UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the quarterly period ended June 30, 1999.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from ________________
to ________________.
Commission File Number: 333-74589
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NATIONAL WINE & SPIRITS, INC.
- -----------------------------
(Exact name of registrant as specified in its charter)
Indiana 35-2064429
- ------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
P.O. Box 1602, 700 W. Morris Street, Indianapolis, Indiana 46206
- ---------------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(317) 636-6092
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(Registrant's telephone number, including area code)
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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 No __
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 12, 1999.
Class Outstanding at August 12, 1999
-------------- ------------------------------
Common Stock,
$.01 par value 104,520 shares
voting
Common Stock,
$.01 par value 5,226,001 shares
non-voting
1
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NATIONAL WINE & SPIRITS, INC.
Quarterly Report
For the period ended June 30, 1999
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 30, 1999 and March 31, 1999................................3
Condensed Consolidated Statements of Income
Three Months Ended June 30, 1999 and 1998.......................4
Condensed Consolidated Statements of Cash Flows
Three Months Ended June 30, 1999 and 1998.......................5
Notes to Condensed Consolidated Financial Statements................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk........................................................15
PART II. OTHER INFORMATION
Item 5. Other Information..................................................15
Item 6. Exhibits and Reports on Form 8-K...................................15
Signature..........................................................16
2
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
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NATIONAL WINE & SPIRITS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
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June 30, 1999 March 31, 1999
------------- --------------
(unaudited) (Note 1)
ASSETS
Current assets:
Cash $ 4,694 $ 1,908
Accounts receivable, less allowances
for doubtful accounts 62,551 37,042
Inventory 69,418 67,961
Prepaid expenses and other 4,986 4,776
--------- ---------
Total current assets 141,649 111,687
--------- ---------
Property and equipment, net 49,426 49,307
Other assets
Notes receivable 1,412 1,486
Cash surrender value of life insurance, net of loans 1,839 1,849
Investment in Kentucky distributor 7,500 7,438
Intangible assets, net 9,463 8,080
Deposits and other 142 142
Deferred pension costs 387 387
--------- ---------
Total other assets 20,743 19,382
--------- ---------
TOTAL ASSETS $211,818 $180,376
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 42,447 $ 27,567
Accrued payroll and payroll taxes 4,908 5,912
Excise taxes payable 6,885 4,055
Other accrued expenses and taxes 10,240 7,459
Current maturities of long-term debt 1,069 1,050
--------- ---------
Total current liabilities 65,549 46,043
Deferred pension liability 387 387
Long-term debt 125,348 116,172
--------- ---------
Total liabilities 191,284 162,602
--------- ---------
Stockholders' equity:
Voting common stock, $.01 par value 1 1
Nonvoting common stock, $.01 par value 53 53
Additional paid-in capital 25,009 25,009
Retained earnings (deficit) 981 (1,883)
--------- ---------
26,044 23,180
Notes receivable from stockholders (5,510) (5,406)
--------- ---------
Total stockholders' equity 20,534 17,774
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $211,818 $180,376
========= =========
<FN>
See notes to condensed consolidated financial statements.
</FN>
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3
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NATIONAL WINE & SPIRITS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands)
(Unaudited)
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Three Months Ended
June 30, 1999 June 30, 1998
------------- -------------
Net product sales $165,090 $131,391
Distribution fees 4,969 4,508
--------- ---------
Total revenue 170,059 135,899
Cost of products sold 133,742 106,358
--------- ---------
Gross profit 36,317 29,541
--------- ---------
Operating expenses:
Warehouse and delivery 9,606 8,826
Selling 10,544 9,105
Administrative 9,449 7,702
--------- ---------
Total operating expenses 29,599 25,633
--------- ---------
Income from operations 6,718 3,908
--------- ---------
Interest expense:
Related parties (97) (144)
Third parties (3,205) (2,386)
--------- ---------
(3,302) (2,530)
Other income:
Equity in earnings of
Kentucky distributor 101 --
Rental and other income 2 57
Gain on sales of assets 45 37
Interest income 206 269
--------- ---------
Total other income 354 363
--------- ---------
Net income $ 3,770 $ 1,741
========= =========
<FN>
See notes to condensed consolidated financial statements.
</FN>
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4
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NATIONAL WINE & SPIRITS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<S> <C> <C>
Three Months Ended
June 30, 1999 June 30, 1998
-------------- --------------
Operating activities:
Net income $ 3,770 $ 1,741
Adjustments to reconcile net income to net cash used
by operating activities:
Depreciation of property and equipment 1,800 1,693
Gain on sales of assets (45) (37)
Amortization of intangible assets 322 316
Equity in earnings of Kentucky distributor (101) --
Changes in operating assets and liabilities:
Accounts receivable (25,359) (7,619)
Inventory (1,457) (2,067)
Prepaid expenses and other (163) 665
Accounts payable 14,841 (180)
Accrued expenses and taxes 4,458 (1,217)
--------- --------
Net cash used by operating activities (1,934) (6,705)
Investing activities:
Purchases of property and equipment (1,835) (3,099)
Acquisition of R. M. Gilligan, Inc., net of cash received (1,630) --
Proceeds from sale of property and equipment 55 37
Distributions from Kentucky distributor 39 --
Intangible assets (158) (238)
Deposits and other -- 28
Decrease in cash surrender value of insurance 18 48
(Increase) decrease in notes receivable 74 (203)
--------- --------
Net cash used by investing activities (3,437) (3,427)
Financing activities:
Net proceeds of line of credit borrowings 9,500 12,384
Proceeds of long-term debt -- 250
Principal payments on long-term debt (333) (1,865)
Proceeds of borrowings from stockholder 97 --
Notes receivable from stockholders and others (201) (279)
Distributions to stockholders (906) --
--------- --------
Net cash provided by financing activities 8,157 10,490
--------- --------
Net increase in cash 2,786 358
Cash at beginning of year 1,908 1,370
--------- --------
Cash at end of period $ 4,694 $ 1,728
========= ========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
5
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National Wine & Spirits, Inc.
Notes To Condensed Consolidated Financial Statements
(Unaudited)
1. Nature of Business and Basis of Presentation
In December 1998, a reorganization took place which created a new holding
company, National Wine & Spirits, Inc. (NWS). All of the shares of capital stock
in National Wine & Spirits Corporation (NWSC) and NWS, Inc. (NWSI) were
contributed in exchange for shares of NWS. In addition, NWSC subsequently
distributed all of its shares in NWS Michigan, Inc. (NWSM) to NWS. Finally, a
new limited liability company subsidiary of NWSI was created into which
substantially all of the Illinois operations were transferred (NWS-LLC). The
reorganization was accounted for as a combination of entities under common
control, similar to a pooling-of-interests. As such, the financial statements
have been presented to reflect this accounting treatment. The unaudited
condensed consolidated financial statements include the accounts of NWS, NWSC,
NWSI, NWS-LLC and NWSM. All significant intercompany accounts and transactions
have been eliminated from the consolidated financial statements. Substantially
all revenues result from the sale of liquor, beer and wine.
Based in Indianapolis, NWSC is a wholesale distributor of liquor and wines
throughout Indiana. Based in Chicago, NWSI is a wholesale distributor of liquor
and wines throughout Illinois. NWSM is a wholesale distributor of liquor
throughout Michigan. NWSC also operates a bottled water division and a division
for distribution of cigars and accessories. NWS performs periodic credit
evaluations of its customers' financial condition and generally does not require
collateral. Credit losses have been within management's expectations.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended June 30, 1999
are not necessarily indicative of the results that may be expected for the year
ending March 31, 2000.
The balance sheet at March 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's registration statement on Form S-4
dated June 18, 1999.
6
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National Wine & Spirits, Inc.
Notes To Condensed Consolidated Financial Statements
(Unaudited)
2. Purchase of R. M. Gilligan, Inc.
On April 30, 1999, NWSM purchased all of the stock of R. M. Gilligan, Inc.
for $1,800,000. R. M. Gilligan, Inc. is a Michigan corporation that conducts
liquor brokerage activities and receives revenue on a per case basis from NWSM's
suppliers.
The acquisition was accounted for using the purchase method of accounting
and the results of operations have been included in the condensed consolidated
financial statements since the date of acquisition. The purchase price was
allocated to the net assets acquired, including $1,547,000 to goodwill, based
upon the fair market value at the date of acquisition.
Assets acquired:
Cash $ 170,000
Other current assets 187,000
Property and equipment 94,000
Goodwill 1,547,000
Other assets 18,000
-----------
2,016,000
Liabilities assumed:
Current liabilities (188,000)
Debt and other long term liabilities (28,000)
-----------
Purchase Price $1,800,000
===========
3. Inventory
Inventory is comprised of the following:
June 30, 1999 March 31, 1999
------------- --------------
Inventory at FIFO $77,204,000 $75,507,000
Less: LIFO reserve 7,786,000 7,546,000
----------- -----------
$69,418,000 $67,961,000
=========== ===========
7
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National Wine & Spirits, Inc.
Notes To Condensed Consolidated Financial Statements
(Unaudited)
4. Debt
Long-term debt is comprised of the following:
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June 30, 1999 March 31, 1999
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Senior notes payable (A) $110,000,000 $110,000,000
Bank revolving line of credit (B) 14,200,000 4,700,000
Term loan payable in annual installments of $300,000 in 2000 and
$500,000 in 2001 and 2002, including interest 1,300,000 1,300,000
Non-competition agreement payable to a former stockholder in annual
installments of $300,000, from April 1 1995 through April 1, 2000. The
obligation is secured by proceeds of life insurance from NWSC's majority
stockholder. 300,000 600,000
Subordinated promissory note payable to an employee on September 30, 1999.
Interest only is payable quarterly at the prime rate plus 1/2%.
The note is subordinate to senior bank debt. 350,000 350,000
City of Indianapolis-First Mortgage Note, Series 1983--payable monthly,
with interest computed at 80% of the prime lending rate of NBD Bank,
N.A., through April 2003. Secured by certain property in
Indianapolis. 238,000 272,000
Other 29,000 -
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126,417,000 117,222,000
Less: current maturities 1,069,000 1,050,000
------------ ------------
$125,348,000 $116,172,000
============ ============
<FN>
(A) On January 25, 1999, the Company issued $110,000,000 of unsecured
senior notes with a maturity of January 15, 2009. Interest on the senior notes
is 10.125% and is payable semiannually. The Company used the net proceeds of the
senior notes (approximately $106,900,000) to repay its outstanding bank and
other debt and amounts outstanding under its revolving credit facilities.
The bond indenture restricts the ability of the Company and its
subsidiaries to incur additional indebtedness, pay dividends, engage in mergers
or consolidations, make capital expenditures and otherwise restricts corporate
activities.
On or after January 15, 2004, the Company may redeem some or all of the
senior notes at any time at stated redemption prices plus accrued interest and
liquidated damages. Notwithstanding the foregoing, during the first 36 months
after January, 20, 1999, the Company may redeem up to 33% of the aggregate
principal amount of the senior notes at a redemption price of 110.125%, plus
accrued interest and liquidated damages, with the net cash proceeds of one or
more public offerings of common stock of the Company.
8
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National Wine & Spirits, Inc.
Notes To Condensed Consolidated Financial Statements
(Unaudited)
(B) On January 25, 1999, the Company entered into a credit agreement that
provides a revolving line of credit for borrowings of up to $60 million through
January 25, 2004. Line of credit borrowings are limited to eligible accounts
receivable plus eligible inventories. The credit agreement permits the Company
to elect an interest rate based upon the Eurodollar rate or the higher of the
prime lending rate or the federal funds effective rate plus 0.5%. At June 30,
1999, the $14,200,000 of outstanding borrowings bear interest at 8.50%. The
Company also pays a commitment fee ranging from .25% to 0.5% of its undrawn
portion of its line of credit.
</FN>
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5. Segment Reporting
The Company's reportable segments are business units that engage in
products sales and all other activities. The majority of the all other
activities relate to distribution fee operations. The Company evaluates
performance and allocates resources based on these segments.
Three Months Ended
June 30, 1999 June 30, 1998
------------- -------------
Revenues from external customers
Product sales $165,090,000 $131,391,000
All other 4,969,000 4,508,000
Segment profit (loss)
Product sales 3,791,000 1,361,000
All other (21,000) 380,000
Segment assets
Product sales 197,789,000 166,131,000
All other 14,029,000 13,833,000
9
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PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
historical condensed consolidated financial statements and the accompanying
notes included elsewhere in this Quarterly Report.
Overview
The Company is one of the largest distributors of wine and spirits in the
United States. Substantially all of the Company's current operations are in
Illinois, Indiana, Michigan, and Kentucky. The Company's reported revenues
include net product sales in Indiana and Illinois, and distribution fees in
Michigan.
The Company announced an across the board price increase in Illinois in
conjunction with a state tax increase on beer, spirits, and wine and supplier
price increases effective July 1, 1999. The total price increase was significant
enough to convince retail customers to increase their purchases in June. This
increase likely had the effect of shifting volume into the first quarter from
the second quarter and we expect a decrease in the total sales in the second
quarter as a result. However, the potential decrease in total sales should be
offset by a higher margin. All the major distributors in Illinois announced
similar price increases effective July 1, 1999.
References to U.S. Beverage relate to the operations of the Company's
national import, craft and specialty beer marketing business performed by
NWS-Illinois.
Results of Operations
The following table includes information regarding total cases shipped by
the Company during the three months ended June 30, 1999 compared with the
comparable period ended June 30, 1998:
Three Months Ended,
June 30
-------------------
1998 1999
----- -----------------
Percent
(Cases in thousands)
Wine (product sales operations) 810 814 0.5%
Spirits (product sales operations) 801 991 23.7%
Spirits (distribution fee operations) 634 709 11.8%
----- -----
Total wine and spirits 2,245 2,514 12.0%
Other 544 678 24.6%
----- -----
Total 2,789 3,192 14.4%
===== =====
10
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Three Months Ended June 30, 1999, Compared with the Three Months Ended June 30,
1998.
Revenue
The Company reported product sales in the three months ended June 30, 1999
of $165.1 million, an increase of $33.7 million, or 25.6%, over the comparable
prior year period. This increase resulted primarily from the significant
Illinois retail customer buy-in in advance of a state tax increase combined with
supplier and distributor price increases effective July, 1999. The Illinois
buy-in increased revenues in the first fiscal quarter ended June 30, 1999, and
may decrease revenues in the second fiscal quarter ending September 30, 1999.
U.S. Beverage had product sales of $8.4 million as compared to $1.9 million over
the comparable prior year period, resulting primarily from the increased sales
of the Hooper's Hooch brand. Distribution fees for the quarter ended June 30,
1999 increased to $5.0 million, a 10.2% increase over the comparable prior year
period, as a result of increased sales of existing brands and the addition of
new suppliers.
Gross Profit
Gross profit on total revenue increased 22.9% to $36.3 million in the three
months ended June 30, 1999, from $29.5 million in the comparable prior year
period. Gross profit on product sales during the quarter ended June 30, 1999
increased to $31.3 million, a 25.2% increase over the quarter ended June 30,
1998. Gross profit percentage on product sales for the three months ended June
30, 1999 decreased to a 19.0% compared to 19.1% for the comparable prior year
period.
Operating Expenses
Operating expenses for the quarter ended June 30, 1999 increased to $29.6
million from $25.6 million for the quarter ended June 30, 1998. As a percentage
of total revenue, operating expenses for the quarter ended June 30, 1999
decreased to 17.4% from 18.9% for the comparable prior year period.
Selling expenses for product markets increased $1.4 million for the three
month period ended June 30, 1999, primarily due to the increase in sales volume
for the Illinois market and increased support for U. S. Beverage's Hooper's
Hooch brand. However, selling expenses as a percentage of total revenues
decreased from 6.7% for the quarter ended June 30, 1998 to 6.2% for the quarter
ended June 30, 1999. Michigan's sales expenses increased $0.3 million from the
comparable prior period as the Company continues to increase its sales force in
Michigan.
Overall, warehouse and delivery expenses in the three month period ended
June 30, 1999 increased $0.8 million from the comparable prior period, primarily
from the increased volume in our Illinois market. Warehouse and delivery expense
as a percent of total revenues declined to 5.6% for the current period from 6.5%
for the comparable prior year period.
11
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Total administrative expenses for the quarter ended June 30, 1999 increased
$1.7 million from the comparable prior year period primarily due to increased
employee costs and professional expenses. Administrative costs as a percentage
of total revenue for the quarter ended June 30, 1999 declined to 5.6% from 5.7%
for the comparable prior year period.
Income from Operations
Operating income increased 71.9%, or $2.8 million, for the three months
ended June 30, 1999, from the comparable prior year period. The increased
revenues for the quarter ended June 30, 1999 and the steady gross profit percent
more than offset the dollar increase in operating expenses.
Interest Expense
Interest expense increased from $2.5 million to $3.3 million for the three
months ended June 30, 1999, primarily due to increased working capital needs
during the quarter ended June 30, 1999, as compared to the comparable prior year
period. The Company's marginal rate for the quarter ended June 30, 1999 was
10.125%, as compared to 9.00% for the period ended June 30, 1998. This reflects
the sale of the senior notes on January 25, 1999.
Other Income
Other income remained constant at $0.4 million for the three months ended
June 30, 1999, compared to the three months ended June 30, 1998. The Company's
share of income from Commonwealth Wine & Spirits, LLC was $0.1 million for the
three month period ended June 30, 1999.
Net Income
Net income increased to $3.8 million for the quarter ended June 30, 1999, a
$2.0 million or 116.5% increase compared to the quarter ended June 30, 1998.
Liquidity and Capital Resources
The Company's primary cash requirements have been to fund accounts
receivable and inventories for the product markets in Illinois, Indiana, and its
U. S. Beverage operations. The Company has historically satisfied its cash
requirements principally through cash flow from operations, trade terms and bank
borrowings.
On January 25, 1999, the Company completed an offering of $110.0 million of
senior notes due 2009. Concurrently with the offering of the senior notes, the
Company entered into a new $60.0 million credit facility secured by the accounts
receivable and inventory of the Companies. With the proceeds from the senior
notes offering and borrowings under the new credit facility, the Company retired
substantially all of its bank revolving and term indebtedness.
12
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At June 30, 1999, the Company had $14.2 million outstanding on its $60.0
million revolving credit facility, with $45.5 million available.
The Company used $1.9 million in net cash from operating activities for the
three months ended June 30, 1999, a $4.8 million decrease from the comparable
prior year period. The decrease for the current reporting period was
attributable to the use of trade credit from the Company's suppliers and
increased profitability.
Net cash used for investing activities during the quarter ended June 30,
1999 was $3.4 million, consistent with the quarter ended June 30, 1998. The
Company had $1.3 less in purchases of property and equipment for the three
months ended June 30, 1999, as compared to the prior comparable year period. The
Company acquired R.M. Gilligan, Inc. for $1.6 million, net of cash received,
during the three months ended June 30, 1999.
Net cash provided by financing activities was $8.2 million, including $9.5
million net proceeds from the revolving line of credit.
Total assets increased to $211.8 million at June 30, 1999, a $31.4 million
increase from March 31, 1999 primarily due to increased accounts receivable as a
result of the sales volume increase in the Illinois and U. S. Beverage markets.
Total debt also increased to $126.4 million at June 30, 1999, as compared to
$117.2 million at March 31, 1999 primarily due to the increase in the revolving
line of credit to fund the increased working capital needs from March 31, 1999,
to June 30, 1999.
The Company believes that the net proceeds received from the offering of
the senior notes, together with cash flow from operations and existing capital
resources, including cash and borrowings available under the Company's revolving
credit facility, will be sufficient to satisfy the Company's anticipated working
capital and debt service requirements and expansion plans.
Inflation
Inflation has not had a significant impact on the Company's operations but
there can be no assurance that inflation will not have a negative effect on the
Company's financial condition, results of operations or debt service
capabilities in the future.
Year 2000
The Company is currently assessing its exposure to potential Year 2000
issues within its businesses. Phases within the process include assessment,
remediation and contingency planning. The Company has established its assessment
phase to include information technology (IT), non-information technology
(non-IT), and to the extent reasonably practicable customer and supplier
readiness. The Company has completed a majority of the assessment work on its
internal IT and non-IT systems, and plans to complete all assessment and
remediation of its IT and non-IT systems by October, 1999. The failure of the
Company to properly assess, remediate and plan for potential Year 2000 problems
could result in disruptions of normal business operations. Such failures could
have negative effect on the financial condition, results of operations or debt
service capabilities of the Company.
13
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The Company has been able to assess the Year 2000 readiness of a minority of
its customers and suppliers. This assessment, including the Company's assessment
of its electronic data interchange (EDI) and electronic funds transfer (EFT)
providers, is complete. The Company currently is not aware of any significant
customer or supplier with a Year 2000 issue that would materially impact the
Company's financial condition, results of operations or debt service
capabilities. However, the Company is necessarily relying on the accuracy of
information from customers and suppliers, does not expect to receive information
from many of them, and has no means of ensuring that customers or suppliers will
be Year 2000 ready. The inability of one or more of these entities to be
prepared could have a negative effect on the Company.
At July, 1999, the Company has incurred less than $40,000 in costs directly
associated with the remediation of its systems, and an additional $60,000
remains in the fiscal 2000 budget for Year 2000 issues. The Company does not
track internal costs incurred by its IT group in connection with the Year 2000
project because they are primarily payroll costs that are not allocated among
Year 2000 and other projects. Management does not believe that future Year 2000
assessment and remediation costs will be material, and intends to fund any
necessary assessment and remediation costs from its existing resources as
budgeted. These costs do not include the cost of upgrading or replacing systems
for other business reasons. Such actions usually provide the additional benefit
of making the system Year 2000 compliant.
While the Company has not yet completed its assessment process, management
does not presently expect, based on the limited information now available, that
the direct impact of Year 2000 issues will have a material adverse effect on the
Company. The Company will be in a better position to estimate total Year 2000
anticipated costs once the assessment process of its IT and non-IT systems,
customers and suppliers has been completed. In addition to any direct effects
from the Year 2000 issue, it is possible that, for example, disruptions in the
economy in general or in the U.S. banking system because of Year 2000 problems
could adversely affect the Company's financial condition, results of operations
or debt service capabilities.
Environmental Matters
The Company currently owns and leases a number of properties, and
historically it has owned and/or leased others. Under applicable environmental
laws, the Company may be responsible for remediation of environmental conditions
relating to the presence of certain hazardous substances on such properties. The
liability imposed by such laws is often joint and several without regard for
whether the property owner or operator knew of, or was responsible for, the
presence of such hazardous substances. In addition, the presence of such
hazardous substances, or the failure to properly remediate such substances, may
adversely affect the property owner's ability to borrow using the real estate as
collateral and to transfer its interest in the real estate. Although the Company
is not aware of the presence of hazardous substances requiring remediation,
there can be no assurance that releases unknown to the Company have not
occurred. Except for blending and bottling of a few of the Company's private
label brands, the Company does not manufacture any of the wine or spirit
products it sells and believes that it has conducted its business in substantial
compliance with applicable environmental laws and regulations.
14
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Other
As a matter of policy, the Company plans to review and evaluate all
professional services firms every three years. This review will include but is
not limited to legal, audit and information systems services. The next scheduled
review will occur after Fiscal 2000 books are closed at March 31, 2000.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There is nothing further to report since March 31, 1999.
PART II. OTHER INFORMATION
Item 5. Other Events
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, National Wine & Spirits, Inc. is hereby
identifying important factors that could cause the Company's actual results to
differ materially from those projected in forward-looking statements of the
Company made by, or on behalf of the Company.
Item 6. Exhibits
(a) Exhibits
(27) Financial Data Schedule
(99) Forward-Looking Statement
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three months
ended June 30, 1999.
15
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SIGNATURE
Pursuant to the requirements 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.
NATIONAL WINE & SPIRITS, INC.
August 16, 1999 /s/ J. Smoke Wallin
- --------------- ------------------------------------------
Date J. Smoke Wallin,
Executive Vice President & Chief Financial
Officer
16
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NATIONAL WINE & SPIRITS, INC.
FORM 10-Q
EXHIBIT INDEX
Exhibit Description
- ------- -----------
27 Financial Data Schedule
99 Forward-Looking Statement
17
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> JUN-30-1999
<CASH> 4,694
<SECURITIES> 0
<RECEIVABLES> 63,700
<ALLOWANCES> 1,149
<INVENTORY> 69,418
<CURRENT-ASSETS> 141,649
<PP&E> 81,572
<DEPRECIATION> 32,146
<TOTAL-ASSETS> 211,818
<CURRENT-LIABILITIES> 65,549
<BONDS> 0
0
0
<COMMON> 54
<OTHER-SE> 20,480
<TOTAL-LIABILITY-AND-EQUITY> 211,818
<SALES> 165,090
<TOTAL-REVENUES> 170,059
<CGS> 133,742
<TOTAL-COSTS> 163,341
<OTHER-EXPENSES> (354)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,302
<INCOME-PRETAX> 3,770
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,770
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
Exhibit 99
Forward-Looking Statements
From time to time, the Company may make or publish forward-looking
statements relating to such matters as anticipated financial performance,
business prospects, technological developments, new products, and similar
matters. Such statements are necessarily estimates reflecting the Company's best
judgement based on current information. The Private Securities Litigation Reform
Act of 1995 provides a safe harbor for forward-looking statements. Such
statements are usually identified by the use of words or phases such as
"believes," "anticipates," "expects," "estimates," "planned," "outlook," and
"goal." Because forward-looking statements involve risks and uncertainties, the
Company's actual results could differ materially. In order to comply with the
terms of the safe harbor, the Company notes that a variety of factors could
cause the Company's actual results and experiences to differ materially from the
anticipated results or other expectations expressed in the Company's
forward-looking statements.
While it is impossible to identify all such factors, the risks and
uncertainties that may affect the operations, performance and results of the
Company's business include the following:
(1) economic and competitive conditions in the markets in which the Company
operates;
(2) strikes or other work stoppages affecting the Company or its major
customers or suppliers;
(3) the Company's ability to continue to control and reduce its costs of
storage and distribution;
(4) the level of consumer demand in the states in which the Company operates
for the Company's line of alcohol-based beverages;
(5) supplier consolidation could result in brand realignment and the loss of
certain products and customers;
(6) the risks associated with the reliance on one or a few significant
suppliers;
(7) the impact of significant price increases or decreases in availability of
certain alcohol-based beverages distributed by the Company;
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(8) the nature and extent of any current or future state and federal
regulations regarding the distribution of alcohol-based beverages;
(9) changes in financial markets affecting the Company's financial structure
and the Company's costs of capital and borrowed money;
(10) any other factors which may be identified from time to time in the
Company's periodic SEC filings and other public announcements.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described in the forward-looking statements. The Company does not intend
to update forward-looking statements.
