FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended August 31, 1998
---------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- --------------------
COMMISSION FILE NUMBER 0-7570
DELAWARE CANANDAIGUA BRANDS, INC. 16-0716709
AND ITS SUBSIDIARIES:
NEW YORK BATAVIA WINE CELLARS, INC. 16-1222994
NEW YORK CANANDAIGUA WINE COMPANY, INC. 16-1462887
NEW YORK CANANDAIGUA EUROPE LIMITED 16-1195581
NEW YORK ROBERTS TRADING CORP. 16-0865491
DELAWARE BARTON INCORPORATED 36-3500366
DELAWARE BARTON BRANDS, LTD. 36-3185921
MARYLAND BARTON BEERS, LTD. 36-2855879
CONNECTICUT BARTON BRANDS OF CALIFORNIA, INC. 06-1048198
GEORGIA BARTON BRANDS OF GEORGIA, INC. 58-1215938
NEW YORK BARTON DISTILLERS IMPORT CORP. 13-1794441
DELAWARE BARTON FINANCIAL CORPORATION 51-0311795
WISCONSIN STEVENS POINT BEVERAGE CO. 39-0638900
ILLINOIS MONARCH IMPORT COMPANY 36-3539106
GEORGIA THE VIKING DISTILLERY, INC. 58-2183528
(State or other (Exact name of registrant as (I.R.S. Employer
jurisdiction of specified in its charter) Identification No.)
incorporation or
organization)
300 WILLOWBROOK OFFICE PARK, FAIRPORT, NEW YORK 14450
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
(716) 393-4130
-----------------------------------------------------
(Registrants' telephone number, including area code)
-----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding with respect to each of the classes of common
stock of Canandaigua Brands, Inc., as of September 23, 1998, is set forth below
(all of the Registrants, other than Canandaigua Brands, Inc., are direct or
indirect wholly-owned subsidiaries of Canandaigua Brands, Inc.):
CLASS NUMBER OF SHARES OUTSTANDING
----- ----------------------------
Class A Common Stock, Par Value $.01 Per Share 14,626,510
Class B Common Stock, Par Value $.01 Per Share 3,248,187
- 1 -
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
August 31, 1998 February 28, 1998
--------------- -----------------
(unaudited)
ASSETS
------
CURRENT ASSETS:
Cash and cash investments $ 1,473 $ 1,232
Accounts receivable, net 154,550 142,615
Inventories, net 345,972 394,028
Prepaid expenses and other current assets 37,550 26,463
----------- -----------
Total current assets 539,545 564,338
PROPERTY, PLANT AND EQUIPMENT, net 246,157 244,035
OTHER ASSETS 262,004 264,786
----------- -----------
Total assets $ 1,047,706 $ 1,073,159
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 63,000 $ 91,900
Current maturities of long-term debt 24,118 24,118
Accounts payable 65,624 52,055
Accrued Federal and state excise taxes 21,561 17,498
Other accrued expenses and liabilities 101,569 97,763
----------- -----------
Total current liabilities 275,872 283,334
----------- -----------
LONG-TERM DEBT, less current maturities 297,407 309,218
----------- -----------
DEFERRED INCOME TAXES 59,237 59,237
----------- -----------
OTHER LIABILITIES 5,445 6,206
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value-
Authorized, 1,000,000 shares;
Issued, none at August 31, 1998, and
February 28, 1998 -- --
Class A Common Stock, $.01 par value-
Authorized, 120,000,000 shares;
Issued, 17,802,475 shares at August 31, 1998,
and 17,604,784 shares at February 28, 1998 178 176
Class B Convertible Common Stock, $.01 par value-
Authorized, 20,000,000 shares;
Issued, 3,873,912 shares at August 31, 1998,
and 3,956,183 shares at February 28, 1998 39 40
Additional paid-in capital 234,992 231,687
Retained earnings 249,733 220,346
----------- -----------
484,942 452,249
----------- -----------
Less-Treasury stock-
Class A Common Stock, 3,029,505 shares at
August 31, 1998, and 2,199,320 shares at
February 28, 1998, at cost (72,990) (34,878)
Class B Convertible Common Stock, 625,725 shares
at August 31, 1998, and February 28, 1998, at cost (2,207) (2,207)
----------- -----------
(75,197) (37,085)
----------- -----------
Total stockholders' equity 409,745 415,164
----------- -----------
Total liabilities and stockholders' equity $ 1,047,706 $ 1,073,159
=========== ===========
<FN>
The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
</FN>
- 2 -
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the Six Months Ended August 31, For the Three Months Ended August 31,
----------------------------------- -------------------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
GROSS SALES $ 880,150 $ 820,326 $ 457,281 $ 409,288
Less - Excise taxes (217,836) (212,791) (107,895) (107,764)
--------- --------- --------- ---------
Net sales 662,314 607,535 349,386 301,524
COST OF PRODUCT SOLD (467,767) (442,044) (247,775) (216,765)
--------- --------- --------- ---------
Gross profit 194,547 165,491 101,611 84,759
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (128,786) (111,483) (67,454) (56,258)
--------- --------- --------- ---------
Operating income 65,761 54,008 34,157 28,501
INTEREST EXPENSE, net (15,952) (16,024) (7,425) (7,545)
--------- --------- --------- ---------
Income before provision for
Federal and state income taxes 49,809 37,984 26,732 20,956
PROVISION FOR FEDERAL AND STATE
INCOME TAXES (20,422) (15,573) (10,960) (8,591)
--------- --------- --------- ---------
NET INCOME $ 29,387 $ 22,411 $ 15,772 $ 12,365
========= ========= ========= =========
SHARE DATA:
Earnings per common share:
Basic $ 1.57 $ 1.20 $ 0.85 $ 0.67
========= ========= ========= =========
Diluted $ 1.53 $ 1.18 $ 0.83 $ 0.65
========= ========= ========= =========
Weighted average common shares
outstanding:
Basic 18,669 18,665 18,589 18,559
Diluted 19,168 19,002 19,051 18,962
<FN>
The accompanying notes to consolidated financial statements are an integral part of these statements.
</FN>
- 3 -
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Six Months Ended August 31,
-----------------------------------
1998 1997
----------- -----------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 29,387 $ 22,411
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of property, plant and equipment 11,952 12,625
Amortization of intangible assets 5,015 4,699
Deferred tax provision 900 4,900
Amortization of discount on long-term debt 189 172
Stock-based compensation expense 51 350
Gain on sale of property, plant and equipment (3) (883)
Change in operating assets and liabilities:
Accounts receivable, net (11,935) (17,518)
Inventories, net 48,056 (8,131)
Prepaid expenses and other current assets (10,867) 1,285
Accounts payable 11,339 57,408
Accrued Federal and state excise taxes 4,063 2,669
Other accrued expenses and liabilities 2,906 1,584
Other assets and liabilities, net (2,549) (717)
-------- --------
Total adjustments 59,117 58,443
-------- --------
Net cash provided by operating activities 88,504 80,854
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (14,098) (18,213)
Purchase of joint venture minority interest (716) --
Proceeds from sale of property, plant and equipment 27 8,512
-------- --------
Net cash used in investing activities (14,787) (9,701)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of treasury stock (36,014) (9,233)
Net repayments of notes payable (28,900) (27,800)
Principal payments of long-term debt (12,000) (40,409)
Exercise of employee stock options 2,154 741
Proceeds from employee stock purchases 1,284 204
Payment of issuance costs of long-term debt -- (388)
-------- --------
Net cash used in financing activities (73,476) (76,885)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH INVESTMENTS 241 (5,732)
CASH AND CASH INVESTMENTS, beginning of period 1,232 10,010
-------- --------
CASH AND CASH INVESTMENTS, end of period $ 1,473 $ 4,278
======== ========
<FN>
The accompanying notes to consolidated financial statements are an integral part of these statements.
</FN>
- 4 -
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1998
1) MANAGEMENT'S REPRESENTATIONS:
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission applicable to quarterly reporting on Form
10-Q and reflect, in the opinion of the Company, all adjustments necessary to
present fairly the financial information for Canandaigua Brands, Inc. and its
subsidiaries. All such adjustments are of a normal recurring nature. Certain
information and footnote disclosures normally included in financial statements,
prepared in accordance with generally accepted accounting principles, have been
condensed or omitted as permitted by such rules and regulations. These
consolidated financial statements and related notes should be read in
conjunction with the consolidated financial statements and related notes
included in the Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1998.
2) INVENTORIES:
Inventories are valued at the lower of cost (computed in accordance with
the last-in, first-out (LIFO) or first-in, first-out (FIFO) methods) or market.
Substantially all of the inventories are valued using the LIFO method. Elements
of cost include materials, labor and overhead and consist of the following:
August 31, February 28,
1998 1998
---------- ------------
(in thousands)
Raw materials and supplies $ 14,395 $ 14,439
Wine and distilled spirits in process 231,442 304,037
Finished case goods 118,280 92,948
---------- ----------
364,117 411,424
Less - LIFO reserve (18,145) (17,396)
---------- ----------
$ 345,972 $ 394,028
========== ==========
Information related to the FIFO method of inventory valuation may be useful
in comparing operating results to those companies not using the LIFO method of
inventory valuation. If the FIFO method had been used, reported net income would
have been $0.4 million, or $0.02 per share on a diluted basis, higher for the
six months ended August 31, 1998, and reported net income would have been $1.7
million, or $0.09 per share on a diluted basis, higher for the six months ended
August 31, 1997.
- 5 -
3) BORROWINGS:
BANK CREDIT AGREEMENT -
In June 1998, the bank credit agreement was amended to, among other things,
eliminate the requirement that the Company reduce the outstanding balance of the
revolving loan facility to less than $60,000,000 for thirty consecutive days
during the six months ending each August 31. In July 1998, the revolving loan
facility under the bank credit agreement was increased by $100.0 million to
$285.0 million.
4) RETIREMENT SAVINGS AND PROFIT SHARING RETIREMENT PLAN:
Effective March 1, 1998, the Company's existing retirement savings and
profit sharing retirement plans and the Barton profit sharing and 401(k) plan
were merged into the Canandaigua Brands, Inc. 401(k) and Profit Sharing Plan
(the Plan). The Plan covers substantially all employees, excluding those
employees covered by collective bargaining agreements. The 401(k) portion of the
Plan permits eligible employees to defer a portion of their compensation (as
defined in the Plan) on a pretax basis. Participants may defer up to 10% of
their compensation for the year, subject to limitations of the Plan. The Company
makes a matching contribution of 50% of the first 6% of compensation a
participant defers. The amount of the Company's contribution under the profit
sharing portion of the Plan is in such discretionary amount as the Board of
Directors may annually determine, subject to limitations of the Plan.
5) STOCKHOLDERS' EQUITY:
STOCK REPURCHASE AUTHORIZATION -
In June 1998, the Company's Board of Directors authorized the repurchase of
up to $100,000,000 of its Class A Common Stock and Class B Convertible Common
Stock. The Company may finance such purchases, which will become treasury
shares, through cash generated from operations or through the bank credit
agreement.
INCREASE IN NUMBER OF AUTHORIZED SHARES OF CLASS A COMMON STOCK -
In July 1998, the stockholders of the Company approved an increase in the
number of authorized shares of Class A Common Stock from 60,000,000 shares to
120,000,000 shares, thereby increasing the aggregate number of authorized shares
of the Company to 141,000,000 shares.
6) EARNINGS PER COMMON 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
- 6 -
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.
The computation of basic and diluted earnings per common share is as
follows:
For the Six Months For the Three Months
Ended August 31, Ended August 31,
------------------ --------------------
1998 1997 1998 1997
------- ------- ------- -------
(in thousands, except per share data)
Income applicable to common shares $29,387 $22,411 $15,772 $12,365
======= ======= ======= =======
Weighted average common shares
outstanding - basic 18,669 18,665 18,589 18,559
Stock options 499 337 462 403
------- ------- ------- -------
Weighted average common shares
outstanding - diluted 19,168 19,002 19,051 18,962
======= ======= ======= =======
EARNINGS PER COMMON SHARE - BASIC $ 1.57 $ 1.20 $ 0.85 $ 0.67
======= ======= ======= =======
EARNINGS PER COMMON SHARE - DILUTED $ 1.53 $ 1.18 $ 0.83 $ 0.65
======= ======= ======= =======
7) SUMMARIZED FINANCIAL INFORMATION - SUBSIDIARY GUARANTORS:
The subsidiary guarantors are wholly owned and the guarantees are full,
unconditional, joint and several obligations of each of the subsidiary
guarantors. Summarized financial information for the subsidiary guarantors is
set forth below. Separate financial statements for the subsidiary guarantors of
the Company are not presented because the Company has determined that such
financial statements would not be material to investors. The subsidiary
guarantors comprise all of the direct and indirect subsidiaries of the Company,
other than the 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:
August 31, February 28,
1998 1998
---------- ------------
(in thousands)
Balance Sheet Data:
Current assets $440,223 $460,618
Noncurrent assets $394,917 $395,225
Current liabilities $121,729 $102,207
Noncurrent liabilities $ 62,010 $ 61,784
- 7 -
For the Six Months For the Three Months
Ended August 31, Ended August 31,
-------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
(in thousands)
Income Statement Data:
Net sales $552,352 $514,338 $289,774 $253,064
Gross profit $122,885 $106,425 $ 64,673 $ 53,093
Income before provision for
Federal and state income
taxes $ 50,451 $ 41,448 $ 27,406 $ 20,233
Net income $ 29,766 $ 24,768 $ 16,221 $ 12,103
8) ACCOUNTING PRONOUNCEMENT:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. SFAS No. 133 requires that every
derivative be recorded as either an asset or liability in the balance sheet
measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting. The Company is required to adopt SFAS No. 133 on a prospective basis
for interim periods and fiscal years beginning March 1, 2000. The Company
believes the effect of adoption on its financial statements will not be
material.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
INTRODUCTION
- ------------
The following discussion and analysis summarizes the significant factors
affecting (i) consolidated results of operations of the Company for the three
months ended August 31, 1998 ("Second Quarter 1999"), compared to the three
months ended August 31, 1997 ("Second Quarter 1998"), and for the six months
ended August 31, 1998 ("Six Months 1999"), compared to the six months ended
August 31, 1997 ("Six Months 1998"), and (ii) financial liquidity and capital
resources for Six Months 1999. This discussion and analysis should be read in
conjunction with the Company's consolidated financial statements and notes
thereto included herein and in the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 1998.
The Company is a leading producer and marketer of beverage alcohol brands.
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.
- 8 -
RESULTS OF OPERATIONS
- ---------------------
SECOND QUARTER 1999 COMPARED TO SECOND QUARTER 1998
NET SALES
The following table sets forth the net sales (in thousands of dollars) and
unit volume (in thousands of cases), if applicable, for branded beverage alcohol
products and other products and services sold by the Company for Second Quarter
1999 and Second Quarter 1998.
Second Quarter 1999 Compared to Second Quarter 1998
-------------------------------------------------------------------
Net Sales Unit Volume
--------------------------------- -----------------------------
%Increase/ %Increase/
1999 1998 (Decrease) 1999 1998 (Decrease)
-------- -------- ---------- ------ ------ ----------
Wine $132,064 $122,099 8.2% 6,654 6,442 3.3%
Beer 141,133 108,383 30.2% 11,177 8,691 28.6%
Spirits 50,183 51,372 (2.3%) 2,488 2,575 (3.4%)
Other (a) 26,006 19,670 32.2% N/A N/A N/A
-------- -------- ----- ------ ------ -----
$349,386 $301,524 15.9% 20,319 17,708 14.7%
======== ======== ===== ====== ====== =====
(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.
Net sales for Second Quarter 1999 increased to $349.4 million from $301.5
million for Second Quarter 1998, an increase of $47.9 million, or 15.9%. This
increase resulted primarily from (i) $32.8 million of additional beer sales,
largely Mexican beers, (ii) $10.0 million of additional wine sales, resulting
primarily from the introduction of new wine brands and (iii) $6.3 million of
additional nonbranded sales, primarily grape juice concentrate sales. Unit
volume for branded beverage alcohol products for Second Quarter 1999 increased
14.7% as compared to Second Quarter 1998. The unit volume increase was the
result of the increased sales of the Company's beer brands, primarily Mexican
beer, and the introduction of new wine brands. Notwithstanding an overall
increase in net sales and unit volume of its wine brands primarily due to the
introduction of new products, the Company has experienced a decline in many of
its other wine brands. The Company is addressing this through implementation of
various programs, such as 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 $101.6 million for Second Quarter
1999 from $84.8 million for Second Quarter 1998, an increase of $16.8 million,
or 19.9%. As a percent of net sales, gross profit increased to 29.1% for Second
Quarter 1999 from 28.1% for Second Quarter 1998. The dollar increase in gross
profit resulted primarily from additional beer unit volume, introduction of new
wine brands and unit cost improvements in wine and spirits brands.
In general, the preferred method of accounting for inventory valuation is
the last-in, first-out method ("LIFO") because, in most circumstances, it
results in a better matching of costs and revenues. For comparison purposes to
companies using the first-in, first-out method of accounting for inventory
- 9 -
valuation ("FIFO") only, gross profit reflected a reduction of $1.6 million and
$0.6 million in Second Quarter 1999 and Second Quarter 1998, respectively, due
to the Company's LIFO accounting method.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $67.5 million for
Second Quarter 1999 from $56.3 million for Second Quarter 1998, an increase of
$11.2 million, or 19.9%. The dollar increase in selling, general and
administrative expenses resulted principally from higher advertising costs
associated with the introduction of new wine brands and increased beer sales,
and higher promotion costs related to the growth in beer sales as well as
programs implemented to improve the Company's wine sales. Selling, general and
administrative expenses as a percent of net sales increased to 19.3% for Second
Quarter 1999 as compared to 18.7% for Second Quarter 1998. The increase in
percent of net sales resulted primarily from advertising costs associated with
the introduction of new wine brands and promotion costs related to programs
implemented to improve the Company's wine sales.
NET INCOME
As a result of the above factors, net income increased to $15.8 million for
Second Quarter 1999 from $12.4 million for Second Quarter 1998, an increase of
$3.4 million, or 27.6%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Second Quarter
1999 were $42.6 million, an increase of $5.6 million over EBITDA of $37.0
million for Second Quarter 1998. EBITDA should not be construed as an
alternative to operating income or net cash flow from operating activities and
should not be construed as an indication of operating performance or as a
measure of liquidity.
SIX MONTHS 1999 COMPARED TO SIX MONTHS 1998
NET SALES
The following table sets forth the net sales (in thousands of dollars) and
unit volume (in thousands of cases), if applicable, for branded beverage alcohol
products and other products and services sold by the Company for Six Months 1999
and Six Months 1998.
Six Months 1999 Compared to Six Months 1998
-------------------------------------------------------------------
Net Sales Unit Volume
--------------------------------- -----------------------------
%Increase/ %Increase/
1999 1998 (Decrease) 1999 1998 (Decrease)
-------- -------- ---------- ------ ------ ----------
Wine $250,852 $247,538 1.3% 12,794 13,162 (2.8%)
Beer 259,929 205,996 26.2% 20,644 16,439 25.6%
Spirits 102,013 101,734 0.3% 5,094 5,124 (0.6%)
Other (a) 49,520 52,267 (5.3%) N/A N/A N/A
-------- -------- ----- ------ ------ -----
$662,314 $607,535 9.0% 38,532 34,725 11.0%
======== ======== ===== ====== ====== =====
(a) Other consists primarily of nonbranded concentrate sales, contract
bottling and other production services and bulk product sales, none of
which are sold in case quantities.
- 10 -
Net sales for Six Months 1999 increased to $662.3 million from $607.5
million for Six Months 1998, an increase of $54.8 million, or 9.0%. This
increase resulted primarily from (i) $53.9 million of additional beer sales,
largely Mexican beers, and (ii) $3.3 million of additional wine sales, resulting
primarily from the introduction of new wine brands. Unit volume for branded
beverage alcohol products for Six Months 1999 increased 11.0% as compared to Six
Months 1998. The unit volume increase was the result of the increased sales of
the Company's beer brands, primarily Mexican beer.
GROSS PROFIT
The Company's gross profit increased to $194.5 million for Six Months 1999
from $165.5 million for Six Months 1998, an increase of $29.1 million, or 17.6%.
As a percent of net sales, gross profit increased to 29.4% for Six Months 1999
from 27.2% for Six Months 1998. The dollar increase in gross profit resulted
primarily from additional beer unit volume, unit cost improvements in wine and
spirits brands, introduction of new wine brands and higher average selling
prices related to wine sales.
In general, the preferred method of accounting for inventory valuation is
the last-in, first-out method ("LIFO") because, in most circumstances, it
results in a better matching of costs and revenues. For comparison purposes to
companies using the first-in, first-out method of accounting for inventory
valuation ("FIFO") only, gross profit reflected a reduction of $0.7 million and
$2.9 million in Six Months 1999 and Six Months 1998, respectively, due to the
Company's LIFO accounting method.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $128.8 million
for Six Months 1999 from $111.5 million for Six Months 1998, an increase of
$17.3 million, or 15.5%. The dollar increase in selling, general and
administrative expenses resulted principally from higher advertising costs
associated with the Company's wine sales, primarily the introduction of new wine
brands, and increased beer sales, and higher promotion costs related to both
programs implemented to improve the Company's wine sales and the growth in beer
sales. Selling, general and administrative expenses as a percent of net sales
increased to 19.4% for Six Months 1999 as compared to 18.4% for Six Months 1998.
The increase in percent of net sales resulted primarily from advertising costs
associated with the introduction of new wine brands and promotion costs related
to programs implemented to improve the Company's wine sales.
NET INCOME
As a result of the above factors, net income increased to $29.4 million for
Six Months 1999 from $22.4 million for Six Months 1998, an increase of $7.0
million, or 31.1%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Six Months 1999
were $82.7 million, an increase of $11.4 million over EBITDA of $71.3 million
for Six Months 1998. EBITDA should not be construed as an alternative to
operating income or net cash flow from operating activities and should not be
construed as an indication of operating performance or as a measure of
liquidity.
- 11 -
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
- -----------------------------------------
GENERAL
The Company's principal use of cash in its operating activities is for
purchasing and carrying inventories. The Company's primary source of liquidity
has historically been cash flow from operations, except during the annual fall
grape harvests when the Company has relied on short-term borrowings. The annual
grape crush normally begins in August and runs through October. The Company
generally begins purchasing grapes in August with payments for such grapes
beginning to come due in September. The Company's short-term borrowings to
support such purchases generally reach their highest levels in November or
December. Historically, the Company has used cash flow from operating activities
to repay its short-term borrowings. The Company will continue to use its
short-term borrowings to support its 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.
SIX MONTHS 1999 CASH FLOWS
OPERATING ACTIVITIES
Net cash provided by operating activities for Six Months 1999 was $88.5
million, which resulted from $47.5 million in net income adjusted for noncash
items, plus $41.0 million representing the net change in operating assets and
liabilities. The net change in operating assets and liabilities resulted
primarily from a $48.1 million decrease in inventory levels.
INVESTING ACTIVITIES AND FINANCING ACTIVITIES
Net cash used in investing activities for Six Months 1999 was $14.8
million, which resulted primarily from $14.1 million of capital expenditures,
including $4.4 million for vineyards.
Net cash used in financing activities for Six Months 1999 was $73.5
million, which resulted primarily from repurchases of $36.0 million of the
Company's Class A Common Stock, net repayments of $28.9 million of revolving
loan borrowings under the Company's bank credit agreement and principal payments
of $12.0 million of long-term debt.
During June 1998, the Company's Board of Directors authorized the
repurchase of up to $100.0 million of its Class A Common Stock and Class B
Common Stock. The repurchase of shares of common stock will be accomplished,
from time to time, depending upon market conditions, through open market or
privately negotiated transactions. The Company may finance such repurchases
through cash generated from operations or through the bank credit agreement. In
July 1998, the revolving loan facility under the bank credit agreement was
increased by $100.0 million to $285.0 million in order to increase its
flexibility to make such purchases . The repurchased shares will become treasury
shares and may be used for general corporate purposes. As of September 28, 1998,
the Company had purchased 1,018,836 shares of Class A Common Stock at an
aggregate cost of $44.9 million, or at an average cost of $44.05 per share.
- 12 -
DEBT
Total debt outstanding as of August 31, 1998, amounted to $384.5 million, a
decrease of $40.7 million from February 28, 1998, resulting primarily from the
net repayments of revolving loan borrowings and principal payments of long-term
debt. The ratio of total debt to total capitalization decreased to 48.4% as of
August 31, 1998, from 50.6% as of February 28, 1998.
As of August 31, 1998, under its bank credit agreement, the Company had
outstanding term loans of $128.0 million bearing interest at 6.3%, $63.0 million
of revolving loans bearing interest at 6.3%, undrawn revolving letters of credit
of $8.4 million, and $213.6 million in revolving loans available to be drawn.
During June 1998, the bank credit agreement was amended to, among other things,
eliminate the requirement that the Company reduce the outstanding balance of the
revolving loan facility to less than $60,000,000 for thirty consecutive days
during the six months ending each August 31.
As of August 31, 1998, the Company had outstanding $195.0 million aggregate
principal amount of 8 3/4% Senior Subordinated Notes due December 2003. The
notes are unsecured and subordinated to the prior payment in full of all senior
indebtedness of the Company, which includes the bank credit agreement. The notes
are guaranteed, on a senior subordinated basis, by substantially all of the
Company's operating subsidiaries.
ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. SFAS No. 133 requires that every
derivative be recorded as either an asset or liability in the balance sheet
measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting. The Company is required to adopt SFAS No. 133 on a prospective basis
for interim periods and fiscal years beginning March 1, 2000. The Company
believes the effect of adoption on its financial statements will not be
material.
YEAR 2000 ISSUE
The Company has in place detailed programs to address Year 2000 readiness
in its internal systems and with its key customers and suppliers. The Year 2000
issue is the result of computer logic that was written using two digits rather
than four to define the applicable year. Any computer logic that processes
date-sensitive information may recognize the date using "00" as the year 1900
rather than the year 2000, which could result in miscalculations or system
failures.
Pursuant to the Company's readiness programs, all major categories of
information technology systems and non-information technology systems (i.e.,
equipment with embedded microprocessors) in use by the Company, including
manufacturing, sales, financial and human resources, are being inventoried and
assessed. In addition, plans are being developed for the required systems
modifications or replacements. With respect to its information technology
systems, the Company has completed the
- 13 -
entire assessment phase and approximately 50% of the remediation phase. With
respect to its non-information technology systems, the Company has completed
approximately 80% of the assessment phase and approximately 40% of the
remediation phase. Selected areas, both internal and external, will be tested to
assure the integrity of the Company's remediation programs. The testing is
expected to be completed by September 1999. The Company plans to have all
internal mission-critical information technology and non-information technology
systems Year 2000 compliant by September 1999.
The Company is also communicating with its major customers, suppliers and
financial institutions to assess the potential impact on the Company's
operations if those third parties fail to become Year 2000 compliant in a timely
manner. While this process is not yet complete, based upon responses to date, it
appears that many of those customers and suppliers have only indicated that they
have in place Year 2000 readiness programs, without specifically confirming that
they will be Year 2000 compliant in a timely manner. Risk assessment, readiness
evaluation, action plans and contingency plans related to the Company's
significant customers and suppliers are expected to be completed by September
1999. The Company's key financial institutions have been surveyed and it is the
Company's understanding that they are or will be Year 2000 compliant on or
before December 31, 1999.
The costs incurred to date related to its Year 2000 activities have not
been material to the Company, and, based upon current estimates, the Company
does not believe that the total cost of its Year 2000 readiness programs will
have a material adverse impact on the Company's results of operations or
financial condition.
The Company's readiness programs also include the development of
contingency plans to protect its business and operations from Year 2000-related
interruptions. These plans should be complete by September 1999 and, by way of
examples, will include back-up procedures, identification of alternate
suppliers, where possible, and increases in safety inventory levels. Based upon
the Company's current assessment of its non-information technology systems, the
Company does not believe it necessary to develop an extensive contingency plan
for those systems. There can be no assurances, however, that any of the
Company's contingency plans will be sufficient to handle all problems or issues
which may arise.
The Company believes that it is taking reasonable steps to identify and
address those matters that could cause serious interruptions in its business and
operations due to Year 2000 issues. However, delays in the implementation of new
systems, a failure to fully identify all Year 2000 dependencies in the Company's
systems and in the systems of its suppliers, customers and financial
institutions, a failure of such third parties to adequately address their
respective Year 2000 issues, or a failure of a contingency plan could have a
material adverse effect on the Company's business, financial condition and
results of operations. For example, the Company would experience a material
adverse impact on its business if significant suppliers of beer, glass or
telecommunications systems fail to timely provide the Company with necessary
inventories or services due to Year 2000 systems failures.
The statements set forth herein concerning Year 2000 issues which are not
historical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements. In particular, the costs associated with the
Company's Year 2000 programs and the time-frame in which the Company plans to
complete Year 2000 modifications are based upon management's best estimates.
These estimates were derived from internal assessments and assumptions of future
events. These estimates may be adversely affected by the continued availability
of personnel and system resources, and by the failure of significant third
parties to properly address Year 2000 issues. Therefore, there can be no
guarantee that any estimates, or other
- 14 -
forward-looking statements will be achieved, and actual results could differ
significantly from those contemplated.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Stockholders of Canandaigua Brands, Inc., held on
July 21, 1998 (the "Annual Meeting"), the holders of the Company's Class A
Common Stock (the "Class A Stock"), voting as a separate class, elected
management's slate of director nominees designated to be elected by the holders
of the Class A Stock, and the holders of the Company's Class B Common Stock (the
"Class B Stock"), voting as a separate class, elected management's slate of
director nominees designated to be elected by the holders of the Class B Stock.
In addition, at the Annual Meeting, the holders of Class A Stock and the
holders of Class B Stock, voting together as a single class, voted upon the
following proposals:
(i) Proposal to amend and restate the Company's Restated Certificate
of Incorporation, as presently amended, to incorporate a prior
amendment and to increase the number of authorized shares of the
Class A Common Stock of the Company from 60,000,000 to
120,000,000, thereby increasing the aggregate number of
authorized shares of the Company to 141,000,000.
(ii) Proposal to ratify the selection of Arthur Andersen LLP,
Certified Public Accountants, as the Company's independent
auditors for the fiscal year ending February 28, 1999.
Set forth below is the number of votes cast for, against or withheld, as
well as the number of abstentions and broker nonvotes, as applicable, as to each
of the foregoing matters.
I. The results of the voting for the election of Directors of the Company
are as follows:
Directors Elected By the Holders of Class A Stock:
--------------------------------------------------
Nominee For Withheld
------- --- --------
Thomas C. McDermott 13,248,797 128,410
Paul L. Smith 13,249,427 127,780
- 15 -
Directors Elected By the Holders of Class B Stock:
--------------------------------------------------
Nominee For Withheld
------- --- --------
George Bresler 31,515,390 10,540
James A. Locke, III 31,516,410 9,520
Marvin Sands 31,516,410 9,520
Richard Sands 31,511,310 14,620
Robert Sands 31,511,310 14,620
Bertram E. Silk 31,516,410 9,520
II. The proposal to amend and restate the Company's Restated Certificate
of Incorporation, as amended, was approved with the following votes:
For: 43,046,325
Against: 1,804,141
Abstain: 52,671
Broker Nonvotes: 0
III. The selection of Arthur Andersen LLP was ratified with the following
votes:
For: 44,799,615
Against: 11,230
Abstain: 92,292
Broker Nonvotes: 0
ITEM 5. OTHER INFORMATION.
Any notice of a proposal that is submitted outside the processes of Rule
14a-8 promulgated under the Securities Exchange Act of 1934, as amended (the
"Act"), and which a stockholder intends to bring forth at the Company's 1999
Annual Meeting of Stockholders will be untimely for purposes of Rule 14a-4 of
the Act, if received by the Company after February 16, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) See Index to Exhibits located on Page 20 of this Report.
(b) No Reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended August 31, 1998.
- 16 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CANANDAIGUA BRANDS, INC.
Dated: September 28, 1998 By: /s/ Thomas F. Howe
------------------------------------
Thomas F. Howe, Vice President,
Corporate Reporting and Controller
Dated: September 28, 1998 By: /s/ Thomas S. Summer
------------------------------------
Thomas S. Summer, Senior Vice
President and Chief Financial
Officer (Principal Financial Officer
and Principal Accounting Officer)
SUBSIDIARIES
BATAVIA WINE CELLARS, INC.
Dated: September 28, 1998 By: /s/ Thomas F. Howe
------------------------------------
Thomas F. Howe, Controller
Dated: September 28, 1998 By: /s/ Thomas S. Summer
------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
CANANDAIGUA WINE COMPANY, INC.
Dated: September 28, 1998 By: /s/ Thomas F. Howe
------------------------------------
Thomas F. Howe, Controller
Dated: September 28, 1998 By: /s/ Thomas S. Summer
------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
- 17 -
CANANDAIGUA EUROPE LIMITED
Dated: September 28, 1998 By: /s/ Thomas F. Howe
------------------------------------
Thomas F. Howe, Controller
Dated: September 28, 1998 By: /s/ Thomas S. Summer
------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
ROBERTS TRADING CORP.
Dated: September 28, 1998 By: /s/ Thomas F. Howe
------------------------------------
Thomas F. Howe, Controller
Dated: September 28, 1998 By: /s/ Thomas S. Summer
------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
BARTON INCORPORATED
Dated: September 28, 1998 By: /s/ Alexander L. Berk
------------------------------------
Alexander L. Berk, President and
Chief Executive Officer
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
BARTON BRANDS, LTD.
Dated: September 28, 1998 By: /s/ Alexander L. Berk
------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
- 18 -
BARTON BEERS, LTD.
Dated: September 28, 1998 By: /s/ Alexander L. Berk
------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
BARTON BRANDS OF CALIFORNIA, INC.
Dated: September 28, 1998 By: /s/ Alexander L. Berk
------------------------------------
Alexander L. Berk, President
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
BARTON BRANDS OF GEORGIA, INC.
Dated: September 28, 1998 By: /s/ Alexander L. Berk
------------------------------------
Alexander L. Berk, President
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
BARTON DISTILLERS IMPORT CORP.
Dated: September 28, 1998 By: /s/ Alexander L. Berk
------------------------------------
Alexander L. Berk, President
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
- 19 -
BARTON FINANCIAL CORPORATION
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, President and
Secretary
Dated: September 28, 1998 By: /s/ Charles T. Schlau
------------------------------------
Charles T. Schlau, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
STEVENS POINT BEVERAGE CO.
Dated: September 28, 1998 By: /s/ Alexander L. Berk
------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
MONARCH IMPORT COMPANY
Dated: September 28, 1998 By: /s/ Alexander L. Berk
------------------------------------
Alexander L. Berk, President
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
THE VIKING DISTILLERY, INC.
Dated: September 28, 1998 By: /s/ Alexander L. Berk
------------------------------------
Alexander L. Berk, President
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
- 20 -
INDEX TO EXHIBITS
(2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR
SUCCESSION.
Not applicable.
(3) ARTICLES OF INCORPORATION AND BY-LAWS.
3.1 Restated Certificate of Incorporation of the Company (filed herewith).
3.2 Amended and Restated By-Laws of the Company (filed herewith).
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES.
4.1 Indenture, dated as of December 27, 1993, among the Company, its
Subsidiaries and The Chase Manhattan Bank (as successor to Chemical Bank)
(filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended November 30, 1993 and incorporated herein by
reference).
4.2 First Supplemental Indenture, dated as of August 3, 1994, among the
Company, Canandaigua West, Inc. 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 as Exhibit 4.4 to the Company's Annual Report on Form
10-K for the fiscal year ended February 28, 1998 and incorporated herein by
reference).
4.5 Indenture with respect to the 8 3/4% Series C Senior Subordinated Notes Due
2003, dated as of October 29, 1996, among the Company, its Subsidiaries and
Harris Trust and Savings Bank (filed as Exhibit 4.2 to the Company's
Registration Statement on Form S-4 (Registration No. 333-17673) and
incorporated herein by reference).
4.6 First Supplemental Indenture, dated as of December 19, 1997, among the
Company, Canandaigua Europe Limited, Roberts Trading Corp. and Harris Trust
and Savings Bank (filed as Exhibit 4.6 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1998 and incorporated
herein by reference).
4.7 Credit Agreement between the Company, its principal operating subsidiaries,
and certain banks for which The Chase Manhattan Bank acts as Administrative
Agent, dated as of December 19, 1997 (filed as Exhibit 4.7 to the Company's
Annual Report on Form 10-K for the fiscal year ended February 28, 1998 and
incorporated herein by reference).
- 21 -
4.8 Amendment No. 1 to Credit Agreement, dated as of June 19, 1998, between the
Company, its principal operating subsidiaries, and certain banks for which
The Chase Manhattan Bank acts as Administrative Agent (filed herewith).
4.9 Tranche II Revolving Agreement (Series A), dated as of July 15, 1998,
between the Company, its principal operating subsidiaries, and certain
banks for which The Chase Manhattan Bank acts as Administrative Agent
(including identification of the omitted annex thereto) (filed herewith).
(10) MATERIAL CONTRACTS.
10.1 Amendment No. 1 to Credit Agreement, dated as of June 19, 1998, between the
Company, its principal operating subsidiaries, and certain banks for which
The Chase Manhattan Bank acts as Administrative Agent (incorporated by
reference to Exhibit 4.8, filed herewith).
10.2 Tranche II Revolving Agreement (Series A), dated as of July 15, 1998,
between the Company, its principal operating subsidiaries, and certain
banks for which The Chase Manhattan Bank acts as Administrative Agent
(including identification of the omitted annex thereto) (incorporated by
reference to Exhibit 4.9, filed herewith).
(11) STATEMENT RE COMPUTATION OF PER SHARE EARNINGS.
Computation of per share earnings (filed herewith).
(15) LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION.
Not applicable.
(18) LETTER RE CHANGE IN ACCOUNTING PRINCIPLES.
Not applicable.
(19) REPORT FURNISHED TO SECURITY HOLDERS.
Not applicable.
(22) PUBLISHED REPORT REGARDING MATTERS SUBMITTED TO A VOTE OF SECURITY HOLDERS.
Not applicable.
(23) CONSENTS OF EXPERTS AND COUNSEL.
Not applicable.
(24) POWER OF ATTORNEY.
Not applicable.
- 22 -
(27) FINANCIAL DATA SCHEDULE.
Financial Data Schedule (filed herewith).
(99) ADDITIONAL EXHIBITS.
Not applicable.