NATIONAL WINE & SPIRITS INC, 10-K, 2000-06-28

NATIONAL WINE & SPIRITS INC
10-K, 2000-06-28
BEER, WINE & DISTILLED ALCOHOLIC BEVERAGES

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended March 31, 2000.

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

Commission File Number: 333-74589

NATIONAL WINE & SPIRITS, INC.
-----------------------------
(Exact name of registrant as specified in its charter)

Indiana 35-2064429 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
--------------
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

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 by check mark if disclosure of delinquent filers pursuant to Item 405
by Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's 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 ]

The registrant is a privately held corporation. As such, there is no practicable
method to determine the aggregate market value of the voting stock held by
non-affiliates of the registrant.

The number of shares of Common Stock, $.01 par value, of National Wine &
Spirits, Inc. outstanding as of March 31, 2000 was 5,330,521, of which 104,520
were voting stock.

Documents Incorporated by Reference: None

<PAGE>

TABLE OF CONTENTS

Page
----
Part I

Item 1. Business 3
Item 2. Properties 15
Item 3. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of Security Holders 16

Part II

Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 17
Item 6. Selected Consolidated Financial Data 17
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 19
Item 7a. Quantitative and Qualitative Disclosures About
Market Risk 27
Item 8. Financial Statements and Supplementary Data 28
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 47

Part III

Item 10. Directors and Executive Officers of the Registrant 48
Item 11. Executive Compensation 50
Item 12. Security Ownership of Certain Beneficial
Owners and Management 51
Item 13. Certain Relationships and Related Transactions 52

Part IV

Item 14. Exhibits, Financial Statements, Schedules and
Report on Form 8-K 54

<PAGE>

Part I

Disclosure Regarding Forward-Looking Statements

This Form 10-K, including, but not limited to the "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business"
sections, contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, which can be identified by the
use of forward-looking terminology, such as "may," "intend," "will," "expect,"
"anticipate," "should," "plans to," "estimate" or "continue" or the negative
thereof or other variations thereon or comparable terminology. In particular,
any statement, express or implied, concerning future operating results or the
ability to generate revenues, income or cash flow to service the Notes are
forward-looking statements. Although the Company believes that the expectations
will prove to have been correct. All forward-looking statements are expressly
qualified by such cautionary statements, and the Company undertakes no
obligation to update such forward-looking statements.

Item 1. Business

General

National Wine & Spirits, Inc. (NWS) is one of the largest distributors of
wine and spirits in the United States. NWS is the largest distributor of spirits
in Indiana with 56% market share and Michigan with 57% market share, and one of
the largest in Illinois with 30% market share. NWS' markets include Chicago and
Detroit, which are the largest and the sixth largest metropolitan markets for
spirits in the United States, respectively. NWS conducts its operations through
its wholly owned subsidiaries, NWS Corporation in Indiana ("NWS-Indiana"), NWS
Illinois, LLC ("NWS-Illinois") and NWS Michigan, Inc. ("NWS- Michigan").

NWS is the exclusive distributor in one or more of its markets for many of
the world's leading suppliers of brand name domestic and imported spirits,
including Diageo-UDV (Diageo), formed through the merger of United Distillers
(Guinness) and International Distillers and Vintners (Grand Metropolitan),
Fortune Brands, Allied Domecq, and Seagram. NWS' featured brands include:

o Absolut;

o Chivas Regal;

o Crown Royal;

o DeKuyper;

o Jim Beam;

o Jose Cuervo;

o Smirnoff;

o Kahlua;

o Maker's Mark; and

o Canadian Club.

<PAGE>

NWS also is the exclusive distributor in Indiana and Illinois for many of
the world's leading wineries, including:

o Banfi Vintners, featuring Riunite and other Italian and Chilean wines;

o Canandaigua, featuring Inglenook, Paul Masson, and Almaden wines;

o Seagram, featuring premium European and California wines; and

o Sebastiani, featuring Vendange and Talus

o Kendall Jackson

NWS operates 12 strategically located distribution facilities and a fleet
of approximately 350 delivery vehicles to provide overnight or second-day
delivery to over 36,000 retail locations, including package liquor stores, drug
and grocery stores, mass merchandisers, hotels and restaurants and bars. NWS'
customers include both local and regional businesses as well as national chains
such as American Stores (Osco), Walgreens, CVS, Sam's Club, Meijer, Morton's,
Ruth's Chris, T.G.I.Friday's, and Hyatt. In select locations, NWS also
distributes premium domestic and imported beer and other products.

From 1996 to 2000, NWS' total revenue increased steadily from $443.3
million to $625.8 million, representing a compound annual growth rate of 9.0%,
while NWS' EBITDA increased from $14.4 million to $26.5 million, representing a
compound annual growth rate of 16.4%. NWS achieved this performance by
successfully integrating several strategic acquisitions since 1992, actively
developing new geographic market areas, pursuing new supplier and brand
relationships, implementing advanced product handling technology and proprietary
information systems, and providing high levels of supplier and customer service.

Under the three-tier regulatory framework established by federal and state
law, suppliers of alcohol-based beverages are generally prohibited from selling
their products directly to retail outlets or consumers, effectively requiring
suppliers to use distributors such as NWS. This regulatory framework effectively
insulates distributors from vertical competition from suppliers or retail
customers. In some states, referred to as "control states", state law has
historically mandated the state to act as the exclusive wholesale distributor
and/or retailer of alcohol-based beverages. In 1996, Michigan became the first
control state to privatize aspects of the wholesale distribution of spirits, and
NWS has become the leading distributor of spirits in that state.

Industry Overview

The United States alcohol-based beverage industry generated total annual
retail sales of approximately $113.5 billion in 1999. Sales of wine and spirits,
in which NWS primarily competes, accounted for approximately 14% and 31%,
respectively, or an estimated $50.2 billion of total retail sales in 1999. In
the United States spirits market, total revenues on a per case basis have
increased since 1994, more than offsetting a general decline in the volume of
spirits sold. Wine consumption has increased nationally and in Indiana, Illinois
and Michigan since 1993 and management believes the demand for high quality wine
will continue to grow. Similar to the trend in the spirits industry, consumers
have been purchasing higher quality and more expensive wines.

<PAGE>

Since the repeal of Prohibition in 1933, the federal and state governments
have regulated the sale of spirits, wine, and beer. State regulatory frameworks
fall into three types: control, open and open-franchise. In nearly all
circumstances, suppliers may not legally sell directly to retailers. In the 18
control states, the state controls either the distribution, the retail sale or
both. In open states, including Indiana and Illinois, the distributors and
retailers are privately owned businesses. In the open-franchise states, there
are laws and regulations, which restrict the suppliers' ability to change
distributors.

Given the three tier regulatory structure, the wine and spirits
distribution industry varies greatly from distribution businesses serving other
industries such as food, drugs, non-alcohol-based beverages and paper products.
Margins in these other industries are often much lower, as suppliers can compete
with or bypass distributors. Some distributors in other industries are also more
sensitive to economic cycles relative to NWS and its competitors.

Competitive Strengths

Market Leadership. NWS is the largest distributor of spirits in Indiana and
Michigan and one of the largest in Illinois. NWS' market leadership reflects its
strong relationships with both suppliers and customers and provides NWS with
numerous advantages over smaller distributors, including significant economies
of scale and increased purchasing power. NWS maintains and seeks to enhance its
market leadership by providing high levels of service to its suppliers and
customers and through its investments in technology and information systems.

Strong Supplier Relationships NWS' success is due in part to its
long-standing relationships with its major wine and spirits suppliers, many of
which extend back more than 25 years. The strength of these relationships was
recently demonstrated when each of NWS' three largest suppliers, Seagram,
Fortune Brands and Diageo, selected NWS over numerous competitors to be its
exclusive distributor of spirits in Michigan. In Indiana and Michigan, NWS is
the exclusive distributor of seven out of the top ten brands of spirits sold in
the United States, including Absolut, Jim Beam, Jose Cuervo, Popov, Seagram's
Gin, Seagram's 7 Crown and Smirnoff. In Illinois, NWS is the exclusive
distributor of four out of the top ten U.S. brands. NWS also represents a
significant share of each of its major suppliers' total United States business.
In calendar 1999, NWS distributed approximately 17% of all cases of spirits sold
in the United States by Seagram, and 11% of all cases of spirits sold by Fortune
Brands.

Stable Industry and Diversified Customer Base. Total wine and spirits
industry revenues have grown steadily over the past 25 years, even during
periods of economic decline. NWS offers products to over 36,000 retail locations
and no single customer or chain represented more than 6.2% of NWS' 2000 total
revenue. Moreover, the three-tier regulatory framework established by federal
and state law generally prohibits vertical integration by suppliers and
retailers and thereby enhances the stability of the wine and spirits
distribution industry. NWS believes that the nature of the wine and spirits
distribution industry and NWS' diverse customer base provide it with increased
stability and predictability of cash flow relative to distributors in many other
industries.

Customer Service Focus. NWS' commitment to highly effective customer
service has also been a major factor in its historical success. Management
emphasizes on-time delivery, product availability, the ability to accept
last-minute orders and special orders for low volume or unusual items, and
reliability on a long-term basis. NWS provides numerous value-added services to
its customers, including category management, customized advertising and
point-of-sale materials, customized packaging and on-line electronic ordering.
Management believes that highly effective customer service strengthens customer
relationships, thereby improving product positioning and sell-through to the
consumer.

<PAGE>

Advanced Infrastructure, Distribution Network and Information Systems. NWS
maintains an extensive distribution network consisting of master warehouses,
hyper-terminals and cross-docking facilities strategically located across
Indiana, Illinois and Michigan and a fleet of approximately 350 delivery
vehicles. This distribution system generates significant operating leverage by
enabling NWS to deliver hundreds of suppliers' products from each master
warehouse and optimize delivery routes by maximizing the density of customer
locations served from each facility. NWS is investing more than $6 million over
18 months to expand existing Indianapolis facilities as well as upgrade and
computerize material handling systems. NWS also utilizes supplier and customer
ordering via electronic data interchange, internet interfaces and on-line
reporting systems used by suppliers to track sales. In addition to enhancing
supplier and customer relationships, the implementation of these systems has
improved NWS' efficiency and enabled NWS to remain a low cost provider.

Experienced Management Team. The seven individuals who comprise NWS' senior
management team have an average of over 24 years of experience in the
alcohol-based beverage industry and 12 years of experience with NWS. In
addition, NWS' senior management team has successfully integrated eight
acquisitions since 1992. Management's experience and expertise have enabled NWS
to establish and maintain long-term relationships with both suppliers and
customers and take advantage of consolidation and privatization opportunities.

Operating Strategy

Continue to Maximize Operating Leverage. As the largest or one of the
largest wine and spirits distributors in each of its markets, NWS continuously
seeks to minimize its operating costs by leveraging its resources in the areas
of warehousing, transportation, general and administrative functions and
information systems to create economies of scale. The fixed nature of many of
these costs enables NWS to generate a higher level of profitability on
incremental increases in volume and price. In addition, NWS' facilities in
Illinois and Michigan have additional capacity, which positions NWS to take
advantage of future expansion opportunities in these markets with relatively low
capital expenditures.

Growth through Addition of New Brands Long-term relationships are critical
to maintaining supplier and brand continuity with distributors. Although brand
movements among distributors are relatively rare as the result of these
relationships, consolidation of distributors or suppliers can affect existing
relationships and present NWS with opportunities to add brands affected by the
consolidation.

Selectively Pursue Strategic Acquisitions and Joint Ventures. NWS plans to
continue to strengthen its competitive position by selectively acquiring other
distributors and entering into strategic joint ventures both in its current
markets and in contiguous markets. These strategic opportunities may arise for
several reasons, including:

(1) suppliers sometimes encourage the consolidation of distributors in
order to reduce costs and improve efficiency.

(2) most distributors are family businesses, and acquisition opportunities
can develop as owners approach retirement age without a definite
succession plan; and

(3) many distributors lack the resources and supplier support to meet the
demands of large suppliers, including expanding outside of their brand
lines or geographic markets.

Management believes NWS' reputation with suppliers and customers, as well
as its financial position, market share and established infrastructure, make NWS
an attractive buyer of, or strategic partner for, other distributors.

<PAGE>

As an example of this strategy, in December, 1998, NWS formed a new
Kentucky distributorship, Commonwealth Wine & Spirits, LLC, in partnership with
two existing Kentucky-based distributors, The Vertner Smith Company and Kentucky
Wine & Spirits. NWS invested $7.5 million ($4.5 million in cash and a $3.0
million cash franchise fee), in exchange for 25% of the new company. Vertner and
Kentucky W&S equally own the remaining 75%.

Continue to Invest in Logistics Technology and Information Systems. The
wine and spirits distribution industry is a relatively mature industry, which is
not extensively automated. Many of NWS' competitors continue to rely primarily
on manual processes and limited technology. NWS plans to expand on its recent
investments in sales and logistics technology and sales and marketing
information systems to further reduce costs and improve service to its customers
and suppliers.

Capitalize on Further Privatizations. NWS' established reputation and
relationships with its major suppliers has made it the leading spirits
distributor in Michigan, the first control state to privatize aspects of its
wholesale spirits distribution business. NWS believes that other control states
may choose to privatize all or part of their wholesale distribution business,
which may allow NWS to expand its geographic markets without acquiring or
merging with existing distributors. Should any such privatization opportunities
arise, particularly in the central United States, NWS plans to selectively
pursue such opportunities by leveraging its experience in Michigan, its strong
relationships with suppliers and its distribution expertise.

Suppliers and Products

NWS represents many of the largest suppliers of wine and spirits in the
United States, and offers hundreds of brands and more than 12,000 individual
products. The breakdown of sales among wine, spirits and other products
distributed by NWS in 1998, 1999, and 2000 is as follows:

Wine (in thousands) Spirits (in thousands) Other (in thousands)
------------------- ---------------------- --------------------
1998 1999 2000 1998 1999 2000 1998 1999 2000

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Product sales .......... $125,861 $143,339 $149,160 $342,594 $355,807 $377,437 $36,686 $36,375 $ 78,390
Distribution fees ...... -- -- -- $ 16,270 17,832 20,770 -- -- --
Percentage of total
Company revenue ...... 24.1% 25.9% 23.8% 68.8% 67.5% 63.6% 7.1% 6.6% 12.6%
</TABLE>

In Michigan, spirits distributors have exclusive relationships with
suppliers by law, and receive distribution fees from suppliers as set by the
state, rather than purchasing from the suppliers for resale to customers. This
arrangement has the effect of understating the importance of spirits in NWS'
overall product mix. For purposes of illustrating the scale of NWS' operations
in Michigan, the total wholesale prices of products delivered by NWS for
Michigan in 1998, 1999, and 2000 was $280.5 million, $305.2 million, and $365.1
million, respectively, based on the fixed wholesale prices of the spirits
delivered by NWS.

NWS' products include the following brands, among many others:

Product Type Brand Names
Vodka: Absolut Popov
Vox Smirnoff
Grey Goose Stolichnaya
Gordons Belvedere

Bourbon and Blended Whiskey: Crown Royal Seven Crown
Jim Beam Wild Turkey
Seagram's V.O. Windsor Canadian
Knob Creek

<PAGE>

Scotch and Single Malt Whiskey: Chivas Regal Glenlivet
Grant's Isle of Jura
Balvenie J&B Rare
Bowmore Springbank
Glenfiddich

Gin: Boodles Gilbey's
Seagram's Gordons

Rum: Captain Morgan Myers
Malibu Ronrico

Tequila: Herradura Patron
Jose Cuervo Margaritaville

Cognacs/Brandy: Hine Martell
Remy Martin

Specialty Spirits: Chambord DeKuyper Cordials
Bailey's Irish Cream Jagermeister
Campari TGI Friday's
Hiram Walker Cordials Kahlua

Wine: Almaden Inglenook
Banfi Perrier Jouet
Beringer Sebastiani
Caymus Stags Leap
Chateau Lafite Sterling
Rothschild Veuve Clicquot
Gundlach Bundschu Kendall Jackson

Specialty Beer: Goose Island Rogue Ales
Grolsch Sierra Nevada
Petes Wicked Ale

Non-Alcohol: Cameron Springs Perrier
Evian Stewart's
Sobe Nantucket Nectars

NWS has entered into written distribution agreements with several of its
principal suppliers which generally may be extended on an annual basis but are
terminable upon 30 days or 60 days written notice to NWS. In addition, NWS has
informal arrangements with many of its suppliers whereby NWS distributes the
suppliers' products pursuant to purchase orders without written distribution
agreements. Although the written agreements provide NWS with the non-exclusive
right to distribute the suppliers' products in a particular state, in practice
the suppliers have generally selected a distributor to be the exclusive
distributor of specified products in each state. In each of Indiana, Illinois
and Michigan, NWS is presently acting as the exclusive distributor with respect
to virtually all of the products it distributes in that state.

The following chart summarizes information about the leading spirits
suppliers in the United States, their rank in Indiana, Illinois and Michigan,
the length of NWS' relationship with those suppliers and their impact on 2000
case sales.

<PAGE>

Length of
State Rank Company Percentage of
Supplier (calendar 1998) Relationship Company 2000
(by U.S. Rank)(1) IN IL MI (in years)(2) Cases (3) Representative Brands
----------------- -- -- -- ------------- --------- ---------------------

<S> <C> <C> <C> <C> <C> <C>
1. Diageo (4)............. 3 * 1 26 11.4% Smirnoff and Jose Cuervo
2. Seagram................ 2 2 3 26 23.1 Absolut and Crown Royal
3. Fortune Brands......... 1 6 2 24 11.7 Jim Beam
-----------

<FN>
(1) Based on calendar 1999 industry sales information.

(2) All of the relationships expressed in this column represent the duration of NWS' relationship with the
suppliers or their predecessors in the Indiana market.

(3) Represents Wine and Spirits cases only.

(4) Diageo represents that portion of Diageo PLC formed by merger between United Distillers and
International Distillers & Vintners. NWS does not represent Diageo's interest in the Schieffelin &
Somerset joint venture which remains a separate organization.

* Not represented by NWS in the referenced state.
</FN>
</TABLE>

Top United States wine brands and wineries represented by NWS include
Beringer, Canandaigua, Inglenook, Sebastiani, and Kendall Jackson. NWS currently
does not distribute wine in Michigan. Major wine producers served by NWS in
Indiana and Illinois include:

Length of
Company

U.S. State Representation Relationship
Supplier/Winery Rank(1) IN IL(2) (in years)(3) Representative Brands
--------------- ------- -- ----- ------------- ---------------------

<S> <C> <C> <C> <C> <C>
Canandaigua Brands...... 2 X X 26 Inglenook and Paul Masson
Sebastiani Vineyards.... 5 X X 16 Sebastiani and Vendange
Sutter Home Winery...... 4 X 6 Sutter Home
Banfi Vintners.......... 7 X X 26 Riunite and Concha y Toro
Beringer Wine Estates... 8 X 25 Beringer and Meridian
Kendall Jackson......... 11 X X 1 Kendall Jackson and Cambria
Seagram................. 12 X X 26 Sterling and Mumm
-----------

<FN>

(1) Source: 1998 Wine Market Impact Databank Review and Forecast.

(2) NWS does not represent the entire brand portfolio in Illinois.

(3) All of the relationships expressed in this column represent the duration of NWS' relationship with the
suppliers or their predecessors in the Indiana market.

</FN>
</TABLE>

<PAGE>

Related Operations

In addition to its core alcohol-based beverage distribution operations, NWS
has conducted related beverage operations through a division, Cameron Springs
Water Company, and through NWS' U.S. Beverage operations. Cameron Springs, a
bottled water supplier in Indiana, was sold to Perrier Group for approximately
$10.5 million in cash, which was in excess of net book value as of June 2000.
U.S. Beverage commenced operations as a division of NWS in March, 1997 to market
and sell imported, specialty and microbrewed beers and specialty malt products
nationally. The brand distribution contracts related to the U.S. Beverage
operations are held by an entity, which is 50% owned by NWS-Illinois. In select
markets, NWS sells and distributes premium cigars primarily as a complement to
NWS' distribution of fine wines and spirits.

In 1998, U.S. Beverage entered into a multiyear agreement with Bass, PLC
granting U.S. Beverage the exclusive U.S. distribution rights for Hooper's Hooch
flavored malt beverage. The Hooper's Hooch business and its growth have provided
U.S. Beverage with the critical mass to support its nationwide sales and
marketing force. In April, 2000, U.S. Beverage entered into an agreement with
the Goose Island Brewing Company by which U.S. Beverage will become the
exclusive sales and marketing firm for the Goose Island brand throughout the
United States. This arrangement facilitates the expansion of U.S. Beverage's
sales force in the Central U.S. and will increase revenues by $10 million
annually.

Customers

Most states, including Indiana, Illinois and Michigan, require wine and
spirits retailers to purchase alcohol-based beverages from licensed
distributors. Suppliers in these states may not legally sell directly to retail
customers. NWS' customers fall into two broad categories depending on where the
alcohol-based beverage ultimately will be consumed: on-premise and off-premise.
Off-premise customers include package liquor stores, grocery stores, drug stores
and mass merchandisers. On-premise customers include hotels, restaurants and
bars, and similar establishments. NWS currently serves over 36,000 retail
locations in Indiana, Illinois and Michigan. No single customer represented more
than 6.2% of NWS' 2000 net sales. As is customary in the industry, NWS' products
are generally purchased under standard purchase orders and not under long-term
supply contracts. As a result, backlog is not meaningful in the wholesale
distribution industry.

The following table summarizes NWS' customer base:

Percentage of

Type of Customer Company 2000 Revenue Representative Customers
---------------- -------------------- ------------------------

<S> <C> <C>
Off-Premise

Package Stores 44.3% Gold Standard and Cap'n Cork
Grocery stores, drug stores
and mass merchandisers 30.0% Kroger, Dominicks, Marsh, American
Stores (Osco), Walgreens, CVS, Sam's
Club, Meijer
Other 0.4% 7-Eleven, White Hen, Village Pantry
-----
Percent of total 74.7%
=====

On-Premise

Restaurants and Bars 23.5% Charlie Trotter's, Hard RockCafe,
House of Blues, Mortons,
Lettuce Entertain U,
Levy, Ruth's Chris
Hotels 1.3% Four Seasons, Hyatt, Hilton,
Other 0.5% Crooked Stick Golf Course, the United
----- Center, American Legion

Percent of total 25.3%
=====
</TABLE>

<PAGE>

Management believes that the number and diversity of NWS' customers and the
nature of NWS' business strengthens NWS' liquidity. The prompt payment of NWS'
invoices is governed by law in all states in which NWS operates. Indiana has a
15-day credit law beyond which retail customers are restricted from buying
alcohol-based beverages from any distributor in the market. Illinois has a
similar 30-day credit law. Typically, NWS' bad debt expenses are incurred less
than 30 days after shipment since the credit laws prohibit extension of terms.
Average bad debt expense for the past five years has been less than 0.10% of
revenue.

Marketing and Sales

Supplier and Customer Services. NWS' marketing and sales programs add value
for suppliers and customers beyond storage and distribution. Through its
approximately 600-person marketing and sales force, NWS acts as the field
marketing and merchandising arm of its suppliers by maintaining regular contact
with NWS' off-premise and on-premise customers. NWS customizes national
marketing programs developed by its suppliers for specific retail locations in
seeking to derive maximum benefit for the supplier and customer at each specific
retail location. NWS provides its customers with a wide variety of services,
including conducting promotional events, building product displays, designing
shelf sets, cross-marketing between off-premise and on-premise locations, and,
in Michigan, accounts receivable collection. Management believes that NWS is a
market leader in developing and implementing marketing programs to improve
alcohol-based beverage sales for both suppliers and customers.

Marketing and Sales Teams. NWS divides its marketing and sales forces by
product brands and geographic region. Field sales representatives provide the
primary source of contact with the customer's retail locations. Brand managers,
who concentrate on a small number of suppliers and brands, are responsible for
product pricing, promotion and all other marketing and sales activity related to
their brands. NWS recently formed a National Accounts Division, which is
responsible for customers with a national profile. Sales and marketing personnel
are compensated under various compensation plans, which typically combine base
pay with a productivity bonus. Members of senior management also are very active
in maintaining supplier and customer relationships with incentive compensation
based on subsidiary, division or company-wide performance.

Sales and Marketing Information Systems. NWS' management information
systems are very important to NWS' sales and marketing efforts. Through its
proprietary information systems, NWS seeks to offer improved levels of service
to suppliers and customers through prompt and accurate product deliveries,
demographic information regarding the purchase and sale of alcohol-based
beverages and other important sales and consumption information. Retail
locations can utilize this information to make decisions regarding product
placement in the wine and spirits sections of their stores, while suppliers can
utilize this information to quickly analyze sell-through by product in a
particular customer location.

Warehousing and Distribution

NWS utilizes a series of four master warehouses, three hyper-terminals and
five cross-docking facilities strategically located throughout Indiana, Illinois
and Michigan to store and ship its products pending sale to customers. NWS uses
common carriers to transport products from suppliers to its master warehouses.
Master warehouses located in Chicago, Indianapolis and Detroit serve as the
primary storage facilities for NWS' inventory. A smaller master warehouse is
located in Champaign, Illinois. Upon receipt of the product at one of the master
warehouses, the products are inspected and stored on pallets or in racks.
Temperature-sensitive products, such as fine wines, are stored in
temperature-controlled areas of the warehouses. Hyper-terminals located in
Peoria, Illinois, South Bend, Indiana and Grand Rapids, Michigan stock only high
volume products and provide an extension of the master warehouses. NWS strives
to optimize inventory levels, taking into account minimum out-of-stock
percentages, projected sales, including seasonal demands, periodic supplier
shipments to meet supplier sales requirements and working capital requirements.

<PAGE>

NWS' customers ordinarily receive either next day or second-day delivery.
In general, orders are collected during the day for batch routing and order
"picking" at night. The Chicago and Detroit master warehouses each use an
automated material handling system, including scanners, automated conveyors,
dispensers and sorters. Products from the master warehouses are then shuttled
nightly to either a hyper-terminal or a cross-docking facility where the orders
are consolidated and loaded onto delivery trucks. Cross-docking facilities
located in Belleville, Illinois, Evansville, Indiana, and Traverse City, Saginaw
and Escanaba, Michigan further extend the service areas of the master
warehouses. Orders for delivery out of the various cross-docking facilities are
picked in the master warehouses, shipped in during the night, and then
transferred onto local delivery trucks for final delivery. NWS owns or leases a
total fleet of approximately 350 delivery trucks, consisting of 280 delivery
trucks, 18 tractors, 33 trailers, 31 vans and 5 pick-up trucks. To maximize
prompt and efficient product delivery, NWS' fleet is allocated among NWS' master
warehouses, hyper-terminals and cross-docking facilities located throughout
Indiana, Illinois and Michigan.

As a result of a number of factors including state laws and regulations,
NWS maintains independent distribution networks in Indiana, Illinois and
Michigan. The Indiana distribution network operates with the Indianapolis master
warehouse feeding the South Bend hyper-terminal and the Evansville cross-docking
facility. The Michigan distribution network operates with the Detroit master
warehouse feeding the Grand Rapids hyper-terminal and the cross-docking
facilities located in Escanaba, Saginaw and Traverse City. The Illinois
distribution network is separated into the metropolitan Chicago area, and all
other service areas. The Chicago area is serviced out of the Chicago master
warehouse, while the downstate areas are serviced by the smaller Champaign
master warehouse, the Peoria hyper-terminal and the Belleville cross-docking
facility.

Management Information Systems

NWS employs customized management information systems to more efficiently
utilize its material handling and distribution system. NWS' information systems
help streamline its distribution network from receipt of order through final
delivery by calculating and implementing efficient product selection, optimizing
delivery routes to meet specific delivery times, and allocating the proper types
and volume of products on specific delivery trucks. These information systems,
when used in connection with NWS' material handling systems, have allowed NWS to
more efficiently manage its inventory and minimize its handling costs per case
primarily by reducing labor costs.

NWS' commitment to technology has also advanced its sales and marketing
initiatives. NWS' sales force is equipped with laptop computers, which expedites
order entry and provides instant feedback to customers regarding order activity.
NWS provides its customers and suppliers with the ability to directly enter and
track orders via electronic data interchange. In addition, NWS' proprietary
information systems provide its sales and marketing personnel, customers and
suppliers with access to a database of information regarding the purchase and
sale of alcohol-based beverages in specific geographic markets. NWS' suppliers
have immediate access to information regarding product and demographic trends
within specific geographic markets and NWS' customers have access to information
regarding popular products or other trends from similarly situated retail
locations. Management believes that its management information systems enhance
its operating performance and improve its relationships with customers and
suppliers.

Competition

The wine and spirits wholesale distribution business is highly competitive.
The principal competitive factors include service, breadth and availability of
product brands offered and, to a lesser extent, price. Distributors compete for
new suppliers or brands based on reputation, market share, access to customers
and ability to satisfy supplier demands. Given its size, supplier relationships,
distribution networks and low operating costs, NWS is well positioned to compete
in Indiana, Illinois and Michigan. NWS' primary competition in Illinois includes
Romano Brothers and Judge & Dolph. Romano Brothers has recently joined with
Glazer's Wholesale Distributing of Dallas, Texas to enter the Indiana market by
acquiring a controlling interest in Olinger Distributing, the second largest
Indiana distributor and the only meaningful Indiana competitor. None of the ten
largest United States distributors competes with NWS in Michigan.

<PAGE>

There are significant barriers to entry into the wholesale wine and spirits
distribution business. These barriers include established supplier-distributor
relationships, specialized distribution equipment such as material handling
systems and delivery vehicles, important industry knowledge regarding pricing,
inventory management, and distribution logistics. Historically, it is extremely
rare for organizations not already engaged as wine and spirits distributors to
enter other markets. New distributors typically enter existing markets through
acquisition.

Environmental Matters

NWS currently owns and leases a number of properties, and historically it
has owned and/or leased others. Under applicable environmental laws, NWS may be
responsible for remediation of environmental conditions relating to the presence
of 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 NWS is not aware of the presence of
hazardous substances requiring remediation, there can be no assurance that
releases unknown to NWS have not occurred. Except for blending and bottling of a
few of its own brands, NWS 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.

Employees

As of March 31, 2000, NWS had approximately 1,550 employees. Approximately
142 employees in Michigan and 403 employees in Illinois are represented by labor
unions. In Illinois, NWS has relationships with three unions:

(1) Teamsters Union Local 744, expiring March 2, 2002;

(2) Liquor and Allied Workers Union Local 3, annual agreements; and

(3) Teamsters, Chauffeurs & Helpers Union Local 50, expiring August 31,
2001.

In Michigan, NWS has relationships with three unions:

(1) Teamsters Union Local 337, expiring March 2, 2001;

(2) Teamsters Union Local 299, expiring March 2, 2001; and

(3) Teamsters Union Local 486, expiring March 2, 2001.

Employees of NWS in Indiana are not represented by any labor unions.

NWS has not experienced any work stoppages in more than 16 years as a
result of labor disputes and considers its employee relations to be good.

Regulatory Considerations

The manufacturing, importation, distribution and sale of alcohol-based
beverages is subject to regulation by the federal government through the
Department of the Treasury, Bureau of Alcohol, Tobacco and Firearms, as well as
by state and local regulatory agencies. Suppliers, distributors and customers
must be properly licensed in order to sell alcohol-based beverages.

<PAGE>

In most states, the alcohol-based beverage industry operates within what is
commonly referred to as a three-tier system of distribution. The three tiers are
identified as follows:

(1) tier one is comprised of suppliers which produce alcohol-based
beverages and/or importers of alcohol-based beverages;

(2) tier two is comprised of distributors, such as NWS; and

(3) tier three is comprised of retail licensees.

Under this system, suppliers sell to distributors, distributors sell to
retailers, and retailers sell to consumers. Suppliers may not sell to retailers
or consumers and distributors may not sell directly to consumers. Most states
prohibit suppliers or distributors from having an interest in retail licensees.
NWS directly and through its affiliates holds federal basic permits and state
permits/licenses as a distributor and importer. Also, NWS-Illinois holds
out-of-state shipper permits that allow it to ship products from one state to a
licensed distributor in any one of the other states.

NWS is required to have each of its officers, directors and principal
stockholders who owns 5% or more of the issued and outstanding stock qualified
by federal and state governmental agencies to have an interest in a licensed
company. NWS' officers, directors and principal stockholders have been, or are
in the process of being, deemed to be qualified parties by ATF and state
regulatory agencies.

Suppliers and retail licensees selling directly to consumers are more
heavily regulated than distributors by governmental authorities. Distributors
like NWS face scrutiny in a number of important areas, including initial
licensing or permitting and sales and marketing activities with or on behalf of
retail customers. The distributors may not give or transfer anything of value to
their customers in exchange for business or other consideration. The definition
of "value" differs from state to state. NWS participates in significant
promotional activities for suppliers and customers. Suppliers also are
increasingly asking distributors to be responsible for activities and related
costs formerly undertaken by suppliers as suppliers pursue ways to reduce their
operating costs. These increased demands will likely challenge distributors,
including NWS, which desire to meet the wishes of their suppliers and customers.
As a result, NWS regularly provides training and education programming for its
sales and marketing personnel.

NWS believes that it is in compliance with applicable regulations in all
material respects. Consistent with industry practice, the sales and marketing
activities permitted by distributors for the benefit of tier one suppliers are
generally regulated by state licensing authorities, many of which regularly
advise distributor representatives of activities that would not be the subject
of enforcement action for failure to comply with all regulations they
administer. NWS relies on such enforcement guidance, which is subject to change
at the discretion of the regulatory authorities, in determining the scope of its
permitted sales and marketing activities.

As part of its regulatory compliance program, NWS is in frequent contact
with regulatory agencies so that NWS can:

(1) be kept current on regulatory developments affecting NWS;

(2) obtain answers from the agencies to questions from company personnel
regarding compliance issues; and

(3) encourage enforcement of applicable laws and regulations on a
consistent basis throughout its markets.

<PAGE>

NWS believes that prompt and consistent enforcement by the regulatory
agencies is important and benefits NWS.

Reorganization of the Company

Historically, NWS' operations in Indiana, Michigan and Illinois have been
conducted through wholly owned subsidiaries for Indiana, NWS-Indiana, and
Michigan, NWS-Michigan, and through an affiliate for Illinois, NWS-Illinois.
Prior to the reorganization, James E. LaCrosse, or a trust for the benefit of
his family, and Norma M. Johnston owned substantially all of the voting and
non-voting shares of common stock of NWS-Indiana and, together with Martin H.
Bart, owned substantially all of the voting and non-voting shares of common
stock of NWS-Illinois.

In December, 1998, a reorganization took place which created a new holding
company, NWS, into which all of the shares of capital stock in NWS-Indiana and
NWS-Illinois owned by Mr. LaCrosse, or a trust for the benefit of his family, or
Mrs. Johnston were contributed in exchange for shares of NWS. NWS-Indiana
subsequently distributed all of its shares in NWS-Michigan to NWS. Finally,
NWS-LLC was created as a new limited liability company subsidiary of
NWS-Illinois into which substantially all of NWS' Illinois operations were
transferred. Currently, NWS-LLC is owned 75% by NWS-Illinois and 25% by Mr.
Bart. Allocations of profits and losses are different, currently 96% for
NWS-Illinois and 4% for Mr. Bart. The profit and loss allocations would be
subject to change in the future depending on the relative capital accounts of
the members, which in turn would affect the amount of Mr. Bart's minority
interest reflected in NWS' financial statements. NWS is substantially wholly
owned by Mr. LaCrosse, or a trust for the benefit of his family, and Mrs.
Johnston.

The primary purpose of the reorganization was to establish a holding
company structure for NWS-Indiana and all of its significant affiliated
companies. The reorganization was accounted for as a combination of entities
under common control, similar to a pooling-of-interest. As such, the NWS
financial statements have been presented to reflect this accounting treatment.

Item 2. Properties

NWS' distribution facilities consist of four master warehouses, three
hyper-terminals and five cross-docking facilities. NWS' corporate headquarters
are located in Indianapolis, Indiana.

The master warehouses, located in Indianapolis, Chicago, Detroit and
Champaign, serve as the primary storage facilities and regional offices for NWS.
The Chicago warehouse contains approximately 650,000 square feet of warehousing
space, including a designated temperature controlled area for
temperature-sensitive products. The Indianapolis warehouse contains
approximately 265,000 square feet of warehousing space, including a designated
temperature controlled area for temperature-sensitive products. The Indianapolis
warehouse is currently being expanded to 325,000 square feet of warehousing
space and expected to be completed in fall, 2000. In calendar 1997, NWS
completed its new Detroit warehouse consisting of approximately 237,000 square
feet of warehousing space, including a material handling system and eight
shipping docks. The Champaign warehouse contains 50,000 square feet of
warehousing space and is designed to hold more high volume products for delivery
to customers in central and southern Illinois.

In September, 1999, NWS purchased a strategically located office building
for future expansion. The building, which is approximately 20,000 square feet,
was purchased for $1.55 million and is currently being leased entirely to
eSkye.com, Inc. under a three-year agreement.

<PAGE>

The following chart lists NWS' warehouses and delivery, production and
office facilities:

Total
Owned/ Square

Location Leased Feet Principal Function
-------- ------ ---- ------------------

<S> <C> <C> <C> <C>
Indiana Indianapolis Owned 265,000 Master Warehouse/Office
South Bend Owned 76,800 Hyper-Terminal/Office
Evansville Owned 5,800 Cross-Docking Facility
Evansville Owned 2,400 Office
Ft. Wayne Leased 5,500 Office
Merrillville Leased 2,600 Office
Indianapolis Owned 3,500 Office (Cameron Springs)
Indianapolis Owned 15,000 Production Plant (Cameron Springs)
Indianapolis Owned 20,000 Leased Office Property

Illinois Chicago Owned 650,000 Master Warehouse/Office
Champaign Leased 50,000 Master Warehouse/Office
Peoria Leased 35,000 Hyper-Terminal/Office
Belleville Leased 16,000 Cross-Docking Facility/Office
Rockford Leased 5,000 Office
Springfield Leased 1,000 Office

Michigan Detroit (Brownstown) Leased 237,000 Master Warehouse/Office
Grand Rapids Leased 100,000 Hyper-Terminal/Office
Escanaba Leased 7,500 Cross-Docking Facility/Office
Saginaw Leased 1,000 Cross-Docking Facility
Traverse City Leased 5,000 Cross-Docking Facility
</TABLE>

NWS' lease agreements for the Detroit master warehouse and the Grand Rapids
hyper-terminal each have a ten-year term, expiring April 20, 2007 and January
31, 2007, respectively, and provide NWS with an option to purchase. The
Merrillville lease expires in August, 2000, which will be replaced with a 7,900
square foot leased office facility in Crown Point, Indiana.

Item 3. Legal Proceedings

The Company has been named as a co-defendant in a lawsuit against a
supplier, which seeks damages of $20,000,000. This suit was filed by the
supplier's former distributor. The Company believes that the suit is without
merit. The Company is also a party to various other lawsuits and claims arising
in the normal course of business. While the ultimate resolution of lawsuits or
claims against the Company cannot be predicted with certainty, management is
vigorously defending all claims and does not expect that these matters will have
a material adverse effect on the financial position or results of operations of
the Company.

The Company settled a lawsuit in April 1999 brought by several drivers of
NWS-LLC for $475,000. The settlement released the Company from all claims,
including legal fees.

Item 4. Submission of Matters to a Vote of Security Holders

None.

<PAGE>

Part II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

There is no established trading market for the common stock of NWS.

Item 6. Selected Consolidated Financial Data

You should read the following summary historical financial information in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and notes
thereto included elsewhere herein.

Distribution fees include our per case distribution fee for cases of
spirits delivered in and on behalf of the State of Michigan. We do not take
title to or finance any inventory in Michigan. Please also note that we have
elected "S" corporation status under the Internal Revenue Code and consequently,
we do not incur liability for federal and state income taxes.

The following will also assist in the review of the following financial
information:

o For purposes of calculating earnings to fixed charges, earnings
consist of net income plus fixed charges. Fixed charges consist of
interest expense, amortization of debt expense and discount or premium
relating to indebtedness and the portion of rental expense on
operating leases which we estimate to be representative of the
interest factor attributable to rental expense.

Years Ended March 31,
-----------------------------------------------------------------
1996 1997 1998 1999 2000
(Dollars and cases in thousands, except per case amount)

Statement of Income Data:
<S> <C> <C> <C> <C> <C>
Net product sales $ 443,257 $ 488,071 $ 505,141 $ 535,521 $ 604,987
Distribution fees -- 2,729 16,270 17,832 20,770
--------- --------- --------- --------- ---------
Total revenue 443,257 490,800 521,411 553,353 625,757
Cost of products sold 364,792 402,072 411,734 436,734 488,444
--------- --------- --------- --------- ---------
Gross profit 78,465 88,728 109,677 116,619 137,313
Selling, general and
administrative expenses 68,925 80,299 99,118 104,634 119,751
--------- --------- --------- --------- ---------
Income from operations 9,540 8,429 10,559 11,985 17,562
Interest expense (7,935) (8,486) (9,672) (11,037) (13,274)
Gain on sale of assets 172 41 4,139 188 173
Other income 1,247 1,619 2,085 341 1,394
--------- --------- --------- --------- ---------
Income before

extraordinary item 3,024 1,603 7,111 1,477 5,855
Extraordinary item -- -- -- 318 --
--------- --------- --------- --------- ---------
Net income $ 3,024 $ 1,603 $ 7,111 $ 1,159 $ 5,855
========= ========= ========= ========= =========
Other Financial Data:
EBITDA (1) $ 14,442 $ 14,186 $ 17,674 $ 20,359 $ 26,467
EBITDA margin 3.3% 2.9% 3.4% 3.7% 4.2%
Cash provided (used)
by operating (6,727) 6,939 9,783 6,013 17,103
activities
Cash used by

investing (5,077) (9,937) (9,908) (20,846) (8,170)
activities
Cash provided (used)
by financing activities 11,789 4,918 (1,900) 15,371 (7,282)
Depreciation and

amortization 4,902 5,757 7,115 8,374 8,905
Capital expenditures(2) 3,609 10,447 13,952 7,858 6,672
Ratio of earnings to
fixed Charges 1.4x 1.2x 1.6x 1.1x 1.4x
Adjusted EBITDA(1) 14,987 15,641 18,244 20,905 27,406
Operating Statistics:
Product Sales Operations
Cases shipped (spirits 6,109 6,099 6,343 6,182 6,394
and wine)
Gross profit margin 17.7% 17.6% 18.5% 18.4% 19.3%
Fee Operations
Cases shipped -- 396 2,545 2,731 2,786
(spirits)
Distribution fee per case -- $ 6.50 $ 6.50 $ 6.50 $ 6.50
</TABLE>

Years Ended March 31,
-----------------------------------------------------------------
1996 1997 1998 1999 2000
(In thousands)
Balance Sheet Data:
<S> <C> <C> <C> <C> <C>
Cash................... $ 1,475 $ 3,395 $ 1,370 $ 1,908 $ 3,559
Total assets........... 143,316 160,366 169,102 180,376 191,140
Total debt............. 86,908 99,545 102,434 117,222 112,471
Stockholders' equity... 14,209 10,470 14,582 17,774 21,126
</TABLE>

<PAGE>

NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA

(1) EBITDA is defined as income from operations plus depreciation and
amortization. Adjusted EBITDA is defined as EBITDA plus non-cash LIFO charges,
as follows:

Years Ended March 31,
-------------------------------------------------------
1996 1997 1998 1999 2000
(In thousands)
<S> <C> <C> <C> <C> <C>
EBITDA................. $ 14,442 $ 14,186 $ 17,674 $ 20,359 $ 26,467
LIFO charge............ 545 1,455 570 546 939
--------- --------- --------- --------- ---------
Adjusted EBITDA..... $ 14,987 $ 15,641 $ 18,244 $ 20,905 $ 27,406
========= ========= ========= ========= =========
</TABLE>

EBITDA is presented because it is a widely accepted financial indicator
used by investors and analysts to analyze and compare companies on the
basis of debt service capability. Adjusted EBITDA is presented because we
believe it may assist in evaluating our ability to service our
indebtedness, including the exchange notes. EBITDA and Adjusted EBITDA are
not intended to represent cash flows for the periods presented, nor have
they been presented as an alternative to operating income as an indicator
of operating performance and should not be considered in isolation or as a
substitute for measures of performance and cash flow prepared in accordance
with generally accepted accounting principles. The EBITDA and Adjusted
EBITDA information reflected above may not be comparable to similarly
titled measures used by other companies.

(2) The breakdown of our capital expenditures by significant project is set
forth below:

Years Ended March 31,
-------------------------------------------------------
1996 1997 1998 1999 2000
(In thousands)
<S> <C> <C> <C> <C> <C>
Business expansion... $ 786 $ 5,855 $10,758 $4,856 $3,112
Information systems.. 1,553 2,446 1,781 1,281 970
Maintenance.......... 1,270 2,146 1,413 1,721 2,590
------- -------- --------- -------- -------
$3,609 $10,447 $13,952 $7,858 $6,672
======= ======== ========= ======== =======
</TABLE>

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

You should read the following discussion in conjunction with "Selected
Consolidated Financial Data" and NWS' historical consolidated financial
statements and the accompanying notes included elsewhere in this Form 10-K.
Unless otherwise indicated, all references to years are to NWS' fiscal year
ended March 31.

Disclosure Regarding Forward-Looking Statements

<PAGE>

use of forward-looking terminology, such as "may," "intend," "will," "expect,"
"anticipate," "should," "plans to," "estimate" or "continue" or the negative
thereof or other variations thereon or comparable terminology. In particular,
any statement, express or implied, concerning future operating results or the
ability to generate revenues, income or cash flow to service the Notes are
forward-looking statements. Although the Company believes that the expectations
will prove to have been correct. All forward-looking statements are expressly
qualified by such cautionary statements, and the Company undertakes no
obligation to update such forward-looking statements.

Overview

NWS is one of the largest distributors of wine and spirits in the United
States. Substantially all of NWS' current operations are in Illinois, Indiana
and Michigan. NWS' reported revenues include net product sales in Indiana and
Illinois, the U.S. Beverage sales operation, and distribution fees in Michigan.
In Indiana and Illinois, NWS' net product sales are comprised of sales to retail
customers of wine and spirits products and, to a much lesser extent, beer, water
and other related products. NWS purchases these products from suppliers and
resells them to customers at more than 24,000 retail locations in Indiana and
Illinois through NWS' approximately 600 person sales organization. U.S. Beverage
purchases products from brewers and resells them through distributors across the
United States. In Michigan, which privatized aspects of its wholesale
distribution of spirits in 1996, NWS serves as an "authorized distribution
agent" for the state and collects a flat $6.50 per case delivery fee set by the
state and paid by suppliers for each case of spirits delivered to approximately
12,000 locations throughout Michigan. NWS does not take title to or finance any
inventory in Michigan and operates with a relatively small sales force.

The Company experienced increases in both product and distribution fee
revenue for the year ended March 31, 2000, over the prior fiscal year. This
increase in revenue resulted from increased case sales along with a greater
average case sale price. Price increases in the product markets, along with a
shift by consumers to premium products were responsible for the revenue gains.
Distribution fee revenue and case volume increased for the year ended March 31,
2000, over the comparable fiscal year due to the acquisition of new suppliers.
The distribution fee product mix has shifted to a higher percentage of bottle
business i.e. less than a full case sale, thus increasing labor and operational
cost. In FY 2000, NWS obtained additional brands in Illinois, Indiana, and
Michigan. NWS became the exclusive distributor for Kendall Jackson Winery in
Indiana and parts of Illinois (the Chicago-land area and most of downstate),
adding approximately $22.0 million in revenue on 200,000 cases. In Michigan, the
brands of Allied Domecq were added (July), generating $1.6 million in revenue on
more than 250,000 cases. Through the sale of the Black Velvet, Christian
Brothers (both in May), and Arrow brands (February) by Diageo, NWS lost
approximately 350,000 cases in Michigan and 29,000 in Indiana (costing
approximately $5.1 million in annual revenue). Robert Mondavi Winery and Ketel
One left the Indiana operation (in June and July, respectively) taking with it
approximately 60,000 cases and $4.8 million in annual sales.

<PAGE>

Results of Operations

The following table includes information regarding total cases shipped by
NWS in 1998, 1999 and 2000:

Years ended March 31,
1998 1999 2000
---------- -------------------- ----------------
Percent Percent
Cases Cases Change Cases Change
(Cases in thousands)
<S> <C> <C> <C> <C> <C>
Wine (product sales operations) 2,981 2,928 (1.8)% 3,044 4.0
Spirits (product sales operations) 3,362 3,254 (3.2) 3,350 3.0
------ ------ ----- ------ ----
Spirits (distribution fee operations) 2,545 2,731 7.3 2,786 2.0
Total wine and spirits 8,888 8,913 0.3 9,180 3.0
Other* 1,971 2,764 40.2 4,274 54.6
------ ------ ----- ------ ----
Total 10,859 11,677 7.5% 13,454 15.2
====== ====== ===== ====== ====

<FN>

*U.S. Beverage's results are included in the other category for the current year and prior years.
</FN>
</TABLE>

Quarterly Results of Operations; Seasonality

NWS' revenues are influenced by a number of factors, particularly the
Christmas holiday season, which tend to result in seasonally high levels of
volume and profitability in NWS' fiscal third quarter with seasonal losses in
NWS' fiscal fourth quarter.

The following table presents unaudited quarterly financial information for
each of the eight quarters in the period ended March 31, 2000. In the opinion of
NWS' management, this information has been prepared on the same basis as the
consolidated historical financial statements appearing elsewhere in this Form
10-K and includes all adjustments, consisting only of normal recurring accruals,
necessary to present fairly the financial results set forth herein. Results of
operations for any quarter are not necessarily indicative of the results of any
future period.

Years ended March 31,
---------------------------------------------------------------------------------
1999 2000
-------------------------------------- --------------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $35,899 $122,005 $179,473 $115,976 $170,059 $130,397 $193,509 $131,792
Operating income (loss) 3,908 503 7,760 (186) 6,718 2,580 8,453 (189)
EBITDA(1) 5,912 2,544 9,789 2,114 8,840 4,831 10,677 2,119
Operating working capital 76,963 78,491 91,381 77,436 89,522 87,128 104,355 78,184
(end of period)(2)

<FN>

(1) See Note 1 to "Selected Consolidated Financial and Other Data" for a
definition of EBITDA and other information regarding EBITDA.

(2) Operating working capital is defined as the sum of accounts receivable and
inventory less accounts payable.

</FN>
</TABLE>

<PAGE>

Fiscal 2000 Compared with Fiscal 1999

Revenue The Company reported product sales for the year ended March 31,
2000 of $605.0 million, an increase of $69.5 million, or 13.0% over the prior
year period. This increase primarily resulted from the continued shift by
consumers to more premium brands, price increases during the year in the Indiana
and Illinois markets, and strong increases in the U.S. Beverage sales of
Hooper's Hooch. U.S. Beverage had product sales of $28.8 million as compared to
$9.2 million over the prior year period. Distribution fees for the year ended
March 31, 2000 increased $2.9 million, or 16.5%, to $20.8 million from the prior
year period.

Gross Profit. Gross profit on total revenue increased 17.7% to $137.3
million, from $116.6 million in the prior year period. Gross profit percentage
on product sales for the year ended March 31, 2000, was 19.3% as compared to
18.4% for the prior year period. Increase sales of premium brands along with
margins on Hooper's Hooch were primarily responsible for the percentage
increase. Gross profit on product sales increased by $17.8 million from the
prior year period.

Operating Expenses. Operating expenses for the year ended March 31, 2000
increased to $119.8 million, or 14.4% over the comparable year. The expansion of
our U.S. Beverage operation along with the creation of a sales department for
our fee market contributed to this increase in expenses. Employee costs and
outside professional expenses were increased due to the expansion of our
business units and to meet the increased public reporting requirements. Total
operating expenses were 19.1% for total revenue for March 31, 2000, as compared
to 18.9% for the prior annual period.

Selling expenses increased $4.6 million, or 12.0% for the year ended March
31, 2000,over the prior annual period. U.S. Beverage's selling expenses
increased $1.9 million as required brand promotion support for the Hooper's
Hooch brand increased. The increased expenses were primarily brand promotion,
point of sale material, and greater brand advertising costs. U.S. Beverage's
case sales for the year ended March 31, 2000 increased 385.2% over the prior
annual period. The creation of a sales department for the brokerage operation in
our fee market resulted in an increase of $1.5 million for March 31, 2000, from
the comparable annual period. These brokerage expenses were primarily employee
salaries with additional expenditures in brand advertising and promotion. The
remaining increase of $1.2 million of selling expense over the prior annual
period resulted from additional promotional and advertising costs. The
introduction of new brands and the increased cost of existing brand promotion,
were primarily responsible for these larger product market selling expenses.

Warehouse and delivery expenses increased 7.7% or $2.7 million in the year
ended March 31, 2000 over the comparable annual period. The volume increase that
was experienced in our Illinois market prior to the tax increase on July 1,
1999, was primarily responsible for the product market increase of $1.8 million
over the comparable annual period. The fee market increase of $0.9 million over
the prior year period was the result of acquiring product lines that had
increased splits, or less than full case orders, which drove up labor costs.
Total warehouse and delivery expense was 6.1% of total revenue for the year
ended March 31, 2000, as compared to 6.4% the prior annual period.

Total administrative costs increased $7.8 million or 25.1% for the year
ended March 31, 2000, over the comparable annual period. The Company has
developed and expanded the corporate services area in the year ended March 31,
2000, which has increased corporate wages and related employee costs.
Professional fees have increased due to the additional reporting and compliance
requirements associated with the senior note issuance. These administrative
expenses have also included first time costs associated with non-employee
directors. Expansion in our U.S. Beverage operation has required additional
administrative support, primarily employees and their associated benefit costs.
Administrative expense, as a percentage of total revenue was 6.2% for the year
ended March 31, 2000, as compared to 5.6% for the comparable annual period.

<PAGE>

Income from Operations Total operating income increased $5.6 million, or
46.5% for the year ended March 31, 2000, over the comparable annual period.
Product markets operating income were up $6.7 million for the current year as
compared to the prior annual period. Revenue gains and an increased gross profit
percentage more than offset the increases in operating expenses for the product
markets. Operating income for the fee market decreased $1.1 million for the
current year as compared to the prior year. The increased cost of the sales
department along with increased labor costs in the operational area outpaced the
increase in fee revenue.

Interest Expense Interest expense increased $2.2 million for the year ended
March 31, 2000 over the prior annual period. The Company had the senior notes
outstanding for approximately two months for the year ended March 31, 1999,
whereas they were outstanding for the entire year that ended March 31, 2000.
Prior to the issuance of the senior notes the marginal rate was 8.25%, while the
senior notes carry a 10.125% fixed rate. The Company's revolving credit
facility's rate is related to the prime lending rate. The revolver's rate was
9.5% at March 31, 2000, and 8.25% at March 31, 1999.

Other Income Other income increased by $1.0 million to $1.6 million for the
year ended March 31, 2000, from the prior annual period. The Company settled a
lawsuit brought by several drivers in our Illinois market for $0.5 million in
the year ended March 31, 1999. The Company also wrote off intangible assets,
non-compete and organizational costs in the amount of $0.3 million for the year
ended March 31, 1999. These expenses in the year ended March 31, 1999, that were
one time costs, along with an increase in rental income of $0.1 million for the
year ended March 31, 2000, were primarily responsible for the increase in other
income.

Minority Investment in Kentucky Distributor The Company's share of income
from Commonwealth Wine & Spirits, L.L.C. remained constant at $0.1 million for
the year ended March 31, 2000 as cash compared to the prior annual period.
Distributions received from Commonwealth were $0.5 million and $0.2 million for
the years ending March 31, 2000 and March 31, 1999, respectively.

Net Income Net income was $5.9 million for the year ended March 31, 2000,
which was an increase of $4.7 million over the comparable annual period.

For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization (EBITDA) for the year ended March
31, 2000 increased $6.1 million, or 30.0% to $26.5 million as compared to the
prior annual period.

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 did not experience any significant disruptions at December 31,
1999 and is not aware of any material Year 2000 issues from our customers or
suppliers that would impact the Company's financial condition, results of
operations, or debt service capabilities.

At March 31, 2000, the Company had incurred less than $75,000 in costs
directly associated with the remediation of its systems. Management does not
believe that future Year 2000 assessment and remediation costs will be material,
and intends to fund any such costs from its existing resources. These costs do
not include the cost of upgrading or replacing systems for other business
reasons.

<PAGE>

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.

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.

Fiscal 1999 Compared with Fiscal 1998

Revenue. NWS reported total sales in 1999 of $553.4 million compared to
$521.4 million for 1998, a gain of $31.9 million or 6.1%.

Product sales in the year ended March 31, 1999 were $535.5 million, an
increase of $30.4 million, or 6.0%, over the comparable prior year period. This
increase resulted primarily from the continued shift by consumers to more
premium brands, a strong increase at U.S. Beverage with the addition of six
months of sales of Hooper's Hooch beverage, and the addition Sebastiani Wines in
the Chicago market for the entire year, which more than offset a slight decline
in total wine and spirits cases sold. Contributing to the decline in the sale of
spirits cases was the additional customer purchases of spirits cases in the
fourth quarter of fiscal 1998 in advance of an announced price increase on
certain key brands. This increased case sales in fiscal 1998 and decreased case
sales in the year ended March 31, 1999. In addition, U.S. Beverage contributed
$9.2 million of revenue; all of which was incremental compared to the prior
year.

Distribution fees increased to $17.8 million for fiscal 1999 compared to
$16.3 million for 1998, a 9.6% increase due to increased volume of existing
brands and the addition of new suppliers throughout the year. Our addition of
new supplier brands in Michigan, McCormick and Austin-Nichols, did not occur
until the middle of the second quarter of 1999 and the addition of Laird did not
occur until the end of the fourth quarter. Therefore, the additional volume is
only partially reflected in our 1999 results. The loss of the J&B brand in
Michigan, which was due to supplier realignment, did not occur until November,
but management does not expect it to have a material impact on our distribution
fee operations. The loss of other brands due to Diageo's divestitures did not
occur until after the fiscal year end.

<PAGE>

Gross Profit. Gross profit on NWS' total revenue increased to $116.6
million in the year ended March 31, 1999 from $109.7 million in the comparable
prior year period. This represented a 6.3% increase, due to relatively flat
gross margins on our increased product sales from 18.5% to 18.4% and the
additional volume in Michigan with no corresponding cost of products sold.
Additionally, the U.S. Beverage business contributed slightly with margins of
19.5% for the year ended March 31, 1999. As a result of this improvement and
since gross profit in Michigan is 100% of fee revenues; our overall gross profit
margin grew from 21.0% for the year ended March 31, 1998 to 21.1% for fiscal
1999. Cost of products sold included a non-cash LIFO charge of $0.5 million in
1999 compared with $0.6 million for the comparable prior year period.

Operating Expenses. Overall, selling, general and administrative expenses
increase $5.5 million to $104.6 million for 1999 from $99.1 million for the
prior year. As a percent of total revenue, selling, general, and administrative
expenses decreased from 19.0% for 1998 to 18.9% for 1999.

Selling expenses for product markets increased $5.2 million, or from 6.4%
to 7.0% of total revenues, for 1999 primarily as a result of increased manpower
to support the Illinois and Indiana product markets, including additional sales
staff in Illinois to support the newly acquired Sebastiani brand line.
Additionally, U.S. Beverage contributed $3.9 million to overall selling,
warehouse and delivery expenses in the prior year. Finally, in order to acquire
additional lines in Michigan, we created a sales team for the first time in that
market. This increased selling expenses by $0.4 million for the year. While
small, selling expenses are expected to grow as we continue to increase our
sales force in Michigan. The recent acquisition of R.M. Gilligan is expected to
accelerate the growth of the Michigan-based sales force.

Total administrative expenses increased by $1.8 million to 5.6% of NWS'
total revenue during 1999. The increase in administrative expenses was primarily
a result of the installation of new computer systems in Indiana and general
employee benefit cost increases.

Start-up expenses decreased 100%, or $3.3 million for 1999 as U.S. Beverage
moved out of its start-up phase and incurred ongoing operating expenses and
NWS-Michigan completed its start-up in fiscal 1998.

Income from Operations. Operating income increased 13.5% or $1.4 million
for 1999 over 1998. As a percent of total revenue, income from operations
improved from 2.0% for 1998 to 2.2% for 1999. The increased revenues for the
year and improved gross margins more than offset the increase in selling,
general and administrative expenses.

Interest Expense Interest expense increased 14.1% to $11.0 million during
the year ended March 31, 1999. The increase was attributable to slightly higher
interest rates on our $110.0 million in senior notes sold in January, 1999, when
compared to the bank debt the senior notes replaced, additional borrowings to
finance the capital expenditures needed for our Michigan operations, an upgrade
to the Chicago material handling system and our recent Kentucky investment.

Other Income. Other income decreased by $5.7 for 1999 compared to the prior
year primarily due to a $4.1 million gain on the sale of certain licensed
brands, trademarks, and tradenames in Illinois in 1998. Excluding the one-time
gain, other income was down $1.6 million. This was the result of other income of
$0.6 million from a gain on Heaven Hill bulk inventories and $0.5 million in
interest income during 1998. Additionally, results for 1999 include the $0.5
million expense to resolve the Illinois driver lawsuit and $0.5 million in
reorganization costs.

Minority Investment in Kentucky Distributor. NWS' share of partnership
income in Commonwealth Wine & Spirits, LLC was approximately $0.1 million for
the year. The six-month period ended March 31, 1999 was Commonwealth's first two
quarters of operation.

Extraordinary Item. NWS recorded a loss on extinguishment of debt of $0.3
million as a result of the $110 million senior note offering.

<PAGE>

Net Income. For the year ended March 31, 1999, NWS reported $1.2 million in
net income compared to $7.1 million for 1998. Without the one-time gain in 1998,
net income was down 61.0% or $1.8 million for 1999.

Liquidity and Capital Resources

The Company's primary cash requirements have been to fund accounts
receivable and inventories in Indiana and Illinois and to fund capital
expenditures and acquisitions. NWS has historically satisfied its cash
requirements principally through cash flow from operations, trade terms and bank
borrowings.

As indicated above, NWS' business is highly seasonal. NWS' operating
working capital fluctuates with seasonal trends as illustrated in the quarterly
table above. As a result, NWS' working capital requirements and borrowings under
its credit facility have fluctuated over the course of each year. In fiscal
2000, NWS' minimum and maximum amount of borrowings under the current $60.0
million credit facility, at any one time was $1.0 million in March, 2000, and
$35.8 million in December, 1999. At March 31, 2000, NWS' outstanding borrowings
under its credit facility were $1.0 million.

Net cash provided by operating activities for the annual period ended March
31, 2000, was $17.1 million as compared to $6.0 million for the prior annual
period. Increases in cash provided were from greater accounts payable, net
income, accrued expenses, and lower prepaid expenses and other receivables.
Decreases in cash from operating activities were the result of increased
inventories and increased accounts receivable. As part of our seasonality, NWS
typically receives replenishment of inventory in March, which is also the
largest revenue month in our fourth quarter. As a result, accounts receivable
and inventories increase with corresponding increases in accounts payable, which
funds the increased assets. Net cash used for investing activities for the year
ended March 31, 2000 was $8.2 million as compared to $20.8 million the prior
annual period. Investments that were made in fiscal 1999 were primarily
responsible for this decrease in cash used. The Company had invested $7.5
million in fiscal 1999 for an equity investment in Commonwealth Wine & Spirits,
L.L.C. The Company invested $1.6 million in the year ended March 31, 2000, for
the stock of R.M. Gilligan, Inc. The Company had increase proceeds from the sale
of property and equipment in the current year primarily from the sale of a
building in our Illinois market. Investments in intangible assets were $3.9
million lower in the current year due to the $5.9 million investment in fiscal
1999 that were primarily the costs of issuing the senior notes in January, 1999.

Net cash used by financing activities was $7.3 million for the year ended
March 31, 2000, as compared to cash provided of $15.4 million for the prior
annual period. Upon the issuance of the senior notes in January, 1999, the
Company repaid its outstanding bank and other debt and amounts outstanding under
its revolving credit facility. The net result of this refinancing and other debt
repayments during the year ended March 31, 1999, was net cash provided of $19.5
million. Net repayments for the year ended March 31, 2000, were $4.8 million,
which was a use of cash, resulting in a difference from the prior year of $24.3
million. The Company had distributions to stockholders during the year that were
for tax liabilities and used to repay shareholder receivables. The $2.4 million
increase in cash from the change in notes receivable from stockholders consisted
of repayments for $3.5 million and net advances of $1.1 million.

Total assets increased to $191.1 million at March 31, 2000, a $10.8 million
increase from the prior year. This increase was primarily the result of
increased accounts receivable of $7.9 million and inventories of $3.2 million.
March, 2000, was a strong revenue month as compared to March, 1999, with a
corresponding increase in purchases of inventory. Property and equipment
declined by $2.6 million due to decreased capital expenditures and the sale of a
building in our Illinois market. Intangibles increased $1.9 million primarily
consisting of goodwill, which resulted from the R.M. Gilligan, Inc. acquisition.
In October, 1999, the Company invested $500,000 in convertible preferred stock
of eSkye.com, Inc. The Company invested an additional $2,012,500 in convertible
preferred stock in May 2000.

<PAGE>

Current liabilities increased $12.4 million from the prior year. Accounts
payable increased $10.4 million due to the increased purchases of inventory in
March, 2000, as compared to March, 1999. Accrued excise taxes increased $1.1
million from the prior year, and was also directly related to the increased
purchase of inventory. Total debt decreased to $112.5 million, at March 31,
2000, as compared to $117.2 million the prior year. Increased cash flow
contributed to a decrease in the revolving credit facility of $3.7 million.

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

Not Applicable.

<PAGE>

Item 8. Financial Statements and Supplementary Data

Report of Independent Auditors

The Board of Directors and Stockholders
National Wine & Spirits, Inc.

We have audited the accompanying consolidated balance sheets of National Wine &
Spirits, Inc. as of March 31, 2000 and 1999, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended March 31, 2000. Our audits also included the financial
statement schedules listed in the Index at Item 14(a). These financial
statements and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of National Wine &
Spirits, Inc. at March 31, 2000 and 1999, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
March 31, 2000 in conformity with accounting principles generally accepted in
the United States. Also, in our opinion, the related financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.

/s/ Ernst & Young LLP

Indianapolis, Indiana
May 19, 2000

National Wine & Spirits, Inc.

Consolidated Balance Sheets

March 31
2000 1999
------------------------------
Assets
Current assets:

<S> <C> <C>
Cash $ 3,559,000 $ 1,908,000
Accounts receivable, less allowance
for doubtful accounts of $1,412,000
($1,298,000 in 1999) 44,952,000 37,042,000
Inventory 71,167,000 67,961,000
Prepaid expenses and other 3,571,000 4,776,000
------------- -------------
Total current assets 123,249,000 111,687,000

Property and equipment, net 46,735,000 49,307,000

Other assets:
Notes receivable 1,142,000 1,486,000
Cash surrender value of life insurance, net of loans 2,270,000 1,849,000
Investment in Kentucky distributor 7,072,000 7,438,000
Investment in eSkye.com, Inc. 500,000 --
Intangible assets, net of amortization 9,988,000 8,080,000
Deferred pension costs -- 387,000
Deposits and other 184,000 142,000
------------- -------------
Total other assets 21,156,000 19,382,000
------------- -------------
Total assets $ 191,140,000 $ 180,376,000
============= =============

Liabilities and stockholders' equity Current liabilities:

Accounts payable $ 37,935,000 $ 27,567,000
Accrued payroll and payroll taxes 6,757,000 5,912,000
Excise taxes payable 5,200,000 4,055,000
Other accrued expenses and taxes 7,651,000 7,459,000
Current maturities of long-term debt 900,000 1,050,000
------------- -------------
Total current liabilities 58,443,000 46,043,000

Deferred pension liability -- 387,000
Long-term debt 111,571,000 116,172,000
------------- -------------
Total liabilities 170,014,000 162,602,000

Stockholders' equity:
Voting common stock, $.01 par value 1,000 1,000
Nonvoting common stock, $.01 par value 53,000 53,000
Additional paid-in capital 25,009,000 25,009,000
Accumulated deficit (825,000) (1,883,000)
------------- -------------
24,238,000 23,180,000
Notes receivable from stockholders (3,112,000) (5,406,000)
------------- -------------
Total stockholders' equity 21,126,000 17,774,000
------------- -------------
Total liabilities and stockholders' equity $ 191,140,000 $ 180,376,000
============= =============

<FN>
See accompanying notes.
</FN>
</TABLE>

National Wine & Spirits, Inc.

Consolidated Statements of Income

Years Ended March 31
2000 1999 1998
-------------------------------------------------

<S> <C> <C> <C>
Net product sales $ 604,987,000 $ 535,521,000 $ 505,141,000
Distribution fees 20,770,000 17,832,000 16,270,000
------------- ------------- -------------
Total revenue 625,757,000 553,353,000 521,411,000
Cost of products sold 488,444,000 436,734,000 411,734,000
------------- ------------- -------------
Gross profit 137,313,000 116,619,000 109,677,000

Selling, general and administrative expenses:

Warehouse and delivery 38,401,000 35,655,000 34,196,000
Selling 42,434,000 37,872,000 32,328,000
Administrative 38,916,000 31,107,000 29,274,000
Start-up costs -- -- 3,320,000
------------- ------------- -------------
119,751,000 104,634,000 99,118,000
------------- ------------- -------------

Income from operations 17,562,000 11,985,000 10,559,000

Interest expense:
Related parties (425,000) (461,000) (507,000)
Third parties (12,849,000) (10,576,000) (9,165,000)
------------- ------------- -------------
(13,274,000) (11,037,000) (9,672,000)
Other income (expense):
Gain on sale of assets 173,000 188,000 4,139,000
Interest income 892,000 977,000 1,246,000
Rental and other income (expense) 371,000 (756,000) 839,000
Equity in earnings of Kentucky

distributor 131,000 120,000 --
------------- ------------- -------------

Total other income

1,567,000 529,000 6,224,000
------------- ------------- -------------
Income before extraordinary item
5,855,000 1,477,000 7,111,000
Extraordinary item:
Loss on extinguishment of debt -- (318,000) --
------------- ------------- -------------

Net income $ 5,855,000 $ 1,159,000 $ 7,111,000
============= ============= =============

<FN>
See accompanying notes.
</FN>
</TABLE>

National Wine & Spirits, Inc.

Consolidated Statements of Stockholders' Equity

Accumulated Notes
$.01 Par Value Additional Other Receivable Total
Common Stock Paid-in Accumulated Comprehensive from Stockholders'
Voting Nonvoting Capital Deficit Income (Loss) Stockholders Equity
---------------------------------------------------------------------------------------------

Balance at

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1997 $ 1,000 $ 53,000 $23,202,000 $(2,357,000) $ (438,000) $(9,991,000) $10,470,000

Comprehensive
income:

Net income -- -- -- 7,111,000 -- -- 7,111,000
Decrease in
unrecognized

net pension -- -- -- -- 438,000 -- 438,000
loss
Total

comprehensive -- -- -- -- -- -- 7,549,000
income

Increase in notes
receivable from

stockholders -- -- -- -- -- (612,000) (612,000)
Distributions to
stockholders -- -- -- (2,825,000) -- -- (2,825,000)
---------------------------------------------------------------------------------------------

Balance at

March 31, 1998 1,000 53,000 23,202,000 1,929,000 -- 10,603,000) 14,582,000

Net income -- -- -- 1,159,000 -- -- 1,159,000
Decrease in notes
receivable from
stockholders -- -- -- -- -- 5,197,000 5,197,000
Distributions to
stockholders -- -- -- (4,971,000) -- -- (4,971,000)
Conversion of
notes payable to
stockholders' -- -- 1,807,000 -- -- -- 1,807,000
equity
---------------------------------------------------------------------------------------------

Balance at

March 31, 1999 1,000 53,000 25,009,000 (1,883,000) -- (5,406,000) 17,774,000

Net income -- -- -- 5,855,000 -- -- 5,855,000
Decrease in notes
receivable from
stockholders -- -- -- -- -- 2,294,000 2,294,000
Distributions to
stockholders -- -- -- (4,797,000) -- -- (4,797,000)
---------------------------------------------------------------------------------------------

Balance at

March 31, 2000 $ 1,000 $ 53,000 $25,009,000 $ (825,000) $ -- $(3,112,000) $21,126,000
=============================================================================================

<FN>
See accompanying notes.
</FN>
</TABLE>

National Wine & Spirits, Inc.

Consolidated Statements of Cash Flows

Years Ended March 31
2000 1999 1998
----------------------------------------------
Operating activities

<S> <C> <C> <C>
Net income $ 5,855,000 $ 1,159,000 $ 7,111,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of property and equipment 7,270,000 6,967,000 5,872,000
Gain on sale of assets (174,000) (188,000) (4,139,000)
Amortization of intangible assets 1,635,000 1,407,000 1,243,000
Equity in earnings of Kentucky distributor (131,000) (120,000) --
Loss on extinguishment of debt -- 318,000 --
Changes in operating assets and liabilities:
Accounts receivable (7,760,000) (5,729,000) 3,427,000
Inventories (3,206,000) 8,773,000 (4,656,000)
Prepaid expenses and other receivables 1,252,000 157,000 (810,000)
Accounts payable 10,329,000 (6,154,000) 2,482,000
Accrued expenses and taxes 2,033,000 (577,000) (747,000)
----------- ----------- -----------
Net cash provided by operating activities 17,103,000 6,013,000 9,783,000

Investing activities

Purchases of property and equipment (6,672,000) (7,858,000) (13,952,000)
Acquisition of R. M. Gilligan, Inc.,
net of cash received (1,630,000) -- --
Investment in Kentucky distributor -- (7,500,000) --
Proceeds from sale of property and equipment 2,242,000 338,000 253,000
Proceeds from sale of assets -- -- 3,000,000
Intangible assets (1,996,000) (5,869,000) (730,000)
Deposits and other (42,000) 28,000 1,766,000
Increase in cash surrender value of life
insurance (413,000) (453,000) (492,000)
Investment in eSkye.com, Inc. (500,000) -- --
Distributions from Kentucky distributor 497,000 182,000 --
Collections on notes receivable 344,000 286,000 247,000
----------- ----------- -----------
Net cash used by investing activities (8,170,000) (20,846,000) (9,908,000)

Financing activities

Net repayments on lines of credit (3,700,000) (62,010,000) (3,078,000)
Proceeds from senior notes issuance -- 110,000,000 --
Proceeds from long-term debt -- 7,500,000 11,257,000
Principal payments on long-term debt (1,079,000) (36,017,000) (5,975,000)
Proceeds from borrowings from stockholder 97,000 241,000 685,000
Repayments on borrowings from stockholder (205,000) -- --
Notes receivable from stockholders and others 2,402,000 628,000 (1,964,000)
Distributions to stockholders (4,797,000) (4,971,000) (2,825,000)
----------- ----------- -----------
Net cash provided (used) by financing activities (7,282,000) 15,371,000 (1,900,000)
----------- ----------- -----------
Net increase (decrease) in cash 1,651,000 538,000 (2,025,000)
Cash, beginning of year 1,908,000 1,370,000 3,395,000
----------- ----------- -----------
Cash, end of year $ 3,559,000 $ 1,908,000 $ 1,370,000
=========== =========== ===========

<FN>
See accompanying notes.
</FN>
</TABLE>

<PAGE>

National Wine & Spirits, Inc.

Notes to Consolidated Financial Statements

March 31, 2000

1. Nature of Business and Summary of Significant Accounting Policies

Nature of Business and Principles of Consolidation

In December 1998, a reorganization took place, which created a new holding
company, National Wine & Spirits, Inc. (NWS or the Company). 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 NWS-LLC 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 consolidated
financial statements include the accounts of NWS, NWSC, 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, NWS-LLC 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.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

<PAGE>

National Wine & Spirits, Inc.

Notes to Consolidated Financial Statements (continued)

1. Nature of Business and Summary of Significant Accounting Policies (continued)

Fair Value of Financial Instruments

The Company's cash, accounts receivable, short-term notes receivable, accounts
payable and certain other accrued liabilities are all short-term in nature and
the carrying amounts approximate fair value. Long-term notes receivable and
payable, except for the Company's senior notes payable, have primarily variable
interest rates, thus their carrying amounts approximate fair value. The carrying
value of the senior notes payable approximates fair value.

Inventory

Substantially all inventory is stated at the lower of cost, determined by the
last-in, first-out (LIFO) method, or market.

Bulk whiskey represents the Company's interest in certain whiskey inventory,
which is being aged by the supplying distiller. This interest serves as
collateral for related notes payable to the distiller. In accordance with
industry practices, storage and handling costs incurred during the aging process
are included as a component of the cost of bulk whiskey. Bulk whisky represented
approximately $1,497,000 and $1,692,000 of the total inventory balance at March
31, 2000 and 1999, respectively.

Advertising Costs

Advertising costs are charged to operations when incurred. Advertising expense
was $5,685,000, $3,224,000 and $2,087,000 in March 31, 2000, 1999 and 1998,
respectively.

Property and Equipment

Property and Equipment are recorded at cost and are depreciated using primarily
the straight-line method over their expected useful lives as follows:

Land improvements 15-40 years
Buildings and improvements 10-40 years
Furniture and equipment 5-7 years
Warehouse equipment 7 years
Automobiles and trucks 5 years

<PAGE>

National Wine & Spirits, Inc.

Notes to Consolidated Financial Statements (continued)

1. Nature of Business and Summary of Significant Accounting Policies (continued)

Intangible Assets

Intangible assets, including goodwill, represent the cost of certain assets
obtained in the acquisition of various distributors, costs incurred in obtaining
financing and amounts paid to acquire supplier distribution rights. These costs
are being amortized by the straight-line method over the terms of the agreements
or their estimated useful lives, which range from two to twenty years.
Accumulated amortization related to these assets was $3,490,000 and $1,852,000
at March 31, 2000 and 1999, respectively.

Long-lived Assets

The carrying value of the long-lived assets is periodically reviewed by
management. If this review indicates that the carrying value may be impaired
then the impaired amount will be written off.

Income Taxes

There is no provision for federal or state income taxes reflected in the
financial statements because the stockholders have consented to NWS' election to
be taxed as an S corporation under the applicable provisions of the Internal
Revenue Code. NWS' income is taxable directly to its stockholders.

Revenue Recognition

NWSC and NWS-LLC purchase inventory items for resale to customers and are liable
for payment to the suppliers, as well as collecting payment from customers. NWSM
receives a fixed fee per case of liquor distributed for the State of Michigan
(distribution fees) which is also responsible for payments to suppliers. All
Michigan shipments are cash on delivery and are deposited directly to the State
of Michigan.

Net sales and distribution fees are recognized at the time product is shipped.

Start-up Costs

Start-up costs to commence operations and to reach normal capacity are expensed
as incurred, in accordance with Statement of Position 98-5, Reporting on the
Costs of Start-up Activities.

<PAGE>

National Wine & Spirits, Inc.

Notes to Consolidated Financial Statements (continued)

1. Nature of Business and Summary of Significant Accounting Policies (continued)

Reclassifications

Certain amounts in the 1999 and 1998 consolidated financial statements have been
reclassified to conform to the 2000 presentation.

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 consolidated financial
statements since the date of acquisition. The purchase price was allocated to
the net assets acquired, including $1,547,000 to goodwill recorded in intangible
assets, 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. Investment In Kentucky Distributorship

In December 1998, NWSC formed a new distributorship in Kentucky (Commonwealth
Wine & Spirits, LLC) in partnership with two existing Kentucky-based
distributors, The Vertner Smith Company ("Vertner") and Kentucky Wine & Spirits
("Kentucky W&S"). Under the terms, NWSC invested $7.5 million ($4.5 million in
cash and a $3 million cash franchise fee), in exchange for 25% of the new
company. Vertner and Kentucky W&S equally own the remaining 75%. NWSC has
accounted for its investment in Commonwealth Wine & Spirits, LLC using the
equity method.

<PAGE>

National Wine & Spirits, Inc.

Notes to Consolidated Financial Statements (continued)

3. Investment In Kentucky Distributorship (continued)

The Company received distributions of $497,000 and $182,000 from Commonwealth
Wine & Spirits, LLC in 2000 and 1999, respectively.

4. Inventory

Inventory at March 31 is comprised of the following:

2000 1999
-------------------------------

Inventory at FIFO $ 79,652,000 $ 75,507,000
Less: LIFO reserve 8,485,000 7,546,000
------------ ------------
$ 71,167,000 $ 67,961,000
============ ============

If the Company had used the first-in, first-out (FIFO) inventory method, net
income would have been $939,000, $546,000 and $570,000 greater in 2000, 1999 and
1998, respectively.

5. Property and Equipment

Property and equipment at March 31 is comprised of the following:

2000 1999
-------------------------------

Land and improvements $ 1,532,000 $ 1,421,000
Buildings and improvements 26,505,000 27,709,000
Furniture and equipment 16,313,000 15,032,000
Warehouse equipment 29,250,000 27,298,000
Automobiles and trucks 7,401,000 8,311,000
Construction in progress 891,000 --
------------ ------------
81,892,000 79,771,000
Less: Accumulated depreciation 35,157,000 30,464,000
------------ ------------
$ 46,735,000 $ 49,307,000
============ ============

<PAGE>

National Wine & Spirits, Inc.

Notes to Consolidated Financial Statements (continued)

6. Debt

Long-term debt at March 31 is comprised of the following:

<TABLE>

2000 1999
-------------------------------

<S> <C> <C>
Senior notes payable (A) $110,000,000 $110,000,000
Bank revolving line of credit (B) 1,000,000 4,700,000
Term loan payable in annual
installments of $500,000 in 2001
and 2002, including interest 1,000,000 1,300,000
Non-competition agreement 300,000 600,000
City of Indianapolis-First
Mortgage Note, Series 1983-
payable monthly, with interest
computed at 80% of the bank's
prime lending rate, through
April 2003, secured by certain
property in Indianapolis 171,000 272,000
Subordinated promissory note payable
to an employee, repaid November 1999 -- 350,000
------------ ------------
112,471,000 117,222,000
Less: current maturities 900,000 1,050,000
------------ ------------
$111,571,000 $116,172,000
============ ============
</TABLE>

(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. These senior notes are guaranteed by the
Company's subsidiaries. The guarantors are all wholly owned and there are no
non-guarantor subsidiaries. The guarantees are full, unconditional and joint and
several. Audited financial information of guarantor subsidiaries has been
omitted because management has determined that they would not be material to
users of the financial statements.

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 early extinguishment of
the bank debt and revolving credit facilities resulted in an extraordinary
charge of $318,000 in 1999.

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.

<PAGE>

National Wine & Spirits, Inc.

Notes to Consolidated Financial Statements (continued)

6. Debt (continued)

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.

(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 March 31,
2000 and 1999, all borrowings bear interest at the prime lending rate plus 0.5%
(9.50% at March 31, 2000). The Company also pays a commitment fee ranging from
0.25% to 0.5% of its undrawn portion of its line of credit.

Credit borrowings are secured by the accounts receivable and inventory of the
Company and its subsidiaries and are guaranteed by NWS' subsidiaries.
Additionally, NWS-LLC has a supplier letter of credit of which $300,000 was
outstanding at March 31, 2000. In addition, the agreement 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.

Principal payments due on debt at March 31, 2000 are as follows:

2001 $ 900,000
2002 571,000
2003 --
2004 1,000,000
2005 --
Thereafter 110,000,000
------------
$112,471,000
============

The Company guarantees an obligation of a related entity, which has an
outstanding balance of $1,000,000 at March 31, 2000.

Cash paid for interest was $13,116,000, $9,780,000 and $9,643,000 in 2000, 1999
and 1998, respectively.

<PAGE>

National Wine & Spirits, Inc.

Notes to Consolidated Financial Statements (continued)

7. Common Stock

The Company has two authorized classes of capital stock: voting $0.01 par value
common shares and nonvoting $0.01 par value common shares. Both classes of stock
have the same relative rights, performance limitations and restrictions, except
that nonvoting shares are not entitled to vote on any matters submitted to a
vote of the stockholders, except as provided by law.

Common stock at March 31, 2000 and 1999 is comprised of the following:

Number of Shares
Authorized Issued Outstanding Amount
---------------------------------------------------------

Voting 200,000 104,520 104,520 $ 1,000
Nonvoting 20,000,000 5,226,001 5,226,001 53,000

8. Commitments

The Company leases office and warehouse space under noncancellable operating
leases ranging from two to ten years, some of which include renewal and purchase
options and escalation clauses, expiring on various dates through 2010. The
Company also leases certain trucks and equipment pursuant to noncancellable
operating leases with terms ranging from three to seven years. Future minimum
rent payments as of March 31, 2000 are as follows:

2001 $ 3,810,000
2002 3,694,000
2003 3,444,000
2004 3,399,000
2005 2,653,000
Thereafter 5,636,000
------------
$ 22,636,000
============

Rent expense was $4,171,000, $3,738,000 and $3,732,000 in 2000, 1999 and 1998,
respectively.

During 2000, NWSC entered into construction agreements for the expansion of its
warehouse facilities in Indianapolis. The commitment under the first phase of
this expansion is $3,000,000. At March 31, 2000, $891,000 of these costs were
capitalized.

<PAGE>

National Wine & Spirits, Inc.

Notes to Consolidated Financial Statements (continued)

9. Pension Plans

The Company sponsors a defined benefit pension plan covering substantially all
of its warehousemen and drivers. Under terms of the plan, the Company is liable
for any unsatisfied liabilities of the other affiliated entities. The Company
makes contributions to the plan based on amounts permitted by law. Total
expenses under the plan were $272,000, $347,000 and $224,000 in 2000, 1999 and
1998, respectively.

The components of net periodic pension cost of the defined benefit plan are as
follows for the years ended March 31:

2000 1999 1998
------------------------------------

<S> <C> <C> <C>
Service cost-benefits earned during the year $ 270,000 $ 262,000 $ 114,000
Interest on projected benefit obligation 248,000 224,000 196,000
Actual return on plan assets (417,000) (464,000) (624,000)
Amortization of unrecognized
net transition asset 20,000 20,000 19,000
Amortization of loss -- -- 8,000
Amortization of prior service cost 35,000 35,000 19,000
Difference between expected and
actual return on plan assets 150,000 247,000 471,000
---------- ---------- ----------
Net periodic pension cost $ 306,000 $ 324,000 $ 203,000
========== ========== ==========
</TABLE>

The change in the projected benefit obligation, plan assets, funded status and
amounts recognized in the accompanying consolidated balance sheets at March 31,
2000 and 1999 for the defined benefit pension plan are as follows:

2000 1999
-----------------------

Change in projected benefit obligation:

<S> <C> <C>
Benefit obligation at beginning of year $3,751,000 $3,277,000
Service cost 270,000 262,000
Interest cost 248,000 224,000
Actuarial changes (662,000) 156,000
Benefits paid (124,000) (168,000)
---------- ----------
Benefit obligation at end of year $3,483,000 $3,751,000
========== ==========
</TABLE>

<PAGE>

National Wine & Spirits, Inc.

Notes to Consolidated Financial Statements (continued)

9. Pension Plans (continued)

2000 1999
-----------------------

<S> <C> <C>
Change in plan assets:

Fair value of plan assets at
beginning of year $ 3,179,000 $ 2,662,000
Actual return on plan assets 417,000 464,000
Company contributions 481,000 221,000
Benefits paid (124,000) (168,000)
---------- ----------
Fair value of plan assets at end of year $ 3,953,000 $ 3,179,000
========== ==========

Funded status of the plan (underfunded) $ 470,000 $ (572,000)
Unrecognized net actuarial gain (1,092,000) (289,000)
Unrecognized prior service cost 496,000 531,000
Unrecognized transition obligation 126,000 146,000
----------- ----------

Accrued benefit cost $ -- $ (184,000)
=========== ===========

Weighted-average assumptions:
Discount rate 6.75% 6.75%
Expected return on plan assets 8.0% 8.0%

Balance Sheet Classification:
Current accrued liability $ -- $ 184,000
Noncurrent deferred additional liability -- 387,000
----------- -----------
Minimum liability $ -- $ 571,000
=========== ===========

Deferred pension costs (intangible asset) $ -- $ 387,000
=========== ===========
</TABLE>

The Company also sponsors a defined contribution pension plan for substantially
all employees not covered by the defined benefit plan. Contributions to the plan
are made at the discretion of the Company and may not exceed 5% of a
participant's compensation. The Company's pension expense for the defined
contribution plan was $1,293,000, $1,044,000 and $942,000 in 2000, 1999 and
1998, respectively.

<PAGE>

National Wine & Spirits, Inc.

Notes to Consolidated Financial Statements (continued)

9. Pension Plans (continued)

NWS-LLC contributes to union-sponsored multi-employer pension plans, which
provide for contributions based on a specified rate per labor hour. Union
employees constitute approximately 57% of NWS-LLC's workforce and 58% of NWSM's
workforce. The union contracts for NWSM expire in 2001. Contributions charged to
expense were $668,000, $602,000 and $565,000 in 2000, 1999 and 1998,
respectively. Information as to NWS-LLC's portion of accumulated plan benefits
and plan net assets is not currently available. Under the Employee Retirement
Income Security Act of 1974 as amended, an employer upon withdrawal from a
multi-employer plan is required to continue funding its proportionate share of
the plan's unfunded vested benefits. NWS-LLC has no intention of withdrawing
from the plans.

10. Related Party Transactions

NWSC had notes receivable from its two stockholders totaling $7,571,000 and
$9,975,000 at March 31, 2000 and 1999, respectively. The notes earn interest at
the Company's effective borrowing rate on its revolving line of credit. Interest
income earned was $809,000, $880,000 and $893,000 in 2000, 1999 and 1998,
respectively. Proceeds of the notes were used by the stockholders to purchase
additional capital stock of NWSC and to make loans to NWS-LLC. The notes, which
are due on demand, have been reflected as a reduction of stockholders' equity in
the consolidated balance sheets as it is the Company's present intent to satisfy
these receivables through future stockholder distributions.

Effective July 31, 1998, the Company and its stockholders executed new notes
payable to stockholders to provide for a legal right of offset against the notes
receivable from stockholders. Accordingly, as of March 31, 2000 and 1999, the
notes payable to stockholders (principal plus accrued interest) have been offset
against the notes receivable from stockholders, with the resulting net amount
reflected as a reduction of stockholders' equity. The total of the subordinated
notes payable was $4,459,000 and $4,569,000 at March 31, 2000 and 1999,
respectively. These notes bear interest at the effective borrowing rate on the
Company's revolving line of credit. Interest expense on these notes was
$425,000, $461,000, and $507,000 in 2000, 1999, and 1998, respectively.

The Company paid $170,000 in 2000, 1999, and 1998 for consulting fees to a
minority stockholder of NWS-LLC.

<PAGE>

National Wine & Spirits, Inc.

Notes to Consolidated Financial Statements (continued)

10. Related Party Transactions (continued)

Effective June 25, 1997, NWS-LLC sold certain of its licensed brands, trademarks
and tradenames for approximately $5,250,000. NWS-LLC recognized a gain of
$4,071,000, which represents $5,250,000 less $1,179,000 in transaction costs,
and the costs of assets related to the brands which were sold. The purchase
price is receivable under a $2,250,000 seven-year promissory note, with the
remaining balance received in cash at the sale date. At March 31, 2000 and 1999,
the note receivable balance was $1,142,000 and $1,759,000, respectively.

A Director of the Company is the Chairman and Chief Executive Officer of
eSkye.com, Inc. The Company received 1,500,000 shares of common stock in
eSkye.com, Inc. upon inception, representing founders stock. The Company
accounts for its investment in eSkye.com, Inc. using the equity method. In
October, 1999, the Company invested $500,000 in convertible preferred stock of
eSkye.com, Inc. The Company invested an additional $2,012,500 in convertible
preferred stock in May 2000.

NWS leases facilities and certain office equipment to eSkye.com, Inc. under the
terms of a three-year operating lease. NWS received rent from eSkye.com, Inc. of
$151,000 in 2000. eSkye.com, Inc. reimbursed the Company for $384,000 of
expenses paid on its behalf during 2000. The Company paid eSkye.com, Inc.
$20,000 for consulting services in 2000.

The Company paid $1,000,000 in April 2000 on behalf of an affiliate to Goose
Island, a distiller of specialty beer, for the national distribution rights on
all Goose Island malt-based products.

<PAGE>

National Wine & Spirits, Inc.

Notes to Consolidated Financial Statements (continued)

11. Segment Reporting

The Company's reportable segments are business units that engage in product
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. The accounting policies of the reportable
segments are the same as those described in the summary of significant
accounting policies.

2000 1999 1998
---------------------------------------------

<S> <C> <C> <C>
Revenues from external customers
Product sales $ 604,987,000 $ 535,521,000 $ 505,141,000
All other 20,770,000 17,832,000 16,270,000
Interest expense

Product sales 11,698,000 9,778,000 8,480,000
All other 1,576,000 1,259,000 1,192,000
Depreciation expense

Product sales 5,205,000 5,020,000 4,750,000
All other 2,065,000 1,947,000 1,122,000
Amortization expense

Product sales 1,243,000 1,320,000 1,224,000
All other 392,000 87,000 19,000
Equity in earnings of Kentucky distributor
Product sales 131,000 120,000 --
Loss on extinguishment of debt
Product sales -- 172,000 --
All other -- 146,000 --
Segment profit (loss)
Product sales 6,959,000 938,000 8,506,000
All other (1,104,000) 221,000 (1,395,000)
Segment assets

Product sales 177,354,000 168,581,000 155,351,000
All other 13,786,000 11,795,000 13,751,000
Expenditures on long-lived assets
Product sales 5,869,000 7,798,000 5,190,000
All other 803,000 60,000 8,762,000
</TABLE>

<PAGE>

National Wine & Spirits, Inc.

Notes to Consolidated Financial Statements (continued)

12. Concentration of Risk

Products purchased from four suppliers amounted to approximately 70%, 65% and
65% of all revenues in 2000, 1999 and 1998, respectively.

13. Litigation

The Company has been named as a co-defendant in a lawsuit against a supplier,
which seeks damages of $20,000,000. This suit was filed by the supplier's former
distributor. The Company is also a party to various other lawsuits and claims
arising in the normal course of business. While the ultimate resolution of
lawsuits or claims against the Company cannot be predicted with certainty,
management is vigorously defending all claims and does not expect that these
matters will have a material adverse effect on the financial position or results
of operations of the Company.

The Company settled a lawsuit in April 1999 brought by several drivers of
NWS-LLC for $475,000. The settlement released the Company from all claims,
including legal fees.

14. Subsequent Event - Unaudited

On June 5, 2000, NWSC sold its bottled water division for $10,500,000 in cash.

<PAGE>

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

Not applicable.

<PAGE>

Part III

Item 10. Directors & Executive Officers of the Registrant

Directors and Executive Officers

The following table sets forth information concerning the directors and
executive officers of NWS:

Name Age Position
---- --- --------

James E. LaCrosse 67 Chairman, President, Chief Executive Officer,
Chief Financial Officer and Director
Martin H. Bart 67 Vice Chairman, Senior Vice President and Director
J. Smoke Wallin 33 Executive Vice President, Secretary and Director
Catherine LaCrosse 33 Corporate Vice President of Sales & Marketing
and Director

James Beck 56 President, NWS-Indiana and Director
Mitchell Stoltz 46 President, NWS-Illinois and Director
David Wilson 42 Corporate Executive Vice President, Sales
& Marketing

Norma M. Johnston 71 Director
Percy N. Stone 69 Director
William Cockrum 62 Director
Vaughn D. Bryson 61 Director

James E. LaCrosse has served as Chairman, President, Chief Executive
Officer and a Director of NWS since December, 1998. He assumed the
responsibilities of Chief Financial Officer in May, 2000. Previously, Mr.
LaCrosse served as Chairman and Director NWS-Indiana since its formation in
1973, and prior to 1973 was employed by various companies in a financial
capacity. Mr. LaCrosse received an MBA from Harvard Business School in 1961 and
a BA in economics from Wesleyan University in 1957.

Martin H. Bart has served as Senior Vice President, Vice Chairman and a
Director of NWS since December, 1998. Previously Mr. Bart served as Vice
Chairman of NWSI from 1995 to 1998. Prior to joining NWS, Mr. Bart served in
various positions with the Joseph E. Seagram & Son Company from 1956 to 1993,
and retired as Executive Vice President of Sales and Marketing. Mr. Bart
received a BA in economics New York University in 1955.

J. Smoke Wallin has served as Executive Vice President, Secretary and a
Director of NWS since December, 1998. He served as Chief Financial Officer from
December 1998 until April 2000. Mr. Wallin joined NWS in 1988 and served as
Executive Vice President, Corporate Group, from 1993 to 1998. He received an MBA
in finance, marketing and operations from Vanderbilt University-Owen School of
Management in 1993 and a BS in economics from Cornell University in 1989. Mr.
Wallin is Mr. LaCrosse's son-in-law.

Catherine LaCrosse has served as Director of NWS since December 1998 and
Vice President, Sales & Marketing, of NWS since March, 2000. Ms. LaCrosse joined
NWS in 1991 and has served in various sales and marketing positions in
NWS-Indiana, NWS-Illinois and NWS-Michigan. Ms. LaCrosse received a BA in
history from Indiana University in 1990. She is Mr. LaCrosse's daughter.

James Beck has served as Director of NWS since December 1998 and President
of NWS-Indiana since 1992. Mr. Beck joined NWS in 1972 and has served in various
positions, including Executive Vice President of Sales for 14 years prior to
being named President of NWS-Indiana. He has been a Director of NWS since
December, 1998. Mr. Beck received a BS in education from Ball State University
in 1968.

<PAGE>

Mitchell Stoltz has served as Director of NWS since December 1998 and
President of NWS-Illinois since 1995. Prior to becoming President, he served as
Executive Vice President of Sales and Marketing for NWS-Illinois. Before joining
NWS in 1992, Mr. Stoltz served as Vice President and General Manager for
Magnolia Marketing Company and as President for Admiral Wine Company. He has
been a Director of NWS since December, 1998. Mr. Stoltz received an M.M. from
Northwestern University Kellogg Graduate School of Management in 1985 and a BA
in Business from Notre Dame University in 1976.

Norma M. Johnston has been a Director of NWS-Indiana since 1976, and a
Director of NWS since December, 1998. Mrs. Johnston served as Secretary of NWS
from 1976 to 1998.

Percy N. Stone has served as Director of NWS since July 1999. He retired as
General Manager of New Business Development from Continental Can in 1984 after
working in various capacities from 1957. Mr. Stone received an MBA from Harvard
Business School in 1957 and a BA in chemistry and biology from Wesleyan
University in 1952.

William Cockrum has served as Director of NWS since July 1999. He has been
an Adjunct Professor of Finance in the UCLA Anderson School of Business since
1984, teaching entrepreneurial finance, business ethics and investment
management. Mr. Cockrum was recognized as top entrepreneurial professor in the
nation by Business Week magazine in 1998. Prior to joining UCLA, he spent 25
years in investment banking, serving as a corporate officer at Becker Paribas,
Inc. until it was acquired by Merrill Lynch in 1984. Mr. Cockrum received an MBA
in finance and marketing from Harvard Business School in 1961 and a BA in
economics from DePauw University in 1959.

Vaughn D. Bryson has served as Director of NWS since July 1999. He serves
on the boards of several public companies, particularly in the biotech industry.
Mr. Bryson retired as Vice Chairman in 1996 from Vector Securities International
(now Prudent Vector). Prior to that, he worked for Eli Lilly and Company from
1961 to 1993 serving as President and CEO from 1991 to 1993, Executive Vice
President from 1986 to 1990, and Board Member from 1984 to 1993. Mr. Bryson is a
graduate of the Stanford Sloan Program, Stanford Graduate School of Business in
1967 and received a BS in pharmacy from the University of North Carolina in
1960.

David Wilson has served as Corporate Executive Vice President, Sales &
Marketing, since March 2000. Mr. Wilson joined the NWS in 1996 and previously
served as Executive Vice President of Spirits for NWS-Illinois. His previous
experience includes 17 years with the Joseph E. Seagram Corporation in various
management positions including Vice President, on-premise, North America and
state general manager in Arizona-New Mexico, Indiana and Illinois. Mr. Wilson
received an MBA from Bellarmine College in 1983 and a BBA in business and
economics from the University of Kentucky in 1979.

<PAGE>

Item 11. Executive Compensation

Compensation of Directors

Only outside Directors of NWS receive compensation per year for serving as
directors. Each outside director received $60,000 for the fiscal year ending
March 31, 2000 for serving on the board.

Executive Compensation

The following table sets forth the compensation paid by NWS to James E.
LaCrosse, Chief Executive Officer, and to each of the four most highly
compensated executive officers of NWS for 2000:

Summary Compensation Table

Annual Compensation
----------------------------------------------------------------
Other Annual All Other
Name and Principal Position Year Salary Bonus Compensation Compensation(1)
<S> <C> <C> <C> <C> <C>
James E. LaCrosse 2000 $438,711 $249,000 $ 2,210(3) $ 220,585(2)
Chairman, President,
Chief Financial Officer, and CEO
James Beck 2000 159,035 255,000 1,017(3) 7,788
President, NWS-Indiana
J. Smoke Wallin 2000 278,231 19,000 2,775(3) 10,591
Executive Vice President and Secretary
Mitchell Stoltz 2000 202,884 60,000 6,693(4) 8,596
President, NWS-Illinois
David Wilson 2000 219,923 50,000 4,305
Corporate Executive Vice President,
Sales & Marketing

<FN>

(1) Includes employer 401(k) Plan contributions in the following amounts: Mr. LaCrosse, $9,585; Mr. Wallin,
$7,973; Mr. Beck, $7,788; Mr. Stoltz, $8,596; and Mr. Wilson, $4,305. Also includes company paid portion of
medical premiums in the following amounts: Mr. Wallin, $2,618.

(2) Includes $211,000 of life insurance premiums paid by NWS on behalf of Mr. LaCrosse and for the benefit of
the LaCrosse family trust for estate planning purposes. NWS expects the premiums paid on behalf of Mr.
LaCrosse in the future will remain at their current annual rate. Upon the death of Mr. LaCrosse or
termination of the life insurance policies, NWS is entitled to repayment out of the proceeds of the policies
of all premiums paid on behalf of Mr. LaCrosse for the benefit of the LaCrosse family trust since the
inception of the policy in 1994.

(3) Represents personal use of a company supplied automobile.

(4) Consists of $3,093 representing personal use of a company-supplied automobile, and $3,600 representing
payments by NWS of country club dues.

</FN>
</TABLE>

<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management

NWS has two authorized classes of capital stock, voting common stock and
non-voting common stock. The following table sets forth the beneficial ownership
of NWS' voting common stock:

(1) By each person known by NWS to beneficially own 5% or more of NWS'
voting common stock, and

(2) By all executive officers and directors of NWS as a group.

Except for Mr. LaCrosse and Mrs. Johnston, who have sole voting and investment
power with respect to their voting common stock, no other executive officer or
director owns any shares of NWS' voting common stock.

Number of
Name and Address Shares Percent
---------------- ------ -------

James E. LaCrosse
700 West Morris Street
Indianapolis, Indiana 46225.......................... 86,520 83%

Norma M. Johnston
700 West Morris Street
Indianapolis, Indiana 46225.......................... 18,000 17

All executive officers and directors as a group
(11 persons)......................................... 104,520 100

The stockholders of NWS have entered into stockholder agreements with each
other and NWS. Such agreements contain restrictions relating to transfers of
stock and provide for rights to purchase and sell stock of each corporation,
among other matters. In particular, the stockholder agreement with NWS governs
the transferability of Mrs. Johnston's stock in NWS. The LaCrosse family is
obligated to purchase Mrs. Johnston's stock at her death or during her lifetime
should she decide to sell. NWS becomes obligated to purchase only if the
LaCrosse family refuses or fails to purchase. The LaCrosse family and NWS also
have the right to purchase Mrs. Johnston's stock at the death of Mr. LaCrosse.
Any obligation of NWS to purchase the stock owned by Mrs. Johnston is subject to
the terms of the indenture and the new credit facility. No right to purchase
stock owned by Mr. LaCrosse or a trust for the benefit of his family exists in
favor of Mrs. Johnston.

The stockholders have also agreed not to take any action or effect any
transfer that would cause NWS or any of its subsidiaries to fail to qualify as
an S corporation or other pass-through entity for federal income tax purposes.
In addition, the stockholders have entered into a tax indemnification agreement
whereby they have agreed to indemnify NWS and its subsidiaries for any loss that
may arise in the event NWS or any of its subsidiaries should fail to maintain
its pass-through status.

The LaCrosse family and NWS own life insurance policies on behalf of Mrs.
Johnston in face amount of $4.0 million and $0.5 million, respectively.

<PAGE>

Item 13. Certain Relationships and Related Transactions

J. Smoke Wallin, a Director of the Company, is the Chairman and Chief Executive
Officer of eSkye.com, Inc. The Company received 1,500,000 shares of common stock
in eSkye.com, Inc. upon inception, representing founders stock. The Company
accounts for its investment in eSkye.com, Inc. using the equity method. In
October, 1999, the Company invested $500,000 in convertible preferred stock of
eSkye.com, Inc. The Company invested an additional $2,012,500 in convertible
preferred stock in May 2000.

From time to time, NWS-Indiana has loaned money to its principal shareholders,
James E. LaCrosse and Norma M. Johnston, the primary purpose of which was to
provide the necessary funds to finance start-up expenses and working capital
needs of NWS-Illinois, an affiliated company owned prior to the reorganization
by Mr. LaCrosse, Mrs. Johnston and Martin H. Bart. As of March 31, 2000, total
indebtedness of Mr. LaCrosse and Mrs. Johnston to NWS-Indiana was $7.6 million.
The indebtedness, which is presently due upon demand, bears interest at the
prime lending rate of the Company's principal lending institution (9.00% at
March 31, 2000). The proceeds of the loans were provided by Mr. LaCrosse and
Mrs. Johnston to NWS-Illinois in the form of loans or additional capital
contributions. This indebtedness to Mr. LaCrosse and Mrs. Johnston, which
matures in 2009, is subordinated to the senior notes and the credit facility,
and bears interest at 9.00% (prime rate at March 31, 2000). At the closing of
the senior notes and the credit facility, NWS-Indiana distributed approximately
$1.8 million to Mr. LaCrosse and Mrs. Johnston. Additionally, the obligations of
NWS-Illinois under the subordinated shareholder notes are expressly subject to
timely payment by Mr. LaCrosse and Mrs. Johnston of their obligations under
their notes to NWS-Indiana.

On July 27, 1998, Mr. LaCrosse transferred substantially all of his non-voting
stock to a family trust for estate-planning purposes. As a part of this transfer
and in addition to normal distributions for tax purposes, NWS distributed $3.5
million to the family trust and Mrs. Johnston in the annual period ended March
31, 2000. These distributions were made within the terms and conditions
contained in the Company's indenture governing the senior notes (including the
limitation on restricted payments) and the credit facility. The family trust
remitted these funds to Mr. LaCrosse in repayment of indebtedness for the
non-voting stock that was purchased on July 27, 1998. Mr. LaCrosse and Mrs.
Johnston then remitted $3.5 million to NWS-Indiana to reduce their indebtedness
described above.

NWS-Indiana and NWS-Illinois have operated as S corporations under the Internal
Revenue Code of 1986 (Code), and their respective subsidiaries have all operated
as qualified subchapter S subsidiaries under the Code or other similarly taxed
pass-through entities (the "S Corp. Businesses"). NWS has elected to be treated
as an S corporation under the Code and has elected or will elect for each of its
subsidiaries to be treated as qualified subchapter S subsidiaries. The S Corp.
Businesses have not been subject to tax on their respective net taxable incomes,
and the shareholders of the S Corp. Businesses have been directly subject to tax
on their respective proportionate shares of such net taxable income. NWS-Indiana
and NWS-Illinois have historically made cash distributions to Mr. LaCrosse, Mrs.
Johnston and Mr. Bart in amounts equal to or greater than their respective tax
obligations related to the S Corp. Businesses. The aggregate amount of these
distributions during 1998, 1999, and 2000 were $2.8 million, $5.0 million and
$4.8 million, respectively. The terms of the senior notes and the credit
facility does permit NWS to make distributions to shareholders with respect to
their tax liabilities subject to certain conditions and limitations each of the
fiscal years ending 1998, 1999 and 2000.

<PAGE>

NWS-Illinois also paid a company owned by Mr. Bart $0.2 million during 1998 for
certain consulting services provided by Mr. Bart to NWS-Illinois. During 1998,
NWS-Indiana entered into a five-year non-compete agreement with James Beck,
president of NWS-Indiana and a Director of NWS, under which Mr. Beck was paid
$0.3 million by the Company. NWS-Indiana obtained certain inventory and other
property related to the wholesale cigar distribution business previously
operated by Mr. Beck.

The Company pays "split-dollar" insurance premiums on eight insurance policies
on the life of Mr. LaCrosse. See Item 11-Executive Compensation. The Company is
entitled to receive reimbursement for all premiums paid out of the proceeds of
these policies upon Mr. LaCrosse's death.

NWS pays "split-dollar" insurance premiums on seven insurance policies with a
fair value of $14.0 million on the lives of Mr. LaCrosse and Mrs. Johnston. NWS
is entitled to receive reimbursement for all premiums paid out of the proceeds
of these policies upon the death of Mr. LaCrosse and Mrs. Johnston. Premiums
paid by NWS were $328,000 in 2000, and $320,000 in 1999, and $264,000 in 1998.
The LaCrosse Family Trust is the beneficiary of those policies.

<PAGE>

PART IV

Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K

(a) Documents filed as part of this Report.

1. Financial Statements

Page(s) in
this Report

-----------

Report of Independent Auditors 28

Consolidated balance sheets - March 31, 2000 & 1999 29

Consolidated statements of income - Years
ended March 31, 2000, 1999, & 1998 30

Consolidated statements of stockholder's equity
- Years ended March 31, 2000, 1999, & 1998 31

Consolidated statements of cash flows - Years
ended March 31, 2000, 1999, & 1998 32

Notes to consolidated financial statements 33 to 46

2. Financial Statement Schedule:

Included as outlined in Item 8 of Part II of this Report.

Schedule II - Valuation & Qualifying
Accounts & Reserves 55

Schedules other than those listed above are omitted
as they are not required, or not applicable, or the
information is shown in the Notes to the Consolidated
Financial Statements.

3. Exhibits

See the Index to Exhibits on pages 57 & 58 of this
Form 10-K, which is incorporated by reference herein.

(b) Reports on Form 8-K. None.

(d) See Exhibit 27

NATIONAL WINE & SPIRITS, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

Additions
---------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Description of Period Expenses Accounts Deductions of Period
----------- ---------- ---------- ---------- ---------- ----------

<S> <C> <C> <C> <C> <C>
Year ended March 31, 2000 Deducted
from asset account:
Allowance for doubtful accounts $1,298,000 $ 544,000 $ -- $ 430,000(1) $1,412,000
LIFO reserve 7,546,000 939,000 -- -- 8,485,000
---------- ---------- --------- --------- ----------
Total $8,844,000 $1,483,000 $ -- $ 430,000 $9,897,000
========== ========== ========= ========= ==========

Year ended March 31, 1999 Deducted
from assets account:
Allowance for doubtful accounts $ 900,000 $ 504,000 $ -- $ 106,000(1) $1,298,000
LIFO reserve 7,000,000 546,000 -- -- 7,546,000
---------- ---------- --------- --------- ----------
Total $7,900,000 $1,050,000 $ -- $ 106,000 $8,844,000
========== ========== ========= ========= ==========

Year ended March 31, 1998
Deducted from assets account:
Allowance for doubtful accounts $ 926,000 $ 601,000 $ -- $ 627,000(1) $ 900,000
LIFO reserve 6,430,000 570,000 -- -- 7,000,000
---------- ---------- --------- --------- ----------
Total $7,356,000 $1,171,000 $ -- 627,000 $7,900,000
========== ========== ========= ========= ==========

<FN>
(1) Uncollectible accounts written off, net of recoveries.
</FN>
</TABLE>

(Remainder of page intentionally left blank.)

<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, on June 27, 2000.

NATIONAL WINE & SPIRITS, INC.

/s/ James E. LaCrosse
By: ----------------------------------------
James E. LaCrosse, Chairman, President,
Chief Executive Officer, and
Chief Financial Officer

Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 27th day of June, 2000 by the following persons
in the capacities indicated:

SIGNATURE TITLE

/s/ James E. LaCrosse
--------------------------------- Chairman, President, Chief Executive
James E. LaCrosse Officer (Principal Executive Officer),
and Chief Financial Officer (Principal
Financial Officer and Principal
Accounting Officer)

--------------------------------- Director, Executive Vice President,
J. Smoke Wallin* and Secretary

--------------------------------- Director
Martin H. Bart*

--------------------------------- Director
James Beck*

--------------------------------- Director
Mitchell Stoltz

--------------------------------- Director
William Cockrum

--------------------------------- Director
Percy N. Stone*

--------------------------------- Director
Norma M. Johnston*

--------------------------------- Director
Vaughn D. Bryson

--------------------------------- Director
Catherine LaCrosse Wallentine*

*By: /s/ James E. LaCrosse
--------------------------
ATTORNEY-IN-FACT

<PAGE>

INDEX TO EXHIBITS

Exhibit No. Description

----------- -----------

3.1 Amended and Restated Articles of Incorporation of National
Wine & Spirits, Inc.

3.2 Amended and Restated Bylaws of National Wine & Spirits, Inc.

3.3 Articles of Incorporation of National Wine & Spirits
Corporation (incorporated by reference Exhibit 3.3 to the
Company's Registration Statement no. 333-74589 on Form S-4,
filed May 13, 1999).

3.4 Bylaws of National Wine & Spirits Corporation (incorporated
by reference Exhibit 3.4 to the Company's Registration
Statement no. 333-74589 on Form S-4, filed May 13, 1999).

3.5 Articles of Incorporation of NWS, Inc. (incorporated by
reference Exhibit 3.5 to the Company's Registration
Statement no. 333-74589 on Form S-4, filed May 13, 1999).

3.6 Bylaws of NWS, Inc. (incorporated by reference Exhibit 3.6
to the Company's Registration Statement no. 333-74589 on
Form S-4, filed May 13, 1999).

3.7 Articles of Incorporation of NWS Michigan, Inc.
(incorporated by reference Exhibit 3.7 to the Company's
Registration Statement no. 333-74589 on Form S-4, filed May
13, 1999).

3.8 Bylaws of NWS Michigan, Inc. (incorporated by reference
Exhibit 3.8 to the Company's Registration Statement no.
333-74589 on Form S-4, filed May 13, 1999).

3.9 Articles of Organization of NWS-Illinois, LLC (incorporated
by reference Exhibit 3.9 to the Company's Registration
Statement no. 333-74589 on Form S-4, filed May 13, 1999).

3.10 Operating Agreement of NWS-Illinois, LLC (incorporated by
reference Exhibit 3.10 to the Company's Registration
Statement no. 333-74589 on Form S-4, filed May 13, 1999).

4.1 Indenture relating to the Exchange Notes, dated as of
January 25, 1999 among National Wine & Spirits, Inc., the
Subsidiary Guarantors and Norwest Bank Minnesota, N.A., as
trustee (including cross-reference sheet regarding sections
310 through 318(a) of the Trust Indenture Act) (incorporated
by reference Exhibit (4b) to the Company's Registration
Statement no. 333-74589 on Form S-4, filed March 17, 1999).

4.2 A/B Exchange Registration Rights Agreement, dated as of
January 25, 1999, among National Wine & Spirits, Inc., the
Subsidiary Guarantors and the Initial Purchasers
(incorporated by reference Exhibit 4(b) to the Company's
Registration Statement no. 333-74589 on Form S-4, filed
March 17, 1999).

4.3 Form of Exchange Notes (including related Subsidiary
Guarantors) (incorporated by reference Exhibit 4(c) to the
Company's Registration Statement no. 333-74589 on Form S-4,
filed March 17, 1999).

4.4 Guaranty entered into as of January 25, 1999 by all
Subsidiary Guarantors (incorporated by reference Exhibit
4(d) to the Company's Registration Statement no. 333-74589
on Form S-4, filed March 17, 1999).

<PAGE>

Exhibit No. Description

----------- -----------

10.1 Purchase Agreement, dated January 20, 1999, among National
Wine & Spirits, Inc., the Subsidiary Guarantors and the
Initial Purchasers (incorporated by reference Exhibit 10(a)
to the Company's Registration Statement no. 333-74589 on
Form S-4, filed March 17, 1999).

10.2 Credit Agreement, dated January 25, 1999, among National
Wine & Spirits, Inc., the Subsidiary Guarantors and NBD, as
agent. (incorporated by reference Exhibit 10(b) to the
Company's Registration Statement no. 333-74589 on Form S-4,
filed March 17, 1999).

12 Statement regarding computation of ratios

21 List of subsidiaries (incorporated by reference Exhibit 21
to the Company's Registration Statement no. 333-74589 on
Form S-4, filed March 17, 1999).

24 Powers of Attorney (contained in signature pages of this
Registration Statement)

27 Financial Data Schedule