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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended: June 30, 2000
Commission file number: 000-23175
BERINGER WINE ESTATES HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 68-0370340
----------------------- ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
610 Airpark Road
P.O. Box 4500
Napa, California 94558
(707) 259-4500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(a) of the Act: Class B Common
Stock
Indicate by check mark whether the registrant (1) has 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
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X]
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 a 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. [X]
As of August 22, 2000, there were issued and outstanding (i) 1,337,962 shares
of Class A Common Stock and (ii) 18,425,214 shares of Class B Common Stock.
The aggregate market value of the a voting stock held by non-
affiliates was $374,209,499 as of August 22, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's annual report to security holders for the fiscal
year ended June 30, 2000 are incorporated by reference into Part II of this
report. Portions of the registrant's definitive proxy statement for its annual
meeting of shareholders to be held on November 9, 2000 are incorporated by
reference into Part III of this report.
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PART I
ITEM 1. BUSINESS
This report contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about us and our industry.
These forward-looking statements involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors, as more fully described in the
"Risk Factors" section of a Discussion and Analysis section of this Annual
Report on Form 10K. We undertake no obligation to update publicly any forward-
looking statements for any reason, even if new information becomes available or
other events occur in the future.
Business Introduction. Beringer Wine Estates Holdings, Inc. is a leading
producer of premium California varietal table wines. These wines are marketed
under the Beringer Vineyards, Meridian Vineyards, Chateau St. Jean, Chateau
Souverain, Stags' Leap and St. Clement brand names. We compete in each of the
premium wine market categories. Our largest entry in the popular premium
category is our Beringer Vineyards White Zinfandel product. Our largest entries
in the super-premium category are our Meridian Vineyards brand, and our new
Beringer Founders Estates product line, each of which sold over one million
cases in fiscal 2000. We are also represented across each of our brands with
high quality products in the ultra-premium category.
We also have an import portfolio of premium brands from Italy, France and Chile.
These wines are marketed under the Gabbiano, Campanile, Travaglini, Tarapaca and
Rivefort de France brands. We sell our wine principally in the United States to
distributors for resale and have achieved a well-established competitive
position in chain stores, club stores and other retail stores and restaurants.
Our wines are widely recognized for quality and value. A substantial portion of
our sales are concentrated in California and, to a lesser extent, the states of
Florida, New Jersey, Texas and Illinois. Export sales accounted for
approximately 3% of net revenues for fiscal 2000.
Beringer was founded in 1876 and is the oldest continuously operating winery in
Napa Valley. Beringer was family-owned until 1971, when it was acquired by a
subsidiary of Nestle S.A. We acquired Chateau Souverain in 1986 and Meridian
Vineyards in 1988. On January 1, 1996, we were acquired in a leveraged
transaction by an investment group led by TPG Partners, L.P. Subsequently we
acquired Chateau St. Jean in April 1996, Stags' Leap Winery in February 1997 and
St. Clement Vineyards in September, 1999. In January 1999, we sold the Napa
Ridge brand. We control extensive strategic vineyard acreage in the prime
growing regions of Napa, Sonoma, Lake, Santa Barbara and San Luis Obispo
Counties.
Industry Background. The wine industry can be separated into four categories:
(1) super-premium wines selling primarily in 750ml bottles for $8 and above, (2)
premium wines selling in 1.5 liter and 750 ml bottles at $4 -$8 per 750 ml
equivalent, (3) "jug" wines selling in large size packages, and (4) other wine
products, including sparkling and fortified wines, wine coolers and flavored
wines. We compete in the premium wine category, which has grown faster than the
other three categories over the past 20 years. We believe this category will
continue to outperform the other categories.
Our largest distributor is Southern Wine and Spirits of America, Inc. They
distribute our brands in California, Florida, Nevada, Hawaii, South Carolina and
New Mexico. Our combined sales to them in fiscal 2000 represented approximately
32% of our gross revenues. Sales to our ten largest distributors combined
represented approximately 61% of our gross revenues during fiscal 2000. Sales to
these ten largest distributors are expected to continue to represent a
substantial majority of our net revenues in the future.
Marketing and Distribution. We employ branded consumer advertising,
merchandising, brand management and public relations to differentiate our
products, build brand loyalty and broaden our potential markets. We sell our
wines primarily to distributors, who then sell to retailers and restaurateurs.
<PAGE>
Grape Supply and Vineyard Ownership. We currently control approximately 10,200
acres of California coastal vineyard land. Approximately 9,900 acres are
currently planted and we plan to plant the balance within three years. During
the 1999 harvest these vineyards supplied us with approximately 19% of our grape
requirements, excluding Beringer White Zinfandel. The remaining 81% was supplied
through contracted arrangements with independent grape growers and purchases of
bulk wine. The grapes used in our Beringer White Zinfandel are almost completely
sourced through long-term contracts with well-established grape growers. Our
strategy enables us to control the quality and supply of the grapes used in more
expensive wines. It also permits us to manage an important cost component of our
wines.
Winemaking. Our strategic focus is to produce high quality wines throughout our
product portfolio. We employ talented winemakers, high quality grapes and state
of the art equipment to produce these wines. Our winemakers blend the best new
technology with traditional practices to produce wines that have been
consistently recognized for quality over the last decade. We are also dedicated
to our research programs that include experimental winemaking and grape growing
studies.
Employees. We employ approximately 900 regular, full-time employees. We also
employ part-time and seasonal workers for our vineyard, production and
hospitality operations. We are not aware of any material disputes with
employees. We believe our relations with our employees are good.
Trademarks. We maintain U.S. Federal trademark registrations for our brands,
proprietary products and certain vineyard names. We also maintain international
trademark registrations where it is appropriate to do so.
Risk Factors
Our dependence on sales of three varietals could adversely affect our
profitability if consumer preferences were to change Approximately 73% of our
net revenues for the fiscal year ended June 30, 2000 were concentrated in our
top three selling varietal wines, White Zinfandel, Chardonnay and Cabernet
Sauvignon. A shift in consumer preferences that results in a reduction in sales
of wine generally, or in any of these three varietals, could cause a significant
decline in our revenues and earnings.
We face significant competition which could adversely affect our profitability
The premium wine industry is highly competitive which could adversely impact our
profit margins and growth prospects. Several of our competitors have greater
financial resources than we do. Our wines compete in all of the premium wine
market segments with many other premium wines produced throughout the world. Our
wines also compete with popular-priced generic wines and with other alcoholic
and, to a lesser degree, non-alcoholic beverages. We compete for shelf space in
retail stores and for marketing focus by our independent distributors, most of
whom carry extensive product portfolios.
If our largest customers and distribution channels perform poorly our
profitability would be adversely affected We sell our products principally to
distributors for resale to restaurants and retail outlets. Sales to our largest
distributor, Southern Wine and Spirits of America, Inc., represented 32% of our
net revenues for fiscal year ended June 30, 2000. Sales to our ten largest
distributors combined represented 61% of our net revenues during fiscal year
ended June 30, 2000. Sales to our ten largest distributors are expected to
continue to represent a substantial majority of our net revenues in the future.
Poor sales performance from our major distributors or our inability to collect
accounts receivable from them when due could significantly reduce our earnings.
If sales in California and other key markets decline, our profits and revenues
may be adversely affected For the fiscal year ended June 30, 2000, approximately
25% of our sales were concentrated in California, while another approximately
24% were concentrated in Florida, New Jersey, Texas and Illinois combined. A
reduction in consumer confidence and spending in these and other regions could
reduce demand for our products, which would adversely affect our business and
financial results.
<PAGE>
Fluctuations in quantity and quality of grape supply could adversely affect us
Grape supply shortages generally result in higher grape prices. Grape prices are
the single largest component of our costs of production. We are most susceptible
to grape price increases with White Zinfandel because we purchase the majority
of these grapes. Most of our farming costs are fixed, so a decline in the yields
from our own vineyards results in higher costs for our wines. If we cannot
increase prices because of competitive pressure, increased grape supply costs
could lead to lower earnings.
Planting new vineyards and replanting old vineyards may result in increased wine
supplies. If this increased supply is not offset by increased consumer demand
for premium wines, we may be unable to maintain or increase our prices.
Consequently, this could significantly reduce our earnings.
If the quality of our grape supply declines, one or more of our wines could be
adversely affected, and this could have an adverse impact on our business.
Disease, pestilence and bad weather could reduce the quality and quantity of our
grape supply Winemaking and grape growing are subject to a variety of
agricultural risks. Various diseases, pests, and extreme weather conditions can
substantially reduce the quality and quantity of our grape supply. If our wine
quality or supply is reduced, it can hurt our financial results. In recent
years, floods have damaged several of our vineyards. While this damage was
limited, and did not materially impact our financial results, future flooding or
other extreme weather conditions may do so. Our vineyards are also susceptible
to various insect pests, along with various grapevine diseases and viruses.
We have experienced Pierce's Disease in some of our vineyards located near
riparian vegetation. This disease destroys individual vines. There is no cure
for Pierce's Disease but its incidence has been reduced by removing vines from
problem areas. A new carrier of Pierce's disease, the Glassy Winged
Sharpshooter, has infected some vineyard acreage in Riverside County. If this
pest migrates north to our Central and North Coast vineyards it could greatly
increase the incidence of Pierce's Disease and reduce the quantity of our grape
supply. We cannot guarantee Pierce's Disease or other diseases, infestations or
pests will not become more widespread in the future. These problems could result
in increased prevention, remedial and other costs, and consequently lower future
earnings.
Phylloxera is a louse that feeds on the vine roots and usually destroys the vine
over a period of time. We have experienced phylloxera in most of our North Coast
vineyards. We have replanted most of these vineyards using rootstocks that are
generally believed to be resistant to phylloxera. However, we cannot assure you
that these rootstocks will be resistant to existing or new strains of
phylloxera.
Our debt and capital requirements could adversely affect us Our total bank debt
was $378.1 million at June 30, 2000, representing approximately 57% of our total
capitalization. We project the need for significant capital spending and
increased working capital requirements over the next several years. This will
require additional borrowing or other financing.
Our leverage has several important consequences to our stockholders. These
include:
. significant interest and principal repayment obligations; and
. restrictive debt covenants that limit, among other things, our ability
to pay dividends and to incur additional indebtedness.
Therefore, our leverage can significantly impact our financial results.
The premium wine industry is a capital-intensive business. It involves
substantial capital expenditures to acquire and develop vineyards and to improve
and expand wine production. Farming of vineyards and the acquisition of grapes
and bulk wine require substantial amounts of working capital.
<PAGE>
Our quarterly results fluctuate because of the seasonality of the wine
business
. We typically experience seasonal and quarterly fluctuations in net
revenues, cost of goods sold and net income.
. Our sales volume tends to increase during holiday periods and prior to the
effective dates of price increases.
. Our sales volume is also sensitive to distributor inventories. If they
begin a period with higher than normal inventories, their purchases may
decline in that period.
. Our timing of releases for our higher priced wines can also affect our
quarterly results.
. Our sales volume historically declines during the summer months. This
seasonality results in lower earnings during our first fiscal quarter.
. Our level of borrowing and related interest expense fluctuates throughout
the year based on the incurrance of harvest costs, and the timing of grape
grower payments and capital expenditures.
Increased regulation could adversely affect us The wine industry is regularly
targeted for increased regulation and enforcement of marketing and trade
practices and distributor relationships. It is also susceptible to trade
barriers erected by countries with competitive wine industries. Increased trade
regulation or trade barriers could restrict the ability of our industry to
compete with other beverages.
Our largest stockholder exercises significant control We have two classes of
Common Stock: Class A Common Stock, which is entitled to 20 votes per share, and
Class B Common Stock, which is entitled to one vote per share. Texas Pacific
Group, and its related partnerships (collectively, the "TPG Entities"), own
1,259,902 shares of Class A Common Stock and 8,281,922 shares of Class B Common
Stock. This represents approximately 94% of all the outstanding Class A Common
Stock and 45% of all the outstanding Class B Common Stock, and 74% of the
combined voting power of both classes of Common Stock. Consequently, the TPG
Entities are able to elect all members of our Board of Directors and control us.
This concentration of ownership may have the effect of delaying or preventing
someone else from acquiring control of us. This could affect the market price of
our Class B Common Stock.
The price of our Class B Common Stock is volatile The market price of our Class
B Common Stock has fluctuated significantly in the past and is likely to
fluctuate significantly in the future. If our financial performance in any
fiscal quarter fails to meet the investment community's expectations, the market
price of our stock could fall. Also, the securities markets have experienced
significant price and volume fluctuations that are unrelated to our operating
results. Future trading prices of our stock may depend on factors beyond our
influence, such as perceptions of our business and the premium wine industry
generally. Prevailing interest rates and the market for similar securities may
influence our stock price. Our stock price may also react to domestic and
international economic and political conditions.
ITEM 2. PROPERTIES
We operate seven wineries in California, including Beringer Vineyards, Meridian
Vineyards, Chateau St. Jean, Chateau Souverain, Stags' Leap, St. Clement and
Asti wineries.
Please see the discussion above, Grape Supply and Vineyard Ownership, regarding
our vineyard properties.
We lease a distribution facility in Napa, California. We also lease office space
in Napa, in several cities throughout the U.S. and in Switzerland. We contract
with an independent third party for finished goods warehouse storage. We also
lease barrel aging facilities in Santa Rosa, Templeton and Santa Maria,
California and a barrel manufacturing facility in Cloverdale, California.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during our
fourth quarter ended June 30, 2000.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our Class A Common Stock is not publicly traded. Our Class B Common Stock is
traded on the Nasdaq National Market under the symbol "BERW". The table below
states the high and low closing sale prices on the Nasdaq National Market from
our initial public offering on October 29, 1997 through the fiscal year ending
June 30, 2000:
Fiscal 2000 High Low
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Fourth Quarter $39.38 $32.31
Third Quarter 47.72 32.94
Second Quarter 41.75 34.25
First Quarter 43.00 35.63
Fiscal 1999 High Low
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Fourth Quarter $41.88 $36.00
Third Quarter 46.38 36.00
Second Quarter 46.00 33.50
First Quarter 45.63 30.00
Fiscal 1998 High Low
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Fourth Quarter $54.06 $39.50
Third Quarter 51.38 36.00
Second Quarter 38.00 30.00
As of June 30, 2000, there were 465 holders of record of our Class A and Class B
Common Stock. We have not paid dividends since our inception and we do not
anticipate paying cash dividends in the foreseeable future.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
We were incorporated for the purpose of acquiring Beringer Wine Estates Company
and its subsidiaries from Nestle on January 1, 1996. We are the successor
company ("New Beringer") as is reflected in the historical results of operations
beginning on January 1, 1996. The historical results of operations through
December 31, 1995 are the results of Beringer Wine Estates Company and its
consolidated subsidiares ("Old Beringer").
<TABLE>
<CAPTION>
Old Beringer New Beringer
---------------------------------- --------------------------------------------
Fiscal Fiscal Year Ended
Year June 30,
Ended Six Months Ended ----------------------------------------------
June 30, Dec 31, June 30,
(in thousands) 1995 1995 1996 1997 1998 1999 2000
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<S> <C> <C> <C> <C> <C> <C> <C>
Volume (total 9-liter case
equivalents)......................... 4,574 2,440 2,557 5,411 6,063 6,787 7,718
Net revenues.......................... $202,010 $106,867 $124,863 $269,460 $318,448 $376,154 $438,805
Gross profit (1)...................... $100,723 $ 52,753 $ 31,237 $ 91,631 $135,891 $178,124 $214,240
Gross Margin.......................... 49.9% 49.4% 25.0% 34.0% 42.7% 47.4% 48.8%
Operating income (loss) (2)........... $ 34,805 $ 16,556 $ (4,783) $ 12,984 $ 42,643 $ 66,532 $119,117
Operating margin...................... 17.2% 15.5% (3.8)% 4.8% 13.4% 17.7% 27.1%
Net income (loss) available to
common stockholders (3)(4).......... $ 16,753 $ 8,086 $(11,419) $(10,369) $ 7,883 $ 29,585 $ 59,094
Total assets.......................... $289,922 $318,022 $438,742 $467,184 $543,600 $644,316 $759,156
Long-term obligations (5)............. -- -- $202,428 $217,731 $171,794 $225,495 $232,575
</TABLE>
(1) In accordance with purchase accounting rules applied to our acquisitions,
inventory was increased to fair market value. Gross profit, excluding the
impact of inventory step-up, would have been $63,368 for the six months
ended June 30, 1996, and $134,939, $163,736, $194,572 and $219,927 for the
years ended June 30, 1997, 1998, 1999 and 2000, respectively.
(2) Excluding the impact of inventory step-up, operating income would have been
$27,348 for the six months ended June 30, 1996, and $56,292, $70,488,
$82,980 and $98,377 for the years ended June 30, 1997, 1998, 1999 and 2000,
respectively.
(3) Net income (loss) available to common stockholders includes preferred
dividends and discount accretion of $2,054 for the six months ended June
30, 1996, and $4,920 and $4,365 for the years ended June 30, 1997 and 1998.
Also included for the year ended June 30, 1997 is a $3,317 extraordinary
loss, net of tax, related to an early extinguishment of debt.
(4) Net income available to common stockholders, adjusted to exclude the
inventory step-up, the extraordinary loss from the early redemption of debt
recorded in fiscal 1998, the non-recurring charge for the accelerated
accretion of the preferred stock discount resulting from the redemption of
Series A Preferred Stock in fiscal 1998 and the gain on the sale of the
Napa Ridge brand in fiscal year 2000, would have been $7,539 for the six
months ended June 30, 1996, and $15,166, $29,537, $39,326 and $46,416 for
the years ended June 30, 1997, 1998, 1999 and 2000, respectively
(5) Includes long-term debt, less current portion; other liabilities and the
redeemable Series A Preferred Stock.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about us and our
industry. These forward-looking statements involve risks and uncertainties.
Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of a number of factors, as more fully
described in the "Risk Factors" section and elsewhere in this report. We
undertake no obligation to update publicly any forward-looking statements for
any reason, even if new information becomes available or other events occur in
the future.
Introduction
We have operated continuously since our founding in 1876. On January 1, 1996,
we were acquired by an investment group led by the Texas Pacific Group, in a
leveraged transaction. In October 1997, we sold 4,920,000 shares of Class B
Common Stock to the public in an initial public offering ("IPO") and 600,000
shares of Class B Common Stock directly to holders of the Series A Preferred
Stock. Net proceeds from the public offering were $132.5 million. We used
these net proceeds to retire all of our outstanding subordinated notes, redeem
all outstanding shares of the Series A Preferred Stock and retire $49.9
million of our line of credit and $6.0 million of long-term senior debt. The
early retirement of the subordinated notes resulted in a pre-tax extraordinary
charge of $4.7 million that included a $3.2 million prepayment penalty and a
$1.5 million write-off of unamortized discount. The early redemption of the
Series A Preferred Stock resulted in a $2.5 million reduction of net income
available to common stockholders, which represented the accelerated accretion
of the original issue discount remaining on the redemption date.
We acquired Chateau St. Jean in April 1996, Stags' Leap Winery in February
1997 and St. Clement Vineyards in 1999. Each of the Beringer, Chateau St.
Jean, Stags' Leap and St. Clement transactions were recorded using the
purchase accounting method. Under this method, the purchase price was
allocated to the assets and liabilities of the acquired company in the order
of their liquidity and based on their estimated fair market values at the time
of the transaction. When we were acquired in January 1996, $101.9 million of
the purchase price in excess of book value was allocated to our inventory on
hand at the transaction date. This allocation of purchase price is referred to
in this report as inventory step-up. Subsequent acquisitions have resulted in
additional inventory step-up. The 1996 purchase of Chateau St. Jean generated
$6.4 million in inventory step-up, the 1997 acquisition of Stags' Leap Winery
generated $14.6 million in inventory step-up and the 1999 acquisition of St.
Clement Vineyards generated $8.4 million in inventory step-up. In January,
2000, we sold the Napa Ridge brand to the Bronco Wine Company for
approximately $40.5 million. The sale included the Napa Ridge trademarked
brand and all labeled case goods in inventory. The sale resulted in a pre-tax
gain of $26.4 million.
We use the "first-in, first-out" ("FIFO") method of inventory accounting.
As the inventory on hand at the transaction dates is sold in the normal course
of business under the FIFO method of accounting, the cost of producing the
wine sold is charged to cost of goods sold. These costs include the amount of
the inventory step-up associated with the wine sold. As this inventory step-up
is charged to cost of goods sold, it reduces our gross profit, operating
income, and net income. The charges to cost of goods sold resulting from the
inventory step-up are non-cash items and are expected to affect our reported
performance at decreasing levels through fiscal year 2002. As the inventory
step-up will affect our reported financial results only in the near term, the
recent results are not indicative of our future performance. This report
includes discussion of adjusted results excluding the impact of inventory
step-up.
8
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Summary of Fiscal 2000
Fiscal 2000 operating results reflect continued sales volume growth,
increasing average unit price and stable operating margins. During the twelve
months ended June 30, 2000, sales volume grew 14% and net revenues rose 17%
driven by growth in the Beringer Vineyards and Meridian Vineyards brands.
Gross profit expanded 20% and operating profit increased 79% over the same
period in the prior fiscal year. Net income and diluted earnings per share
increased significantly over fiscal 1999 levels to $59.1 million and $2.91,
respectively. Our success as a leading producer of premium varietal wines is
due to an emphasis on quality products, brand strength and consumer focused
marketing.
The following table shows net income per share for the fiscal years ended June
30, 1998, 1999 and 2000. Adjusted net income excludes the non-cash charge
related to inventory step-up, the extraordinary item and the non-recurring
charge for accelerated accretion of the preferred dividend discount resulting
from the redemption of Series A Preferred Stock and the gain on the sale of
the Napa Ridge brand.
Net Income and Per Share Amounts
<TABLE>
<CAPTION>
Fiscal year ended June 30 (in thousands, except per share data) 1998 1999 2000
----- ------ -----
<S> <C> <C> <C>
As Reported
Net income available to
common stockholders............................................... $ 7,883 $29,585 $59,094
Diluted EPS......................................................... 0.43 1.46 2.91
Adjusted (1)
Net income available to
common stockholders.............................................. $29,537 $39,326 $46,416
Diluted EPS......................................................... 1.63 1.94 2.29
</TABLE>
_____________
(1) Net income available to common stockholders is adjusted to exclude the
after-tax effect of the non-cash charge related to inventory step-up, the
extraordinary loss from the early redemption of debt recorded in fiscal
1998, the non-recurring charge for the accelerated accretion of the
preferred stock discount resulting from the redemption of Series A
Preferred Stock recorded in fiscal 1998 and the gain on the sale of the
Napa Ridge brand in fiscal 2000.
Net income available to common stockholders expanded to $59.1 million or $2.91
per diluted share for fiscal 2000 compared to $29.6 million or $1.46 per
diluted share in fiscal 1999. Adjusted net income available to common
stockholders grew 18% to $46.4 million for the year compared to $39.3 million
for fiscal 1999. Fiscal 2000 adjusted diluted earnings per share rose 18% to
$2.29 from $1.94 in fiscal 1999.
Fiscal 2000 net revenues grew $62.7 million or 17% to $438.8 million. Gross
profit increased $36.1 million or 20% over fiscal 1999 to $214.2 million
reflecting increased sales volume and a $10.8 million reduction in the non-
cash charge associated with inventory step-up. Adjusted gross profit for
fiscal 2000, excluding inventory step-up, grew 13% over fiscal 1999 to $219.9
million. Selling, general and administrative expenses for fiscal 2000 grew
$10.0 million or 9% over fiscal 1999 due primarily to increased advertising
and product promotion expense. Fiscal 2000 operating income increased $52.6
million over fiscal 1999 to $119.1 million including a pre-tax gain of $26.4
million from the sale of Napa Ridge brand. Adjusted operating income for
fiscal 2000, excluding inventory step-up and the one-time gain on the sale of
the Napa Ridge brand, increased $15.4 million or 19% to $98.4 million.
Total assets grew $114.8 million to $759.2 million at June 30, 2000.
Inventories rose $45.9 million to $331.5 million, 16% higher than the June 30,
1999 balances. Property, plant and equipment, net of accumulated depreciation,
grew $45.1 million to $334.9 million at June 30, 2000. Partially funding
growth in assets, total debt expanded $50.1 million from June 30, 1999 to
$378.1 million at June 30, 2000.
9
<PAGE>
Fiscal 1999 vs. Fiscal 2000
The following table shows our brands' contribution to consolidated net
revenues for the fiscal years ended June 30, 1998, 1999 and 2000.
Net Revenues
<TABLE>
<CAPTION>
Fiscal year ended June 30 (dollars and volume in thousands) 1998 1999 2000
------- ------- -------
<S> <C> <C> <C>
Beringer Vineyards..................................................... $190,441 $224,278 $276,529
Meridian Vineyards..................................................... 53,782 69,981 81,019
All Other California Brands............................................ 59,698 64,007 62,893
Imports................................................................ 14,527 17,888 18,364
-------- -------- --------
Total Net Revenues.................................................. $318,448 $376,154 $438,805
======== ======== ========
Volume (total 9-liter case equivalents)................................ 6,063 6,787 7,718
Net Revenue Per Case................................................... $ 52.52 $ 55.42 $ 56.85
</TABLE>
Fiscal 2000 net revenues increased 17% over fiscal 1999 to $438.8 million. Net
revenues in fiscal 2000 grew 23% for the Beringer Vineyards brand and 16% for
Meridian Vineyards. In fiscal 2000, we shipped 7.7 million nine-liter case
equivalents, 14% higher than the 6.8 million cases shipped in fiscal 1999.
Volume growth continues to be driven primarily by the Beringer Vineyards brand
with the introduction of the new Beringer Founders' Estate product line and
the continued expansion of Meridian Vineyards.
The average net revenue per nine-liter case increased 3% to $56.85 per case
from $55.42 per case in fiscal 1999. This increase primarily reflects the
positive mix change resulting from increased Beringer Founders' Estate and
Meridian Vineyards sales volume at higher than our average per case revenue.
We expect this trend of increasing unit revenue to continue as we pursue the
opportunities in the $8.00 to $12.00 per bottle retail price category with
Beringer Founders' Estate and Meridian Vineyards.
Based on the growth of Beringer Founders' Estate within the Beringer Vineyards
brand, Beringer White Zinfandel has been reduced to 28% of our total net
revenues in fiscal 2000 from 31% in fiscal 1999. Net revenues for all other
California brands declined from 17% of total in fiscal 1999 to 14% in fiscal
2000 due to the sale of the Napa Ridge brand in January, 2000.
Cost of Goods Sold Cost of goods sold in fiscal 2000 increased $26.5 million
to $224.6 million. Included in cost of goods sold are $16.4 and $5.7 million
of non-cash charges resulting from the inventory step-up for years ended June
30, 1999 and 2000, respectively. Cost of goods sold, excluding inventory step-
up, grew $37.3 million to $218.9 million in fiscal 2000. The average cost per
nine-liter case, excluding inventory step-up, increased $1.61 or 6% to $28.36
for fiscal 2000. These changes are primarily due to changes in product mix
sold and changes in raw materials costs, particularly as new vintages are
introduced.
10
<PAGE>
Gross Profit The following table shows consolidated gross profit for the
fiscal years ended June 30, 1998, 1999 and 2000.
<TABLE>
<CAPTION>
Fiscal year ended June 30 (in thousands) 1998 1999 2000
-------- -------- --------
<S> <C> <C> <C>
Net Revenues........................................................ $318,448 $376,154 $438,805
Cost of Goods Sold.................................................. 182,557 198,030 224,565
-------- -------- --------
Gross Profit........................................................ 135,891 178,124 214,240
Inventory Step-Up................................................... 27,845 16,448 5,687
-------- -------- --------
Adjusted Gross Profit............................................... $163,736 $194,572 $219,927
======== ======== ========
</TABLE>
Gross profit for fiscal 2000 increased $36.1 million, or 20% over fiscal 1999
to $214.2 million. Adjusted gross profit, excluding inventory step-up, for
fiscal 2000 increased $25.4 million over fiscal 1999, to $219.9 million. This
13% increase in adjusted gross profit reflects 14% growth in the number of
cases sold off-set partially by a 1% decline in per case profit.
Gross Margin The following table shows gross margin for the fiscal years ended
June 30, 1998, 1999 and 2000. Gross profit is expressed as a percentage of net
revenues.
<TABLE>
<CAPTION>
Fiscal year ended June 30 1998 1999 2000
----- ----- -----
<S> <C> <C> <C>
Net Revenues.......................................................... 100.0% 100.0% 100.0%
Cost of Goods Sold.................................................... 57.3% 52.7% 51.2%
----- ----- -----
Gross Margin.......................................................... 42.7% 47.3% 48.8%
Inventory Step-Up..................................................... 8.7% 4.4% 1.3%
----- ----- -----
Adjusted Gross Margin................................................. 51.4% 51.7% 50.1%
===== ===== =====
</TABLE>
Fiscal 2000 gross margin improved to 48.8% from 47.3% for fiscal 1999
primarily related to the reduced non-cash charge associated with the inventory
step-up. Adjusted gross margin, excluding inventory step-up, declined from
51.7% to 50.1%, due to changes in product mix sold and changes in raw
materials costs, particularly as new vintages are introduced.
Selling, General and Administrative Expenses Selling general and
administrative expenses consist of product-specific selling and marketing
expenses such as advertising, product merchandising and trade discounts, and
non-product specific expenses such as sales and marketing staff, and general
and administrative expenses. In fiscal 2000 these expenses increased $10.0
million or 9% over fiscal 1999 to $121.6 million, primarily reflecting higher
product promotion expenses.
Fiscal 2000 selling, general and administrative expenses declined to 27.7% of
net revenue from 29.7% in fiscal 1999. This reduction reflects an 11% increase
in advertising and promotional spending, and a 6% increase in non-product
specific expenses, compared to a 17% increase in net revenues.
We expect selling, general and administrative expenses to increase slightly
below the rate of sales growth as we continue to achieve efficiencies in our
marketing and administrative expenses.
11
<PAGE>
Operating Income and Margin The following table shows operating income and
adjusted operating income expressed as a percentage of revenue for the fiscal
years ended June 30, 1998, 1999 and 2000.
<TABLE>
<CAPTION>
Fiscal year ended June 30 (dollars in thousands) 1998 1999 2000
------- ------- --------
<S> <C> <C> <C>
Operating Income...................................................... $42,643 $66,532 $119,117
Inventory Step-Up..................................................... 27,845 16,448 5,687
Gain on Sale of Napa Ridge Brand...................................... -- -- (26,427)
------- ------- --------
Adjusted Operating Income............................................. $70,488 $82,980 $ 98,377
======= ======= ========
Operating Margin...................................................... 13.4% 17.7% 27.1%
Adjusted Operating Margin............................................. 22.1% 22.1% 22.4%
</TABLE>
Operating income for the fiscal year rose $52.6 million or 79% over fiscal
1999 to $119.1 million. Excluding inventory step-up and the gain on the sale
of Napa Ridge brand, adjusted operating income for fiscal 2000 increased $15.4
million or 19% over fiscal 1999 to $98.4 million. The adjusted operating
margin increased in fiscal 2000 to 22.4%, compared with 22.1% in fiscal 1999.
Interest Expense and Other Income/Expense Interest expense for fiscal 2000
increased $2.7 million to $24.6, primarily reflecting higher average debt
levels in fiscal 2000. Average debt outstanding increased $50.5 million to
fund investment in inventories and property, plant and equipment.
Income Tax Provision (Benefit) The fiscal 2000 income tax provision was based
on an effective tax rate of approximately 39% compared to 37% in fiscal 1999.
Our effective tax rate is lower than the federal statutory rate due to the
effect of state taxes and the amortization of tax basis goodwill. We
anticipate that our effective tax rate will increase as taxable income
increases, approaching the statutory rate of approximately 41%.
Preferred Stock Dividends During the second quarter of fiscal 1998, we
redeemed all of our Series A Preferred Stock with proceeds from the IPO. As a
result of this redemption, we recorded a $2.5 million charge for the
accelerated accretion of the remaining original issue discount. In addition,
prior to redemption, we recorded dividends and normal accretion of $1.9
million in fiscal 1998.
Extraordinary Items During the second quarter of fiscal 1998, we retired all
of our outstanding subordinated debt with proceeds from the IPO. The
prepayment penalty and accelerated accretion of the remaining original issue
discount resulted in an extraordinary charge of $4.7 million. The
extraordinary item is shown net of $1.4 million in taxes.
Financial Condition
Assets. Our total assets increased $114.8 million or 18% from June 30, 1999 to
$759.2 million on June 30, 2000. Inventories rose $45.9 million to $331.5
million, 16% higher than the June 30, 1999 balances. This increase reflects a
$43.2 million increase in inventory quantities on hand, and a $2.7 million
increase in inventory step-up. Although our inventory and receivable levels
will be affected by seasonal patterns, we expect total assets to continue to
increase as inventory and property, plant and equipment expand to support
anticipated future growth.
Liabilities. Our total liabilities increased $52.7 million or 12% from June
30, 1999 to $479.0 million at June 30, 2000. At June 30, 2000, our long-term
debt outstanding was $235.2 million and the line of credit balance was $142.9
million. At June 30, 2000, $154.6 million was available under the terms of our
credit agreement.
12
<PAGE>
Liquidity and Capital Resources Our operating activities for the fiscal year
ended June 30, 2000 provided net cash of $14.8 million. Net cash used in
investing activities in fiscal 2000 of $67.9 million consisted primarily of
$53.3 million of expenditures for property, plant and equipment. Our capital
spending included $23.9 million for vineyard development and $33.0 million for
winery facilities development. We expect to continue to have significant cash
requirements, primarily for growth in inventory and capital spending on
vineyards and winery facilities.
Net cash provided by our financing activities during the fiscal year ended
June 30, 2000 of $53.1 million was provided primarily through our bank credit
agreement. We anticipate that current capital, combined with cash from
operations and the availability of cash from additional financing under our
existing credit facilities, will be sufficient to meet our liquidity and
capital expenditure requirements through the end of fiscal 2001. However, as a
result of our expected growth and planned capital investments, we expect to
increase the utilization of our credit facilities and potentially access
alternative financing sources in the future.
Fiscal 1998 vs. Fiscal 1999
Fiscal 1999 operating results improved over fiscal 1998 as sales volume grew
12%, net revenues rose 18%, and net income and earnings per share increased
significantly from fiscal 1998 levels. Our net income available to common
stockholders was $29.6 million or $1.46 per diluted share for fiscal 1999
compared to net income of $7.9 million or $0.43 per diluted share for fiscal
1998. Adjusted net income available to common stockholders was $39.3 million
for fiscal 1999 compared to $29.5 million for fiscal 1998. Adjusted earnings
per share, on a diluted basis, grew 19% to $1.94 for fiscal 1999 from $1.63
for fiscal 1998.
Fiscal 1999 net revenues grew $57.7 million or 18% over fiscal 1998 to $376.2
million. Fiscal 1999 gross profit increased $42.2 million or 31% over fiscal
1998 to $178.1 million. Adjusted gross profit, excluding inventory step-up,
for fiscal 1999 grew 19% over 1998 to $194.6 million. Selling, general and
administrative expenses for fiscal 1999 grew $18.3 million or 20% over fiscal
1998. Fiscal 1999 operating income increased $23.9 million over fiscal 1998 to
$66.5 million. Adjusted operating income for fiscal 1999, excluding inventory
step-up, increased $12.5 million or 18% to $83.0 million compared to fiscal
1998.
Total assets at June 30, 1999 were $644.3 million, 19% higher than the prior
year, and inventories were $285.6 million, 13% higher than the June 30, 1998
balances. Total debt at June 30, 1999 was $328.0 million, up $50.8 million
from June 30, 1998.
13
<PAGE>
New Accounting Pronouncements
Financial Instruments
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 133, which was deferred from its original
effective date, is now effective for years beginning after June 15, 2000. The
statement requires all derivative securities to be recorded on the balance
sheet at fair value and establishes "special accounting" for the different
types of hedges. We plan to adopt this statement in fiscal 2001. Had we
adopted the statement in fiscal 2000, we would have recorded a $454,000 after-
tax increase to other comprehensive income for the fair value of our swap
agreements
Sales Incentives
At the July 19-20, 2000 meeting of the Emerging Issues Task Force of the
Financial Standards Board (EITF), the EITF reached a consensus on EITF 00-14,
"Accounting for Certain Sales Incentives" which requires vendors to record
sales incentives as a reduction of revenue at the date of sale. The standard
is effective in the first quarter of fiscal 2001 and requires reclassification
of prior period financial statements. We are in the process of determining the
impact that adopting the EITF will have on our fiscal 2001 financial
statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates. To manage this
exposure, we have entered into interest rate exchange agreements. We do not
use financial instruments for trading purposes and we are not a party to any
leveraged derivatives.
At June 30, 2000, our debt was $378.1 million, of which $177.8 million will
re-price during the next twelve months. At June 30, 2000, we had interest rate
exchange agreements that converted a notional amount of $90 million of our
variable-rate debt to a fixed rate.
Assuming a 1% increase in interest rates, we would expect our annual interest
expense to increase approximately $1,317,000. Our credit exposure under these
agreements is limited to the cost of replacing an agreement in the event of
non-performance by our counterparty. To minimize this risk, we select high
credit quality counterparties.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Balance Sheets at June 30, 1999 and 2000.............................................. 15
Consolidated Statements of Operations for the years ended June 30, 1998, 1999 and 2000............. 16
Consolidated Statements of Stockholders' Equity for the years ended June 30, 1998,
1999 and 2000................................................................................... 17
Consolidated Statements of Cash Flows for the years ended June 30, 1998, 1999 and 2000............. 18
Notes to Consolidated Financial Statements......................................................... 19-32
Report of Independent Accountants.................................................................. 33
</TABLE>
14
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, June 30,
(in thousands, except share and per share data) 1999 2000
-------- --------
ASSETS
<S> <C> <C>
Current assets:
Cash............................................................................. $ 18 $ 20
Accounts receivable, net......................................................... 45,388 57,063
Inventories...................................................................... 285,635 331,506
Deferred tax assets.............................................................. 11,293 17,380
Prepaids and other current assets................................................ 2,768 9,320
-------- --------
Total current assets.......................................................... 345,102 415,289
Property, plant and equipment, net................................................. 289,824 334,908
Other assets, net.................................................................. 9,390 8,959
-------- --------
Total assets.................................................................. $644,316 $759,156
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................. $ 23,301 $ 21,082
Book overdraft................................................................... 3,416 1,151
Accrued trade discounts.......................................................... 9,258 16,387
Accrued payroll, bonuses and benefits............................................ 9,447 10,272
Accrued interest................................................................. 4,572 4,817
Other accrued expenses........................................................... 7,597 5,597
Income taxes payable............................................................. 2,270 3,506
Line of credit................................................................... 102,100 142,900
Current portion of long-term debt................................................ 2,695 2,920
-------- --------
Total current liabilities..................................................... 164,656 208,632
Long-term debt, less current portion............................................... 223,162 232,242
Deferred tax liabilities........................................................... 36,065 37,753
Other liabilities.................................................................. 2,333 333
-------- --------
Total liabilities............................................................. 426,216 478,960
-------- --------
Stockholders' equity:
Class A Common Stock, $0.01 par value; 2,000,000 shares authorized;
1,312,326 and 1,337,962 shares issued and outstanding.......................... 13 13
Class B Common Stock, $0.01 par value; 38,000,000 shares authorized;
18,242,071 and 18,408,964 shares issued and outstanding....................... 182 184
Notes receivable from stockholders............................................... (306) (166)
Additional paid-in-capital....................................................... 191,192 194,052
Retained earnings................................................................ 27,019 86,113
-------- --------
Total stockholders' equity.................................................... 218,100 280,196
-------- --------
Total liabilities and stockholders' equity.................................... $644,316 $759,156
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------
(in thousands, except per share data) 1998 1999 2000
-------- -------- --------
<S> <C> <C> <C>
Gross revenues...................................................... $334,398 $393,986 $459,270
Less excise taxes................................................... 15,950 17,832 20,465
-------- -------- --------
Net revenues........................................................ 318,448 376,154 438,805
Cost of goods sold.................................................. 182,557 198,030 224,565
-------- -------- --------
Gross profit........................................................ 135,891 178,124 214,240
Selling, general and administrative expenses........................ 93,248 111,592 121,550
Gain on the sale of Napa Ridge brand................................ -- -- 26,427
-------- -------- --------
Operating income.................................................... 42,643 66,532 119,117
Interest expense.................................................... 23,000 21,899 24,646
Other expense (income), net......................................... (2,465) (2,471) (2,112)
-------- -------- --------
Income before income taxes.......................................... 22,108 47,104 96,583
Provision for income taxes.......................................... 6,543 17,519 37,489
-------- -------- --------
Net income before extraordinary item and preferred stock
dividends and discount accretion................................... 15,565 29,585 59,094
Less preferred stock dividends and discount accretion............... 4,365 -- --
-------- -------- --------
Income before extraordinary item available to common
stockholders....................................................... 11,200 29,585 59,094
Extraordinary loss, net of tax...................................... (3,317) -- --
-------- -------- --------
Net income available to common stockholders....................... $ 7,883 $ 29,585 $ 59,094
======== ======== ========
Income per share:
Basic EPS before extraordinary item............................... $ 0.65 $ 1.51 $ 3.01
Extraordinary loss per share...................................... (0.19) -- --
-------- -------- --------
Basic EPS after extraordinary item................................ $ 0.46 $ 1.51 $ 3.01
======== ======== ========
Diluted EPS before extraordinary item . $ 0.62 $ 1.46 $ 2.91
Extraordinary loss per share...................................... (0.19) -- --
-------- -------- --------
Diluted EPS after extraordinary item.............................. $ 0.43 $ 1.46 $ 2.91
======== ======== ========
Weighted average number of common shares and
equivalents outstanding:
Basic............................................................. 17,108 19,554 19,660
======== ======== ========
Diluted........................................................... 18,170 20,300 20,292
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Notes
Class A Class B Receivable
Common Stock Common Stock From
(in thousands, except share data) --------------------- ---------------------
Shares Amount Shares Amount Stockholders Warrants
------- ------ ------ ------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1997............ 1,019,980 $10 11,716,212 $117 $(636) $ 1,848
Net income.........................
Issuance of stock.................. 50,831 --
Proceeds from initial public
offering.......................... 5,520,000 55
Exercise of warrants............... 431,612 5 (1,848)
Exercise of stock options, net of
repurchase and retirements........ 676,042 7
Repayment of notes receivable
from stockholders................. 188
Conversion, Class B to Class A
Common Stock...................... 356,228 4 (356,228) (4)
Other..............................
Preferred stock dividend and
discount accretion................
--------- --- ---------- ---- ----- --------
Balance at June 30, 1998............ 1,376,208 14 18,038,469 180 (448) --
Net income.........................
Issuance of stock.................. 82,658 1
Exercise of stock options, net of
repurchase and retirements........ 57,062 --
Repayment of notes receivable
from stockholders................. 142
Conversion, Class A to Class B
Common Stock...................... (63,882) (1) 63,882 1
--------- --- ---------- ---- ----- --------
Balance at June 30, 1999............ 1,312,326 13 18,242,071 182 (306) --
Net income.........................
Issuance of stock.................. 19,107
Exercise of stock options, net of
repurchase and retirements and
related tax benefits.............. 168,900 2
Repayment of notes receivable
from stockholders................. 140
Conversion, Class B to Class A
Common Stock...................... 28,000 (28,000)
Conversion, Class A to Class B
Common Stock...................... (2,364) 2,364
--------- --- ---------- ---- ----- -------
Balance at June 30, 2000............ 1,337,962 $13 18,404,442 $184 $(166) $ --
========= === ========== ==== ===== =======
<CAPTION>
Retained
Additional Earnings /
Paid in (Accumulated
(in thousands, except share data) Capital Deficit) Total
----------- ------------- ----------
<S> <C> <C> <C>
Balance at June 30, 1997............ $ 57,470 $(14,816) $ 43,993
Net income......................... 12,248 12,248
Issuance of stock.................. 1,061 1,061
Proceeds from initial public
offering.......................... 132,421 132,476
Exercise of warrants............... 1,843 --
Exercise of stock options, net of
repurchase and retirements........ 293 300
Repayment of notes receivable
from stockholders................. 188
Conversion, Class B to Class A
Common Stock...................... --
Other.............................. (2) 2 --
Preferred stock dividend and
discount accretion................ (4,365) (4,365)
-------- -------- --------
Balance at June 30, 1998............ 188,721 (2,566) 185,901
Net income......................... 29,585 29,585
Issuance of stock.................. 2,027 2,028
Exercise of stock options, net of
repurchase and retirements........ 444 444
Repayment of notes receivable
from stockholders................. 142
Conversion, Class A to Class B
Common Stock...................... -------- -------- --------
Balance at June 30, 1999............ 191,192 27,019 218,100
Net income......................... 59,094 59,094
Issuance of stock.................. 621 621
Exercise of stock options, net of
repurchase and retirements and
related tax benefits............... 2,239 2,241
Repayment of notes receivable
from stockholders................. 140
Conversion, Class B to Class A
Common Stock......................
Conversion, Class A to Class B
Common Stock......................
-------- -------- --------
Balance at June 30, 2000............ $194,052 $ 86,113 $280,196
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------
(in thousands) 1998 1999 2000
--------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................................ $ 12,248 $ 29,585 $ 59,094
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Deferred taxes........................................................ (5,694) (3,006) (4,399)
Depreciation and amortization......................................... 12,226 13,408 14,467
Extraordinary loss on early extinguishment of debt.................... 1,509 -- --
Other ............................................................... 160 97 48
Change in assets and liabilities:
Accounts receivable................................................. (2,298) (14,864) (11,409)
Inventories......................................................... (37,572) (33,966) (34,851)
Prepaids and other assets........................................... 323 (2,260) (8,201)
Accounts payable.................................................... 7,342 5,845 (3,096)
Book overdraft...................................................... (794) 2,209 (2,265)
Accrued liabilities................................................. 4,473 8,583 6,199
Income taxes payable................................................ 1,686 584 1,236
Other liabilities................................................... (2,000) (2,000) (2,000)
-------- -------- --------
Net cash provided by (used in) operating activities.............. (8,391) 4,215 14,823
-------- -------- --------
Cash flows from investing activities:
Acquisitions of property, plant and equipment............................. (43,199) (56,865) (53,342)
Business acquisition...................................................... -- -- (14,608)
Other..................................................................... (147) (660) 70
-------- -------- --------
Net cash used in investing activities............................ (43,346) (57,525) (67,880)
-------- -------- --------
Cash flows from financing activities:
Net proceeds from (repayments of) line of credit.......................... 1,300 (3,200) 40,800
Proceeds from long-term debt.............................................. -- 58,000 12,000
Repayment of long-term debt............................................... (44,816) (4,010) (2,695)
Issuance of common stock.................................................. 133,676 2,375 2,814
Redemption of preferred stock............................................. (38,705) -- --
Proceeds from notes receivable from stockholders.......................... 188 142 140
-------- -------- --------
Net cash provided by financing activities........................ 51,643 53,307 53,059
-------- -------- --------
Net increase/(decrease) in cash............................................. (94) (3) 2
Cash at beginning of the period............................................. 115 21 18
-------- -------- --------
Cash at end of the period................................................... $ 21 $ 18 $ 20
======== ======== ========
Supplemental cash flow information:
Cash payments of income taxes............................................... $ 9,045 $ 20,129 $ 39,938
Cash payments of interest................................................... 23,749 23,867 27,563
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Note 1--Organization and Summary of Significant Accounting Policies
Organization and Nature of Business
Beringer Wine Estates Holdings, Inc. (BWEH or the Company), a Delaware
corporation, was incorporated for the purpose of acquiring Beringer Wine Estates
Company and its wholly owned subsidiaries. The acquisition from Nestle Holdings,
Inc. (Nestle) of all of the outstanding common stock of Beringer Wine Estates
Company by BWEH took place on January 1, 1996 (Note 2).
We are engaged in the operation of vineyards and wineries, and the production
and sale of premium bottled wine. The majority of our operations are carried out
in California. We sell our wine principally in the United States to distributors
for resale to retail outlets and restaurants. A substantial portion of our sales
are concentrated in California and, to a lesser extent, the States of New
Jersey, Texas, Illinois, and Florida. Export sales for all periods presented
account for approximately 3% of net revenues.
Summary of Significant Accounting Policies
Basis of presentation. The consolidated financial statements include the
accounts of BWEH and all of its subsidiaries. Intercompany transactions and
balances have been eliminated. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. During fiscal 2000, we changed our estimate of
accrued liablilities for trade discount payments. This change had the effect of
reducing selling, general and administrative expense by $2,300,000 and
increasing net income by $1,408,000 in the fourth quarter.
Revenue recognition. We recognize revenue when the product is shipped and title
passes to the customer. Revenue from product sold at our retail locations is
recognized at the time of sale. We generally allow thirty days from the date of
shipment for our customers to make payment. No products are sold on consignment.
Major customers. We sell the majority of our wines through distributors in the
United States and through brokers and agents in export markets. Receivables
arising from these sales are not collateralized; however, credit risk is
minimized as a result of the large and diverse nature of our customer base.
There is common ownership in several distributorships in different states that,
when considered to be one entity, represented 31.6%, 31.2% and 32.2% of revenues
for the years ended June 30, 1998, 1999 and 2000, respectively. Trade accounts
receivable from these distributors at June 30, 1999 and 2000 totaled $13,230,000
and $16,854,000, respectively. Our accounts receivable are presented net of an
allowance for doubtful accounts totaling $255,000 at June 30, 1999 and 2000.
<PAGE>
Inventories. Inventories are valued at the lower of cost or market. Inventory
and cost of inventory sold are determined using the first-in, first-out (FIFO)
method. Costs associated with growing crops, winemaking and other costs
associated with the manufacturing of product for resale are recorded as
inventory. In accordance with general practice in the wine industry, wine
inventories are included in current assets, although a portion of such
inventories may be aged for periods longer than one year.
Inventories consist of the following:
<TABLE>
June 30, June 30,
(in thousands) 1999 2000
-------- --------
<S> <C> <C>
Bulk wine......................................................................... $124,105 $170,697
Cased goods and retail............................................................ 135,429 131,797
Crop costs and supplies........................................................... 26,101 29,012
-------- --------
$285,635 $331,506
======== ========
</TABLE>
Each of the acquisitions described below in Note 2 resulted in an allocation of
purchase price in excess of book value to inventory on hand at the date of
purchase. This allocation of purchase price in excess of book value is referred
to as inventory step-up. The Beringer, Chateau St. Jean, Stags' Leap Winery and
St. Clement Vineyards acquisitions resulted in $101.9 million, $6.4 million,
$14.6 million and $8.4 million in inventory step-up, respectively.
Included in inventory at June 30, 1999 and 2000 were $3.2 million and $5.9
million, respectively, of inventory step-up remaining from applying purchase
accounting to the acquisitions of Chateau St. Jean, Stags' Leap Winery and St.
Clement Vineyards (Note 2).
Property, plant and equipment. Property, plant and equipment is stated at the
lower of cost or, if impaired, the fair value at date of impairment. Property,
plant and equipment is deemed to be impaired if, on an undiscounted basis, the
sum of the estimated future cash flows is less than the carrying amount of the
asset. Maintenance and repairs are expensed as incurred. Costs incurred in
developing vineyards, including related interest costs, are added to asset cost
until the vineyards become commercially productive.
Depreciation and amortization are generally computed using the straight-line
method over the estimated useful life of the assets, generally 15 to 25 years
for vineyards, 40 years for buildings, 5 to 30 years for machinery and
equipment, and 3 to 5 years for office furniture and fixtures. Leasehold
improvements are amortized over the estimated useful lives of the improvements
or the terms of the related lease, whichever is shorter.
The cost and accumulated depreciation of property, plant and equipment consist
of the following:
<TABLE>
June 30, June 30,
(in thousands) 1999 2000
-------- --------
<S> <C> <C>
Land.............................................................................. $ 77,812 $ 82,214
Vineyards......................................................................... 62,713 70,385
Machinery and equipment........................................................... 69,680 70,597
Buildings......................................................................... 35,609 38,226
Leasehold improvements............................................................ 8,865 8,979
Furniture and fixtures............................................................ 2,187 2,282
Vineyards under development....................................................... 47,911 64,370
Construction in progress.......................................................... 20,826 46,090
-------- --------
325,603 383,143
Less accumulated depreciation and amortization.................................... (35,779) (48,235)
-------- --------
$289,824 $334,908
======== ========
</TABLE>
<PAGE>
Included in property, plant and equipment are $1,356,000, $2,609,000 and
$3,871,000 of interest capitalized for the years ended June 30, 1998, 1999 and
2000, respectively. All property, plant and equipment is pledged as collateral
for amounts owed under our credit agreement (Note 3).
Other assets. Other assets include loan fees, long-term prepaid lease costs, and
miscellaneous other assets. Loan fees are amortized over the terms of the
related loans. Prepaid lease costs will be offset against future operating lease
obligations.
Income taxes. Income taxes are recorded using the liability method. Under this
method, deferred taxes are determined by applying current tax rates to the
differences between the tax and financial reporting bases of our assets and
liabilities. In estimating future tax consequences, all expected future events
are considered, except for potential income tax law or rate changes.
Advertising costs. We expense costs relating to advertising either as the costs
are incurred or the first time the advertising takes place. Advertising expense,
including merchandising and point of sale materials charged to expense, totaled
$16,118,000, $19,433,000 and $20,262,000 for the years ended June 30, 1998, 1999
and 2000, respectively. Point of sale materials are accounted for as prepaid
expenses and charged to merchandising expense as utilized.
Financial instruments. We utilize financial instruments to reduce interest rate
and foreign currency exchange risks. We do not enter into financial instruments
for trading or speculative purposes. Payments or receipts on interest rate swap
agreements are recorded in interest expense. Gains and losses on forward foreign
exchange contracts, which are used to manage foreign currency exchange risk on
certain oak barrel purchase commitments, are deferred and recognized as
adjustments of carrying amounts of assets purchased when the hedged transaction
occurs.
Stock based compensation. We use an intrinsic value based method to measure
compensation cost in connection with our employee stock compensation plans,
which has not historically resulted in compensation cost. Our stock option plans
are discussed in Note 9.
<PAGE>
Earnings Per Share. Basic EPS represents the income available to common
stockholders divided by the weighted average number of Class A and Class B
common shares outstanding during the measurement period. Diluted EPS represents
the income available to common stockholders divided by the weighted average
number of Class A and Class B common shares outstanding during the measurement
period while also giving effect to all dilutive potential common shares that
were outstanding during the period. Potential common shares consist primarily of
stock options and warrants (dilutive impact calculated applying the "treasury
stock method").
The table below presents the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------
(in thousands, except per share data) 1998 1999 2000
------- ------- -------
<S> <C> <C> <C>
Numerator--Income
Income before extraordinary item available to
common stockholders.............................................. $11,200 $29,585 $59,094
======= ======= =======
Denominator--Basic shares
Average common shares outstanding................................... 17,108 19,554 19,660
------- ------- -------
Basic EPS before extraordinary item................................. $ 0.65 $ 1.51 $ 3.01
======= ======= =======
Denominator--Diluted shares
Average common shares outstanding................................... 17,108 19,554 19,660
Dilutive effect of common stock equivalents......................... 1,062 746 632
------- ------- -------
Total diluted shares............................................ 18,170 20,300 20,292
------- ------- -------
Diluted EPS before extraordinary item............................... $ 0.62 $ 1.46 $ 2.91
======= ======= =======
</TABLE>
Segment Reporting. We adopted Statement of Financial Accounting Standards No.
131 ("SFAS 131") , "Disclosure about Segments of an Enterprise and Related
Information" for the year ended June 30, 2000. SFAS 131 establishes standards
for reporting certain information about operating segments of an enterprise.
Operating segments are defined based upon the way that management organizes
financial information within the enterprise for making operating decisions and
assessing performance. We organize financial information by brands and product
lines. These brands and product lines have been aggregated for financial
reporting purposes due to similarities in economic characteristics of the brands
and product lines and the similar nature of the products, production processes,
customers and distribution methods. Substantially all of our revenues and assets
are within the United States.
Sales Incentives At the July 19-20, 2000 meeting of the Emerging Issues Task
Force of the Financial Standards Board (EITF), the EITF reached a consensus on
EITF 00-14, "Accounting for Certain Sales Incentives" which requires vendors to
record sales incentives as a reduction of revenue at the date of sale. The
standard is effective in the first quarter of fiscal 2001 and requires
reclassification of prior period financial statements. We are in the process of
determining the impact that adopting the EITF will have on the fiscal 2001
financial statements.
<PAGE>
Note 2--Acquisitions
On January 1, 1996, pursuant to a Stock Purchase Agreement among the Company,
Nestle, and TPG Partners, L.P. (TPG), we acquired all of the then outstanding
common stock of Beringer Wine Estates Company from Nestle (the "Beringer
Acquisition"). We financed the acquisition through the issuance of common and
preferred stock (Notes 7 and 8), the issuance of senior subordinated notes and
the incurrence of long-term indebtedness under our credit agreement (Note 3)
which eliminated short-term mezzanine financing provided by the seller.
On April 1, 1996, pursuant to an Asset Purchase Agreement between the Company
and Suntory International Corporation (Suntory), we acquired the net assets of
Chateau St. Jean from Suntory (the "CSJ Acquisition"). On February 28, 1997,
pursuant to a Stock and Asset Purchase Agreement between the Company and Stags'
Leap Winery, Inc., Stags' Leap Associates, and various individuals, we acquired
all of the outstanding common stock of Stags' Leap Winery, Inc. and certain
assets from Stags' Leap Associates and the various individuals (the "SLW
Acquisition"). On September 1, 1999, pursuant to an Asset Purchase Agreement
between the Company and Sapporo U.S.A., Inc. (Sapporo), we acquired the net
assets of St. Clement Vineyards from Sapporo (the "St. Clement Acquisition").
Each acquisition has been accounted for using the purchase method of accounting.
The total cost of each acquisition follows:
<TABLE>
<CAPTION>
Beringer CSJ SLW St. Clement
(in thousands) Acquisition Acquisition Acquisition Acquisition
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Cash paid, net of cash purchased..................... $258,262 $29,312 $19,197 $14,608
Amount due to seller................................. 95,762 -- 2,850 --
Acquisition costs.................................... 17,036 1,864 1,154 --
-------- ------- ------- -------
Total purchase price.............................. $371,060 $31,176 $23,201 $14,608
======== ======= ======= =======
</TABLE>
The allocation of purchase price to the assets acquired and liabilities assumed
has been made using estimated fair values at the applicable dates of acquisition
based on independent appraisals and on studies performed by management.
The purchase price allocations are summarized as follows:
<TABLE>
<CAPTION>
Beringer CSJ SLW St. Clement
(in thousands) Acquisition Acquisition Acquisition Acquisition
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Fair market value of assets acquired, net of cash
purchased:
Accounts receivable................................ $ 20,169 $ 2,627 $ 813 $ 266
Inventories........................................ 231,489 23,057 20,046 10,143
Property, plant and equipment...................... 178,557 10,942 12,300 6,550
Other.............................................. 17,153 2,360 740 --
-------- ------- ------- -------
447,368 38,986 33,899 16,959
Fair value in excess of purchase price offset
against non-current assets acquired.................. --- (5,750) (7,388) (2,351)
Liabilities assumed.................................. (21,436) (400) (173) --
Deferred tax liabilities............................. (54,872) (1,660) (3,137) --
-------- ------- ------- -------
$371,060 $31,176 $23,201 $14,608
======== ======= ======= =======
</TABLE>
<PAGE>
Results of operations of the St. Clement Acquisition are included in the
Consolidated Statements of Operations since its acquisition date. The pro
forma effects of the St. Clement Acquisition on the Company's Consolidated
Statements of Operations were not material.
Note 3--Long-Term Debt and Line of Credit Agreement
In connection with the acquisition of the Company in January 1996, we entered
into a credit agreement with several financial institutions and issued senior
subordinated notes to certain investors. In connection with the issuance of
the senior subordinated notes, the investors also received 308,294 and 123,318
of our Class A and Class B Stock Warrants, respectively (Note 9).
The credit agreement, which was amended in December 1998, provides for a
senior secured credit facility consisting of term credit and a secured
revolving line of credit. The line of credit expires on January 1, 2003 and
has a maximum credit available of $300.0 million. The maximum credit available
will be reduced if the value or amount of certain of our assets which are used
in determining the borrowing base for the line of credit fall below specified
levels. The maximum credit available will also be reduced to the extent of any
outstanding amounts due to growers. At June 30, 1999, we had drawn $102.1
million on the line of credit. At June 30, 2000, we had drawn $142.9 million
on the line of credit. At June 30, 2000, we had one outstanding letter of
credit totaling $2.5 million related to a building lease. Unused availability
under the credit line was $154.6 million at June 30, 2000. Interest under the
line of credit, which is payable quarterly, accrues at a rate determined under
various bank interest programs ranging from 6.06% to 8.02% for the periods
ended June 30, 1999 and 2000. We may, at our option, elect to convert all or
any portion of outstanding indebtedness under the line of credit to a fixed
interest rate. We must pay a quarterly commitment fee equal to 0.25% per annum
of the average daily amount by which the maximum credit available exceeds the
outstanding balance on the credit line.
<TABLE>
<CAPTION>
Long-term debt consists of the following:
June 30, June 30,
(in thousands) 1999 2000
--------- ---------
<S> <C> <C>
Term loan, Tranche A; secured by all properties; interest rates determined under various
bank interest programs (6.43% to 7.25% at June 30, 1999 and 7.25% to 8.02% at June 30,
2000); interest payable quarterly; principal payable monthly and quarterly commencing
April 1,1997; due July 16, 2005........................................................... $ 13,508 $ 13,240
Term loan, Tranche B; secured by all properties; interest rates determined under various
bank interest programs (6.43% to 7.95% at June 30, 1999 and 7.12% to 8.03% at June 30,
2000); interest payable quarterly; principal payable quarterly commencing January 1,
1998; due July 16, 2005................................................................... 154,349 151,922
Term loan, Tranche C; secured by all properties; interest rates determined under various
bank interest programs (fixed at 6.86% under these programs at June 30, 1999 and 6.86% to
8.16% at June 30, 2000); interest payable quarterly; principal payable quarterly
commencing January 1, 2004, due October 1, 2008........................................... 58,000 70,000
--------- ---------
Total debt 225,857 235,162
Less current portion....................................................................... (2,695) (2,920)
--------- ---------
Total long-term debt $ 223,162 $ 232,242
========= =========
</TABLE>
<PAGE>
Aggregate annual maturities of long-term debt at June 30, 2000 are as follows
(in thousands):
(in thousands) Year ending June 30,
-------------------
2001...................................................... $ 2,920
2002...................................................... 3,659
2003...................................................... 5,505
2004...................................................... 6,777
2005...................................................... 8,174
Thereafter................................................ 208,127
---------
$ 235,162
=========
The terms of the credit agreement contain, among other provisions, requirements
for maintaining certain working capital and other financial ratios, and limit
our ability to pay dividends, merge, alter the existing capital structure, incur
indebtedness and acquire or sell assets.
In November 1997, we used the proceeds from our IPO to retire all of the
outstanding senior subordinated notes. The early retirement of the subordinated
notes resulted in a pre-tax extraordinary charge of $4,659,000 that included a
$3,150,000 prepayment penalty and a $1,509,000 write-off of unamortized
discount.
Note 4--Financial Instruments
We do not enter into financial instruments for trading purposes and are not
party to any leveraged derivatives. Financial instruments are used to reduce the
impact of changes in interest rates and foreign currency exchange rates. The
principal financial instruments used are interest rate swaps and forward foreign
exchange contracts. Our credit exposure under these agreements is limited to the
cost of replacing an agreement in the event of non-performance by the
counterparty. To minimize this risk, we select high-quality financial
institution counterparties.
Interest rate swaps. We enter into interest rate swap agreements to manage our
exposure to interest rate changes. The swaps involve the exchange of fixed and
variable interest rate payments without exchanging the notional principal
amount. At June 30, 1999 and 2000, we had outstanding interest rate swap
agreements, maturing at various dates from February 1, 2001 through January 2,
2002, with a total notional amount of $90.0 million. Under these agreements, we
receive a variable rate of interest, or a weighted average rate of 5.22% and
6.65% at June 30, 1999 and 2000, respectively, and pay a weighted average fixed
interest rate of 6.36% at June 30, 1999 and 2000.
The fair value of these interest rate swap agreements represents the estimated
receipts or payments that would be made to terminate the agreements. At June 30,
1999, we would have paid $733,000 to terminate the agreements. Due to increases
in the indexed interest rate, we would have received $741,000 to terminate the
swap agreements at June 30, 2000. The fair value is based on dealer quotes,
considering current interest rates. In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133,
which was deferred from its original effective date, is now effective for years
beginning after June 15, 2000. The statement requires all derivative securities
to be recorded on the balance sheet at fair value and establishes "special
accounting" for the different types of hedges. We plan to adopt this statement
in fiscal 2001. Had we adopted the statement in fiscal 2000, we would have
recorded a $454,000 after-tax increase to other comprehensive income for the
fair value of our swap agreements, as described above.
<PAGE>
Forward foreign exchange contracts. We enter into forward foreign exchange
contracts to reduce the effect of fluctuating foreign currencies on certain
foreign currency denominated purchase commitments. At June 30, 2000, we had
oustanding forward exchange contracts with an aggregate U.S. dollar notional
amount of $2,823,027 that had remaining maturities of 10 months or less. At June
30, 1999, we had outstanding forward exchange contracts with an aggregate U.S.
dollar notional amount of $2,364,000 that had remaining maturities of 2 months
or less.
The estimated fair value of our forward foreign exchange contracts represents
the amount required to enter into offsetting contracts with similar remaining
maturities based on quoted market prices. At June 30, 1999 and 2000, the
difference between the contract amounts and the fair values was not significant.
Fair value of other financial instuments. The fair value of our long-term debt
and line of credit is estimated based on current rates we are offered for
financings of the same remaining maturities. The carrying amount of our long-
term debt and line of credit approximates fair value.
Note 5--Employee Benefit Plans
We maintain a 401(k) savings plan which covers substantially all employees of
the Company. Under this plan, employees can elect to contribute up to 15%
(subject to certain limits prescribed by tax law) of their annual pay to the
plan. We make a matching contribution of $0.50 for every dollar the employees
contribute to the plan up to 6% of the employee's pay. We may also make an
annual contribution to the plan solely at the discretion of the Board of
Directors of the Company. Employees are immediately 100% vested in our matching
contributions. Employees with less than four years of service vest ratably in
any discretionary contributions we make. Our contributions for the years ended
June 30, 1998, 1999 and 2000 totaled $1,257,000, $1,598,000 and $2,229,900,
respectively, including discretionary contributions of $734,000, $1,062,000 and
$1,503,200, respectively.
Note 6--Income Taxes
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------
(in thousands) 1998 1999 2000
-------- -------- --------
<S> <C> <C> <C>
Current tax provision:
Federal............................................................ $ 8,568 $ 16,153 $ 33,331
State.............................................................. 2,327 4,560 9,134
------- -------- --------
10,895 20,713 42,465
------- -------- --------
Deferred tax provision (benefit):
Federal............................................................ (4,539) (2,676) (4,491)
State.............................................................. (1,155) (518) (485)
------- -------- --------
(5,694) (3,194) (4,976)
------- -------- --------
5,201 17,519 37,489
Tax impact of extraordinary item...................................... 1,342 -- --
------- -------- --------
Total tax provision (benefit)......................................... $ 6,543 $ 17,519 $ 37,489
======= ======== ========
</TABLE>
<PAGE>
Income tax provision differs from the amount computed by multiplying the
statutory federal income tax rate times income before income taxes, due to the
following:
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------------
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
Federal statutory tax rate............................................. 35.0% 35.0% 35.0%
State income taxes, net of federal benefit............................. 4.4% 5.6% 5.8%
Amortization of tax basis goodwill..................................... (10.6%) (4.0%) (1.9%)
Other.................................................................. 1.0% 0.6% (0.1%)
---- ---- ----
29.8% 37.2% 38.8%
==== ==== ====
</TABLE>
The approximate effect of temporary differences that give rise to deferred tax
balances are as follows:
<TABLE>
<CAPTION>
(in thousands) 1999 2000
--------- ---------
<S> <C> <C>
Gross deferred tax assets
Liabilities and accruals.......................................................... $ 2,620 $ 2,703
Inventories....................................................................... 7,077 11,480
State taxes....................................................................... 1,596 3,197
--------- ---------
11,293 17,380
--------- ---------
Gross deferred tax liabilities
Property, plant and equipment..................................................... (36,065) (37,753)
--------- ---------
Net deferred tax liabilities......................................................... $ (24,772) $ (20,373)
========= =========
</TABLE>
In the year ended June 30, 2000, we recognized certain tax benefits related to
stock option plans in the amount of $609,000. These benefits were recorded as a
decrease in income taxes payable and an increase in paid-in-capital.
Note 7--Redeemable Preferred Stock
In 1996, we authorized 2,000,000 shares of Series A Preferred Stock (Preferred
Stock) with a par value of $0.0001 per share. The Preferred Stock was non-voting
and senior to all other classes and series of our stock. The Preferred Stock had
a semi-annual dividend rate per share of 7% of the liquidation value of $100 per
share. Dividends on the Preferred Stock issued in 1996 were paid in additional
shares of Preferred Stock. The liquidiation value of the Preferred Stock, in the
event of an involuntary conversion was equal to the previously stated
liquidation value of $100 per share.
In January and September 1996, we issued 300,000 shares and 3,548 shares,
respectively, of Preferred Stock, resulting in net proceeds to the Company of
$27,049,000 and $318,000, respectively. During the years ended June 30, 1997 and
1998, dividends accrued and paid in additional shares of Preferred Stock
amounted to 46,703 and 18,034 shares, respectively.
In November 1997, we used net proceeds from our IPO to redeem all outstanding
shares of the Preferred Stock. The early redemption of the Preferred Stock
resulted in a $2,500,000 reduction of net income allocable to common
stockholders, which represented the accelerated accretion of the original issue
discount remaining on the redemption date.
<PAGE>
Note 8--Common Stock and Other Stockholders' Equity
We have authorized 2,000,000 shares of Class A Common Stock, par value $0.01 per
share, and 38,000,000 shares of Class B Common Stock, par value $0.01 per share.
Each share of Class A Common Stock is entitled to twenty votes and each share of
Class B Common Stock is entitled to one vote on all matters submitted to a vote
of the stockholders of the Company. Generally, all matters to be voted upon by
stockholders must be approved by a majority of the votes entitled to be cast by
all shares of Class A Common Stock and Class B Common Stock, voting together as
a single class. Holders of Class A Common Stock and Class B Common Stock are
entitled to receive ratably such dividends, if any, as may be declared by the
Board of Directors, subject to preferences applicable to any then outstanding
preferred stock. In the event of liquidation, dissolution or winding up of the
Company, holders of the Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preference of any
then outstanding preferred stock (Note 7).
The Class A Common Stock is convertible at the option of the holder, on a one-
for-one basis, into shares of Class B Common Stock. Additionally, upon the
approval of a majority of the shares of Class A Common Stock, the Class A
stockholders can be required to convert their shares into shares of Class B
Common Stock on a one-for-one basis.
In September 1996, we issued 11,980 shares and 224,380 shares, respectively, of
Class A Common Stock and Class B Common Stock, resulting in net proceeds to the
Company of $825,000, net of notes receivable from stockholders of $356,000. In
March 1997, we issued 833,334 shares of Class B Common Stock, resulting in net
proceeds to the Company of $4,955,000, net of notes receivable from stockholders
of $46,000.
In October 1997, we issued, in an initial public offering, 4,920,000 shares of
Class B Common Stock and issued 600,000 shares of Class B Common Stock directly
to holders of the Series A Preferred Stock. These issuances of common stock
resulted in net proceeds to the Company of $132,476,000. All outstanding
warrants were exercised resulting in issuance of 431,612 shares of Class B
common stock.
During the year ended June 30, 1999, 63,348 options were exercised resulting in
proceeds of $444,672 to the Company and the retirement of 6,286 shares of Class
B Commom Stock. During the year ended June 30, 2000, 188,796 options were
exercised, resulting in proceeds of $1,648,436 to the Company and the retirement
of 15,174 shares of Class B Common Stock. We also issued 80,243 and 16,722 Class
B Common Stock shares during the years ended June 30, 1999 and 2000,
respectively, in connection with the Employee Stock Purchase Plan (Note 9).
In lieu of cash compensation, we have also issued 10,072, 2,415 and 2,376 shares
of Class B Common Stock to Directors for the years ended June 30, 1998, 1999 and
2000, respectively.
Notes receivable from stockholders, who are also our employees, bear interest at
the prime rate (8.50% at June 30, 1998, 7.75% at June 30, 1999 and 9.50% at June
30, 2000), are due ten years from their date of issuance, and are secured by
shares of our stock. The notes become due upon termination of the holders'
employment or upon sale of the underlying security.
<PAGE>
Note 9--Stock Option and Employee Stock Purchase Plans
We have two stock option plans, two option agreements, an employee stock
purchase plan and an Omnibus plan that are described below. We apply APB 25 and
related Interpretations in accounting for our plans. No compensation cost has
been recognized for our stock option plans because grants have been made at
exercise prices at or above fair market value of the common stock on the date of
grant.
The fair value of the common stock on the date of grant for 1,263,584 of the
2,976,051 total options granted under our stock option plans and option
agreements approximated $5-$6 per share, which was determined based on the
approximate purchase value for the Company on January 1, 1996 (Note 2). The
remaining options were granted at exercise prices ranging from $6 to $43 per
share. Had the minimum value of the options been calculated in accordance with
FAS 123, net income allocable to common stockholders would have been $6,739,000,
$27,661,000 and $56,477,000, respectively, and net income per diluted share
would have been $0.37, $1.36 and $2.78, respectively, for the year ended June
30, 1998, 1999 and 2000.
For purposes of calculating compensation cost under FAS 123, the minimum fair
value of each option grant is estimated on the date of grant using the Black-
Scholes option-pricing model with the following weighted-average assumptions
used for grants in fiscal 1998, 1999 and 2000, respectively: dividend yield of
0% for all years; expected volatility of 42% for fiscal 1998, 54% for fiscal
1999 and 41% for fiscal 2000; risk-free interest rates of 5.95%, 4.22% and
6.06%; and, expected lives of three to seven years for all years.
Stock Option Plans
We have two option plans and had two option agreements: the 1996 Stock Option
Plan, the 1998 Option Plan, the MAR Stock Option Agreement and the Silverado
Stock Option Agreement.
Under the 1996 Stock Option Plan, we are authorized to grant both incentive and
non-qualified stock options for up to 2,205,604 shares of Class B Common Stock
to selected employees at an exercise price not less than 100% of the fair market
value on the date of grant. Options vest over five years and expire after ten
years from the date of grant. We have granted 2,025,521 stock options under this
plan at June 30, 2000.
Under the 1998 Stock Option Plan, we are authorized to grant both incentive and
non-qualified stock options for up to 200,000 shares of Class B Common Stock to
selected employees at an exercise price not less than 100% of the fair market
value on the date of grant. The options will vest over a period determined on
the date of grant and will expire after ten years from the date of grant. We
have granted 192,550 stock options under this plan at June 30, 2000. The balance
of the shares authorized were subsequently transferred to the 1996 Stock Option
Plan. This plan will not be used for any further grants.
Under the MAR Stock Option Agreement, we were authorized to grant stock options
for up to 60,000 shares of Class B Common Stock. Each option was immediately
vested from the date of grant and no option was exercisable after ten years from
the date of grant. All options under this agreement have been granted and were
exercised during fiscal 1998.
Under the Silverado Stock Option Agreement, we were authorized to grant both
incentive and non-qualified stock options for up to 697,980 shares of Class B
Common Stock. Each option was immediately vested from the date of grant and no
option was exercisable after ten years from the date of grant. All options under
this agreement have been granted and were exercised during fiscal 1998.
<PAGE>
Information regarding these option plans for the fiscal years 1999 and 2000 are
as follows:
<TABLE>
<CAPTION>
Option Shares Outstanding
----------------------------------------------------------------------
Weighted
Shares Average
Available Options Exercise Options
for Grant Granted Price Exercisable
----------- --------- --------- ------------
<S> <C> <C> <C> <C>
Balance at June 30, 1998............................ 1,061,858 1,343,746 16.46 285,537
Options granted..................................... (385,300) 385,300 41.20
Options cancelled................................... 35,700 (35,700) 31.13
Options exercised................................... (63,348) 10.88
--------- ---------
Balance at June 30, 1999............................ 712,258 1,629,998 22.21 530,122
Options granted..................................... (484,625) 484,625 39.58
Options cancelled................................... 80,465 (80,465) 36.22
Options exercised................................... (188,796) 11.81
--------- ---------
Balance at June 30, 2000............................ 308,098 1,845,362 27.52 598,058
========= =========
</TABLE>
The weighted average exercise price of options exercisable at June 30, 1999 and
2000 was $9.41 and $11.38 per share, respectively. At June 30, 2000, the
1,845,362 options outstanding had a range of exercise price from $5 to $43 and a
range of expiration dates from December 2002 to May 2010.
Stock Warrants
In connection with the sale of the senior subordinated notes (Note 3), we issued
308,294 and 123,318, respectively, of detachable Series A and Series B Stock
Warrants to the senior subordinated note holders. The warrants were allocated an
imputed fair value of $1,848,000 on the date of issuance, resulting in a
discount in face amount of the senior subordinated notes, using the Black-
Scholes Option pricing model with the following weighted average assumptions:
dividend yield of 0%; expected volatility of 45%; risk free interest rate of
5.23%; and an expected life of 10 years. Each Series A and Series B Stock
Warrant provides the holder the right to purchase one share of Class B Common
Stock in exchange for one Series A or Series B Stock Warrant plus one cent. All
warrants were exercised during fiscal 1998.
Employee Stock Purchase Plan
We adopted the 1997 Employee Stock Purchase Plan (ESPP) and reserved 200,000
shares of Class B Common Stock for issuance under the ESPP. The ESPP allows
eligible employees the right to purchase Class B Common Stock at the lower of
85% of the fair value on the date the Company grants the right to purchase or
85% of the fair value on the date of purchase. Employees, through payroll
deductions of no more than 15% of their base compensation, subject to certain
other limits, could exercise their rights to purchase for the period specified
in the related offering. We pay all of the administrative expenses of the ESPP.
This plan is no longer used and the program survives under the 1998 Incentive
Stock Plan.
Omnibus Plan ("1998 Incentive Stock Plan")
We adopted the Omnibus or 1998 Incentive Stock Plan and reserved 300,000 shares
of Class B Common Stock for issuance under this plan. This plan permits the
issuance of shares under an employee stock purchase program, the grant of stock
options and the grant of restricted Class B Common Stock. In the year ending
June 30, 2000, we issued 14,000 shares of restricted stock under this plan.
<PAGE>
Note 10--Related Party Transactions
We regularly enter into transactions with related parties on terms which we
believe are similar to like transactions with third parties.
We recorded rent expense of $948,000 in each of the years ended June 30, 1998,
1999 and 2000, related to the lease of warehouse space from a partnership
consisting of certain directors of the Company.
Minimum rental payments under this non-cancelable operating lease at June 30,
2000 are as follows:
(in thousands) Year ending June 30,
--------------------
2001........................................... $ 948
2002........................................... 948
2003........................................... 1,152
2004........................................... 1,152
2005........................................... 1,152
Thereafter..................................... 1,152
------
$6,504
======
Note 11--Commitments and Contingencies
We lease some of our office space, warehousing facilities, vineyards and
equipment under non-cancelable and month-to-month operating leases. Certain of
these leases have options to renew. Rental costs under these operating leases
amounted to $10,830,000, $16,540,000 and $19,263,000, respectively, for the
years ended June 30, 1998, 1999 and 2000. Minimum rental payments under non-
cancelable operating leases at June 30, 2000 are as follows (in thousands):
(in thousands) Year ending June 30,
--------------------
2001............................................ $ 20,265
2002............................................ 19,787
2003............................................ 19,555
2004............................................ 19,495
2005............................................ 16,870
Thereafter...................................... 122,418
--------
$218,390
========
We have contracted with various growers and certain wineries to supply a
significant portion of our future grape requirements and a portion on of our
future bulk wine requirements. While most of these contracts call for prices
to be determined by market conditions, several contracts provide for minimum
grape purchase prices.
We are subject to litigation in the ordinary course of business. In our opinion,
after consultation with legal counsel, the ultimate outcome of existing
litigation will not have a material adverse effect on our consolidated
financial condition, results of operations, or cash flows.
<PAGE>
Note 12--Quarterly Financial data
Unaudited quarterly financial data for the fiscal years ended June 30, 1999 and
2000 are as follows:
<TABLE>
<CAPTION>
(in thousands, except per share data, unaudited) Quarter 1 Quarter 2 Quarter 3 Quarter 4
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended June 30, 2000
Net revenues................................................ $90,457 $131,232 $106,088 $111,028
Gross profit................................................ 44,480 63,773 51,526 54,461
Net income.................................................. 7,691 12,901 26,727 11,775
Basic EPS................................................... 0.39 0.66 1.36 0.60
Diluted EPS................................................. 0.38 0.64 1.31 0.58
Year ended June 30, 1999
Net revenues................................................ $75,020 $112,573 $ 93,204 $ 95,357
Gross profit................................................ 34,378 52,677 43,952 47,117
Net income.................................................. 4,004 8,359 7,635 9,587
Basic EPS................................................... 0.21 0.43 0.39 0.49
Diluted EPS................................................. 0.20 0.41 0.38 0.47
</TABLE>
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders of Beringer Wine Estates
Holdings, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' equity and
of cash flows present fairly, in all material respects, the financial
position of Beringer Wine Estates Holdings, Inc. and its subsidiaries at
June 30, 1999 and 2000, and the results of their operations and their cash
flows for each of the three years in the period ended June 30, 2000, in
conformity with accounting principles generally accepted in the United
States. 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 of these statements
in accordance with auditing standards generally accepted in the United
States which require that we plan and perform the audits 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, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
San Francisco, California
August 3, 2000
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information for Directors and executive officers required by this item
follows:
Name Age Position
--------------------------------------------------------------------------------
Walter T. Klenz 55 President, Chief Executive Officer and Chairman of
the Board of Directors
Richard L. Adams 49 Director
David Bonderman 57 Director
Randy Christofferson 43 Director
James G. Coulter 40 Director
Timm F. Crull 69 Director
William A. Franke 63 Director
E. Michael Moone 60 Director
William S. Price III 44 Director
Jesse Rogers 43 Director
George A. Vare 63 Director
Peter F. Scott 47 Executive Vice President, Chief Financial and
Administrative Officer
James W. Watkins 44 Executive Vice President, Chief Operating Officer
Robert E. Steinhauer 59 Senior Vice President, Vineyard Operations
Edward B. Sbragia 51 Senior Vice President, Winemaster
Janelle E. Thompson 51 Vice President, Marketing and Hospitality
Richard G. Carter 56 Vice President, Sales
Martin L. Foster 54 Vice President, Investor Relations
A. Tor Kenward 52 Vice President, Winery Communications
Thomas W. Peterson 48 Vice President, Sonoma Operations and Winemaking
Ben Lawrence 43 Vice President, Human Resources
Douglas A. Walker 44 Vice President, Corporate Planning
Lloyd P. Chasey 45 Vice President, Finance and Controller
Douglas W. Roberts 48 Vice President, General Counsel and Secretary
Walter T. Klenz has been a director since January 1996 and became Chairman of
the Board in August 1997. Mr. Klenz joined us in 1976 as director of marketing
for the Beringer brand, and has served as our President and Chief Executive
Officer since 1990. From 1984 until 1990, he served as Senior Vice President,
Finance and Operations.
Mr. Adams has been a director since January 1996. Mr. Adams is partner of the
law firm Worsham, Forsythe & Wooldridge, L.L.P. He has been employed by that
firm since 1978.
Mr. Bonderman has been a director since January 1996. Mr. Bonderman is a
principal of Texas Pacific Group, a partnership he co-founded in 1992. He
currently serves on the Boards of Directors of Continental Airlines, Inc.;
Realty Information Group; Denbury Resources, Inc.; Bell & Howell Company; Virgin
Cinemas Limited; Ducati Motor Holdings, S.p.A.; GPA/Aerfi; J. Crew Group, Inc.;
Oxford Health Plans, Inc.; Rynair, Ltd. and Washington Mutual, Inc.
Mr. Christofferson has been a director since January 1996. Mr. Christofferson is
Chief Executive Officer of Walker Digital since 1999. He served as President of
First USA Bank from 1995 until 1999, and from 1990 to 1995 held various
positions in the travel and related service business of American Express. He
currently serves on the Board of Directors of Walker Digital and Monogram Credit
Card Services.
<PAGE>
Mr. Coulter has been a director since January 1996. Mr. Coulter served as Co-
Chairman of the Board from January 1996 to August 1997. Mr. Coulter is a
principal of Texas Pacific Group, a partnership he co-founded in 1992. Mr.
Coulter currently serves on the Boards of Directors of J. Crew Group, Inc.;
Oxford Health Plans, Inc.; Virgin Entertainment Group, Ltd.; Northwest Airlines
Corporation; Genesis Eldercare, Inc.; and Globespan, Inc.
Mr. Crull has been a director since January 1996. Mr. Crull was Chairman of the
Board of Nestle USA from 1991 to 1994, and is currently a member of the Boards
of Directors of Hallmark Cards; and Smart & Final Inc.
Mr. Franke has been a director since January 1996. Mr. Franke has been Chairman,
President and Chief Executive Officer of America West Holdings Corporation and
since 1992 has been Chairman of the Board of its principal subsidiary, America
West Airlines, Inc. He served as America West's Chief Executive Officer from
1993 to 1997, and resumed these duties in 1999. Mr. Franke is the owner and
president of Franke & Company, Inc., a financial advisory firm, and a managing
partner of Newbridge Latin America, L.P., a private equity investment fund. He
is also a director of Central Newspapers, Inc., publisher of the Phoenix and
Indianapolis morning newspapers, Phelps Dodge Corporation, a major mining and
manufacturing company, and AerFi Group, plc., an entity involved in aircraft
financing and leasing.
Mr. Moone has been a director since January 1996. Mr. Moone has been Chairman of
Napa Valley Kitchens in St. Helena, California, Chairman of Luna Vineyards in
Napa, California and Chairman and a managing partner of Silverado Equity
Partners, L.P. ("Silverado Partners") since 1995. From 1990 to 1992, Mr. Moone
served as President and Chief Executive Officer of Stouffer Foods Corporation,
where he also served as President of Nestle Frozen Food Company. He is currently
a member of the Board of Directors of Ruiz Mexican Foods, Inc.
Mr. Price has been a director since January 1996. Mr. Price served as Co-
Chairman of the Board from January 1996 to August 1997. Mr. Price is a principal
of Texas Pacific Group, a partnership he co-founded in 1992. Mr. Price currently
serves on the Boards of Directors of Aerfi; Continental Airlines, Inc.; Belden &
Blake Corporation; Del Monte Holdings; Denbury Resources, Inc.; Punch plc.;
Favorite Brands, Inc.; Zilog, Inc.; and Vivra Specialty Partners, Inc. Mr. Price
is also an officer of Newbridge Investment Partners.
Mr. Rogers has been a director since January 1996. Mr. Rogers has been an
officer of Bain & Company, Inc., an international strategic consulting firm,
since 1989, where he currently serves as a director. He is currently a member of
the Boards of Directors of Bain & Company, Inc.; Ruiz Food Products, Inc. and
the United Way of the Bay Area.
Mr. Vare has been a director since January 1996. Mr. Vare has been President of
Luna Vineyards and a managing partner of Silverado Partners since 1995. From
1991 to 1994, Mr. Vare was President and Chief Executive Officer of the Henry
Wine Group, then the fourth largest California wine wholesaler.
Peter F. Scott joined us in June 1997 as our Senior Vice President, Finance and
Operations and Chief Financial Officer. Mr. Scott was promoted to Executive Vice
President, Chief Financial and Administrative Officer in August 1999. He served
as Chief Financial Officer of Kendall-Jackson Winery, Ltd. from 1990 until he
joined us.
James W. Watkins joined us in August 1999 as our Executive Vice President, Chief
Operating Officer. From 1997 to 1999 he served as Senior Vice President of North
America Marketing at Burger King Corporation and from 1994 to 1997 he served as
Vice President and General Manager of Colgate's Hill's Pet Nutrition Division.
Robert E. Steinhauer joined us in 1979 and has served as our Senior Vice
President, Vineyard Operations since 1989.
Edward B. Sbragia joined us in 1976 and has served as our Senior Vice President,
Winemaster since 1989.
<PAGE>
Janelle E. Thompson joined us in 1982 and has served as our Vice President,
Marketing and Hospitality since 1987.
Richard G. Carter joined us in 1975 and has served as our Vice President, Sales
since 1984.
Martin L. Foster joined us in 1992 as Vice President, Treasurer. In 1997 he
assumed executive responsibility for Investor Relations.
A. Tor Kenward joined us in 1977 and has served as our Vice President, Winery
Communications since 1986.
Thomas W. Peterson joined us in 1986 and has served as our Vice President,
Sonoma Operations and Winemaking since 1996.
Ben Lawrence joined us in 2000 as our Vice President, Human Resources. From 1991
to January 2000, he was employed by the Clorox Company, and most recently held
the position of Vice President, International Human Resources.
Douglas A. Walker joined us in 1996 as our Vice President, Corporate Planning.
From 1993 to 1996, he served as the President of Chateau St. Jean winery.
Lloyd P. Chasey joined us in 2000 as our Vice President, Finance and Controller.
From 1982 to 2000, he was employed by The Clorox Company, and most recently held
the position of Vice President, Financial Reporting & Systems.
Douglas W. Roberts joined us in 1976 and has served as our Secretary since 1990.
He was appointed Vice President, General Counsel in 1997.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the
registrant's definitive proxy statement for its annual meeting of shareholders
to be held on November 9, 2000, to be filed with the Securities and Exchange
Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from the
registrant's definitive proxy statement for its annual meeting of shareholders
to be held on November 9, 2000, to be filed with the Securities and Exchange
Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from the
registrant's definitive proxy statement for its annual meeting of shareholders
to be held on November 9, 2000, to be filed with the Securities and Exchange
Commission.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Form 10-K:
1. Financial Statements: Reference is made to the Index to Consolidated
Financial Statements under Item 8 in Part II of this Form 10-K.
2. Financial Statement Schedules: Financial Statement schedules are omitted
because they are not applicable or the required information is shown in the
financial statements or notes thereto.
3. Exhibits: The Exhibits listed below are required by Item 601 of Regulation
S-K. Each management contract or compensatory plan or arrangement required
to be filed as an exhibit to this Form 10-K has been identified.
Exhibits: previously filed
2.1 Stock Purchase Agreement by and among Nestle Holdings, Inc., NOTG
Holdings, Inc., Silverado Partners Acquisition Corp. and TPG
Partners, L.P., dated as of November 17, 1995, as amended on
December 28, 1995. (1)
3(i) Form of Restated Certificate of Incorporation, as filed with the
Secretary of State of the State of Delaware on November 4, 1997.
(2)
3(ii) Bylaws of the registrant, amended May 11, 1999
10.1 Registrant's 1996 Stock Option Plan and Incentive Stock Option
and Non-Qualified Stock Option Agreements. (1)
10.5 Registrant's 1998 Incentive Stock Plan. (4)
10.6 Form of Indemnity Agreement between the Registrant and its
officers and directors. (1)
10.7 Third Amended and Restated Credit Agreement between Beringer Wine
Estates Company and Pacific Coast Farm Credit Services, ACA, as
agent on behalf of several lenders dated as of December 10, 1998.
(5)
10.8 Wine Distributorship Agreement between Registrant and Southern
Wine & Spirits of America, Inc. effective as of October 1, 1996,
as amended. (Confidential treatment granted for part of this
document.) (1)
10.9 Grape, Juice and Wine Purchase Agreement between Delicato
Vineyards and the Registrant dated December 31, 1996.
(Confidential treatment granted for part of this document.) (1)
10.10 Five Year Evergreen Contract for White Zinfandel Wine from Lodi
between Registrant and Bronco Wine Company dated May 15, 1997, as
revised June 3, 1997. (Confidential treatment granted for part of
this document.) (1)
21 Subsidiaries of the registrant. (3)
23.1 Consent of PricewaterhouseCoopers LLP
27.1 Financial Data Schedule
(1) Incorporated by reference to Registration Statement on Form S-1 filed
October 28,1997.
(2) Incorporated by reference to Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1997.
(3) Incorporated by reference to Annual Report on Form 10-K for the
fiscal year ended June 30, 1998.
(4) Incorporated by reference to Definitive 14A filed September 25, 1998.
(5) Incorporated by reference to Quarterly Report on Form 10-Q for the
quarterly period ended December 31, 1998.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended June 30, 2000.
<PAGE>
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.
Beringer Wine Estates Holdings, Inc.
August 28, 2000
By: /s/ Walter T. Klenz
Walter T. Klenz, Chief Executive Officer,
President and Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Walter T. Klenz, Peter F. Scott and Douglas W. Roberts,
and each of them, his or her true and lawful attorneys-in-fact and agents, each
with full power of substitution and re-substitution, for him or her and in his
or her name, place and stead, in any and all capacities, to sign any and all
amendments to this Annual Report on Form 10-K, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person, hereby ratifying and
confirming all that each of said attorneys-in-fact and agents or their
substitutes may lawfully do or cause to be done by virtue hereof.
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.
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Walter T. Klenz Chairman of the Board, President &
-------------------------- Chief Executive Officer August 28, 2000
Walter T. Klenz
/s/ Peter F. Scott Executive Vice President, Chief
-------------------------- Financial & Administrative Officer August 28, 2000
Peter F. Scott
/s/ Lloyd P. Chasey Vice President, Finance and
-------------------------- Controller & Chief Accounting Officer August 28, 2000
Lloyd P. Chasey
/s/ Richard L. Adams Director August 28, 2000
---------------------------
Richard L. Adams
/s/ David Bonderman Director August 28, 2000
----------------------------
David Bonderman
/s/ Randy Christofferson Director August 28, 2000
----------------------------
Randy Christofferson
/s/ James G. Coulter Director August 28, 2000
---------------------------
James G. Coulter
/s/ Timm F. Crull Director August 28, 2000
----------------------------
Timm F. Crull
/s/ William A. Franke Director August 28, 2000
----------------------------
William A. Franke
/s/ E. Michael Moone Director August 28, 2000
----------------------------
E. Michael Moone
/s/ William S. Price III Director August 28, 2000
----------------------------
William S. Price III
/s/ Jesse Rogers Director August 28, 2000
----------------------------
Jesse Rogers
/s/ George A. Vare Director August 28, 2000
----------------------------
George A. Vare
</TABLE>
