark whether the Registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the common stock held by non-affiliates of
Canandaigua Brands, Inc., as of May 18, 1998, was $665,089,755.
The number of shares outstanding with respect to each of the classes of common
stock of Canandaigua Brands, Inc., as of May 18, 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 15,470,066
Class B Common Stock, Par Value $.01 Per Share 3,296,976
DOCUMENTS INCORPORATED BY REFERENCE
The proxy statement of Canandaigua Brands, Inc. to be issued for the annual
meeting of stockholders to be held July 21, 1998, is incorporated by reference
in Part III.
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PART I
ITEM 1. BUSINESS
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UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM "COMPANY" REFERS TO
CANANDAIGUA BRANDS, INC. AND ITS SUBSIDIARIES, ALL REFERENCES TO "NET SALES"
REFER TO GROSS REVENUES LESS EXCISE TAXES AND RETURNS AND ALLOWANCES TO CONFORM
WITH THE COMPANY'S METHOD OF CLASSIFICATION. ALL REFERENCES TO "FISCAL 1998" AND
"FISCAL 1997" SHALL REFER TO THE COMPANY'S FISCAL YEAR ENDED THE LAST DAY OF
FEBRUARY OF THE INDICATED YEAR. DURING JANUARY 1996, THE BOARD OF DIRECTORS OF
THE COMPANY CHANGED THE COMPANY'S FISCAL YEAR END FROM AUGUST 31 TO THE LAST DAY
OF FEBRUARY. ACCORDINGLY, THIS FORM 10-K INCLUDES AND PRESENTS INFORMATION FOR
THE COMPANY'S TRANSITION PERIOD FROM SEPTEMBER 1, 1995, TO FEBRUARY 29, 1996
(THE "TRANSITION PERIOD"), AS WELL AS INFORMATION FOR THE PERIOD FROM MARCH 1,
1995, TO FEBRUARY 29, 1996 ("PRO FORMA FISCAL 1996"). REFERENCES TO "FISCAL
1995" SHALL REFER TO THE COMPANY'S FISCAL YEAR ENDED AUGUST 31, 1995.
DURING FISCAL 1998, THE COMPANY CHANGED ITS NAME FROM CANANDAIGUA WINE
COMPANY, INC. TO CANANDAIGUA BRANDS, INC. THE NEW NAME BETTER REFLECTS THE SCOPE
OF THE COMPANY'S OPERATIONS AS A PRODUCER, MARKETER AND IMPORTER OF BRANDS
WITHIN ALL THREE BEVERAGE ALCOHOL PRODUCT CATEGORIES IN WHICH THE COMPANY
OPERATES: WINE, BEER AND DISTILLED SPIRITS.
MARKET SHARE AND INDUSTRY DATA DISCLOSED IN THIS REPORT HAVE BEEN OBTAINED
FROM THE FOLLOWING INDUSTRY AND GOVERNMENT PUBLICATIONS: THE GOMBERG-FREDRIKSON
REPORT; JOBSON'S LIQUOR HANDBOOK; JOBSON'S WINE HANDBOOK; JOBSON'S BEER
HANDBOOK; ADAMS MEDIA HANDBOOK ADVANCE; THE U.S. WINE MARKET: IMPACT DATABANK
REVIEW AND FORECAST; THE U.S. BEER MARKET: IMPACT DATABANK REVIEW AND FORECAST;
BEER MARKETER'S INSIGHTS; BEER INDUSTRY UPDATE; THE BEER INSTITUTE; U.S.
DEPARTMENT OF THE TREASURY STATISTICAL RELEASES; AND THE MAXWELL CONSUMER
REPORT. THE COMPANY HAS NOT INDEPENDENTLY VERIFIED THIS DATA. REFERENCES TO
MARKET SHARE DATA ARE BASED ON UNIT VOLUME.
The Company is a Delaware corporation organized in 1972 as the successor to
a business founded in 1945 by Marvin Sands, Chairman of the Board of the
Company.
The Company is a leading producer and marketer of branded beverage alcohol
products, with over 130 national and regional brands which are distributed by
over 850 wholesalers throughout the United States and in selected international
markets. The Company's beverage alcohol brands are marketed in three general
categories: wine (primarily table wine), beer (primarily imported beer) and
distilled spirits. The Company is the second largest supplier of wine, the
second largest importer of beer and the fourth largest supplier of distilled
spirits in the United States. The Company's principal brands include the
following:
WINE: Inglenook, Almaden, Paul Masson, Manischewitz, Taylor, Marcus James,
Estate Cellars, Vina Santa Carolina, Dunnewood, Cook's, J. Roget, Great
Western, Richards Wild Irish Rose and Cisco
BEER: Corona Extra, Corona Light, St. Pauli Girl, Modelo Especial,
Pacifico, Tsingtao, Negra Modelo, Peroni, Double Diamond and Point
DISTILLED SPIRITS: Fleischmann's, Barton, Mr. Boston, Canadian LTD, Ten
High, Montezuma, Inver House, Monte Alban and Chi-Chi's Prepared Cocktails
Many of the Company's brands are leaders in their respective categories in
the United States, including Corona Extra, the largest selling imported beer
brand; Almaden and Inglenook, the fifth and seventh largest selling table wine
brands; Richards Wild Irish Rose, the largest selling dessert wine brand; Cook's
champagne, the second largest selling sparkling wine brand; Fleischmann's, the
fourth largest blended whiskey and fourth largest domestically bottled gin;
Montezuma, the second largest selling tequila brand; and Monte Alban, the
largest selling mezcal brand.
The Company has diversified its product portfolio through a series of
strategic acquisitions that have resulted in an increase in the Company's net
sales from $176.6 million in fiscal 1991 to $1,212.8 million for Fiscal 1998.
Through these acquisitions, the Company has developed strong market positions in
the growing beverage alcohol product categories of varietal table wine (wine
named for the grape that comprises the principal component of the wine) and
imported beer. During this period, the Company has strengthened its relationship
with wholesalers, expanded its distribution and enhanced its production
capabilities as well as acquired additional management, operational, marketing
and research and development expertise.
In October 1991, the Company acquired Cook's, Cribari, Dunnewood and other
brands and related facilities and assets from Guild Wineries & Distilleries. In
June 1993, the Company acquired Barton Incorporated ("Barton"), which enabled
the Company to diversify into the imported beer and distilled spirits categories
(the "Barton Acquisition"). With the Barton Acquisition, the Company acquired
distribution rights with respect to the Corona, St. Pauli Girl, and other
imported beer brands; the Barton, Ten High, Montezuma, and other distilled
spirits brands; and related facilities and assets. In October 1993, the Company
acquired the Paul Masson, Taylor California Cellars and other brands and related
facilities and assets of Vintners International Company, Inc. ("Vintners") (the
"Vintners Acquisition"). In August 1994, the Company acquired the Almaden,
Inglenook and other brands, a grape juice concentrate business and related
facilities and assets (the "Almaden/Inglenook Product Lines") from Heublein,
Inc. (the "Almaden/Inglenook Acquisition"). On September 1, 1995, the Company
acquired the Mr. Boston, Canadian LTD, Skol, Old Thompson, Kentucky Tavern,
Glenmore and di Amore distilled spirits brands; the rights to the Fleischmann's
and Chi-Chi's distilled spirits brands under long-term license agreements; the
U.S. rights to the Inver House, Schenley and El Toro distilled spirits brands;
and related facilities and assets from United Distillers Glenmore, Inc. and
certain of its North American affiliates (collectively, "UDG"); in addition, the
transaction included multiyear agreements under which UDG supplies the Company
with bulk whiskey and the Company supplies UDG with services including continued
packaging of various UDG brands not acquired by the Company (collectively, the
"UDG Acquisition").
The Company's growth through acquisitions has substantially expanded its
portfolio of brands and has enabled it to become a major participant in
additional product categories of the beverage alcohol business. This expansion
has positioned the Company to benefit from faster growing categories with over
40% of the Company's net sales generated from the growth categories of imported
beer and varietal table wine.
The Company's business strategy is to manage its existing portfolio of
brands and businesses in order to maximize profit and return on investment, and
reposition its portfolio of brands to benefit from growth trends in the beverage
alcohol industry. To achieve the foregoing, the Company intends to: (i) adjust
the price/volume relationships of certain brands; (ii) develop new brands and
introduce line extensions; (iii) expand geographic distribution; and (iv)
acquire businesses that meet its strategic and financial objectives.
INDUSTRY
The beverage alcohol industry in the United States consists of the
production, importation, marketing and distribution of wine, beer and distilled
spirits products. Over the past five years there has been increasing
consolidation at the supplier, wholesaler and, in certain markets, retailer
tiers of the beverage alcohol industry. As a result, it has become advantageous
for certain suppliers to expand their portfolio of brands through acquisitions
and internal development in order to take advantage of economies of scale and to
increase their importance to a more limited number of wholesalers and, in
certain markets, retailers. During the 1990's, the overall per capita
consumption of beverage alcohol products in the United States has declined
slightly; however, consumption of table wine, in particular varietal table wine,
and imported beer has increased during the period.
The following table sets forth the industry unit volume for shipments of
beverage alcohol products in the Company's three principal beverage alcohol
product categories in the United States for the five calendar years ended
December 31, 1997:
INDUSTRY DATA 1997 1996 1995 1994 1993
- --------------------- ------- ------- ------- ------- -------
Wine (a)(b) 219,970 212,399 197,258 193,052 188,846
Imported Beer (c) 197,355 173,077 157,023 146,096 128,815
Distilled Spirits (b) 137,798 138,536 137,330 139,997 144,162
(a) Includes domestic and imported table, sparkling and dessert wine, wine
coolers and vermouth
(b) Units are in thousands of 9-liter case equivalents (2.378 gallons per
case)
(c) Units are in thousands of 2.25 gallon cases
WINE: From 1993 to 1997, shipments of wine in the United States increased
at an average compound annual rate of 4%. In 1997, wine shipments increased by
4% when compared to 1996, led by increased shipments of table wine (wine
containing 14% or less alcohol by volume). Table wine accounted for 88% of the
total United States wine market in 1997 while sparkling wine (includes
effervescent wine like champagne and spumante) and dessert wine (wine containing
more than 14% alcohol by volume) each accounted for 6%. Over the last five
years, sparkling and dessert wine, as a percentage of total wine, have been
declining in the United States. The Company believes the improvement in the
table wine consumption may be due in part to published reports, over recent
years, from a number of sources, citing the health benefits of moderate wine
consumption. The Company believes the declines in sparkling and dessert wine
consumption in the United States reflect a general shift in consumer preferences
and, with respect to sparkling wine, concerns about drinking and driving, as a
large part of sparkling wine consumption occurs outside the home at social
gatherings and restaurants.
IMPORTED BEER: Shipments of imported beer have increased at an average
compound annual rate of 11% from 1993 to 1997. Shipments of Mexican beer in 1997
increased 37% over 1996 as compared to an increase of 14% for the entire
imported beer category. Shipments of imported beer as a percentage of the United
States beer market, increased to 7.3% in 1997 from 6.5% in 1996. Imported beer,
along with microbrews and super-premium priced domestic beer, is generally
priced above the leading domestic premium brands.
DISTILLED SPIRITS: Although shipments of distilled spirits in the United
States declined at an average compound annual rate of 1% from 1993 to 1997,
certain types of distilled spirits, such as rum, tequila and brandy have
increased. In 1997, shipments of distilled spirits declined by 0.5% as compared
to 1996. The Company believes shipments of certain types of distilled spirits
may have been negatively affected by concerns about drinking and driving, and a
shift in consumer preference toward lower alcohol or lighter tasting products
like imported beer and varietal table wine which have grown substantially during
the period from 1993 to 1997.
PRODUCT CATEGORIES
The Company produces, markets and imports beverage alcohol products in
three principal product categories: wine (primarily table wine), beer (primarily
imported beer) and distilled spirits. The following tables include net sales and
unit volume of branded products sold by the Company and the distilled spirits
table includes the brands and products acquired in the UDG Acquisition for all
periods shown as if they had been owned by the Company for the entire period.
WINE: The Company is the second largest supplier of wine in the United
States. The Company participates in the table, dessert and sparkling wine
categories. The table below sets forth the net sales (in thousands of dollars)
and unit volume (in thousands of 9-liter case equivalents) for all of the
branded wine sold by the Company for the periods shown:
PRO FORMA
FISCAL 1998 FISCAL 1997 FISCAL 1996 FISCAL 1995
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WINE (a) NET SALES VOLUME NET SALES VOLUME NET SALES VOLUME NET SALES VOLUME
--------- ------ --------- ------ --------- ------ --------- ------
$ 533,257 34,587 $ 512,510 33,787 $ 499,962 35,396 $ 487,101 34,910
<FN>
(a) Includes domestic and imported table, dessert and sparkling wine
</FN>
Net sales and unit volume of the Company's wine brands increased 4% and 2%,
respectively, in Fiscal 1998 compared to Fiscal 1997. These increases can be
attributed to increased sales of table wine.
The Company sells over 70 different brands of wine, substantially all of
which are marketed in the popularly priced segment (wine that retails at less
than $5.75 per 750 ml. bottle). The Company's principal wine brands include
Inglenook, Almaden, Paul Masson, Manischewitz, Taylor, Marcus James, Estate
Cellars, Vina Santa Carolina, Dunnewood, Richards Wild Irish Rose, Cisco,
Cook's, J. Roget and Great Western.
BEER: The Company is the second largest marketer of imported beer in the
United States. The Company distributes five of the top 20 imported beer brands
in the United States: Corona Extra, Corona Light, St. Pauli Girl, Modelo
Especial and Pacifico. The Company's other imported beer brands include Negra
Modelo from Mexico, Tsingtao from China, Peroni from Italy and Double Diamond
from the United Kingdom. The Company also operates the Stevens Point Brewery, a
regional brewer located in Wisconsin, which produces Point Special, among other
brands. The table below sets forth the net sales (in thousands of dollars) and
unit volume (in thousands of 2.25 gallon cases) for the beer sold by the Company
for the periods shown:
PRO FORMA
FISCAL 1998 FISCAL 1997 FISCAL 1996 FISCAL 1995
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BEER NET SALES VOLUME NET SALES VOLUME NET SALES VOLUME NET SALES VOLUME
--------- ------ --------- ------ --------- ------ --------- ------
$ 376,607 30,016 $ 298,925 23,848 $ 239,785 19,344 $ 216,159 17,471
Net sales and unit volume of the Company's beer brands have grown since
Fiscal 1995, primarily as a result of the increased sales of Corona and the
Company's other Mexican beer brands. Net sales and unit volume increased 26.0%
in Fiscal 1998 compared to Fiscal 1997. This sales growth helped Corona Extra
become the number one imported beer nationwide.
DISTILLED SPIRITS: The Company is the fourth largest supplier of distilled
spirits in the United States. The Company produces, bottles, imports and markets
a diversified line of quality distilled spirits, and also exports distilled
spirits to approximately 20 foreign countries. The Company's principal distilled
spirits brands include Fleischmann's, Barton, Mr. Boston, Canadian LTD, Ten
High, Montezuma, Inver House and Monte Alban. Substantially all of the Company's
spirits unit volume consists of products marketed in the price value segment.
The table below sets forth the net sales (in thousands of dollars) and unit
volume (in thousands of 9-liter case equivalents) for the distilled products
case goods sold by the Company for the periods shown:
PRO FORMA
FISCAL 1998 FISCAL 1997 FISCAL 1996 (a) FISCAL 1995 (a)
DISTILLED ------------------ ------------------ ------------------ ------------------
SPIRITS NET SALES VOLUME NET SALES VOLUME NET SALES VOLUME NET SALES VOLUME
--------- ------ --------- ------ --------- ------ --------- ------
$ 200,276 11,456 $ 183,843 10,899 $ 178,803 10,740 $ 184,536 10,930
<FN>
(a) Net sales and volume include the brands and products acquired in the
UDG Acquisition as if they had been owned by the Company for the
entire period.
</FN>
For Fiscal 1998, net sales and unit volume of distilled spirits brands sold
by the Company increased 9% and 5%, respectively, compared to Fiscal 1997. Unit
volume of vodka, tequila, brandy, bourbon whiskey and Canadian whisky have
increased while blended whiskey, Scotch whisky and gin have experienced
decreases in unit volume.
From the beginning of Fiscal 1995 to the end of Pro Forma Fiscal 1996, the
unit volume of brands acquired in the UDG Acquisition declined in excess of
industry rates. The Company believes that these declines resulted from
noncompetitive retail pricing and promotional activities. The Company
implemented pricing and promotional activities during Fiscal 1997 which
eliminated the rate of decline and resulted in a volume increase of 3% in Fiscal
1997 and 4% in Fiscal 1998.
OTHER PRODUCTS AND RELATED SERVICES: As a related part of its wine
business, the Company produces grape juice concentrate. Grape juice concentrate
is sold to the food and wine industries as a raw material for the production of
juice-based products, no-sugar-added foods and beverages. Grape juice
concentrate competes with other domestically produced and imported fruit-based
concentrates. The Company is one of the leading grape juice concentrate
producers in the United States. The Company's other wine related products and
services include: bulk wine; grape juice; St. Regis, a leading nonalcoholic line
of wine in the United States; cooking wine; and wine for the production of
vinegar. The Company also sells distilled spirits in bulk and provides contract
production and bottling services for third parties.
MARKETING AND DISTRIBUTION
The Company's products are distributed and sold throughout the United
States through over 850 wholesalers, as well as through state alcoholic beverage
control agencies. The Company employs a full-time, in-house marketing, sales and
customer service organization of approximately 415 people to develop and service
its sales to wholesalers and state agencies. The Company's sales force is
organized in separate sales divisions: a beer division, a spirits division and a
wine division. The Company believes that the organization of its sales force
into separate divisions positions it to maintain a high degree of focus on each
of its principal product categories.
The Company's marketing strategy places primary emphasis upon promotional
programs directed at its broad national distribution network (and to the
retailers served by that network). The Company has extensive marketing programs
for its brands including promotional programs on both a national basis and
regional basis in accordance with the strength of the brands, point-of-sale
materials, consumer media advertising, event sponsorship, market research, trade
advertising and public relations.
In fiscal 1999, the Company expects to increase its advertising
expenditures to put more emphasis on consumer advertising for certain wine
brands, including newly introduced brands, and for its imported beer brands,
primarily Mexican brands. In addition, promotional spending in fiscal 1999 could
increase as it relates to the Company's wine brands to address competitive
factors.
TRADEMARKS AND DISTRIBUTION AGREEMENTS
The Company's wine and distilled spirits products are sold under a number
of trademarks. Most of these trademarks are owned by the Company.
The Company also produces and sells wine and distilled spirits products
under exclusive license or distribution agreements. Significant agreements
include: a long-term license agreement with Nabisco Brands Company for a term
which expires in 2008 and which automatically renews for successive additional
20 year terms unless canceled by the Company for the Fleischmann's spirits
brands; a long-term license agreement with Hiram Walker & Sons, Inc. for a term
which expires in 2116 for the Ten High, Crystal Palace, Northern Light and
Imperial Spirits brands; and a long-term license agreement with the B.
Manischewitz Company for a term which expires in 2042 for the Manischewitz brand
of kosher wine. The Company also has other less significant license and
distribution agreements related to the sale of wine and distilled spirits with
terms of various durations.
All of the Company's imported beer products are marketed and sold pursuant
to exclusive distribution agreements with the suppliers of these products. These
agreements have terms that vary and prohibit the Company from importing other
beer from the same country. The Company's agreement to distribute Corona and its
other Mexican beer brands exclusively throughout 25 states expires in December
2006 and, subject to compliance with certain performance criteria, continued
retention of certain Company personnel and other terms under the agreement, will
be automatically renewed for additional terms of five years. The Company's
agreement for the importation of St. Pauli Girl expires in 2003, subject to
compliance with certain performance criteria. The Company's agreement for the
exclusive importation of Tsingtao throughout the entire United States expires in
December 1999 and, subject to compliance with certain performance criteria and
other terms under the agreement, will be automatically renewed until December
2002. Prior to their expiration, these agreements may be terminated if the
Company fails to meet certain performance criteria. The Company believes it is
currently in compliance with its material imported beer distribution agreements.
From time to time, the Company has failed, and may in the future fail, to
satisfy certain performance criteria in its distribution agreements. Although
there can be no assurance that its beer distribution agreements will be renewed,
given the Company's long-term relationships with its suppliers, the Company
expects that such agreements will be renewed prior to their expiration and does
not believe that these agreements will be terminated.
COMPETITION
The beverage alcohol industry is highly competitive. The Company competes
on the basis of quality, price, brand recognition and distribution. The
Company's beverage alcohol products compete with other alcoholic and
nonalcoholic beverages for consumer purchases, as well as shelf space in retail
stores and marketing focus by the Company's wholesalers. The Company competes
with numerous multinational producers and distributors of beverage alcohol
products, many of which have significantly greater resources than the Company.
The Company's principal competitors include E & J Gallo Winery and The Wine
Group in the wine category; Heineken USA, Molson Breweries USA, Labatt's USA and
Guinness Import Company in the imported beer category; and Jim Beam Brands and
Heaven Hill Distilleries, Inc. in the distilled spirits category.
PRODUCTION
The Company's wine is produced from several varieties of wine grapes grown
principally in California and New York. The grapes are crushed at the Company's
wineries and stored as wine, grape juice or concentrate. Such grape products may
be made into wine for sale under the Company's brand names, sold to other
companies for resale under their own labels, or shipped to customers in the form
of juice, juice concentrate, unfinished wine, high-proof grape spirits or
brandy. Most of the Company's wine is bottled and sold within 18 months after
the grape crush. The Company's inventories of wine, grape juice and concentrate
are usually at their highest levels in November and December, immediately after
the crush of each year's grape harvest, and are substantially reduced prior to
the subsequent year's crush.
The bourbon whiskeys, domestic blended whiskeys and light whiskeys marketed
by the Company are primarily produced and aged by the Company at its distillery
in Bardstown, Kentucky, though it may from time to time supplement its
inventories through purchases from other distillers. At its Albany, Georgia,
facility, the Company produces all of the neutral grain spirits and whiskeys
used by it in the production of vodka, gin and blended whiskey sold by it to
customers in the state of Georgia. The Company's requirements of Canadian and
Scotch whiskies, and tequila, mezcal, and the neutral grain spirits used by it
in the production of gin and vodka for sale outside of Georgia, and other
spirits products, are purchased from various suppliers.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The principal components in the production of the Company's branded
beverage alcohol products are: packaging materials, primarily glass; grapes; and
other agricultural products, such as grain.
The Company utilizes glass and PET bottles and other materials, such as
caps, corks, capsules, labels and cardboard cartons, in the bottling and
packaging of its products. Glass bottle costs are one of the largest components
of the Company's cost of product sold. The glass bottle industry is highly
concentrated with only a small number of producers. The Company has
traditionally obtained, and continues to obtain, its glass requirements from a
limited number of producers. The Company has not experienced difficulty in
satisfying its requirements with respect to any of the foregoing and considers
its sources of supply to be adequate. However, the inability of any of the
Company's glass bottle suppliers to satisfy the Company's requirements could
adversely affect the Company's operations.
Most of the Company's annual grape requirements are satisfied by purchases
from each year's harvest, which normally begins in August and runs through
October. Costs per ton for grapes in the fall 1995 and fall 1996 grape harvests
escalated dramatically. Costs per ton for grapes in the fall 1997 grape harvest
decreased slightly as compared to the fall 1996 grape harvest. The Company
believes that it has adequate sources of grape supplies to meet its sales
expectations. However, in the event demand for certain wine products exceeds
expectations, the Company could experience shortages.
The Company purchases grapes from over 700 independent growers principally
in the San Joaquin Valley and Monterey regions of California and in New York
State. The Company enters into written purchase agreements with a majority of
these growers on a year-to-year basis. The Company currently owns or leases
under various arrangements approximately 4,200 acres of vineyards, either fully
bearing or under development, in California and New York. This acreage supplies
only a small percentage of the Company's total needs. The Company continues to
consider the purchase or lease of additional vineyards, and additional land for
vineyard plantings, to supplement its grape supply.
The distilled spirits manufactured by the Company require various
agricultural products, neutral grain spirits and bulk spirits. The Company
fulfills its requirements through purchases from various sources, through
contractual arrangements and through purchases on the open market. The Company
believes that adequate supplies of the aforementioned products are available at
the present time.
GOVERNMENT REGULATION
The Company's operations are subject to extensive federal and state
regulation. These regulations cover, among other matters, sales promotion,
advertising and public relations, labeling and packaging, changes in officers or
directors, ownership or control, distribution methods and relationships, and
requirements regarding brand registration and the posting of prices and price
changes. All of the Company's facilities are also subject to federal, state and
local environmental laws and regulations and the Company is required to obtain
permits and licenses to operate its facilities. The Company believes that it is
in compliance in all material respects with all presently applicable
governmental laws and regulations and that the cost of administration of
compliance with such laws and regulations does not have, and is not expected to
have, a material adverse impact on the Company's financial condition or results
of operations.
EMPLOYEES
The Company had approximately 2,500 full-time employees at the end of
Fiscal 1998 and Fiscal 1997. As of February 28, 1998, approximately 1,030
employees were covered by collective bargaining agreements. Additional workers
may be employed by the Company during the grape crushing season. The Company
considers its employee relations generally to be good.
ITEM 2. PROPERTIES
- ------- ----------
The Company currently operates 10 wineries, two distilling plants, one of
which includes bottling operations, three bottling plants and a brewery, most of
which include warehousing and distribution facilities on the premises. All of
these facilities are owned by the Company other than a winery in Escalon,
California, a winery in Batavia, New York and a bottling plant in Carson,
California, each of which is leased. The Company considers its principal
facilities to be the Mission Bell winery in Madera, California; the Canandaigua,
New York winery; the Monterey Cellars winery in Gonzales, California; the
distilling and bottling facility located in Bardstown, Kentucky; and the
bottling facility located in Owensboro, Kentucky.
In New York, the Company operates three wineries located in Canandaigua,
Naples and Batavia. The Company currently operates seven winery facilities in
California. The Mission Bell winery is a crushing, wine production, bottling and
distribution facility and a grape juice concentrate production facility. The
Monterey Cellars winery is a crushing, wine production and bottling facility.
The other wineries operated in California are located in Escalon, Madera,
Fresno, and Ukiah. The Company has exercised its option to buy the Escalon
facility and is in the process of transferring the facility's ownership to the
Company. The Company currently owns or leases under various arrangements
approximately 4,200 acres of vineyards, either fully bearing or under
development, in California and New York.
The Company operates five facilities that produce, bottle and store
distilled spirits. It owns a distilling, bottling and storage facility in
Bardstown, Kentucky, and a distilling and storage facility in Albany, Georgia,
and operates bottling plants in Atlanta, Georgia; Owensboro, Kentucky; and
Carson, California. The Carson plant is operated under a management contract and
a sublease, each of which is scheduled to expire on December 31, 1998. The
parties are currently negotiating an extension of this arrangement. The Carson
plant receives distilled spirits in bulk from Bardstown and outside vendors,
which it bottles and distributes. The Company also performs contract bottling at
the Carson plant. The Bardstown facility distills, bottles and warehouses
distilled spirits products for the Company's account and on a contractual basis
for other participants in the industry. The Owensboro facility bottles and
warehouses distilled spirits products for the Company's account and performs
contract bottling. The Company's Atlanta, Georgia facility bottles, for itself
and on a contract basis, and its Albany, Georgia facility distills, for its own
account, vodka, gin and blended whiskeys.
The Company owns a brewery in Stevens Point, Wisconsin, where it produces
and bottles Point beer and brews and packages on a contract basis for a variety
of brewing and other food and beverage industry members.
The Company maintains its corporate headquarters in offices leased in
Fairport, New York, and maintains its wine division headquarters in offices
owned in Canandaigua, New York, where it also leases additional office space.
The Company also leases office space in Chicago, Illinois, for its Barton
headquarters.
The Company believes that all of its facilities are in good condition and
working order and have adequate capacity to meet its needs for the foreseeable
future.
Most of the Company's real property has been pledged under the terms of
collateral security mortgages as security for the payment of outstanding loans
under the Company's bank Credit Agreement (as defined in Item 7 of this Report
on Form 10-K under "Financial Liquidity and Capital Resources").
ITEM 3. LEGAL PROCEEDINGS
- ------- -----------------
The Company and its subsidiaries are subject to litigation from time to
time in the ordinary course of business. Although the amount of any liability
with respect to such litigation cannot be determined, in the opinion of
management, such liability will not have a material adverse effect on the
Company's financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
Not Applicable.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth information with respect to the current
executive officers of the Company:
NAME AGE OFFICE HELD
- ---- --- -----------
Marvin Sands 74 Chairman of the Board
Richard Sands 47 President and Chief Executive Officer
Robert Sands 39 Executive Vice President, General Counsel and Secretary
Daniel C. Barnett 48 President of Canandaigua Wine Company, Inc.
Alexander L. Berk 48 President and Chief Operating Officer of Barton
Incorporated
Thomas S. Summer 44 Senior Vice President and Chief Financial Officer
Marvin Sands is the founder of the Company, which is the successor to a
business he started in 1945. He has been a director of the Company and its
predecessor since 1946 and was Chief Executive Officer until October 1993.
Marvin Sands is the father of Richard Sands and Robert Sands.
Richard Sands, Ph.D., has been employed by the Company in various
capacities since 1979. He was elected Executive Vice President and a director in
1982, became President and Chief Operating Officer in May 1986 and was elected
Chief Executive Officer in October 1993. He is a son of Marvin Sands and the
brother of Robert Sands.
Robert Sands was appointed Executive Vice President, General Counsel in
October 1993. In January 1995, he was appointed Secretary of the Company. He was
elected a director of the Company in January 1990 and served as Vice President,
General Counsel since June 1990. From June 1986, until his appointment as Vice
President, General Counsel, Mr. Sands was employed by the Company as General
Counsel. He is a son of Marvin Sands and the brother of Richard Sands.
Daniel C. Barnett serves as President of Canandaigua Wine Company, Inc., a
wholly-owned subsidiary of the Company. In this capacity, Mr. Barnett is in
charge of the Company's wine division, and has been since he joined the Company
in November 1995. From July 1994 to October 1995, Mr. Barnett served as
President and Chief Executive Officer of Koala Springs International, a juice
beverage company. Prior to that, from April 1991 to June 1994, Mr. Barnett was
Vice President and General Manager of Nestle USA's beverage businesses. From
October 1988 to April 1991, he was President of Weyerhauser's baby diaper
division.
Alexander L. Berk serves as President and Chief Operating Officer of Barton
Incorporated, a wholly-owned subsidiary of the Company. In this capacity, Mr.
Berk is in charge of the Company's beer and spirits divisions. Mr. Berk became
an executive officer of the Company on February 28, 1998, when his position was
expanded to include overall responsibility for the beer and spirits divisions.
This change occurred when Ellis M. Goodman, who formerly held this
responsibility, left Barton to pursue other interests. Mr. Berk has served as
President and Chief Operating Officer of Barton since 1990. From 1988 to 1990,
Mr. Berk was the President and Chief Executive Officer of Schenley Industries
and previously served in various other positions with Schenley since 1971. Mr.
Berk served during an interim period of 1974 to 1978 as the Vice President and
Director of Marketing for Schieffelin & Co., Inc., an importer of wine and
spirits.
Thomas S. Summer joined the Company during April l997 as Senior Vice
President and Chief Financial Officer. From November 1991 to April 1997, Mr.
Summer served as Vice President, Treasurer of Cardinal Health, Inc., a large
national health care services company, where he was responsible for directing
financing strategies and treasury matters. Prior to that, from November 1987 to
November 1991, Mr. Summer held several positions in corporate finance and
international treasury with PepsiCo, Inc.
Executive officers of the Company hold office until the next Annual Meeting
of the Board of Directors and until their successors are chosen and qualify.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- ------- -----------------------------------------------------------------
MATTERS
-------
The Company's Class A Common Stock (the "Class A Stock") and Class B Common
Stock (the "Class B Stock") trade on the NASDAQ National Stock Market under the
symbols "CBRNA" and "CBRNB," respectively. The following tables set forth for
the periods indicated the high and low sales prices of the Class A Stock and the
Class B Stock as reported on the NASDAQ National Stock Market.
CLASS A STOCK
---------------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
Fiscal 1997
High $39 1/2 $32 1/4 $27 1/2 $31 3/4
Low $27 $22 7/8 $15 3/4 $25 1/2
Fiscal 1998
High $32 1/4 $42 3/4 $53 1/2 $58 1/2
Low $21 7/8 $29 3/8 $39 1/2 $43 3/4
CLASS B STOCK
---------------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
Fiscal 1997
High $39 1/2 $32 1/2 $29 3/4 $34
Low $27 3/4 $25 3/8 $19 $28 3/4
Fiscal 1998
High $37 $43 $54 5/8 $57 3/4
Low $27 $35 1/2 $40 3/4 $45
At May 18, 1998, the number of holders of record of Class A Stock and Class
B Stock of the Company were 1,076 and 317, respectively.
The Company's policy is to retain all of its earnings to finance the
development and expansion of its business, and the Company has not paid any cash
dividends since its initial public offering in 1973. In addition, the Company's
current bank Credit Agreement, the Company's indenture for its $130 million 8
3/4% Senior Subordinated Notes due 2003 and its indenture for its $65 million 8
3/4% Series C Senior Subordinated Notes due 2003 restrict the payment of cash
dividends.
ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------
FOR THE SIX
FOR THE YEARS ENDED MONTHS ENDED FOR THE YEARS ENDED
FEBRUARY 28, FEBRUARY 29, AUGUST 31,
--------------------------- -------------- -------------------------------------
1998 1997 1996 1995 1994 1993
------------ ------------ -------------- ---------- ----------- ----------
(in thousands, except per
share data)
Gross sales $ 1,632,357 $ 1,534,452 $ 738,415 $ 1,185,074 $ 861,059 $ 389,417
Less-excise taxes (419,569) (399,439) (203,391) (278,530) (231,475) (83,109)
------------ ------------- ------------ ------------ ----------- -----------
Net sales 1,212,788 1,135,013 535,024 906,544 629,584 306,308
Cost of product sold (864,053) (844,181) (396,208) (653,811) (447,211) (214,931)
------------ ------------- ------------ ------------ ----------- -----------
Gross profit 348,735 290,832 138,816 252,733 182,373 91,377
Selling, general and
administrative expenses (231,680) (208,991) (112,411) (159,196) (121,388) (59,983)
Nonrecurring restructuring
expenses - - (2,404) (2,238) (24,005) -
------------ ------------- ------------ ------------ ----------- -----------
Operating income 117,055 81,841 24,001 91,299 36,980 31,394
Interest expense, net (32,189) (34,050) (17,298) (24,601) (18,056) (6,126)
------------ ------------- ------------ ------------ ----------- -----------
Income before provision
for Federal and state
income taxes 84,866 47,791 6,703 66,698 18,924 25,268
Provision for Federal and
state income taxes (34,795) (20,116) (3,381) (25,678) (7,191) (9,664)
------------ ------------- ------------ ------------ ----------- -----------
Net income $ 50,071 $ 27,675 $ 3,322 $ 41,020 $ 11,733 $ 15,604
============ ============= ============ ============ =========== ===========
Earnings per common share:
Basic $ 2.68 $ 1.43 $ 0.17 $ 2.18 $ 0.76 $ 1.32
============ ============= ============ ============ =========== ===========
Diluted $ 2.62 $ 1.42 $ 0.17 $ 2.16 $ 0.75 $ 1.20
============ ============= ============ ============ =========== ===========
Total assets $ 1,073,159 $ 1,020,901 $ 1,054,580 $ 785,921 $ 826,562 $ 355,182
============ ============= ============ ============ =========== ===========
Long-term debt $ 309,218 $ 338,884 $ 327,616 $ 198,859 $ 289,122 $ 108,303
============ ============= ============ ============ =========== ===========
For the fiscal years ended February 28, 1998 and 1997, and the six months ended
February 29, 1996, see Management's Discussion and Analysis of Financial
Condition and Results of Operations under Item 7 of this Report and Notes to
Consolidated Financial Statements as of February 28, 1998, under Item 8 of this
Report.
Earnings per common share for all periods presented reflect the Company's
adoption of SFAS No. 128 (see Notes 1 and 10 in the Notes to Consolidated
Financial Statements as of February 28, 1998, under Item 8 of this Report).
ITEM 7. 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 year
ended February 28, 1998 ("Fiscal 1998"), compared to the year ended February 28,
1997 ("Fiscal 1997"), Fiscal 1997 compared to the twelve months ended February
29, 1996 ("Pro Forma Fiscal 1996"), and the six month transition period ended
February 29, 1996 ("Transition Period"), compared to the six months ended
February 28, 1995 ("February 1995 Six Months"), and (ii) financial liquidity and
capital resources for Fiscal 1998. This discussion and analysis should be read
in conjunction with the Company's consolidated financial statements and notes
thereto included herein.
The Company operates primarily in the beverage alcohol industry. The
Company is principally a producer and supplier of wine and an importer and
producer of beer and distilled spirits in the United States. The Company's
beverage alcohol brands are marketed in three general categories: wine, beer and
distilled spirits.
RESULTS OF OPERATIONS
FISCAL 1998 COMPARED TO FISCAL 1997
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 Fiscal 1998 and
Fiscal 1997.
Fiscal 1998 Compared to Fiscal 1997
---------------------------------------------------------------------
Net Sales Unit Volume
------------------------------------ ----------------------------
Branded Beverage %Increase/ %Increase/
Alcohol Products: 1998 1997 (Decrease) 1998 1997 (Decrease)
---------- ---------- ---------- ------ ------ ----------
Wine $ 533,257 $ 512,510 4.0% 27,793 27,393 1.5%
Beer 376,607 298,925 26.0% 30,016 23,848 25.9%
Spirits 200,276 183,843 8.9% 9,930 9,390 5.8%
Other (a) 102,648 139,735 (26.5%) N/A N/A N/A
---------- ---------- ---------- ------ ------ ----------
$1,212,788 $1,135,013 6.9% 67,739 60,631 11.7%
========== ========== ========== ====== ====== ==========
<FN>
(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.
</FN>
Net sales for Fiscal 1998 increased to $1,212.8 million from $1,135.0
million for Fiscal 1997, an increase of $77.8 million, or 6.9%. This increase
resulted primarily from (i) $77.7 million of additional beer sales, largely
Mexican beer, (ii) $22.5 million of additional table wine sales and (iii) $16.4
million of additional spirits sales. These increases were partially offset by
lower sales of grape juice concentrate, bulk wine and other branded wine
products. Although table wine sales have increased, the Company has experienced
a market share decline of its wine products during Fiscal 1998, a trend which
has continued into fiscal 1999. The Company is implementing various programs to
address the decline, such as addressing noncompetitive consumer prices of its
wine products on a market-by-market basis as well as increasing its promotional
activities where appropriate.
GROSS PROFIT
The Company's gross profit increased to $348.7 million for Fiscal 1998 from
$290.8 million for Fiscal 1997, an increase of $57.9 million, or 19.9%. As a
percent of net sales, gross profit increased to 28.8% for Fiscal 1998 from 25.6%
for Fiscal 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
valuation ("FIFO") only, gross profit reflected an addition of $5.0 million in
Fiscal 1998 and a reduction of $31.4 million in Fiscal 1997 due to the Company's
LIFO accounting method.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $231.7 million
for Fiscal 1998 from $209.0 million for Fiscal 1997, an increase of $22.7
million, or 10.9%. The dollar increase in selling, general and administrative
expenses resulted principally from marketing and selling costs associated with
the Company's increased branded sales volume, and a one-time charge for
separation costs related to an organizational change within the Company.
Selling, general and administrative expenses as a percent of net sales increased
to 19.1% for Fiscal 1998 as compared to 18.4% for Fiscal 1997. The increase in
percent of net sales resulted from the one-time charge for separation costs
related to an organizational change within the Company and 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 cost 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 $32.2 million for Fiscal 1998 from $34.1
million for Fiscal 1997, a decrease of $1.9 million, or 5.5%. The decrease was
primarily due to a decrease in 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 Fiscal 1998 decreased to 41.0% from
42.1% for Fiscal 1997 as Fiscal 1997 reflected a higher effective tax rate in
California caused by statutory limitations on the Company's ability to utilize
certain deductions.
NET INCOME
As a result of the above factors, net income increased to $50.1 million for
Fiscal 1998 from $27.7 million for Fiscal 1997, an increase of $22.4 million, or
80.9%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Fiscal 1998 were
$150.2 million, an increase of $36.5 million over EBITDA of $113.7 million for
Fiscal 1997. EBITDA should not be construed as an alternative to operating
income or net cash flow from operating activities and should not be construed as
an indication of operating performance or as a measure of liquidity.
FISCAL 1997 COMPARED TO PRO FORMA FISCAL 1996
NET SALES
Net sales for Fiscal 1997 increased to $1,135.0 million from $987.1 million
for Pro Forma Fiscal 1996, an increase of $147.9 million, or 15.0%. This
increase resulted primarily from (i) $59.1 million of additional imported beer
sales, primarily Mexican beer; (ii) the inclusion of $49.0 million of net sales
of products and services from the UDG Acquisition during the period from March
1, 1996, through August 31, 1996; (iii) $22.7 million of higher sales of grape
juice concentrate; (iv) $19.4 million of increased net sales of the Company's
varietal table wine products (wine named for the grape that comprises the
principal component of the wine) resulting from selling price increases
implemented between October 1995 and May 1996, as well as additional unit
volume; and (v) $5.8 million of additional sales of spirits brands; partially
offset by $5.2 million of decreased sales of the Company's nonvarietal table
wine brands (wine named after the European regions where similar types of wine
were originally produced [e.g., burgundy], niche products and proprietary
brands) and a decrease of $2.9 million in sales of other products and services.
For purposes of computing the net sales and unit volume comparative data
for the table below and for the remainder of the discussion of net sales, sales
of spirits acquired in the UDG Acquisition have been included for the period
from March 1, 1995, through August 31, 1995, which was prior to the UDG
Acquisition.
The following table sets forth the net sales (in thousands of dollars) and
unit volume (in thousands of cases), if applicable, for branded beverage alcohol
products and other products and services sold by the Company for Fiscal 1997 and
Pro Forma Fiscal 1996.
Fiscal 1997 Compared to Pro Forma Fiscal 1996
---------------------------------------------------------------------
Net Sales Unit Volume
------------------------------------ ----------------------------
Branded Beverage %Increase/ %Increase/
Alcohol Products: 1997 1996 (Decrease) 1997 1996 (Decrease)
---------- ---------- ---------- ------ ------ ----------
Wine $ 512,510 $ 499,962 2.5% 27,393 28,232 (3.0%)
Beer 298,925 239,786 24.7% 23,848 19,344 23.3%
Spirits (a) 183,843 178,803 2.8% 9,390 9,223 1.8%
Other (b) 139,735 110,047 27.0% N/A N/A N/A
---------- ---------- ---------- ------ ------ ----------
$1,135,013 $1,028,598 10.3% 60,631 56,799 6.7%
========== ========== ========== ====== ====== ==========
<FN>
(a) For comparison purposes only, net sales of $41,514 and unit volume of
2,001 cases of distilled spirits brands acquired in the September 1,
1995, UDG Acquisition have been included in the table for the twelve
months ended February 29, 1996. These amounts represent net sales and
unit volume of those brands for the period March 1, 1995, through
August 31, 1995, which was prior to the UDG Acquisition.
(b) Other consists primarily of nonbranded concentrate sales, contract
bottling and other production services and bulk product sales, none of
which are sold in case quantities.
</FN>
Net sales and unit volume for Fiscal 1997 increased 10.3% and 6.7%,
respectively, as compared to Pro Forma Fiscal 1996. The net sales increase
resulted from higher imported beer sales, higher sales of grape juice
concentrate, price increases on most of the Company's branded wine products,
particularly varietal table wine brands, and increased sales of the Company's
spirits brands. Unit volume increases were led by substantial growth in the
Company's imported beer brands and increases in its varietal table wine and
spirits brands, partially offset by declines in unit volume of nonvarietal table
wine, dessert wine and sparkling wine. Excluding the impact of the UDG
Acquisition, net sales and unit volume increased by 10.7% and 7.1%,
respectively. Net sales of the brands acquired in the UDG Acquisition decreased
by 1.2% and unit volume increased by 2.5% in Fiscal 1997. Net sales declines
reflected the impact of downward selling price adjustments to bring these brands
more in line with the pricing strategy of the rest of the Company's spirits
portfolio.
GROSS PROFIT
The Company's gross profit increased to $290.8 million in Fiscal 1997 from
$264.8 million in Pro Forma Fiscal 1996, an increase of $26.1 million, or 9.8%.
This change in gross profit resulted primarily from (i) $20.5 million of gross
profit from sales generated during the period from March 1, 1996, through August
31, 1996, from the business acquired from UDG; (ii) $19.0 million of additional
gross profit from increased beer sales; and (iii) $13.4 million of lower gross
profit primarily due to increased cost of product sold, particularly higher
grape costs in the fall 1996 harvest and additional costs resulting from
inefficiencies in the production of wine and grape juice concentrate at the
Company's Mission Bell winery in California, partially offset by additional net
sales resulting primarily from selling price increases of the Company's branded
wine and grape juice concentrate products and a reduction of certain long-term
grape contracts to reflect current market prices and the renegotiation of
certain unfavorable contracts. The Company's increased production costs stemmed
from low bulk wine conversion rates and bottling inefficiencies. The Company
also experienced high imported concentrate and bulk freight costs. The Company
has instituted a series of steps to address these matters, including a
reengineering effort to redesign its work processes, organizational structure
and information systems.
Gross profit as a percentage of net sales was 25.6% for Fiscal 1997 as
compared to 26.8% in Pro Forma Fiscal 1996. The decline in the gross profit
margin was largely due to higher costs, particularly grape costs, of wine and
grape juice concentrate products, partially offset by increased selling prices
on most of the Company's branded wine and grape juice concentrate products. The
Company has experienced significant increases in its cost of grapes in both the
1995 and 1996 harvests. The Company believes that these increases in grape costs
were due to an imbalance in supply and demand in the varieties which the Company
purchases.
In general, the preferred method of accounting for inventory valuation is
the last-in, first-out method ("LIFO") because, in most circumstances, it
results in a better matching of costs and revenues. For comparison purposes to
companies using the first-in, first-out method of accounting for inventory
valuation ("FIFO") only, gross profit reflected a reduction of $31.4 million and
$3.9 million in Fiscal 1997 and Pro Forma Fiscal 1996, respectively, due to the
Company's LIFO accounting method.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for Fiscal 1997 were $209.0
million, an increase of $17.3 million as compared to Pro Forma Fiscal 1996. Of
this amount, $13.5 million was due primarily to increased personnel and related
expenses stemming from the Company's reengineering efforts, including the
continued strengthening of the Company's management, and other expenses
consistent with the Company's growth; and $11.3 million related to the UDG
Acquisition. These items were offset primarily by one-time costs incurred in
advertising and promotion expenses in Pro Forma Fiscal 1996 due to the change in
the Company's fiscal year-end.
NONRECURRING RESTRUCTURING EXPENSES
Pro Forma Fiscal 1996 included $4.0 million of nonrecurring restructuring
expenses.
INTEREST EXPENSE, NET
Net interest expense totaled $34.1 million in Fiscal 1997, an increase of
$5.3 million as compared to Pro Forma Fiscal 1996, primarily due to additional
interest expense from the UDG Acquisition financing.
PROVISION FOR FEDERAL AND STATE INCOME TAXES
The Company's effective tax rate for Fiscal 1997 was 42.1% as compared to
40.5% for Pro Forma Fiscal 1996 due to a higher effective tax rate in California
caused by statutory limitations on the Company's ability to utilize certain
deductions.
NET INCOME
As a result of the above factors, net income for Fiscal 1997 was $27.7
million, an increase of $3.7 million as compared to Pro Forma Fiscal 1996.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Fiscal 1997 were
$113.7 million, an increase of $22.6 million over EBITDA of $91.1 million in Pro
Forma Fiscal 1996. EBITDA should not be construed as an alternative to operating
income or net cash flow from operating activities and should not be construed as
an indication of operating performance or as a measure of liquidity.
TRANSITION PERIOD COMPARED TO FEBRUARY 1995 SIX MONTHS
NET SALES
Net sales for the Transition Period increased to $535.0 million from $454.5
million for the February 1995 Six Months, an increase of $80.5 million, or
17.7%. In addition to the net sales of $53.4 million of products and services
from the UDG Acquisition, the Company had additional net sales of $23.6 million
from its imported beer brands and $14.1 million from its varietal wine products,
partially offset by lower sales of bulk wine, nonvarietal wine, contract
bottling services, grape juice concentrate and dessert wine.
For purposes of computing the net sales and unit volume comparative data
below and for the remainder of the discussion of net sales, sales of products
acquired in the UDG Acquisition have been included in the Company's results for
the entire Transition Period and the entire February 1995 Six Months, which was
prior to the UDG Acquisition.
The following table sets forth the net sales (in thousands of dollars) and
unit volume (in thousands of cases), if applicable, for branded beverage alcohol
products and other products and services sold by the Company for the Transition
Period and the February 1995 Six Months.
Transition Period Compared to February 1995 Six Months
-----------------------------------------------------------------------------
Net Sales Unit Volume
------------------------------------ ------------------------------------
February February
Branded Beverage Transition 1995 %Increase/ Transition 1995 %Increase/
Alcohol Products: Period Six Months (Decrease) Period Six Months (Decrease)
---------- ---------- ---------- ---------- ---------- ----------
Wine $ 268,782 $ 255,881 5.0% 14,783 14,537 1.7%
Beer 115,757 92,131 25.6% 9,316 7,444 25.1%
Spirits (a) 91,219 96,547 (5.5%) 4,648 4,793 (3.0%)
Other (b) 59,266 60,548 (2.1%) N/A N/A N/A
---------- ---------- ---------- ---------- ---------- ----------
$ 535,024 $ 505,107 5.9% 28,747 26,774 7.4%
========== ========== ========== ========== ========== ==========
<FN>
(a) For comparison purposes only, net sales of $50,622 and unit volume of
2,340 of distilled spirits have been included in the table for the six
months ended February 28, 1995, which was prior to the UDG
Acquisition.
(b) Other consists primarily of nonbranded concentrate sales, contract
bottling and other production services and bulk product sales, none of
which are sold in case quantities.
</FN>
Net sales and unit volume for the Transition Period increased 5.9% and
7.4%, respectively, as compared to the February 1995 Six Months. These increases
were principally due to increased net sales and unit volume of the Company's
imported beer brands and varietal table wine brands. Excluding the impact of the
UDG Acquisition, net sales and unit volume grew by 6.0% and 9.2%, respectively,
in the Transition Period. Unit sales of the brands acquired in the UDG
Acquisition were 11.5% lower than in the February 1995 Six Months, accounting
for lower overall spirits sales. During the period from 1993 to 1995, the brands
acquired in the UDG Acquisition declined in excess of industry rates. The
Company believes that these declines resulted from noncompetitive retail pricing
and promotional activities.
GROSS PROFIT
Gross profit for the Transition Period was $138.8 million, an increase of
$12.0 million as compared to gross profit of $126.8 million for the February
1995 Six Months. This increase in gross profit resulted from $18.5 million of
additional gross profit from sales generated from the business acquired from UDG
and $1.0 million from ongoing operations, which was offset in part by $7.5
million of (i) overtime, freight and other expenses and restructuring charges
related to production and shipping delays associated with the relocation of West
Coast bottling operations to the Company's Mission Bell winery, employee bonuses
and certain nonrecurring expenses; and (ii) as a result of the change in the
Company's fiscal year end, increased cost of product sold due to the different
amount and composition of inventory levels at the end of February versus the end
of August, the Company's former fiscal year end. The $1.0 million increase in
gross profit from ongoing operations resulted from a $7.3 million increase in
gross profit, primarily due to increased sales and gross margins from the
Company's imported beer business, partially offset by $6.3 million of lower
gross profits in the Company's wine and grape juice concentrate businesses,
which was due primarily to higher grape costs which were only partially
recovered by selling price increases in the Transition Period.
Gross profit as a percentage of net sales declined from 27.9% to 25.9% in
the Transition Period. This decline was due primarily to the impact of higher
grape and other costs in the Transition Period, partially offset by the higher
gross profit sales of brands acquired from UDG and improved gross profit as a
percentage of net sales in the Company's imported beer business. The gross
profit percentage was positively impacted by the UDG Acquisition, as gross
profit as a percentage of net sales on the business acquired from UDG was 34.7%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses totaled $112.4 million for the
Transition Period, an increase of $32.5 million as compared to the February 1995
Six Months. Exclusive of $11.1 million of nonrecurring costs including, as a
result of the change in the Company's fiscal year end, the recognition of higher
than normal advertising and promotion expenses in the Transition Period due to
the seasonality of these expenses and employee bonuses and other nonrecurring
costs and $8.3 million related to the UDG Acquisition, selling, general and
administrative expenses increased by $13.1 million, or 16.3%, as compared to the
February 1995 Six Months. Advertising and promotion increases of $6.7 million
were related primarily to the Almaden/Inglenook Product Lines which were
acquired in August 1994 and which the Company did not advertise or promote at a
full level in the first several months after their acquisition. The Company also
incurred increased advertising and promotion expenses related to the increased
sales of its imported beer. Selling expenses increased by $5.4 million primarily
as a result of the Almaden/Inglenook Product Line acquisitions, with the
Transition Period including a full complement of sales and marketing personnel
to service the brands that were not in place for the entire period in the
February 1995 Six Months. The Transition Period also included additional sales
personnel in the Company's spirits and imported beer divisions. Other general
and administrative expenses increased by $1.0 million.
Excluding the nonrecurring costs referred to above and the UDG Acquisition,
selling, general and administrative expenses as a percent of net sales increased
to 19.3% from 17.6% in the February 1995 Six Months due to the inclusion of a
full complement of advertising, promotion and selling expense related to the
Almaden/Inglenook Product Lines.
NONRECURRING RESTRUCTURING EXPENSES
The Company incurred net restructuring charges of $2.4 million in the
Transition Period, as compared to restructuring charges of $0.7 million in the
February 1995 Six Months. The restructuring expenses in the Transition Period
represent $3.1 million of incremental, nonrecurring expenses such as overtime
and freight expense related to production and shipment delays associated with
the Restructuring Plan, offset by a net reduction of $0.7 million in accrued
liabilities associated with the Restructuring Plan to take into account lower
than expected expenses for severance and facility holding and closure costs. See
the Notes to the Company's Consolidated Financial Statements included herein.
INTEREST EXPENSE, NET
Net interest expense increased $4.2 million to $17.3 million in the
Transition Period as compared to the February 1995 Six Months. The increase
resulted from additional interest expense associated with the borrowings related
to the UDG Acquisition, amounting to $5.1 million, and increased working capital
requirements due primarily to higher grape costs and the UDG Acquisition,
partially offset by net reductions in the Company's term loans and revolving
loans using proceeds of the Company's November 18, 1994, public equity offering.
PROVISION FOR FEDERAL AND STATE INCOME TAXES
The Company's effective tax rate for the Transition Period increased to
50.4% from 38.5% for the February 1995 Six Months due to a higher effective tax
rate in California caused by statutory limitations on the Company's ability to
utilize certain deductions.
NET INCOME
As a result of the above factors, net income for the Transition Period was
$3.3 million, a decrease of $17.0 million as compared to the February 1995 Six
Months.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
GENERAL
The Company's principal use of cash in its operating activities is for
purchasing and carrying inventories. The Company's primary source of liquidity
has historically been cash flow from operations, except during the annual fall
grape harvests when the Company has relied on short-term borrowings. The annual
grape crush normally begins in August and runs through October. The Company
generally begins purchasing grapes in August with payments for such grapes
beginning to come due in September. The Company's short-term borrowings to
support such purchases generally reach their highest levels in November or
December. Historically, the Company has used cash flow from operating activities
to repay its short-term borrowings. The Company will continue to use its
short-term borrowings to support its working capital requirements. The Company
believes that cash provided by operating activities and its financing
activities, primarily short-term borrowings, will provide adequate resources to
satisfy its working capital, liquidity and anticipated capital expenditure
requirements for both its short-term and long-term capital needs.
FISCAL 1998 CASH FLOWS
OPERATING ACTIVITIES
Net cash provided by operating activities for Fiscal 1998 was $28.8
million, which resulted from $88.7 million in net income adjusted for noncash
items, less $59.9 million representing a net increase in the Company's operating
assets in excess of operating liabilities. The net increase in operating assets
in excess of operating liabilities resulted primarily from an increase in the
Company's inventory levels of $65.6 million related primarily to higher
purchases of grapes from the 1997 grape harvest.
INVESTING ACTIVITIES AND FINANCING ACTIVITIES
Net cash used in investing activities for Fiscal 1998 was $18.6 million,
which resulted from $31.2 million of capital expenditures, including $11.5
million for vineyards, partially offset by proceeds from the sale of property,
plant and equipment of $12.6 million.
Net cash used in financing activities for Fiscal 1998 was $18.9 million,
which resulted primarily from the repurchase of $9.2 million of the Company's
Class A Common Stock and principal payments of $186.4 million of long-term debt,
which included $74.2 million of scheduled and required principal payments and
payment of $112.2 million of principal under the Company's Third Amended and
Restated Credit Agreement which was refinanced under the December 19, 1997,
Credit Agreement (see Note 6 to the Company's financial statements located in
Item 8 of this Report on Form 10-K). This amount was partially offset by
proceeds of $140.0 million of long-term debt as a result of the refinancing and
proceeds of $34.9 million of net revolving loan borrowings under the Company's
Credit Agreement.
As of February 28, 1998, under the Credit Agreement, the Company had
outstanding term loans of $140.0 million bearing interest at 6.4%, $91.9 million
of revolving loans bearing interest at 6.0%, undrawn revolving letters of credit
of $3.9 million, and $89.2 million in revolving loans available to be drawn.
Total debt outstanding as of February 28, 1998, amounted to $425.2 million,
a decrease of $11.1 million from February 28, 1997. The ratio of total debt to
total capitalization decreased to 50.6% as of February 28, 1998, from 54.5% as
of February 28, 1997.
During January 1996, the Company's Board of Directors authorized the
repurchase of up to $30.0 million of its Class A Common Stock and Class B Common
Stock (the "Repurchase Program"). During May 1997, 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 1,149,550 shares of Class A Common Stock at an
aggregate cost of $30.0 million, or at an average cost of $26.10 per share.
THE COMPANY'S CREDIT AGREEMENT
On December 19, 1997, the Company, its principal operating subsidiaries,
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 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
of February 28, 1998, the Credit Agreement provided for (i) a $140.0 million
term loan facility due in June 2003 and (ii) a $185.0 million revolving loan
facility, including letters of credit up to a maximum of $20.0 million, which
expires in June 2003. A brief description of the Credit Agreement is contained
in Note 6 to the Company's financial statements located in Item 8 of this Report
on Form 10-K.
SENIOR SUBORDINATED NOTES
As of February 28, 1998, the Company had outstanding $195.0 million
aggregate principal amount of 8 3/4% Senior Subordinated Notes due December
2003, being the $130.0 million aggregate principal amount of 8 3/4% Senior
Subordinated Notes due December 2003 issued in December 1993 (the "Original
Notes") and the $65.0 million aggregate principal amount of 8 3/4% Series C
Senior Subordinated Notes due December 2003 issued in February 1997 (the "Series
C Notes"). The Original Notes and the Series C Notes are redeemable at the
option of the Company, in whole or in part, on or after December 15, 1998. A
brief description of the Original Notes and the Series C Notes is contained in
Note 6 to the Company's financial statements located in Item 8 of this Report on
Form 10-K.
CAPITAL EXPENDITURES
During Fiscal 1998, the Company expended $31.2 million for capital
expenditures, including $11.5 million related to vineyards. The Company plans to
spend approximately $25.0 million for capital expenditures, exclusive of
vineyards, in fiscal 1999. In addition, the Company continues to consider the
purchase, lease and development of vineyards. See "Business - Sources and
Availability of Raw Materials" under Item 1 of this Report. The Company may
incur additional expenditures for vineyards if opportunities become available.
Management reviews the capital expenditure program periodically and modifies it
as required to meet current business needs.
COMMITMENTS
The Company has agreements with suppliers to purchase various spirits and
blends of which certain agreements are denominated in British pounds sterling.
The future obligations under these agreements, based upon exchange rates at
February 28, 1998, aggregate approximately $23.4 million to $40.9 million for
contracts expiring through December 2005.
At February 28, 1998, the Company had no open currency forward contracts.
The Company's use of such contracts is limited to the management of currency
rate risks related to purchases denominated in a foreign currency. The Company's
strategy is to enter into currency exchange contracts that are matched to
specific purchases and not to enter into any speculative contracts.
EFFECTS OF INFLATION AND CHANGING PRICES
The Company's results of operations and financial condition have not been
significantly affected by inflation and changing prices other than grape costs.
The Company has discussed the impact of increases in grape prices in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The Company has been able, subject to normal competitive
conditions, to pass along rising costs through increased selling prices.
ACCOUNTING PRONOUNCEMENTS
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
in a full set of financial statements. The Company is required to adopt SFAS No.
130 for interim periods and fiscal years beginning March 1, 1998.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. The Company believes the effect of adoption
will not be significant. SFAS No. 131 establishes standards for reporting
information about operating segments in annual financial statements and requires
reporting of selected information in interim financial statements. 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.
YEAR 2000 ISSUE
The Company is currently working to resolve the potential impact of the
year 2000 on the processing of date-sensitive information by the Company's
computerized information systems (including both hardware and software
applications). The year 2000 issue is the result of computer logic being written
using two digits rather than four to define the applicable year. Any of the
Company's logic that processes date-sensitive information may recognize a date
using "00" as the year 1900 rather than the year 2000, which could result in
miscalculations or system failures. Based on preliminary information, costs of
addressing potential issues are not currently expected to have a material
adverse impact on the Company's financial position, results of operations or
cash flows in future periods. The Company and its customers and vendors have
been, and continue to be, active in identifying, assessing and resolving such
processing issues. However, if the Company and its customers or vendors are
unable to resolve such processing issues in a timely manner, it could result in
a material financial risk. Accordingly, the Company plans to devote the
necessary resources to resolve all significant year 2000 issues in a timely
manner.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
------- -------------------------------------------
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
-----------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
AND
---
SUPPLEMENTARY SCHEDULES
-----------------------
FEBRUARY 28, 1998
-----------------
Page
----
The following information is presented in this report:
Report of Independent Public Accountants .............................. 30
Consolidated Balance Sheets - February 28, 1998 and 1997 .............. 31
Consolidated Statements of Income for the years ended February 28,
1998 and 1997, for the six months ended February 29, 1996
and February 28, 1995 (unaudited), and for the year ended
August 31, 1995 .................................................. 32
Consolidated Statements of Changes in Stockholders' Equity for the
years ended February 28, 1998 and 1997, for the six months ended
February 29, 1996, and for the year ended August 31, 1995 ........ 33
Consolidated Statements of Cash Flows for the years ended February 28,
1998 and 1997, for the six months ended February 29, 1996
and February 28, 1995 (unaudited), and for the year ended
August 31, 1995 .................................................. 34
Notes to Consolidated Financial Statements ............................ 35
Selected Financial Data ............................................... 15
Selected Quarterly Financial Information (unaudited) .................. 51
Schedules I through V are not submitted because they are not applicable or not
required under the rules of Regulation S-X.
Individual financial statements of the Registrant have been omitted because the
Registrant is primarily an operating company and no subsidiary included in the
consolidated financial statements has minority equity interest and/or noncurrent
indebtedness, not guaranteed by the Registrant, in excess of 5% of total
consolidated assets.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Canandaigua Brands, Inc.:
We have audited the accompanying consolidated balance sheets of Canandaigua
Brands, Inc. (a Delaware corporation) and subsidiaries as of February 28, 1998
and 1997, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the years ended February 28, 1998 and
1997, the six months ended February 29, 1996, and the year ended August 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Canandaigua Brands, Inc. and
subsidiaries as of February 28, 1998 and 1997, and the results of their
operations and their cash flows for the years ended February 28, 1998 and 1997,
the six months ended February 29, 1996, and the year ended August 31, 1995, in
conformity with generally accepted accounting principles.
Rochester, New York, /s/ Arthur Andersen LLP
April 8, 1998
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
February 28, February 28,
1998 1997
------------ ------------
ASSETS
------
CURRENT ASSETS:
Cash and cash investments $ 1,232 $ 10,010
Accounts receivable, net 142,615 142,592
Inventories, net 394,028 326,626
Prepaid expenses and other current assets 26,463 21,787
------------ ------------
Total current assets 564,338 501,015
PROPERTY, PLANT AND EQUIPMENT, net 244,035 249,552
OTHER ASSETS 264,786 270,334
------------ ------------
Total assets $ 1,073,159 $ 1,020,901
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 91,900 $ 57,000
Current maturities of long-term debt 24,118 40,467
Accounts payable 52,055 55,892
Accrued Federal and state excise taxes 17,498 17,058
Other accrued expenses and liabilities 97,763 76,156
------------ ------------
Total current liabilities 283,334 246,573
------------ ------------
LONG-TERM DEBT, less current maturities 309,218 338,884
------------ ------------
DEFERRED INCOME TAXES 59,237 61,395
------------ ------------
OTHER LIABILITIES 6,206 9,316
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value-
Authorized, 1,000,000 shares;
Issued, none at February 28, 1998, and
February 28, 1997 - -
Class A Common Stock, $.01 par value-
Authorized, 60,000,000 shares;
Issued, 17,604,784 shares at February 28, 1998,
and 17,462,332 shares at February 28, 1997 176 174
Class B Convertible Common Stock, $.01 par value-
Authorized, 20,000,000 shares;
Issued, 3,956,183 shares at February 28, 1998, and
February 28, 1997 40 40
Additional paid-in capital 231,687 222,336
Retained earnings 220,346 170,275
------------ ------------
452,249 392,825
------------ ------------
Less-Treasury stock-
Class A Common Stock, 2,199,320 shares at
February 28, 1998, and 1,915,468 shares at
February 28, 1997, at cost (34,878) (25,885)
Class B Convertible Common Stock, 625,725 shares
at February 28, 1998, and February 28, 1997, at cost (2,207) (2,207)
------------ ------------
(37,085) (28,092)
------------ ------------
Total stockholders' equity 415,164 364,733
------------ ------------
Total liabilities and stockholders' equity $ 1,073,159 $ 1,020,901
============ ============
<FN>
The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
</FN>
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the Years Ended For the Six Months Ended For the Year Ended
------------------------------- ---------------------------- --------------------
February 28, February 28, February 29, February 28, August 31,
1998 1997 1996 1995 1995
----------- ----------- ------------ ------------ -----------
(unaudited)
GROSS SALES $ 1,632,357 $ 1,534,452 $ 738,415 $ 592,305 $ 1,185,074
Less - Excise taxes (419,569) (399,439) (203,391) (137,820) (278,530)
------------ ------------ ---------- ---------- ----------
Net sales 1,212,788 1,135,013 535,024 454,485 906,544
COST OF PRODUCT SOLD (864,053) (844,181) (396,208) (327,694) (653,811)
------------ ------------ ---------- ---------- ----------
Gross profit 348,735 290,832 138,816 126,791 252,733
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (231,680) (208,991) (112,411) (79,925) (159,196)
NONRECURRING RESTRUCTURING EXPENSES - - (2,404) (685) (2,238)
------------ ------------ ---------- ---------- ----------
Operating income 117,055 81,841 24,001 46,181 91,299
INTEREST EXPENSE, net (32,189) (34,050) (17,298) (13,141) (24,601)
------------ ------------ ---------- ---------- ----------
Income before provision for Federal
and state income taxes 84,866 47,791 6,703 33,040 66,698
PROVISION FOR FEDERAL AND
STATE INCOME TAXES (34,795) (20,116) (3,381) (12,720) (25,678)
------------ ------------ ---------- ---------- ----------
NET INCOME $ 50,071 $ 27,675 $ 3,322 $ 20,320 $ 41,020
============ ============ ========== ========== ==========
SHARE DATA:
Earnings per common share:
Basic $ 2.68 $ 1.43 $ 0.17 $ 1.13 $ 2.18
============ ============ ========== =========== ==========
Diluted $ 2.62 $ 1.42 $ 0.17 $ 1.12 $ 2.16
============ ============ ========== =========== ==========
Weighted average common shares outstanding:
Basic 18,672 19,333 19,611 17,989 18,776
Diluted 19,105 19,521 19,807 18,179 19,005
<FN>
The accompanying notes to consolidated financial statements are an integral part of these statements.
</FN>
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except share data)
Common Stock Additional
---------------- Paid-In Retained Treasury Restricted
Class A Class B Capital Earnings Stock Stock Total
------- ------- ---------- -------- --------- ---------- --------
BALANCE, August 31, 1994 $ 138 $ 40 $ 113,348 $ 98,258 $ (7,591) $ - $ 204,193
Conversion of 19,093 Class B Convertible Common
shares to Class A Common shares - - - - - - -
Issuance of 3,000,000 Class A Common shares 30 - 90,353 - - - 90,383
Exercise of 432,067 Class A stock options
related to the Vintners Acquisition 5 - 13,013 - - - 13,018
Employee stock purchases of 28,641 treasury shares - - 546 - 87 - 633
Exercise of 114,075 Class A stock options 1 - 1,324 - - - 1,325
Tax benefit on stock options exercised - - 1,251 - - - 1,251
Tax benefit on disposition of employee stock
purchases - - 59 - - - 59
Net income for fiscal 1995 - - - 41,020 - - 41,020
------ ------- --------- -------- -------- ---------- ---------
BALANCE, August 31, 1995 174 40 219,894 139,278 (7,504) - 351,882
Conversion of 5,000 Class B Convertible Common
shares to Class A Common shares - - - - - - -
Exercise of 18,000 Class A stock options - - 238 - - - 238
Employee stock purchases of 20,869 treasury shares - - 593 - 63 - 656
Issuance of 10,000 Class A stock options - - 134 - - - 134
Tax benefit on stock options exercised - - 198 - - - 198
Tax benefit on disposition of employee stock
purchases - - 76 - - - 76
Net income for Transition Period - - - 3,322 - - 3,322
------ ------- ---------- -------- -------- ---------- ---------
BALANCE, February 29, 1996 174 40 221,133 142,600 (7,441) - 356,506
Conversion of 35,500 Class B Convertible Common
shares to Class A Common shares - - - - - - -
Exercise of 3,750 Class A stock options - - 17 - - - 17
Employee stock purchases of 37,768 treasury shares - - 884 - 114 - 998
Repurchase of 787,450 Class A Common shares - - - - (20,765) - (20,765)
Acceleration of 18,500 Class A stock options - - 248 - - - 248
Tax benefit on stock options exercised - - 27 - - - 27
Tax benefit on disposition of employee stock
purchases - - 27 - - - 27
Net income for fiscal 1997 - - - 27,675 - - 27,675
------ ------- ---------- -------- -------- ---------- ---------
BALANCE, February 28, 1997 174 40 222,336 170,275 (28,092) - 364,733
Exercise of 117,452 Class A stock options 2 - 1,799 - - - 1,801
Employee stock purchases of 78,248 treasury shares - - 1,016 - 240 - 1,256
Repurchase of 362,100 Class A Common shares - - - - (9,233) - (9,233)
Acceleration of 142,437 Class A stock options - - 3,625 - - - 3,625
Issuance of 25,000 restricted Class A Common shares - - 1,144 - - (1,144) -
Amortization of unearned restricted stock
compensation - - - - - 267 267
Accelerated amortization of unearned restricted
stock compensation - - 200 - - 877 1,077
Tax benefit on stock options exercised - - 1,382 - - - 1,382
Tax benefit on disposition of employee stock
purchases - - 185 - - - 185
Net income for fiscal 1998 - - - 50,071 - - 50,071
------ ------- ---------- -------- -------- ---------- ---------
BALANCE, February 28, 1998 $ 176 $ 40 $ 231,687 $220,346 $(37,085) $ - $ 415,164
====== ======= ========== ======== ======== ========== =========
<FN>
The accompanying notes to consolidated financial statements are an integral part of these statements.
</FN>
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Years Ended For the Six Months Ended For the Year Ended
------------------- ------------------------ ------------------
February 28, February 28, February 29, February 28, August 31,
1998 1997 1996 1995 1995
------------ ------------ ------------ ------------ ----------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 50,071 $ 27,675 $ 3,322 $ 20,320 $ 41,020
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation of property, plant and equipment 23,847 22,359 9,521 9,786 15,568
Amortization of intangible assets 9,314 9,480 4,437 2,865 5,144
Deferred tax provision 6,319 5,769 1,991 57 19,232
Stock-based compensation expense 1,747 275 - - -
Amortization of discount on long-term debt 352 112 - - -
(Gain) loss on sale of property, plant and
equipment (3,001) (3,371) 81 - (33)
Restructuring charges - fixed asset write-down - - 275 - (2,050)
Change in operating assets and liabilities:
Accounts receivable, net 749 3,523 (27,008) 1,586 7,392
Inventories, net (65,644) 16,232 (70,172) (18,783) 41,528
Prepaid expenses and other current assets (4,354) 3,271 (2,350) 3,079 (3,884)
Accounts payable (3,288) (431) (2,362) (30,068) (13,415)
Accrued Federal and state excise taxes 440 (2,641) 4,066 6,907 (1,025)
Other accrued expenses and liabilities 14,655 24,617 (8,564) (28,175) (20,784)
Other assets and liabilities, net (2,452) 898 1,930 (3,817) (15,375)
--------- --------- ---------- --------- ---------
Total adjustments (21,316) 80,093 (88,155) (56,563) 32,298
--------- --------- ---------- --------- ---------
Net cash provided by (used in) operating
activities 28,755 107,768 (84,833) (36,243) 73,318
--------- --------- ---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment,
net of minor disposals (31,203) (31,649) (16,077) (11,342) (37,121)
Proceeds from sale of property, plant and equipment 12,552 9,174 555 - 1,336
Payment of accrued earn-out amounts - (13,848) (11,307) - (28,300)
--------- --------- ---------- --------- ---------
Net cash used in investing activities (18,651) (36,323) (26,829) (11,342) (64,085)
--------- --------- ---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt (186,367) (50,842) (14,579) (89,474) (139,906)
Purchases of treasury stock (9,233) (20,765) - - -
Payment of issuance costs of long-term debt (1,214) (1,550) - - -
Proceeds from issuance of long-term debt,
net of discount 140,000 61,668 13,220 47,000 47,000
Net proceeds from (repayment of) notes payable 34,900 (54,300) 111,300 (12,000) (19,000)
Exercise of employee stock options 1,776 17 224 341 1,325
Proceeds from employee stock purchases 1,256 998 656 - 633
Proceeds from equity offering, net - - - 103,313 103,400
--------- --------- ---------- --------- ---------
Net cash (used in) provided by financing
activities (18,882) (64,774) 110,821 49,180 (6,548)
--------- --------- ---------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH INVESTMENTS (8,778) 6,671 (841) 1,595 2,685
CASH AND CASH INVESTMENTS, beginning of period 10,010 3,339 4,180 1,495 1,495
--------- --------- ---------- --------- ---------
CASH AND CASH INVESTMENTS, end of period $ 1,232 $ 10,010 $ 3,339 $ 3,090 $ 4,180
========= ========= ========== ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 33,394 $ 32,615 $ 14,720 $ 14,068 $ 25,082
========= ========= ========== ========= =========
Income taxes $ 32,164 $ 4,411 $ 3,612 $ 9,454 $ 11,709
========= ========= ========== ========= =========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Fair value of assets acquired, including
cash acquired $ - $ - $ 144,927 $ - $ -
Liabilities assumed - - (3,147) - -
--------- --------- ---------- --------- ---------
Cash paid - - 141,780 - -
Less - Amounts borrowed - - (141,780) - -
--------- --------- ---------- --------- ---------
Net cash paid for acquisition $ - $ - $ - $ - $ -
========= ========= ========== ========= =========
Goodwill reduction on settlement of disputed
final closing net current asset statement
for Vintners Acquisition $ - $ 5,894 $ - $ - $ -
========= ========= ========== ========= ==========
Accrued earn-out amounts $ - $ - $ 15,155 $ - $ 10,000
========= ========= ========== ========= ==========
<FN>
The accompanying notes to consolidated financial statements are an integral part of these statements.
</FN>
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS -
Canandaigua Brands, Inc. (formerly Canandaigua Wine Company, Inc.), and its
subsidiaries (the Company) operate primarily in the beverage alcohol industry.
The Company is principally a producer and supplier of wine and an importer and
producer of beer and distilled spirits in the United States. It maintains a
portfolio of over 130 national and regional brands of beverage alcohol which are
distributed by over 850 wholesalers throughout the United States and selected
international markets. Its beverage alcohol brands are marketed in three general
categories: wine, beer and distilled spirits.
YEAR-END CHANGE -
The Company changed its fiscal year end from August 31 to the last day of
February. The period from September 1, 1995, through February 29, 1996, is
hereinafter referred to as the "Transition Period."
PRINCIPLES OF CONSOLIDATION -
The consolidated financial statements of the Company include the accounts of
Canandaigua Brands, Inc., and all of its subsidiaries. All intercompany accounts
and transactions have been eliminated.
UNAUDITED FINANCIAL STATEMENTS -
The consolidated statements of income and cash flows for the six month period
ended February 28, 1995, have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission
applicable to interim reporting and reflect, in the opinion of the Company, all
adjustments necessary to present fairly the financial information for
Canandaigua Brands, Inc., and its subsidiaries. All such adjustments are of a
normal recurring nature.
MANAGEMENT'S USE OF ESTIMATES AND JUDGMENT -
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH INVESTMENTS -
Cash investments consist of highly liquid investments with an original maturity
when purchased of three months or less and are stated at cost, which
approximates market value. The amounts at February 28, 1998 and 1997, are not
significant.
FAIR VALUE OF FINANCIAL INSTRUMENTS -
To meet the reporting requirements of Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments," the
Company calculates the fair value of financial instruments using quoted market
prices whenever available. When quoted market prices are not available, the
Company uses standard pricing models for various types of financial instruments
(such as forwards, options, swaps, etc.) which take into account the present
value of estimated future cash flows. The methods and assumptions used to
estimate the fair value of financial instruments are summarized as follows:
ACCOUNTS RECEIVABLE: The carrying amount approximates fair value due to the
short maturity of these instruments, the creditworthiness of the customers and
the large number of customers constituting the accounts receivable balance
NOTES PAYABLE: These instruments are variable interest rate bearing notes
for which the carrying value approximates the fair value.
LONG-TERM DEBT: The carrying value of the debt facilities with short-term
variable interest rates approximates the fair value. The fair value of the fixed
rate debt was estimated by discounting cash flows using interest rates currently
available for debt with similar terms and maturities.
FOREIGN EXCHANGE HEDGING AGREEMENTS: The fair value of currency forward
contracts is estimated based on quoted market prices.
INTEREST RATE HEDGING AGREEMENTS: The fair value of interest rate hedging
instruments is the estimated amount that the Company would receive or be
required to pay to terminate the derivative agreements at year end. The fair
value includes consideration of current interest rates and the creditworthiness
of the counterparties to the agreements.
LETTERS OF CREDIT: At February 28, 1998 and 1997, the Company had letters
of credit outstanding totaling approximately $3,865,000 and $8,622,000,
respectively, which guarantee payment for certain obligations. The Company
recognizes expense on these obligations as incurred and no material losses are
anticipated.
The carrying amount and estimated fair value of the Company's financial
instruments are summarized as follows:
February 28, 1998 February 28, 1997
------------------------ ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- --------- --------- ---------
(in thousands)
Liabilities:
- ------------
Notes payable $ 91,900 $ 91,900 $ 57,000 $ 57,000
Long-term debt, including current
portion $ 333,336 $ 340,934 $ 379,351 $ 374,628
Derivative Instruments:
- -----------------------
Foreign exchange hedging agreements:
Currency forward contracts $ - $ - $ 374 $ 407
Interest rate hedging agreements:
Interest rate cap agreement $ - $ - $ - $ -
Interest rate collar agreement $ - $ - $ - $ -
INTEREST RATE FUTURES AND CURRENCY FORWARD CONTRACTS -
From time to time, the Company enters into interest rate futures and a variety
of currency forward contracts in the management of interest rate risk and
foreign currency transaction exposure. Unrealized gains and losses on interest
rate futures are deferred and recognized as a component of interest expense over
the borrowing period. Unrealized gains and losses on currency forward contracts
are deferred and recognized as a component of the related transactions in the
accompanying financial statements. Discounts or premiums on currency forward
contracts are recognized over the life of the contract.
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. The
percentage of inventories valued using the LIFO method is 92% and 94% at
February 28, 1998 and 1997, respectively. Replacement cost of the inventories
determined on a FIFO basis is approximately $411,424,000 at February 28, 1998,
and $349,006,000 at February 28, 1997.
A substantial portion of barreled whiskey and brandy will not be sold within one
year because of the duration of the aging process. All barreled whiskey and
brandy are classified as in-process inventories and are included in current
assets, in accordance with industry practice. Bulk wine inventories are also
included as work in process within current assets, in accordance with the
general practices of the wine industry, although a portion of such inventories
may be aged for periods greater than one year. Warehousing, insurance, ad
valorem taxes and other carrying charges applicable to barreled whiskey and
brandy held for aging are included in inventory costs.
Elements of cost include materials, labor and overhead and consist of the
following:
February 28, February 28,
1998 1997
------------ ------------
(in thousands)
Raw materials and supplies $ 14,439 $ 14,191
Wine and distilled spirits in process 304,037 262,289
Finished case goods 92,948 72,526
---------- ----------
411,424 349,006
Less - LIFO reserve (17,396) (22,380)
---------- ----------
$ 394,028 $ 326,626
========== ==========
If the FIFO method of inventory valuation had been used, reported net income
would have been approximately $2,941,000, or $0.15 per share on a diluted basis,
lower for the year ended February 28, 1998, and reported net income would have
been approximately $18,163,000, or $0.93 per share on a diluted basis, higher
for the year ended February 28, 1997.
PROPERTY, PLANT AND EQUIPMENT -
Property, plant and equipment is stated at cost. Major additions and betterments
are charged to property accounts, while maintenance and repairs are charged to
operations as incurred. The cost of properties sold or otherwise disposed of and
the related accumulated depreciation are eliminated from the accounts at the
time of disposal and resulting gains and losses are included as a component of
operating income.
DEPRECIATION -
Depreciation is computed primarily using the straight-line method over the
following estimated useful lives:
Depreciable Life in Years
-------------------------
Buildings and improvements 10 to 33 1/3
Machinery and equipment 3 to 15
Motor vehicles 3 to 7
Amortization of assets capitalized under capital leases is included with
depreciation expense. Amortization is calculated using the straight-line method
over the shorter of the estimated useful life of the asset or the lease term.
OTHER ASSETS -
Other assets, which consist of goodwill, distribution rights, trademarks, agency
license agreements, deferred financing costs, cash surrender value of officers'
life insurance and other amounts, are stated at cost, net of accumulated
amortization. Amortization is calculated on a straight-line or effective
interest basis over the following estimated useful lives:
Useful Life in Years
--------------------
Goodwill 40
Distribution rights 40
Trademarks 40
Agency license agreements 16 to 40
Deferred financing costs 5 to 10
At February 28, 1998, the weighted average remaining useful life of these assets
is approximately 36 years. The face value of the officers' life insurance
policies totaled $2,852,000 at both February 28, 1998 and 1997.
LONG-LIVED ASSETS AND INTANGIBLES -
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," the Company reviews its long-lived assets and certain
identifiable intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable on an undiscounted cash flow basis. The statement also requires that
long-lived assets and certain identifiable intangibles to be disposed of be
reported at the lower of carrying amount or fair value less cost to sell. The
Company did not record any asset impairment in fiscal 1998.
ADVERTISING AND PROMOTION COSTS -
The Company generally expenses advertising and promotion costs as incurred,
shown or distributed. Prepaid advertising costs at February 28, 1998 and 1997,
are not material. Advertising and promotion expense for the years ended February
28, 1998 and 1997, the Transition Period, the six months ended February 28, 1995
(unaudited), and the year ended August 31, 1995, were approximately
$111,685,000, $101,319,000, $60,187,000, $41,658,000 (unaudited) and
$84,246,000, respectively.
INCOME TAXES -
The Company uses the liability method of accounting for income taxes. The
liability method accounts for deferred income taxes by applying statutory rates
in effect at the balance sheet date to the difference between the financial
reporting and tax basis of assets and liabilities.
ENVIRONMENTAL -
Environmental expenditures that relate to current operations are expensed as
appropriate. Expenditures that relate to an existing condition caused by past
operations, and which do not contribute to current or future revenue generation,
are expensed. Liabilities are recorded when environmental assessments and/or
remedial efforts are probable, and the cost can be reasonably estimated.
Generally, the timing of these accruals coincides with the completion of a
feasibility study or the Company's commitment to a formal plan of action.
Liabilities for environmental costs were not material at February 28, 1998 and
1997.
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 excludes the effect of common stock
equivalents and is computed by dividing income available to common stockholders
by the weighted average number of common shares outstanding during the period
for Class A Common Stock and Class B Convertible Common Stock. Diluted earnings
per common share reflects the potential dilution that could result if securities
or other contracts to issue common stock were exercised or converted into common
stock. Diluted earnings per common share assumes the exercise of stock options
using the treasury stock method and assumes the conversion of convertible
securities, if any, using the "if converted" method. Historical earnings per
common share have been restated to conform with the provisions of SFAS No. 128.
OTHER -
Certain fiscal 1997, Transition Period and fiscal 1995 balances have been
reclassified to conform with current year presentation.
2. ACQUISITIONS:
UDG ACQUISITION -
On September 1, 1995, the Company through its wholly-owned subsidiary, Barton
Incorporated (Barton), acquired certain of the assets of United Distillers
Glenmore, Inc., and certain of its North American affiliates (collectively, UDG)
(the UDG Acquisition). The acquisition was made pursuant to an Asset Purchase
Agreement dated August 29, 1995 (the Purchase Agreement), entered into between
Barton and UDG. The acquisition included all of UDG's rights to the
Fleischmann's, Skol, Mr. Boston, Canadian LTD, Old Thompson, Kentucky Tavern,
Chi-Chi's, Glenmore and di Amore distilled spirits brands; the U.S. rights to
Inver House, Schenley and El Toro distilled spirits brands; and related
inventories and other assets. The acquisition also included two of UDG's
production facilities; one located in Owensboro, Kentucky, and the other located
in Albany, Georgia. In addition, pursuant to the Purchase Agreement, the parties
entered into multiyear agreements under which Barton (i) purchases various bulk
distilled spirits brands from UDG and (ii) provides packaging services for
certain of UDG's distilled spirits brands as well as warehousing services.
The aggregate consideration for the acquired brands and other assets consisted
of $141,780,000 in cash and assumption of certain current liabilities. The
source of the cash payment made at closing, together with payment of other costs
and expenses required by the UDG Acquisition, was financing provided by the
Company pursuant to a term loan under the Company's then existing bank credit
agreement.
The UDG Acquisition was accounted for using the purchase method; accordingly,
the UDG assets were recorded at fair market value at the date of acquisition.
The excess of the purchase price over the estimated fair market value of the net
assets acquired (goodwill), $86,348,000, is being amortized on a straight-line
basis over 40 years. The results of operations of the UDG Acquisition have been
included in the Consolidated Statements of Income since the date of acquisition.
3. PROPERTY, PLANT AND EQUIPMENT:
The major components of property, plant and equipment are as follows:
February 28, February 28,
1998 1997
------------ ------------
(in thousands)
Land $ 15,103 $ 16,961
Buildings and improvements 74,706 76,379
Machinery and equipment 244,204 243,274
Motor vehicles 5,316 5,355
Construction in progress 17,485 13,999
------------ ------------
356,814 355,968
Less - Accumulated depreciation (112,779) (106,416)
------------ ------------
$ 244,035 $ 249,552
============ ============
4. OTHER ASSETS:
The major components of other assets are as follows:
February 28, February 28,
1998 1997
------------ ------------
(in thousands)
Goodwill $ 150,595 $ 150,595
Distribution rights, agency license
agreements and trademarks 119,346 119,316
Other 23,686 22,936
------------ ------------
293,627 292,847
Less - Accumulated amortization (28,841) (22,513)
------------ ------------
$ 264,786 $ 270,334
============ ============
5. OTHER ACCRUED EXPENSES AND LIABILITIES:
The major components of other accrued expenses and liabilities are as follows:
February 28, February 28,
1998 1997
------------ ------------
(in thousands)
Accrued salaries and commissions $ 23,704 $ 12,109
Other 74,059 64,047
------------ ------------
$ 97,763 $ 76,156
============ ============
6. BORROWINGS:
Borrowings consist of the following:
February 28, 1998 February 28, 1997
------------------------------------------ -------------------
Current Long-term Total Total
----------- ------------- ---------- -------------------
(in thousands)
Notes Payable:
- --------------
Senior Credit Facility:
Revolving Credit Loans $ 91,900 $ - $ 91,900 $ 57,000
========== =========== ========== ==========
Long-term Debt:
- ---------------
Senior Credit Facility:
Term Loan, variable rate, aggregate
proceeds of $140,000, due in
installments through June 2003 $ 24,000 $ 116,000 $ 140,000 $ 185,900
Senior Subordinated Notes:
8.75% redeemable after December 15, 1998,
due 2003 - 130,000 130,000 130,000
8.75% Series C redeemable after December 15,
1998, due 2003 (less unamortized discount of
$2,868 - effective rate 9.76%) - 62,132 62,132 61,780
Capitalized Lease Agreements:
Capitalized facility lease bearing interest
at 9%, due in monthly installments through
fiscal 1998 - - - 348
Industrial Development Agencies:
7.50% 1980 issue, original proceeds $2,370,
due in annual installments of $119 through
fiscal 2000 118 119 237 356
Other Long-term Debt:
Loans payable bearing interest at 5%, secured
by cash surrender value of officers' life
insurance policies - 967 967 967
---------- ----------- ---------- ----------
$ 24,118 $ 309,218 $ 333,336 $ 379,351
========== =========== ========== ==========
SENIOR CREDIT FACILITY -
On December 19, 1997, the Company and a syndicate of banks (the Syndicate Banks)
entered into a new $325,000,000 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 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 $140,000,000 term
loan facility due in June 2003 and a $185,000,000 revolving loan facility,
including letters of credit up to a maximum of $20,000,000, 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). The Credit Agreement
also provides for certain mandatory term loan prepayments.
The term loan facility requires quarterly repayments of $6,000,000 beginning
March 1998 through December 2002, and payments of $10,000,000 in March 2003 and
June 2003. At February 28, 1998, the margin on the term loan facility borrowings
was 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 $60,000,000 for thirty consecutive days
during the six months ending each August 31. The margin on the revolving loan
facility was 0.5% at February 28, 1998, and may be decreased by up to 0.25% and
increased by up to 0.4% depending on the Company's Debt Ratio. In addition, the
Company pays a facility fee on the total revolving loan facility. At February
28, 1998, the facility fee was 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 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.
The Company had average outstanding Revolving Credit Loans of approximately
$59,892,000 and $88,825,000 for the years ended February 28, 1998 and 1997,
respectively. Amounts available to be drawn down under the Revolving Credit
Loans were $89,235,000 and $119,378,000 at February 28, 1998 and 1997,
respectively. The average interest rate on the Revolving Credit Loans was 6.57%,
6.58%, 6.76% and 7.16%, for fiscal 1998 and 1997, the Transition Period and for
fiscal 1995, respectively. Facility fees on the new Credit Agreement are due
based upon the total revolving loan facility, whereas commitment fees under the
prior agreement were based upon the unused portion of the revolving loan
facility. These fees are based upon the Company's Debt Ratio and can range from
0.15% to 0.35%. At February 28, 1998, the facility fee percentage was 0.25%. The
commitment fee percentage at February 28, 1997, was 0.325%.
SENIOR SUBORDINATED NOTES -
On December 27, 1993, the Company issued $130,000,000 aggregate principal amount
of 8.75% Senior Subordinated Notes due in December 2003 (the Notes). Interest on
the Notes is payable semiannually on June 15 and December 15 of each year. The
Notes are unsecured and subordinated to the prior payment in full of all senior
indebtedness of the Company, which includes the Credit Agreement. The Notes are
guaranteed, on a senior subordinated basis, by all of the Company's significant
operating subsidiaries.
The Trust Indenture relating to the Notes contains certain covenants, including,
but not limited to, (i) limitation on indebtedness; (ii) limitation on
restricted payments; (iii) limitation on transactions with affiliates; (iv)
limitation on senior subordinated indebtedness; (v) limitation on liens; (vi)
limitation on sale of assets; (vii) limitation on issuance of guarantees of and
pledges for indebtedness; (viii) restriction on transfer of assets; (ix)
limitation on subsidiary capital stock; (x) limitation on the creation of any
restriction on the ability of the Company's subsidiaries to make distributions
and other payments; and (xi) restrictions on mergers, consolidations and the
transfer of all or substantially all of the assets of the Company to another
person. The limitation on indebtedness covenant is governed by a rolling four
quarter fixed charge ratio requiring a specified minimum.
On October 29, 1996, the Company issued $65,000,000 aggregate principal amount
of 8.75% Series B Senior Subordinated Notes due in December 2003 (the Series B
Notes). The Company used the net proceeds of approximately $61,700,000 to repay
$50,000,000 of Revolving Credit Loans and to prepay and permanently reduce
$9,600,000 of the Term Loan. The remaining proceeds were used to pay various
fees and expenses associated with the offering. The terms of the Series B Notes
were substantially identical to those of the Notes. In February 1997, the
Company exchanged $65,000,000 aggregate principal amount of 8.75% Series C
Senior Subordinated Notes due in December 2003 (the Series C Notes) for the
Series B Notes. The terms of the Series C Notes are identical in all material
respects to the Series B Notes.
LOANS PAYABLE -
Loans payable, secured by officers' life insurance policies, carry an interest
rate of 5%. The notes carry no due dates and it is management's intention not to
repay the notes during the next fiscal year.
CAPITALIZED LEASE AGREEMENTS - INDUSTRIAL DEVELOPMENT AGENCIES -
Certain capitalized lease agreements require the Company to make lease payments
equal to the principal and interest on certain bonds issued by Industrial
Development Agencies. The bonds are secured by the leases and the related
facilities. These transactions have been treated as capital leases with the
related assets included in property, plant and equipment and the lease
commitments included in long-term debt. Among the provisions under the debenture
and lease agreements are covenants that define minimum levels of working capital
and tangible net worth and the maintenance of certain financial ratios as
defined in the agreements.
DEBT PAYMENTS -
Principal payments required under long-term debt obligations during the next
five fiscal years are as follows:
February 28, 1998
-----------------
(in thousands)
1999 $ 24,118
2000 24,119
2001 24,000
2002 24,000
2003 24,000
Thereafter 215,967
---------
$336,204
=========
7. INCOME TAXES:
The provision for Federal and state income taxes consists of the following:
For the For the For the Six For the
Year Ended Year Ended Months Ended Year Ended
February 28, 1998 February 28, February 29, August 31,
--------------------------------- ------------ ------------ ------------
State and
Federal Local Total 1997 1996 1995
--------- ----------- -------- ------------ ------------ ------------
(in thousands)
Current income tax provision $ 21,032 $ 7,444 $ 28,476 $ 14,347 $ 1,390 $ 6,446
Deferred income tax provision 5,935 384 6,319 5,769 1,991 19,232
--------- ----------- --------- ----------- ----------- ------------
$ 26,967 $ 7,828 $ 34,795 $ 20,116 $ 3,381 $ 25,678
========= =========== ========= =========== =========== ============
A reconciliation of the total tax provision to the amount computed by applying
the expected U.S. Federal income tax rate to income before provision for Federal
and state income taxes is as follows:
For the Year Ended For the Year Ended For the Six Months For the Year Ended
February 28, February 28, Ended February 29, August 31,
1998 1997 1996 1995
------------------ ------------------ ------------------ ------------------
% of % of % of % of
Pretax Pretax Pretax Pretax
Amount Income Amount Income Amount Income Amount Income
------ ------ ------ ------ ------ ------ ------ ------
(in thousands)
Computed "expected"
tax provision $ 29,703 35.0 $ 16,727 35.0 $ 2,346 35.0 $ 23,344 35.0
State and local
income taxes,
net of Federal
income tax benefit 5,089 6.0 3,304 6.9 827 12.3 2,395 3.6
Nondeductible meals
and entertainment
expenses 294 0.3 310 0.6 205 3.1 290 0.4
Miscellaneous items,
net (291) (0.3) (225) (0.4) 3 -- (351) (0.5)
-------- ---- -------- ---- ------- ---- -------- ----
$ 34,795 41.0 $ 20,116 42.1 $ 3,381 50.4 $ 25,678 38.5
======== ==== ======== ==== ======= ==== ======== ====
Deferred tax liabilities (assets) are comprised of the following:
February 28, February 28,
1998 1997
------------ ------------
(in thousands)
Depreciation and amortization $ 70,303 $ 68,155
LIFO reserve 13,601 2,019
Inventory reserves 6,974 9,418
Other accruals (18,193) (13,191)
-------- --------
$ 72,685 $ 66,991
======== ========
At February 28, 1998, the Company has state and U.S. Federal net operating loss
(NOL) carryforwards of $16,213,000 and $3,654,000, respectively, to offset
future taxable income that, if not otherwise utilized, will expire as follows:
state NOLs of $6,945,000, $6,828,000 and $2,440,000 at February 28, 2001, 2002
and 2003, respectively, and Federal NOL of $3,654,000 at February 28, 2011.
8. PROFIT SHARING RETIREMENT PLANS AND RETIREMENT SAVINGS PLAN:
The Company's profit sharing retirement plans, which cover substantially all
employees, provide for contributions by the Company in such amounts as the Board
of Directors may annually determine and for voluntary contributions by
employees. The plans are qualified as tax-exempt under the Internal Revenue Code
and conform with the Employee Retirement Income Security Act of 1974. The
Company's provisions for the plans, including the Barton plan described below,
were $5,571,000 and $4,999,000 for the years ended February 28, 1998 and 1997,
respectively, $2,579,000 in the Transition Period and $3,830,000 for fiscal
1995.
The Company's retirement savings plan, established pursuant to Section 401(k) of
the Internal Revenue Code, permits substantially all full-time employees of the
Company (excluding Barton employees, who are covered by a separate plan
described below) to defer a portion of their compensation on a pretax basis.
Participants may defer, subject to a maximum contribution limitation, up to 10%
of their compensation for the year. The Company makes a matching contribution of
25% of the first 4% of compensation an employee defers. Company contributions to
this plan were $367,000 and $700,000 for the years ended February 28, 1998 and
1997, respectively, $325,000 in the Transition Period and $281,000 in fiscal
1995.
The Barton profit sharing and 401(k) plan covers all salaried employees of
Barton. The amount of Barton's contribution under the profit sharing portion of
the plan is at the discretion of its Board of Directors, subject to limitations
of the plan. Contribution expense was $2,799,000 and $2,504,000 for the years
ended February 28, 1998 and 1997, respectively, $1,095,000 in the Transition
Period and $1,430,000 in fiscal 1995. Pursuant to the 401(k) portion of the
plan, participants may defer up to 8% of their compensation for the year,
subject to limitations of the plan, and receive no matching contribution from
Barton.
9. STOCKHOLDERS' EQUITY:
COMMON STOCK -
The Company has two classes of common stock: Class A Common Stock and Class B
Convertible Common Stock. Class B Convertible Common Stock shares are
convertible into shares of Class A Common Stock on a one-to-one basis at any
time at the option of the holder. Holders of Class B Convertible Common Stock
are entitled to ten votes per share. Holders of Class A Common Stock are
entitled to only one vote per share but are entitled to a cash dividend premium.
If the Company pays a cash dividend on Class B Convertible Common Stock, each
share of Class A Common Stock will receive an amount at least ten percent
greater than the amount of the cash dividend per share paid on Class B
Convertible Common Stock. In addition, the Board of Directors may declare and
pay a dividend on Class A Common Stock without paying any dividend on Class B
Convertible Common Stock.
At February 28, 1998, there were 15,405,464 shares of Class A Common Stock and
3,330,458 shares of Class B Convertible Common Stock outstanding, net of
treasury stock.
STOCK REPURCHASE AUTHORIZATION -
On January 11, 1996, the Company's Board of Directors authorized the repurchase
of up to $30,000,000 of its Class A and Class B Common stock. The Company was
permitted to finance such purchases, which became treasury shares, through cash
generated from operations or through the Credit Agreement. The Company completed
its repurchase program during fiscal 1998, repurchasing 362,100 shares of Class
A Common Stock for $9,233,000. Throughout the year ended February 28, 1997, the
Company repurchased 787,450 shares of Class A Common Stock totaling $20,765,000.
LONG-TERM STOCK INCENTIVE PLAN -
In July 1997, the stockholders approved the amendment and restatement of the
Company's Stock Option and Stock Appreciation Right Plan (the Original Stock
Plan) as the Long-Term Stock Incentive Plan (the Long-Term Stock Plan). Options
granted under the Original Stock Plan remain outstanding and in full force in
accordance with their terms.
Under the Long-Term Stock Plan, nonqualified stock options, stock appreciation
rights, restricted stock and other stock-based awards may be granted to
employees, officers and directors of the Company. Grants, in the aggregate, may
not exceed 4,000,000 shares of the Company's Class A Common Stock. The exercise
price, vesting period and term of nonqualified stock options granted are
established by the committee administering the plan (the Committee). Grants of
stock appreciation rights, restricted stock and other stock-based awards may
contain such vesting, terms, conditions and other requirements as the Committee
may establish. During fiscal 1998, no stock appreciation rights and 25,000
shares of restricted Class A Common Stock were granted. At February 28, 1998,
there were 1,840,258 shares available for future grant.
A summary of nonqualified stock option activity is as follows:
Weighted Weighted
Avg. Avg.
Shares Under Exercise Options Exercise
Option Price Exercisable Price
------------ -------- ----------- --------
Balance, August 31, 1994 563,500 $ 15.65
Options granted 289,000 $ 40.29
Options exercised (114,075) $ 7.02
Options forfeited/canceled (4,500) $ 19.22
---------
Balance, August 31, 1995 733,925 $ 26.68 39,675 $ 4.44
Options granted 571,050 $ 36.01
Options exercised (18,000) $ 13.23
Options forfeited/canceled (193,250) $ 44.06
---------
Balance, February 29, 1996 1,093,725 $ 28.70 28,675 $ 4.44
Options granted 1,647,700 $ 22.77
Options exercised (3,750) $ 4.44
Options forfeited/canceled (1,304,700) $ 32.09
---------
Balance, February 28, 1997 1,432,975 $ 18.85 51,425 $ 10.67
Options granted 569,400 $ 38.72
Options exercised (117,452) $ 15.33
Options forfeited/canceled (38,108) $ 17.66
---------
Balance, February 28, 1998 1,846,815 $ 25.23 360,630 $ 25.46
=========
The following table summarizes information about stock options outstanding at
February 28, 1998:
Options Outstanding Options Exercisable
------------------------------------- ---------------------
Weighted
Avg. Weighted Weighted
Remaining Avg. Avg.
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
- --------------- ----------- ----------- -------- ----------- --------
$ 4.44 - $11.50 38,675 3.5 years $ 9.15 38,675 $ 9.15
$17.00 - $25.63 998,540 7.3 years $ 17.37 134,280 $ 17.00
$26.75 - $31.25 351,800 8.5 years $ 28.46 80,200 $ 27.30
$35.38 - $56.75 457,800 9.6 years $ 41.25 107,475 $ 40.53
--------- -------
1,846,815 8.0 years $ 25.23 360,630 $ 25.46
========= =======
The weighted average fair value of options granted during fiscal 1998, fiscal
1997 and the Transition Period was $20.81, $10.27 and $15.90, respectively. The
fair value of options is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions: risk-free
interest rate of 6.4% for fiscal 1998, 6.6% for fiscal 1997 and 5.5% for the
Transition Period; volatility of 41.3% for fiscal 1998, 42.7% for fiscal 1997
and 39.6% for the Transition Period; expected option life of 6.9 years for
fiscal 1998, 4.7 years for fiscal 1997 and 5.4 years for the Transition Period.
The dividend yield was 0% for fiscal 1998, fiscal 1997 and the Transition
Period. Forfeitures are recognized as they occur.
INCENTIVE STOCK OPTION PLAN -
The ability to grant incentive stock options under the Original Stock Plan was
eliminated when it was amended and restated as the Long-Term Stock Plan. In July
1997, stockholders approved the adoption of the Company's Incentive Stock Option
Plan. Under the Incentive Stock Option Plan, incentive stock options may be
granted to employees, including officers, of the Company. Grants, in the
aggregate, may not exceed 1,000,000 shares of the Company's Class A Common
Stock. The exercise price of any incentive stock option may not be less than the
fair market value of the Company's Class A Common Stock on the date of grant.
The vesting period and term of incentive stock options granted are established
by the Committee. The maximum term of incentive stock options is ten years.
During fiscal 1998, no incentive stock options were granted.
EMPLOYEE STOCK PURCHASE PLAN -
In fiscal 1989, the Company approved a stock purchase plan under which 1,125,000
shares of Class A Common Stock can be issued. Under the terms of the plan,
eligible employees may purchase shares of the Company's Class A Common Stock
through payroll deductions. The purchase price is the lower of 85% of the fair
market value of the stock on the first or last day of the purchase period.
During fiscal 1998 and fiscal 1997, the Transition Period and fiscal 1995,
employees purchased 78,248, 37,768, 20,869 and 28,641 shares, respectively.
The weighted average fair value of purchase rights granted during fiscal 1998
and fiscal 1997 was $11.90 and $8.41, respectively. The fair value of purchase
rights is estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions: risk-free interest rate
of 5.3% for fiscal 1998 and 5.6% for fiscal 1997; volatility of 35.1% for fiscal
1998 and 65.4% for fiscal 1997; expected purchase right life of 0.5 years for
fiscal 1998 and 0.8 years for fiscal 1997. The dividend yield was 0% for both
fiscal 1998 and fiscal 1997. No purchase rights were granted in the Transition
Period.
PRO FORMA DISCLOSURE -
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for its
plans. In fiscal 1997, the Company elected to adopt the disclosure-only
provisions of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation," (SFAS No. 123). Accordingly, no compensation
expense has been recognized for its stock-based compensation plans. Had the
Company recognized the compensation cost based upon the fair value at the date
of grant for awards under its plans consistent with the methodology prescribed
by SFAS No. 123, net income and earnings per common share would have been
reduced to the pro forma amounts as follows:
For the Year Ended For the Year Ended For the Six Months
February 28, 1998 February 28, 1997 Ended February 29, 1996
-------------------- -------------------- -----------------------
As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma
-------- -------- -------- -------- -------- -------
(in thousands, except per
share data)
Net income $ 50,071 $ 46,171 $ 27,675 $ 25,038 $ 3,322 $ 3,178
Earnings per common share:
Basic $ 2.68 $ 2.47 $ 1.43 $ 1.30 $ 0.17 $ 0.16
Diluted $ 2.62 $ 2.42 $ 1.42 $ 1.28 $ 0.17 $ 0.16
The provisions of SFAS No. 123 have not been applied to options or purchase
rights granted prior to September 1, 1995. Therefore, the resulting pro forma
effect on net income may not be representative of that to be expected in future
years.
STOCK OFFERING -
During November 1994, the Company completed a public offering and sold 3,000,000
shares of its Class A Common Stock, resulting in net proceeds to the Company of
approximately $95,515,000 after underwriters' discounts and commissions and
expenses. In connection with the offering, 432,067 of the Vintners option shares
were exercised and the Company received proceeds of $7,885,000. Under the terms
of the then existing bank credit agreement, approximately $82,000,000 was used
to repay a portion of the Term Loan under the bank credit agreement. The balance
of net proceeds was used to repay Revolving Credit Loans under the bank credit
agreement.
10. EARNINGS PER COMMON SHARE:
The following table presents historical earnings per common share restated to
conform with the provisions of SFAS No. 128.
For the
For the Years Ended For the Six Months Ended Year Ended
-------------------------- -------------------------- ----------
February 28, February 28, February 29, February 28, August 31,
1998 1997 1996 1995 1995
------------ ------------ ------------ ------------ ----------
(in thousands, except per share data) (unaudited)
BASIC EARNINGS PER COMMON SHARE:
- --------------------------------
Income applicable to common shares $ 50,071 $ 27,675 $ 3,322 $ 20,320 $ 41,020
Weighted average common shares
outstanding 18,672 19,333 19,611 17,989 18,776
BASIC EARNINGS PER COMMON SHARE $ 2.68 $ 1.43 $ 0.17 $ 1.13 $ 2.18
======== ======== ======== ======== ========
DILUTED EARNINGS PER COMMON SHARE:
- ----------------------------------
Income applicable to common shares $ 50,071 $ 27,675 $ 3,322 $ 20,320 $ 41,020
-------- -------- -------- -------- --------
Weighted average common shares
outstanding 18,672 19,333 19,611 17,989 18,776
Incentive stock options 423 179 129 152 155
Options/employee stock purchases 10 9 67 38 74
-------- -------- -------- -------- --------
Adjusted weighted average common
shares outstanding 19,105 19,521 19,807 18,179 19,005
-------- -------- -------- -------- --------
DILUTED EARNINGS PER COMMON SHARE $ 2.62 $ 1.42 $ 0.17 $ 1.12 $ 2.16
======== ======== ======== ======== ========
11. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES -
Future payments under noncancelable operating leases having initial or remaining
terms of one year or more are as follows:
February 28, 1998
-----------------
(in thousands)
1999 $ 3,506
2000 2,627
2001 1,947
2002 1,513
2003 1,291
Thereafter 8,590
--------
$ 19,474
========
Rental expense was approximately $5,554,000 and $4,716,000 for fiscal 1998 and
fiscal 1997, respectively, $2,382,000 in the Transition Period and $4,193,000
for fiscal 1995.
PURCHASE COMMITMENTS AND CONTINGENCIES -
The Company has agreements with three suppliers to purchase blended Scotch
whisky through December 2001. The purchase prices under the agreements are
denominated in British pounds sterling. Based upon exchange rates at February
28, 1998, the Company's aggregate future obligation ranges from approximately
$10,758,000 to $22,835,000 for the contracts expiring through December 2001.
The Company has an agreement to purchase Canadian blended whisky through
September 1, 1999, with a maximum obligation of approximately $4,453,000. The
Company also has two agreements to purchase Canadian new distillation whisky
(including dumping charges) through December 2005 at purchase prices of
approximately $12,521,000 to $13,536,000. In addition, the Company has an
agreement to purchase corn whiskey through April 1999 at a purchase price of
approximately $90,000.
All of the Company's imported beer products are marketed and sold pursuant to
exclusive distribution agreements from the suppliers of these products. The
Company's agreement to distribute Corona and its other Mexican beer brands
exclusively throughout 25 states was renewed effective November 22, 1996, and
expires December 2006, with automatic five year renewals thereafter, subject to
compliance with certain performance criteria and other terms under the
agreement. The remaining agreements expire through June 2003. Prior to their
expiration, these agreements may be terminated if the Company fails to meet
certain performance criteria. At February 28, 1998, the Company believes it is
in compliance with all of its material distribution agreements and, given the
Company's long-term relationships with its suppliers, the Company does not
believe that these agreements will be terminated.
In connection with the Vintners Acquisition and the Almaden/Inglenook
Acquisition, the Company assumed purchase contracts with certain growers and
suppliers. In addition, the Company has entered into other purchase contracts
with various growers and suppliers in the normal course of business. Under the
grape purchase contracts, the Company is committed to purchase all grape
production yielded from a specified number of acres for a period of time ranging
up to 20 years. The actual tonnage and price of grapes that must be purchased by
the Company will vary each year depending on certain factors, including weather,
time of harvest, overall market conditions and the agricultural practices and
location of the growers and suppliers under contract.
The Company purchased $154,909,000 of grapes under these contracts during fiscal
1998. Based on current production yields and published grape prices, the Company
estimates that the aggregate purchases under these contracts over the remaining
term of the contracts will be approximately $915,651,000. During fiscal 1994, in
connection with the Vintners Acquisition and the Almaden/Inglenook Acquisition,
the Company established a reserve for the estimated loss on these firm purchase
commitments of approximately $62,664,000, which was subsequently reduced during
fiscal 1995 to reflect the effects of the termination payments to cancel
contracts with certain growers. The remaining reserve for the estimated loss on
the remaining contracts is approximately $771,000 at February 28, 1998.
The Company's aggregate obligations under bulk wine purchase contracts will be
approximately $32,502,000 over the remaining term of the contracts which expire
through fiscal 2001.
EMPLOYMENT CONTRACTS -
The Company has employment contracts with certain of its executive officers and
certain other management personnel with remaining terms ranging up to three
years. These agreements provide for minimum salaries, as adjusted for annual
increases, and may include incentive bonuses based upon attainment of specified
management goals. In addition, these agreements provide for severance payments
in the event of specified termination of employment. The aggregate commitment
for future compensation and severance, excluding incentive bonuses, was
approximately $7,903,000 as of February 28, 1998, of which approximately
$1,436,000 is accrued in other liabilities as of February 28, 1998.
EMPLOYEES COVERED BY COLLECTIVE BARGAINING AGREEMENTS -
Approximately 42% of the Company's full-time employees are covered by collective
bargaining agreements at February 28, 1998. Agreements expiring within one year
cover approximately 7% of the Company's full-time employees.
LEGAL MATTERS -
The Company is subject to litigation from time to time in the ordinary course of
business. Although the amount of any liability with respect to such litigation
cannot be determined, in the opinion of management, such liability will not have
a material adverse effect on the Company's financial condition or results of
operations.
12. SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK:
The Company sells its products principally to wholesalers for resale to retail
outlets including grocery stores, package liquor stores, club and discount
stores and restaurants. Gross sales to the five largest wholesalers of the
Company represented 26.4%, 22.9%, 16.9% and 21.6% of the Company's gross sales
for the fiscal years ending February 28, 1998 and 1997, the Transition Period
and for the fiscal year ended August 31, 1995, respectively. Gross sales to the
Company's largest wholesaler, Southern Wine and Spirits, represented 12.1%,
10.5% and 10.6% of the Company's gross sales for the fiscal years ended February
28, 1998 and 1997, and for the fiscal year ended August 31, 1995, respectively.
Accounts receivable from the Company's largest wholesaler represented 14.1% and
11.3% of the Company's total accounts receivable as of February 28, 1998 and
1997, respectively. No single wholesaler was responsible for greater than 10% of
gross sales during the Transition Period. Gross sales to the Company's five
largest wholesalers are expected to continue to represent a significant portion
of the Company's revenues. The Company's arrangements with certain of its
wholesalers may, generally, be terminated by either party with prior notice. The
Company performs ongoing credit evaluations of its customers' financial
position, and management of the Company is of the opinion that any risk of
significant loss is reduced due to the diversity of customers and geographic
sales area.
13. RESTRUCTURING PLAN:
The Company provided for costs to restructure the operations of its California
wineries (the Restructuring Plan) in the fourth quarter of fiscal 1994. Under
the Restructuring Plan, all bottling operations at the Central Cellars winery in
Lodi, California, and the branded wine bottling operations at the Monterey
Cellars winery in Gonzales, California, were moved to the Mission Bell winery
located in Madera, California. The Monterey Cellars winery will continue to be
used as a crushing, winemaking and contract bottling facility. The Central
Cellars winery was closed in the fourth quarter of fiscal 1995 and was sold for
its approximate net book value during fiscal 1997. In fiscal 1994, the
Restructuring Plan reduced income before taxes and net income by approximately
$24,005,000 and $14,883,000, respectively, or $0.92 per share on a diluted
basis. Of the total pretax charge in fiscal 1994, approximately $16,481,000 was
to recognize estimated losses associated with the revaluation of land, buildings
and equipment related to facilities described above to their estimated net
realizable value; and approximately $7,524,000 related to severance and other
benefits associated with the elimination of 260 jobs. In fiscal 1995, the
Restructuring Plan reduced income before income taxes and net income by
approximately $2,238,000 and $1,376,000, respectively, or $0.07 per share on a
diluted basis. Of the total pretax charge in fiscal 1995, $4,288,000 relates to
equipment relocation and employee hiring and relocation costs, offset by a
decrease of $2,050,000 in the valuation reserve as compared to fiscal 1994,
primarily related to the land, buildings and equipment at the Central Cellars
winery. The Company also expended approximately $19,071,000 in fiscal 1995 for
capital expenditures to expand storage capacity and install certain relocated
equipment. In the Transition Period, the expense incurred in connection with the
Restructuring Plan reduced income before taxes and net income by approximately
$2,404,000 and $1,192,000, respectively, or $0.06 per share on a diluted basis.
These charges represented incremental, nonrecurring expenses of $3,982,000
primarily incurred for overtime and freight expenses resulting from
inefficiencies related to the Restructuring Plan, offset by a reduction in the
accrual for restructuring expenses of $1,578,000, primarily for severance and
facility holding and closure costs. The Company completed the Restructuring Plan
at February 29, 1996, with a total employment reduction of 177 jobs. The Company
expended approximately $2,125,000 in fiscal 1997 and $6,644,000 during the
Transition Period for capital expenditures to expand storage capacity. As of
February 28, 1997, the Company had accrued liabilities of approximately $402,000
relating to the Restructuring Plan. As of February 28, 1998, the Company had no
accrued liabilities relating to the Restructuring Plan.
14. SUMMARIZED FINANCIAL INFORMATION - SUBSIDIARY GUARANTORS:
The subsidiary 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 nonguarantor 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; however, except for limited amounts, the
subsidiary guarantors may not loan funds to the Company.
The following table presents summarized financial information for subsidiary
guarantors in connection with all of the Company's 8.75% Senior Subordinated
Notes:
February 28, February 28,
1998 1997
------------ ------------
(in thousands)
Balance Sheet Data:
Current assets $ 460,618 $ 401,870
Noncurrent assets $ 395,225 $ 403,068
Current liabilities $ 102,207 $ 100,009
Noncurrent liabilities $ 61,784 $ 65,300
For the Year
For the Years Ended For the Six Months Ended Ended
-------------------------- -------------------------- ------------
February 28, February 28, February 29, February 28, August 31,
1998 1997 1996 1995 1995
------------ ------------ ------------ ------------ ----------
(in thousands)
Income Statement Data:
Net sales $ 985,757 $ 907,387 $ 416,839 $ 334,885 $ 716,969
Gross profit $ 196,642 $ 164,471 $ 73,843 $ 62,883 $ 131,489
Income before provision for
Federal and state income taxes $ 64,270 $ 47,303 $ 17,083 $ 22,690 $ 52,756
Net income $ 38,094 $ 27,392 $ 8,466 $ 13,954 $ 32,445
15. ACCOUNTING PRONOUNCEMENTS:
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 in a full set
of financial statements. The Company is required to adopt SFAS No. 130 for
interim periods and fiscal years beginning March 1, 1998. Reclassification of
financial statements for earlier periods provided for comparative purposes is
required. The Company believes the effect of adoption will not be significant.
SFAS No. 131 establishes standards for reporting information about operating
segments in annual financial statements and requires reporting of selected
information in interim financial statements. 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.
16. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
A summary of selected quarterly financial information is as follows:
QUARTER ENDED
-----------------------------------------------------
May 31, August 31, November 30, February 28,
Fiscal 1998 1997 1997 1997 1998 Full Year
- -------------------------- --------- ---------- ------------ ------------ -----------
(in thousands, except per
share data)
Net sales $ 306,011 $ 301,524 $ 322,703 $ 282,550 $ 1,212,788
Gross profit $ 80,732 $ 84,759 $ 98,000 $ 85,244 $ 348,735
Net income $ 10,046 $ 12,365 $ 17,611 $ 10,049 $ 50,071
Earnings per common share:
Basic $ 0.54 $ 0.67 $ 0.94 $ 0.54 $ 2.68
Diluted $ 0.53 $ 0.65 $ 0.92 $ 0.53 $ 2.62
QUARTER ENDED
-----------------------------------------------------
May 31, August 31, November 30, February 28,
Fiscal 1997 1996 1996 1996 1997 Full Year
- -------------------------- --------- ---------- ------------ ------------ -----------
(in thousands, except per
share data)
Net sales $ 276,493 $ 279,218 $ 317,733 $ 261,569 $ 1,135,013
Gross profit $ 72,907 $ 69,835 $ 81,683 $ 66,407 $ 290,832
Net income $ 8,501 $ 4,941 $ 8,311 $ 5,922 $ 27,675
Earnings per common share:
Basic $ 0.43 $ 0.25 $ 0.43 $ 0.31 $ 1.43
Diluted $ 0.43 $ 0.25 $ 0.43 $ 0.31 $ 1.42
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------- --------------------------------------------------
The information required by this Item (except for the information regarding
executive officers required by Item 401 of Regulation S-K which is included in
Part I hereof in accordance with General Instruction G(3)) is incorporated
herein by reference to the Company's proxy statement to be issued in connection
with the Annual Meeting of Stockholders of the Company to be held on July 21,
1998, under those sections of the proxy statement titled "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance", which
proxy statement will be filed within 120 days after the end of the Company's
fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
The information required by this Item is incorporated herein by reference
to the Company's proxy statement to be issued in connection with the Annual
Meeting of Stockholders of the Company to be held on July 21, 1998, under that
section of the proxy statement titled "Executive Compensation" and that caption
titled "Director Compensation" under "Election of Directors", which proxy
statement will be filed within 120 days after the end of the Company's fiscal
year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- --------------------------------------------------------------
The information required by this Item is incorporated herein by reference
to the Company's proxy statement to be issued in connection with the Annual
Meeting of Stockholders of the Company to be held on July 21, 1998, under those
sections of the proxy statement titled "Beneficial Ownership" and "Stock
Ownership of Management", which proxy statement will be filed within 120 days
after the end of the Company's fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
The information required by this Item is incorporated herein by reference
to the Company's proxy statement to be issued in connection with the Annual
Meeting of Stockholders of the Company to be held on July 21, 1998, under that
section of the proxy statement titled "Executive Compensation", which proxy
statement will be filed within 120 days after the end of the Company's fiscal
year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- -------- ----------------------------------------------------------------
(a) 1. Financial Statements
The following consolidated financial statements of the Company are
submitted herewith:
Report of Independent Public Accountants
Consolidated Balance Sheets - February 28, 1998 and 1997
Consolidated Statements of Income for the years ended February
28, 1998 and 1997, for the six months ended February 29, 1996 and
February 28, 1995 (unaudited), and for the year ended August 31,
1995
Consolidated Statements of Changes in Stockholders' Equity for
the years ended February 28, 1998 and 1997, for the six months
ended February 29, 1996, and for the year ended August 31, 1995
Consolidated Statements of Cash Flows for the years ended
February 28, 1998 and 1997, for the six months ended February 29,
1996 and February 28, 1995 (unaudited), and for the year ended
August 31, 1995
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
The following consolidated financial information is submitted
herewith:
Selected Financial Data
Selected Quarterly Financial Information (unaudited)
All other schedules are not submitted because they are not applicable or not
required under Regulation S-X or because the required information is included in
the financial statements or notes thereto.
Individual financial statements of the Registrant have been omitted because the
Registrant is primarily an operating company and no subsidiary included in the
consolidated financial statements has minority equity interests and/or
noncurrent indebtedness, not guaranteed by the Registrant, in excess of 5% of
total consolidated assets.
3. Exhibits required to be filed by Item 601 of Regulation S-K
The following exhibits are filed herewith or incorporated herein by
reference, as indicated:
2.1 Stock Purchase Agreement dated April 27, 1993 among the
Company, Barton Incorporated and the stockholders of Barton
Incorporated, Amendment No. 1 to Stock Purchase Agreement
dated May 3, 1993, and Amendment No. 2 to Stock Purchase
Agreement dated June 29, 1993 (filed as Exhibit 2(a) to the
Company's Current Report on Form 8-K dated June 29, 1993 and
incorporated herein by reference).
2.2 Asset Sale Agreement dated September 14, 1993 between the
Company and Vintners International Company, Inc. (filed as
Exhibit 2(a) to the Company's Current Report on Form 8-K
dated October 15, 1993 and incorporated herein by
reference).
2.3 Amendment dated as of October 14, 1993 to Asset Sale
Agreement dated as of September 14, 1993 by and between
Vintners International Company, Inc. and the Company (filed
as Exhibit 2(b) to the Company's Current Report on Form 8-K
dated October 15, 1993 and incorporated herein by
reference).
2.4 Amendment No. 2 dated as of January 18, 1994 to Asset Sale
Agreement dated as of September 14, 1993 by and between
Vintners International Company, Inc. and the Company (filed
as Exhibit 2.1 to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended February 28, 1994 and
incorporated herein by reference).
2.5 Asset Purchase Agreement dated August 3, 1994 between the
Company and Heublein, Inc. (filed as Exhibit 2(a) to the
Company's Current Report on Form 8-K dated August 5, 1994
and incorporated herein by reference).
2.6 Amendment dated November 8, 1994 to Asset Purchase Agreement
between Heublein, Inc. and the Company (filed as Exhibit 2.2
to the Company's Registration Statement on Form S-3
(Amendment No. 2) (Registration No. 33-55997) filed with the
Securities and Exchange Commission on November 8, 1994 and
incorporated herein by reference).
2.7 Amendment dated November 18, 1994 to Asset Purchase
Agreement between Heublein, Inc. and the Company (filed as
Exhibit 2.8 to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1994 and incorporated
herein by reference).
2.8 Amendment dated November 30, 1994 to Asset Purchase
Agreement between Heublein, Inc. and the Company (filed as
Exhibit 2.9 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended November 30, 1994 and
incorporated herein by reference).
2.9 Asset Purchase Agreement among Barton Incorporated (a
wholly-owned subsidiary of the Company), United Distillers
Glenmore, Inc., Schenley Industries, Inc., Medley Distilling
Company, United Distillers Manufacturing, Inc., and The
Viking Distillery, Inc., dated August 29, 1995 (filed as
Exhibit 2(a) to the Company's Current Report on Form 8-K,
dated August 29, 1995 and incorporated herein by reference).
3.1(a) Certificate of Amendment of the Certificate of Incorporation
of the Company (filed as Exhibit 3.1(a) to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 1997 and incorporated herein by reference).
3.1(b) Restated Certificate of Incorporation of the Company (filed
as Exhibit 3.1 to the Company's Transition Report on Form
10-K for the Transition Period from September 1, 1995 to
February 29, 1996 and incorporated herein by reference).
3.2 Amended and Restated By-laws of the Company (filed as
Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended August 31, 1997 and
incorporated herein by reference).
4.1 Indenture dated as of December 27, 1993 among the Company,
its Subsidiaries and The Chase Manhattan Bank (as successor
to Chemical Bank) (filed as Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
November 30, 1993 and incorporated herein by reference).
4.2 First Supplemental Indenture dated as of August 3, 1994
among the Company, Canandaigua West, Inc. and The Chase
Manhattan Bank (as successor to Chemical Bank) (filed as
Exhibit 4.5 to the Company's Registration Statement on Form
S-8 (Registration No. 33-56557) and incorporated herein by
reference).
4.3 Second Supplemental Indenture dated August 25, 1995 among
the Company, V Acquisition Corp. (a subsidiary of the
Company now known as The Viking Distillery, Inc.) and The
Chase Manhattan Bank (as successor to Chemical Bank) (filed
as Exhibit 4.5 to the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 1995 and incorporated
herein by reference).
4.4 Third Supplemental Indenture dated as of December 19, 1997
among the Company, Canandaigua Europe Limited, Roberts
Trading Corp. and The Chase Manhattan Bank (filed herewith).
4.5 Indenture with respect to the 8 3/4% Series C Senior
Subordinated Notes due 2003 dated as of October 29, 1996
among the Company, its Subsidiaries and Harris Trust and
Savings Bank (filed as Exhibit 4.2 to the Company's
Registration Statement on Form S-4 (Registration No.
333-17673) and incorporated herein by reference).
4.6 First Supplemental Indenture dated as of December 19, 1997
among the Company, Canandaigua Europe Limited, Roberts
Trading Corp. and Harris Trust and Savings Bank (filed
herewith).
4.7 Credit Agreement between the Company, its principal
operating subsidiaries, and certain banks for which The
Chase Manhattan Bank acts as Administrative Agent, dated as
of December 19, 1997 (including a list briefly identifying
the contents of all omitted schedules and exhibits thereto)
(filed herewith). The Registrant will furnish supplementally
to the Commission, upon request, a copy of any omitted
schedule or exhibit.
10.1 Employment Agreement between Barton Incorporated and Ellis
M. Goodman dated as of October 1, 1991 as amended by
Amendment to Employment Agreement between Barton
Incorporated and Ellis M. Goodman dated as of June 29, 1993
(filed as Exhibit 10.5 to the Company's Annual Report on
Form 10-K for the fiscal year ended August 31, 1993 and
incorporated herein by reference).
10.2 Barton Incorporated Management Incentive Plan (filed as
Exhibit 10.6 to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1993 and incorporated
herein by reference).
10.3 Ellis M. Goodman Split Dollar Insurance Agreement (filed as
Exhibit 10.7 to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1993 and incorporated
herein by reference).
10.4 Barton Brands, Ltd. Deferred Compensation Plan (filed as
Exhibit 10.8 to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1993 and incorporated
herein by reference).
10.5 Marvin Sands Split Dollar Insurance Agreement (filed as
Exhibit 10.9 to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1993 and incorporated
herein by reference).
10.6 Letter agreement, effective as of October 7, 1995, as
amended, addressing compensation, between the Company and
Daniel Barnett (filed as Exhibit 10.23 to the Company's
Transition Report on Form 10-K for the Transition Period
from September 1, 1995 to February 29, 1996 and incorporated
herein by reference).
10.7 Employment Agreement between Barton Incorporated and
Alexander L. Berk dated as of September 1, 1990 as amended
by Amendment No. 1 to Employment Agreement between Barton
Incorporated and Alexander L. Berk dated November 11, 1996
(filed herewith).
10.8 Credit Agreement between the Company, its principal
operating subsidiaries, and certain banks for which The
Chase Manhattan Bank acts as Administrative Agent, dated as
of December 19, 1997 (including a list briefly identifying
the contents of all omitted schedules and exhibits thereto)
(incorporated by reference to Exhibit 4.7, filed herewith).
10.9 Long-Term Stock Incentive Plan, which amends and restates
the Canandaigua Wine Company, Inc. Stock Option and Stock
Appreciation Right Plan (filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended May 31, 1997 and incorporated herein by
reference).
10.10 Amendment Number One to the Long-Term Stock Incentive Plan
of the Company (filed as Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 1997 and incorporated herein by reference).
10.11 Incentive Stock Option Plan of the Company (filed as Exhibit
10.2 of the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended August 31, 1997 and incorporated herein
by reference).
10.12 Amendment Number One to the Incentive Stock Option Plan of
the Company (filed as Exhibit 10.3 of the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 1997 and incorporated herein by reference).
10.13 Annual Management Incentive Plan of the Company (filed as
Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended August 31, 1997 and
incorporated herein by reference).
10.14 Amendment Number One to the Annual Management Incentive Plan
of the Company (filed herewith).
11.1 Statement re Computation of Per Share Earnings (filed
herewith).
21.1 Subsidiaries of Company (filed herewith).
23.1 Consent of Arthur Andersen LLP (filed herewith).
27.1 Financial Data Schedule for fiscal year ended February 28,
1998 (filed herewith).
27.2 Restated Financial Data Schedule for the fiscal quarter
ended November 30, 1997 (filed herewith).
27.3 Restated Financial Data Schedule for the fiscal quarter
ended August 31, 1997 (filed herewith).
27.4 Restated Financial Data Schedule for the fiscal quarter
ended May 31, 1997 (filed herewith).
27.5 Restated Financial Data Schedule for the fiscal year ended
February 28, 1997 (filed herewith).
27.6 Restated Financial Data Schedule for the fiscal quarter
ended November 30, 1996 (filed herewith).
27.7 Restated Financial Data Schedule for the fiscal quarter
ended August 31, 1996 (filed herewith).
27.8 Restated Financial Data Schedule for the fiscal quarter
ended May 31, 1996 (filed herewith).
27.9 Restated Financial Data Schedule for the Transition Period
from September 1, 1995 to February 29, 1996 (filed
herewith).
27.10 Restated Financial Data Schedule for the fiscal year ended
August 31, 1995 (filed herewith).
99.1 1989 Employee Stock Purchase Plan of the Company, as amended
by Amendment Number 1 through Amendment Number 5 (filed
herewith).
(b) Reports on Form 8-K
No Reports on Form 8-K were filed by the Company with the Securities and
Exchange Commission during the fourth quarter of the fiscal year ended
February 28, 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 1998 CANANDAIGUA BRANDS, INC.
By: /s/ Richard Sands
-----------------
Richard Sands, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Richard Sands /s/ Thomas S. Summer
- ----------------- --------------------
Richard Sands, President, Chief Thomas S. Summer, Senior Vice President
Executive Officer and Director and Chief Financial Officer (Principal
(Principal Executive Officer) Financial Officer and Principal
Dated: May 29, 1998 Accounting Officer)
Dated: May 29, 1998
/s/ Marvin Sands /s/ Robert Sands
- ---------------- ----------------
Marvin Sands, Chairman of Robert Sands, Director
the Board Dated: May 29, 1998
Dated: May 29, 1998
/s/ George Bresler /s/ James A. Locke
- ------------------ ------------------
George Bresler, Director James A. Locke, III, Director
Dated: May 29, 1998 Dated: May 29, 1998
/s/ Thomas C. McDermott /s/ Bertram E. Silk
- ----------------------- -------------------
Thomas C. McDermott, Director Bertram E. Silk, Director
Dated: May 29, 1998 Dated: May 29, 1998
/s/ Paul L. Smith
- -----------------
Paul L. Smith, Director
Dated: May 29, 1998
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 1998 BATAVIA WINE CELLARS, INC.
By: /s/ Ned Cooper
--------------
Ned Cooper, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 29, 1998 /s/ Ned Cooper
--------------
Ned Cooper, President
(Principal Executive Officer)
Dated: May 29, 1998 /s/ Thomas S. Summer
--------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 29, 1998 /s/ Richard Sands
-----------------
Richard Sands, Director
Dated: May 29, 1998 /s/ Robert Sands
----------------
Robert Sands, Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 1998 CANANDAIGUA WINE COMPANY, INC.
By: /s/ Daniel C. Barnett
---------------------
Daniel C. Barnett, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 29, 1998 /s/ Daniel C. Barnett
---------------------
Daniel C. Barnett, President
(Principal Executive Officer)
Dated: May 29, 1998 /s/ Thomas S. Summer
--------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 29, 1998 /s/ Richard Sands
-----------------
Richard Sands, Director
Dated: May 29, 1998 /s/ Robert Sands
----------------
Robert Sands, Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 1998 CANANDAIGUA EUROPE LIMITED
By: /s/ Douglas Kahle
-----------------
Douglas Kahle, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 29, 1998 /s/ Douglas Kahle
-----------------
Douglas Kahle, President
(Principal Executive Officer)
Dated: May 29, 1998 /s/ Thomas S. Summer
--------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 29, 1998 /s/ Richard Sands
-----------------
Richard Sands, Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 1998 ROBERTS TRADING CORP.
By: /s/ Daniel C. Barnett
---------------------
Daniel C. Barnett, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 29, 1998 /s/ Daniel C. Barnett
---------------------
Daniel C. Barnett, President
(Principal Executive Officer)
Dated: May 29, 1998 /s/ Thomas S. Summer
--------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 29, 1998 /s/ Richard Sands
-----------------
Richard Sands, Director
Dated: May 29, 1998 /s/ Robert Sands
----------------
Robert Sands, Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 1998 BARTON INCORPORATED
By: /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President and
Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 29, 1998 /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President, Chief
Operating Officer and Director
(Principal Executive Officer)
Dated: May 29, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 29, 1998 /s/ Edward L. Golden
--------------------
Edward L. Golden, Director
Dated: May 29, 1998 /s/ William F. Hackett
----------------------
William F. Hackett, Director
Dated: May 29, 1998 /s/ Richard Sands
-----------------
Richard Sands, Director
Dated: May 29, 1998 /s/ Robert Sands
----------------
Robert Sands, Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 1998 BARTON BRANDS, LTD.
By: /s/ Edward L. Golden
--------------------
Edward L. Golden, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 29, 1998 /s/ Edward L. Golden
--------------------
Edward L. Golden, President and Director
(Principal Executive Officer)
Dated: May 29, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 29, 1998 /s/ Alexander L. Berk
---------------------
Alexander L. Berk, Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 1998 BARTON BEERS, LTD.
By: /s/ Richard Sands
-----------------
Richard Sands, Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 29, 1998 /s/ Richard Sands
-----------------
Richard Sands, Chief Executive Officer
and Director (Principal Executive
Officer)
Dated: May 29, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 29, 1998 /s/ Alexander L. Berk
---------------------
Alexander L. Berk, Director
Dated: May 29, 1998 /s/ William F. Hackett
----------------------
William F. Hackett, Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 1998 BARTON BRANDS OF CALIFORNIA, INC.
By: /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 29, 1998 /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President and
Director (Principal Executive Officer)
Dated: May 29, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 29, 1998 /s/ Edward L. Golden
--------------------
Edward L. Golden, Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 1998 BARTON BRANDS OF GEORGIA, INC.
By: /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 29, 1998 /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President and
Director (Principal Executive Officer)
Dated: May 29, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 29, 1998 /s/ Edward L. Golden
--------------------
Edward L. Golden, Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 1998 BARTON DISTILLERS IMPORT CORP.
By: /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 29, 1998 /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President and
Director (Principal Executive Officer)
Dated: May 29, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 29, 1998 /s/ Edward L. Golden
--------------------
Edward L. Golden, Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 1998 BARTON FINANCIAL CORPORATION
By: /s/ Raymond E. Powers
---------------------
Raymond E. Powers, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 29, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, President, Secretary
and Director (Principal Executive
Officer)
Dated: May 29, 1998 /s/ Charles T. Schlau
---------------------
Charles T. Schlau, Treasurer and
Director (Principal Financial Officer
and Principal Accounting Officer)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 1998 STEVENS POINT BEVERAGE CO.
By: /s/ James P. Ryan
-----------------
James P. Ryan, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 29, 1998 /s/ James P. Ryan
-----------------
James P. Ryan, President, Chief
Executive Officer and Director
(Principal Executive Officer)
Dated: May 29, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 29, 1998 /s/ Alexander L. Berk
---------------------
Alexander L. Berk, Director
Dated: May 29, 1998 /s/ William F. Hackett
----------------------
William F. Hackett, Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 1998 MONARCH IMPORT COMPANY
By: /s/ James P. Ryan
-----------------
James P. Ryan, Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 29, 1998 /s/ James P. Ryan
-----------------
James P. Ryan, Chief Executive Officer
(Principal Executive Officer)
Dated: May 29, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 29, 1998 /s/ Alexander L. Berk
---------------------
Alexander L. Berk, Director
Dated: May 29, 1998 /s/ William F. Hackett
----------------------
William F. Hackett, Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 1998 THE VIKING DISTILLERY, INC.
By: /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 29, 1998 /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President and
Director (Principal Executive Officer)
Dated: May 29, 1998 /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 29, 1998 /s/ Edward L. Golden
--------------------
Edward L. Golden, Director
INDEX TO EXHIBITS
EXHIBIT NO.
2.1 Stock Purchase Agreement dated April 27, 1993 among the Company,
Barton Incorporated and the stockholders of Barton Incorporated,
Amendment No. 1 to Stock Purchase Agreement dated May 3, 1993, and
Amendment No. 2 to Stock Purchase Agreement dated June 29, 1993
(filed as Exhibit 2(a) to the Company's Current Report on Form 8-K
dated June 29, 1993 and incorporated herein by reference).
2.2 Asset Sale Agreement dated September 14, 1993 between the Company
and Vintners International Company, Inc. (filed as Exhibit 2(a) to
the Company's Current Report on Form 8-K dated October 15, 1993
and incorporated herein by reference).
2.3 Amendment dated as of October 14, 1993 to Asset Sale Agreement
dated as of September 14, 1993 by and between Vintners
International Company, Inc. and the Company (filed as Exhibit 2(b)
to the Company's Current Report on Form 8-K dated October 15, 1993
and incorporated herein by reference).
2.4 Amendment No. 2 dated as of January 18, 1994 to Asset Sale
Agreement dated as of September 14, 1993 by and between Vintners
International Company, Inc. and the Company (filed as Exhibit 2.1
to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended February 28, 1994 and incorporated herein by
reference).
2.5 Asset Purchase Agreement dated August 3, 1994 between the Company
and Heublein, Inc. (filed as Exhibit 2(a) to the Company's Current
Report on Form 8-K dated August 5, 1994 and incorporated herein by
reference).
2.6 Amendment dated November 8, 1994 to Asset Purchase Agreement
between Heublein, Inc. and the Company (filed as Exhibit 2.2 to
the Company's Registration Statement on Form S-3 (Amendment No. 2)
(Registration No. 33-55997) filed with the Securities and Exchange
Commission on November 8, 1994 and incorporated herein by
reference).
2.7 Amendment dated November 18, 1994 to Asset Purchase Agreement
between Heublein, Inc. and the Company (filed as Exhibit 2.8 to
the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1994 and incorporated herein by reference).
2.8 Amendment dated November 30, 1994 to Asset Purchase Agreement
between Heublein, Inc. and the Company (filed as Exhibit 2.9 to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 30, 1994 and incorporated herein by reference).
2.9 Asset Purchase Agreement among Barton Incorporated (a wholly-owned
subsidiary of the Company), United Distillers Glenmore, Inc.,
Schenley Industries, Inc., Medley Distilling Company, United
Distillers Manufacturing, Inc., and The Viking Distillery, Inc.,
dated August 29, 1995 (filed as Exhibit 2(a) to the Company's
Current Report on Form 8-K, dated August 29, 1995 and incorporated
herein by reference).
3.1(a) Certificate of Amendment of the Certificate of Incorporation of
the Company (filed as Exhibit 3.1(a) to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended August 31, 1997
and incorporated herein by reference).
3.1(b) Restated Certificate of Incorporation of the Company (filed as
Exhibit 3.1 to the Company's Transition Report on Form 10-K for
the Transition Period from September 1, 1995 to February 29, 1996
and incorporated herein by reference).
3.2 Amended and Restated By-laws of the Company (filed as Exhibit 3.2
to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended August 31, 1997 and incorporated herein by
reference).
4.1 Indenture dated as of December 27, 1993 among the Company, its
Subsidiaries and The Chase Manhattan Bank (as successor to
Chemical Bank) (filed as Exhibit 4.1 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended November 30, 1993
and incorporated herein by reference).
4.2 First Supplemental Indenture dated as of August 3, 1994 among the
Company, Canandaigua West, Inc. and The Chase Manhattan Bank (as
successor to Chemical Bank) (filed as Exhibit 4.5 to the Company's
Registration Statement on Form S-8 (Registration No. 33-56557) and
incorporated herein by reference).
4.3 Second Supplemental Indenture dated August 25, 1995 among the
Company, V Acquisition Corp. (a subsidiary of the Company now
known as The Viking Distillery, Inc.) and The Chase Manhattan Bank
(as successor to Chemical Bank) (filed as Exhibit 4.5 to the
Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1995 and incorporated herein by reference).
4.4 Third Supplemental Indenture dated as of December 19, 1997 among
the Company, Canandaigua Europe Limited, Roberts Trading Corp. and
The Chase Manhattan Bank (filed herewith).
4.5 Indenture with respect to the 8 3/4% Series C Senior Subordinated
Notes due 2003 dated as of October 29, 1996 among the Company, its
Subsidiaries and Harris Trust and Savings Bank (filed as Exhibit
4.2 to the Company's Registration Statement on Form S-4
(Registration No. 333-17673) and incorporated herein by
reference).
4.6 First Supplemental Indenture dated as of December 19, 1997 among
the Company, Canandaigua Europe Limited, Roberts Trading Corp. and
Harris Trust and Savings Bank (filed herewith).
4.7 Credit Agreement between the Company, its principal operating
subsidiaries, and certain banks for which The Chase Manhattan Bank
acts as Administrative Agent, dated as of December 19, 1997
(including a list briefly identifying the contents of all omitted
schedules and exhibits thereto) (filed herewith). The Registrant
will furnish supplementally to the Commission, upon request, a
copy of any omitted schedule or exhibit.
10.1 Employment Agreement between Barton Incorporated and Ellis M.
Goodman dated as of October 1, 1991 as amended by Amendment to
Employment Agreement between Barton Incorporated and Ellis M.
Goodman dated as of June 29, 1993 (filed as Exhibit 10.5 to the
Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1993 and incorporated herein by reference).
10.2 Barton Incorporated Management Incentive Plan (filed as Exhibit
10.6 to the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1993 and incorporated herein by reference).
10.3 Ellis M. Goodman Split Dollar Insurance Agreement (filed as
Exhibit 10.7 to the Company's Annual Report on Form 10-K for the
fiscal year ended August 31, 1993 and incorporated herein by
reference).
10.4 Barton Brands, Ltd. Deferred Compensation Plan (filed as Exhibit
10.8 to the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1993 and incorporated herein by reference).
10.5 Marvin Sands Split Dollar Insurance Agreement (filed as Exhibit
10.9 to the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1993 and incorporated herein by reference).
10.6 Letter agreement, effective as of October 7, 1995, as amended,
addressing compensation, between the Company and Daniel Barnett
(filed as Exhibit 10.23 to the Company's Transition Report on Form
10-K for the Transition Period from September 1, 1995 to February
29, 1996 and incorporated herein by reference).
10.7 Employment Agreement between Barton Incorporated and Alexander L.
Berk dated as of September 1, 1990 as amended by Amendment No. 1
to Employment Agreement between Barton Incorporated and Alexander
L. Berk dated November 11, 1996 (filed herewith).
10.8 Credit Agreement between the Company, its principal operating
subsidiaries, and certain banks for which The Chase Manhattan Bank
acts as Administrative Agent, dated as of December 19, 1997
(including a list briefly identifying the contents of all omitted
schedules and exhibits thereto) (incorporated by reference to
Exhibit 4.7, filed herewith).
10.9 Long-Term Stock Incentive Plan, which amends and restates the
Canandaigua Wine Company, Inc. Stock Option and Stock Appreciation
Right Plan (filed as Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended May 31, 1997 and
incorporated herein by reference).
10.10 Amendment Number One to the Long-Term Stock Incentive Plan of the
Company (filed as Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended August 31, 1997 and
incorporated herein by reference).
10.11 Incentive Stock Option Plan of the Company (filed as Exhibit 10.2
of the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended August 31, 1997 and incorporated herein by
reference).
10.12 Amendment Number One to the Incentive Stock Option Plan of the
Company (filed as Exhibit 10.3 of the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended August 31, 1997 and
incorporated herein by reference).
10.13 Annual Management Incentive Plan of the Company (filed as Exhibit
10.4 of the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended August 31, 1997 and incorporated herein by
reference).
10.14 Amendment Number One to the Annual Management Incentive Plan of
the Company (filed herewith).
11.1 Statement re Computation of Per Share Earnings (filed herewith).
21.1 Subsidiaries of Company (filed herewith).
23.1 Consent of Arthur Andersen LLP (filed herewith).
27.1 Financial Data Schedule for fiscal year ended February 28, 1998
(filed herewith).
27.2 Restated Financial Data Schedule for the fiscal quarter ended
November 30, 1997 (filed herewith).
27.3 Restated Financial Data Schedule for the fiscal quarter ended
August 31, 1997 (filed herewith).
27.4 Restated Financial Data Schedule for the fiscal quarter ended May
31, 1997 (filed herewith).
27.5 Restated Financial Data Schedule for the fiscal year ended
February 28, 1997 (filed herewith).
27.6 Restated Financial Data Schedule for the fiscal quarter ended
November 30, 1996 (filed herewith).
27.7 Restated Financial Data Schedule for the fiscal quarter ended
August 31, 1996 (filed herewith).
27.8 Restated Financial Data Schedule for the fiscal quarter ended May
31, 1996 (filed herewith).
27.9 Restated Financial Data Schedule for the Transition Period from
September 1, 1995 to February 29, 1996 (filed herewith).
27.10 Restated Financial Data Schedule for the fiscal year ended August
31, 1995 (filed herewith).
99.1 1989 Employee Stock Purchase Plan of the Company, as amended by
Amendment Number 1 through Amendment Number 5 (filed herewith).