Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1994
______________________
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
__________________ __________________
Commission File No. 0-7570,
______
Delaware Canandaigua Wine Company, Inc. and its 16-0716709
subsidiaries
New York Batavia Wine Cellars, Inc. 16-1222994
Delaware Bisceglia Brothers Wine Co. 94-2248544
California California Products Company 94-0360780
New York Guild Wineries & Distilleries, Inc. 16-1401046
South Carolina Tenner Brothers, Inc. 57-0474561
New York Widmer's Wine Cellars, Inc. 16-1184188
Delaware Barton Incorporated 36-3500366
Delaware Barton Brands, Ltd. 36-3185921
Maryland Barton Beers, Ltd. 36-2855879
Connecticut Barton Brands of California, Inc. 06-1048198
Georgia Barton Brands of Georgia, Inc. 58-1215938
New York Barton Distillers Import Corp. 13-1794441
Delaware Barton Financial Corporation 51-0311795
Wisoncsin Stevens Point Beverage Co. 39-0638900
New York Monarch Wine Company, Limited Partnership 36-3547524
Illinois Barton Management, Inc. 36-3539106
New York Vintners International Company, Inc. 16-1443663
_____________ _______________________________________ __________
(State or other (Exact Name of registrant as specified (I.R.S.
incorporation or in its charter) Employer
organization) Identification
Number)
116 Buffalo Street, Canandaigua, New York 14424
___________________________________________________________
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (716)394-7900
_____________
Former Name, Former Adress and Former Fiscal Year, if Changed Since
Last Report
Indicate by check 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 wasrequired to file such reports), and (2) has been subject to
such filing requirements for the past 90 days Yes X No
The number of shares outstanding of each of the classes of common
stock of Canandaigua Wine Company, Inc. as of April 8, 1994 is set forth
below (all of the registrants, other than Canandaigua Wine Company, Inc.
are direct or indirect wholly owned subsidiaries of Canandaigua Wine
Company, Inc.).
Class Number of Shares
Outstanding
Class A Common Stock,
Par Value $.01 Per Share 12,591,831
Class B Convertible Common Stock,
Par Value $.01 Per Share 3,391,451
PAGE
<PAGE>
Part 1 - Financial Information
Item 1. Financial Statements
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
February 28, 1994 August 31, 1993
(Unaudited) (Unaudited)
Assets
<S> <C> <C>
Current Assets:
Cash and equivalents $5,583,715 $3,717,782
Accounts receivable 91,485,890 75,908,946
Inventories 226,837,816 147,165,267
Prepaid expenses and other current assets 18,253,589 17,262,919
Total Current Assets $342,161,010 $244,054,914
Property, Plant and Equipment, at cost less accumulated
depreciation 166,119,369 78,600,281
Other Assets 42,111,525 32,527,291
Total Assets $550,391,904 $355,182,486
Liabilities and Stockholders' Equity
Current Liabilities:
Current portion of long-debt $14,054,835 $11,828,000
Notes Payable - banks 51,000,000 9,000,000
Accounts payable - trade 33,114,211 41,288,481
Federal and state income taxes 694,452 950,509
Federal and state excise taxes 17,195,957 11,194,941
Accrued salaries, bonuses and commissions 5,488,311 4,276,960
Other accrued liabilities 27,800,616 16,499,606
Deferred income taxes 1,763,241 1,763,241
Total Current Liabilities $151,111,623 $96,801,738
Long-Term Debt, less current portion $175,205,995 $108,303,233
Deferred Income Taxes $20,381,729 $20,629,329
Other Long-Term Liabilities $3,191,313 $3,344,414
Stockholders' Equity
Class A Common Stock, $.01 par value - Authorized
60,000,000 shares; Issued, 13,831,197 at February
28,1994 and 10,543,645 at August 31, 1993 $138,312 $105,439
Class B Convertible Common Stock, $.01 par value -
Authorized 20,000,000 shares; Issued, 4,017,176 at
February 28, 1994 and 4,068,576 at August 31, 1993 40,172 40,685
110,066,831 47,201,942
Additional paid-in capital 97,919,770 86,525,325
Retained earnings 208,165,085 133,873,391
Less Treasury Stock
Class A Common Stock, 1,239,366 shares at February 28,
1994 and 1,274,251 at August 31, 1993, at cost (5,457,318) (5,563,096)
Class B Convertible Common Stock, 625,725 shares at
February 28, 1994 and August 31, 1993, at cost (2,206,523) (2,206,523)
Total Stockholders' Equity $200,501,244 $126,103,772
Total Liabilities and Stockholders' Equity $550,391,904 $355,182,486
The accompanying notes to consolidated financial statements are an integral part of these
statements.
</TABLE>
PAGE
<PAGE>
<TABLE> CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Retained Earnings
<S>
Six Months Ended Three Months Ended
February 28, 1994 February 28, 1993 February 28, 1994 February 28, 19
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<C> <C> <C> <C>
Gross Sales $406,572,248 $160,006,558 $192,618,021 $71,845,481
Less Excise taxes (112,056,505) (30,116,066) (52,586,893) (13,063,746)
Net sales $294,515,743 $129,890,492 $140,031,128 $58,781,735
Cost of Product Sold (208,191,988) (90,660,486) (98,362,807) (41,088,734)
Gross profit on sales 86,323,755 39,230,006 41,668,321 17,693,001
Selling, General & Administrative Expenses (59,659,905) (25,740,223) (28,012,389) (11,418,580)
Operating Income 26,663,850 13,489,783 13,655,932 6,274,421
Interest Income 73,771 121,954 35,746 18,006
Interest Expense (8,359,536) (3,038,436) (4,505,713) (1,531,530)
Income before provision for income taxes 18,378,085 10,573,301 9,185,965 4,760,897
Provision for Federal and State Income Taxes (6,983,640) (4,017,750) (3,444,732) (1,809,050)
Net Income 11,394,445 6,555,551 5,741,233 2,951,847
Retained Earnings, Beginning 86,525,325 70,921,273 92,178,537 74,524,977
Retained Earnings, Ending $97,919,770 $77,476,824 $97,919,770 $77,476,824
Net Income Per Common and Equivalent Share
Primary $.75 $.56 $.35 $.25
Fully Diluted $.72 $.52 $.35 $.24
Weighted Average Shares Outstanding
Primary 15,198,371 11,769,600 16,375,396 11,779,222
Fully Diluted 16,307,830 15,062,684 16,375,396 15,072,307
Dividend per share NONE NONE NONE NONE
The accompanying notes to consolidated financial statements
are an integral part of these statements
</TABLE>
<PAGE>
<PAGE>
<TABLE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<S>
Six Months Ended Three Months Ended
February 28, 1994 February 28, 1993 February 28, 1994 Febru
(Unaudited) (Unaudited) (Unaudited) (U
<C> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income $11,394,445 $6,555,551 $5,741,233 $2,951,847
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation of property, plant and equipment
4,732,677 3,602,774 2,438,970 1,790,011
Amortization
1,648,692 515,934 804,889 257,967
Gain on sale of equipment
0 (184,968) 0 0
Change in deferred taxes
(247,600) 0 (247,600) 0
Accrued interest on converted debentures, net of
tax
161,241 0 (520,900) 0
Changes in assets and liabilities, net of effects
from purchase of business:
Accounts receivable 4,600,826 5,481,235 31,919,372 16,287,963
Inventories 4,738,299 (6,934,091) 14,424,867 9,377,687
Prepaid expenses (677,574) 613,164 (3,423,283) (1,688,853)
Accounts payable (41,439,624) (26,066,356) (12,831,766) (8,911,183)
Accrued Federal and state income taxes (256,057) 1,690,921 (2,365,826) (490,850)
Accrued Federal and state excise taxes 4,943,538 (209,395) 3,762,193 (82,420)
Accrued salaries and commissions 1,211,351 (430,051) 556,349 (502,216)
Other accrued liabilities (5,819,961) (789,333) (6,835,694) (921,951)
Other (9,120,695) (222,787) (9,076,990) (10,252)
Total adjustments $(35,524,887) $(22,932,953) $18,604,581 $15,105,903
Net cash used by operating activities $(24,130,442) $(16,377,402) $24,345,814 $18,057,750
Cash Flows From Investing Activities
Purchases of property, plant and equipment, net of
minor disposals $(2,800,418) (3,151,506) (1,274,828) (940,732)
Purchase of business-net of cash acquired
3,200 0 0 0
Proceeds from sale of equipment
0 649,000 0 0
Net cash used by investing activities
$(2,797,218) $(2,502,506) $(1,274,828) $(940,732)
Cash Flows From Financing Activities:
Net proceeds of short-term borrowings 30,681,358 18,000,000 (19,500,000) (17,000,000)
Principal payments of long-term debt (2,439,666) (25,682) (2,037,546) (10,850)
Proceeds of employee stock appreciation & purchase
plan 544,860 202,279 544,860 152,005
Exercise of employee stock options 10,000 0 10,000 0
Fractional shares paid for stock splits (2,959) 0 0 0
Net cash provided by financing activities $28,793,593 $18,176,597 $(20,982,686) $(16,858,845)
Net Decrease in Cash and Cash Investments $1,865,933 (703,311) 2,088,300 $258,173
Cash and Cash Equivalents, beginning of period 3,717,782 2,193,543 3,495,415 1,232,059
Cash and Cash Equivalents, end of period $5,583,715 $1,490,232 $5,583,715 $1,490,232
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest $6,722,319 $3,038,436 $4,128,157 $1,427,233
Income taxes $8,008,197 $2,326,829 $6,579,057 $2,299,900
Supplemental Disclosures of Noncash Investing and
Financing Activities:
Fair value of assets acquired $199,493,954
Liabilities assumed (52,661,669)
Consideration paid
$146,832,285
Less - amounts borrowed
(142,622,285)
Less - issuance of Class A Common Stock options (4,210,000)
Net cash paid for acquisition $ 0
Issuance of Class A Common Stock for conversion of
debentures $58,960,000
Write off of unamortized deferred financing costs on
debentures (1,568,719)
Write off of unpaid accrued interest on debentures 1,370,743
Total addition to Stockholders' Equity from
Conversion $58,762,024
The accompanying notes to consolidated financial statements are an integral part of these statements
</TABLE>
<PAGE>
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
February 28, 1994
1. Management Representations:
The condensed consolidated financial statements included
herein have been prepared by the Company, without audit, pursuant
to the rules and regulations of the Securities and Exchange
Commission applicable to quarterly reporting on Form 10-Q and
reflect, in the opinion of the Company, all adjustments necessary
to present fairly the financial information for Canandaigua Wine
Company, Inc. and its consolidated subsidiaries. All such
adjustments are of a normal recurring nature. Certain information
and footnote disclosures normally included in financial
statements, prepared in accordance with generally accepted
accounting principles, have been condensed or omitted as
permitted by such rules and regulations. These consolidated
financial statements should be read in conjunction with the
consolidated financial statements and related notes, included in
the Company's Annual Report on Form 10-K, for the fiscal year
ended August 31, 1993.
2. Inventories:
Inventories are valued at the lower of cost (computed in
accordance with the last-in, first-out (LIFO) or first-in, first-
out (FIFO) methods) or market. The percentage of inventories
valued using the LIFO method is 95%, 88%, and 96% at February 28,
1994, August 31, 1993, and February 28, 1993, respectively.
Replacement cost of the inventories determined on a FIFO basis
approximated $227,043,000, $146,421,000, and $99,615,000 at
February 28, 1994, August 31, 1993, and February 28, 1993,
respectively. At February 28, 1994, August 31, 1993 and February
28, 1993, the net realizable value of the Company's inventories
was in excess of $226,837,816, $147,165,267, and $99,628,492,
respectively.
Elements of cost include materials, labor and overhead and
consist of the following:
<TABLE>
February 28, August 31, February 28,
1994 1993 1993
<S> <C> <C> <C>
Raw
materials
and
supplies $32,972,286 $31,683,657 $33,971,573
Wines,
whiskey
and
spirits in
process 145,942,808 73,400,765 48,121,804
Finished
case goods 47,922,722 42,080,845 17,535,115
$226,837,816 $147,165,267 $99,628,492<PAGE>
3. Property, Plant and Equipment:
</TABLE>
3. Property, Plant and Equipment:
The major components of property, plant and equipment for
the Company are as follows:
<TABLE>
February 28, 1994 August 31, 1993
<S> <C> <C>
Land $12,368,286 $4,305,648
Buildings and
improvements 63,568,625 30,135,151
Machinery and equipment 140,608,209 91,161,305
Motor vehicles 2,466,542 2,553,585
Construction in progress 3,470,362 2,074,570
$222,482,024 $130,230,259
Less accumulated
depreciation (56,362,655) (51,629,978)
$166,119,369 $78,600,281
</TABLE>
4. Vintners Acquisition:
On October 15, 1993, the Company acquired substantially all
of the tangible and intangible assets of Vintners International
Company, Inc. ("Vintners") other than cash and the Hammondsport
Winery (the "Vintners Assets"), and assumed certain current
liabilities associated with the ongoing business (the "Vintners
Acquisition"), for an aggregate purchase price of $148.9 million
(the "Cash Consideration"), subject to adjustment based upon the
determination of the Final Net Current Asset Amount (as defined
below), and paid $8,961,000 of direct acquisition and financing
costs. In addition, at closing the Company delivered options (the
"Options") to Vintners and Household Commercial of California,
Inc., one of Vintners' lenders, to purchase an aggregate of
500,000 shares (the "Option Shares") of the Company's Class A
Common Stock, at an exercise price per share of $18.25, which are
exercisable at any time until October 15, 1996. These options
have been recorded at $8.42 per share, based upon an independent
appraisal and $4,210,000 has been reflected as a component of
additional paid-in-capital.
Vintners was the United States' fifth largest supplier of
wine with two of the country's most highly recognized brands,
Paul Masson and Taylor California Cellars. The wineries acquired
from Vintners are the Gonzales Winery in Gonzales, California and
the Paul Masson wineries in Madera and Soledad, California. In
addition, the Company is leasing from Vintners the Hammondsport
Winery in Hammondsport, New York. The lease is for a period of
18 months from the date of the Vintners Acquisition.
The Cash Consideration was funded by the Company pursuant to
(i) approximately $12.6 million of Revolving Loans under the
Credit Facility (as defined in Note 5 below) of which $11.2
million funded the Cash Consideration and $1.4 million funded the
payment of direct acquisition costs; (ii) an accrued liability of
approximately $7.7 million for the holdback described below and
(iii) the $130.0 million Subordinated Bank Loan (as defined in
Note 5 below). See "Description of Long-Term Debt" under Note 5
below.
<PAGE>
At closing the Company held back from the Cash Consideration
approximately 10% of the then estimated net current assets of
Vintners purchased by the Company, and deposited an additional
$2.8 million of the Cash Consideration into an escrow to be held
until October 15, 1995. If the amount of the net current assets
as determined after the closing (the "Final Net Current Asset
Amount") is greater than 90% and less than 100% of the amount of
net current assets estimated at closing (the "Estimated Net
Current Asset Amount"), then the Company shall pay into the
established escrow an amount equal to the Final Net Current Asset
Amount less 90% of the Estimated Net Current Asset Amount. If
the Final Net Current Asset Amount is greater than the Estimated
Net Current Asset Amount, then, in addition to the payment
described above, the Company shall pay an amount equal to such
excess, plus interest from the closing, to Vintners. If the
Final Net Current Asset Amount is less than 90% of the Estimated
Net Current Asset Amount, then the Company shall be paid such
deficiency out of the escrow account. As of February 28, 1994,
no adjustment to the established escrow was required and the
Final Net Current Asset Amount has not been determined.
The Vintners Acquisition was accounted for using the purchase
method; accordingly, the Vintners Assets were recorded at fair
market value at the date of acquisition. The fair market value
of the Vintners Assets approximated the aggregate purchase price.
The accompanying consolidated financial statements reflect the
results of operations of Vintners since October 15, 1993.
The following table presents unaudited pro forma results of
operations as if the Vintners Acquisition occurred at the
beginning of the six months ended 2/28/94 and as if the
acquisitions of both Vintners and Barton Incorporated ("Barton")
occurred at the beginning of the six months ended 2/28/93, after
giving effect to certain adjustments for depreciation,
amortization of intangibles, interest expense on the acquisition
debt and related income tax effects. These pro forma results
have been prepared for comparative purposes only and do not
purport to be indicative of what would have occurred had the
acquisition been made at the beginning of fiscal 1994 and 1993,
respectively, or of results which may occur in the future.
<TABLE>
Proforma
For the Six Months Ended
February 28, 1994 February 28, 1993
<S> <C> <C>
Net Sales $311,778,000 $331,392,000
Net Income from
Operations 26,245,000 35,233,000
Net Income 9,888,517 15,301,000
Net Income per Common and
Equivalent Shares:
Primary $.65 $1.19
Fully Diluted $.63 $1.03
Weighted Average Shares
Outstanding:
Primary 15,198,371 12,887,241
Fully Diluted 16,307,830 16,189,521
</TABLE>
<PAGE>
5. Long-Term Debt:
Long-term debt consists of the following at February 28, 1994:
<TABLE>
Current Long-Term Total
<S> <C> <C> <C>
Credit Facilities
Senior Credit Facility:
Term loan, variable rate,
original proceeds $50,000,000
due in installments through
fiscal 1999 $8,000,000 $40,000,000 $48,000,000
Senior Subordinated Notes:
8.75% redeemable after December
15, 1998, due 2003 ----- 130,000,000 130,000,000
Capitalized Lease Agreements:
Capitalized equipment leases at
interest rates ranging from
8.9% to 18% due in monthly
installments through fiscal
1997 276,977 326,522 603,499
Industrial Development
Agencies:
7 1/4 1975 issue, original
proceeds $2,000,000, due in
annual installments of $100,000
through fiscal 1994 100,000 ----- 100,000
7 1/2% 1980 issue, original
proceeds $2,370,000, due in
annual installments of $118,500
through fiscal 1999 118,500 592,500 711,000
Other Long-Term Debt:
Loans payable - 5% secured by
cash surrender value of
officer's life insurance
policies ----- 966,973 966,973
Notes payable at 1% below prime
rate to prime rate, due in
yearly installments through
fiscal 1995 5,239,358 3,000,000 8,239,358
Promissory note at prime rate
due in equal yearly
installments through September
30, 1995 320,000 320,000 640,000
$14,054,835 $175,205,995$189,260,830
</TABLE>
Description of Long-Term Debt
Senior Credit Facility
On October 15, 1993 the Company amended the Senior Credit
Facility (the "Credit Facility") in connection with the
acquisition of substantially all of the assets of Vintners.
The Credit Facility consists of: (i) a $50.0 million Term
Loan; (ii) Revolving Loans in an aggregate principal amount,
together with the aggregate amount of all undrawn or drawn
letters of credit ("Revolving Letters of Credit"), not to exceed
$95.0 million; and (iii) a standby irrevocable letter of credit
of $28.2 million. The Banks have been given security interests
in substantially all of the assets of the Company and its
subsidiaries and each of the Company's principal operating
subsidiaries has guaranteed, jointly and severally, the Company's
obligations under the Credit Facility.
The Revolving Loans and the Term Loan, at the Company's
option, can be either a Base Rate Loan or a Eurodollar Loan. A
Base Rate Loan bears interest at the rate per annum equal to (i)
the higher of (1) Federal Funds Rate for such day plus 1/2 of 1%,
or (2) the Chase Bank prime commercial lending rate, plus (ii)
0.375% (subject to adjustment). A Eurodollar Loan bears interest
at London Interbank Offered Rate plus 1.625% (subject to
adjustment).
As of February 28, 1994, the Term Loan outstanding balance
was $48 million, which was a Eurodollar Loan that bears interest
at 5.13% per annum. As of February 28, 1994, $51.0 million was
outstanding under the Revolving Loans and $41.0 million was
available to be drawn down by the Company. The Revolving Loans
are required to be prepaid in such amounts that the aggregate
amount of Revolving Loans outstanding, together with the drawn
and undrawn Revolving Letters of Credit, will not exceed the
Borrowing Base. The Borrowing Base means the sum of 70% of the
amount of certain eligible receivables plus 40% of the value of
certain eligible inventory. In addition, the Revolving Loans are
required to be prepaid in such amounts that, for a period of 30
consecutive days during the last two fiscal quarters of each
fiscal year, the aggregate amount of Revolving Loans outstanding,
together with drawn and undrawn Revolving Letters of Credit, will
not exceed $35.0 million. The Revolving Loans mature on June 15,
1999.
The Company is subject to certain restrictive covenants
including those relating to additional liens, additional
indebtedness, the sale of assets, the payment of dividends,
transactions with affiliates, certain investments and certain
other fundamental changes and making capital expenditures that
exceed specified levels. The Company is also required to
maintain the following financial covenants above specified
levels: indebtedness to tangible net worth; tangible net worth;
fixed charges ratio; operating cash flow to interest expense; and
current ratio.
The Company is required to maintain in effect until June 29,
1995 interest rate swap, cap or collar agreements or other
similar arrangements (each, an "Interest Rate Protection
Agreement") which protect the Company against three-month London
Interbank Offered Rates exceeding 7.5% per annum in an amount at
least equal to $25.0 million.
Senior Subordinated Notes
The Company borrowed $130.0 million under a subordinated bank
loan agreement (the "Subordinated Bank Loan") provided in
connection with the Vintners Acquisition. On December 27, 1993,
the Company repaid the Subordinated Bank Loan from the proceeds
of an issuance of $130 million of senior subordinated notes ("the
Notes") together with borrowings under the revolving loans. The
Notes are due 2003 with a stated interest rate of 8.75% per
annum. Interest will be payable semi-annually on June 15 and
December 15 of each year. The Notes are redeemable at the option
of the Company, in whole or in part, on or after December 15,
1998. The Notes are unsecured and subordinated to the prior
payment in full of all senior indebtedness of the Company, which
includes the Credit Facility and, the Notes are guaranteed, on a
senior subordinated basis, by substantially all of the Company's
operating subsidiaries.
The indenture relating to the Notes contains certain
covenants, including, but not limited to, (i) limitation on
indebtedness; (ii) limitation on restricted payments; (iii)
limitation on transactions with affiliates; (iv) limitation on
senior subordinated indebtedness; (v) limitation on liens; (vi)
limitation on sale of assets; (vii) limitation on issuance of
guarantees of and pledges for indebtedness; (viii) restriction on
transfer of assets; (ix) limitation on subsidiary capital stock;
(x) limitation on the creation of any restriction on the ability
of the Company's subsidiaries to make distributions and other
payments; and (xi) restrictions on mergers, consolidations and
the transfer of all or substantially all of the assets of the
Company to another person. The limitation on indebtedness
covenant is governed by a rolling four quarter fixed charge
coverage ratio covenant requiring a specified minimum.
Convertible Subordinated Debentures
On October 18, 1993, the Company called its 7% Convertible
Subordinated Debentures (the "Debentures") for redemption on
November 19, 1993 at a redemption price of 102.1% plus accrued
interest. During the period September 1, 1993 through November
19, 1993, Debentures in an aggregate principal amount of
$58,960,000 were converted to 3,235,882 shares of the Company's
Class A Common Stock at a price of $18.22 per share. Debentures
in an aggregate principal amount of approximately $63,000 were
redeemed. Interest was accrued on the Debentures until the date
of conversion but was forfeited by the debentureholders upon
conversion. Accrued interest in an amount of approximately
$1,370,000 was recorded as an addition to additional paid-in-
capital.
At the redemption date, the capitalized debenture issuance
costs of approximately $2,246,000 net of accumulated amortization
of approximately $677,000 were recorded as a reduction of
additional paid-in-capital.
<PAGE>
6. Commitments and Contingencies
In connection with the Vintners Acquisition, the Company has
assumed Vintners' purchase and crush contracts with certain
growers and suppliers. Under the grape purchase contracts, the
Company is committed to purchase all grape production yielded
from a specified number of acres for a period of time ranging up
to five years. The actual tonnage of grapes that must be
purchased by the Company will vary each year depending on certain
factors, including weather, time of harvest, and the agricultural
practices and location of the growers and suppliers under
contract.
The grapes purchased under these contracts are generally
priced at market value as determined by either the prior year's
(or an average of the three most recent prior years) Grape Crop
Report issued by the California Department of Food and
Agriculture or on prices as reported by the Federal State Market
News Service. Some contracts include a minimum base price per
ton that the Company must pay. The Company purchased $8,464,000
of grapes under these contracts during the period October 15,
1993 through February 28, 1994. Based on current and anticipated
future yields and prices, the Company estimates that purchases in
the following amounts will be required under these contracts
during the subsequent four fiscal years:
Year 1995 $26,648,000
Year 1996 $18,179,000
Year 1997 $5,665,000
Year 1998 $1,895,000
For contracts extending beyond 1998, it is not feasible to
estimate the amounts to be paid. However, none of the contracts
with terms extending beyond 1998 are at prices in excess of
market value, as defined above, and all of the contracts
extending beyond 1998 are for quantities and varieties less than
the anticipated future requirements of the business.
The Company has assumed Vintners' grape crush contract
obligations with another winery under which the Company is
obligated to pay $600,000 for crushing and processing of a
specified tonnage at a fixed price per ton during fiscal 1995.
The Company has also assumed the lease obligations of
Vintners, including the lease obligation with the owner of
certain warehouse facilities no longer used by the Company.
Under the terms of the agreement, the Company's lease obligation
is reduced by the amount of rentals received from a new lessee of
the facilities. The Company has accrued the estimated lease
obligations in excess of the amount of rentals to be received
from the new lessee.
At February 28, 1994, aggregate minimum rental commitments
under various non-cancelable operating lease agreements assumed
from Vintners for the remainder of fiscal 1994 and thereafter are
as follows:
Remainder of 1994 373,640
Year 1995 132,300
Year 1996 89,498
Year 1997 77,518
Year 1998 75,505
Thereafter 75,505
7. Subsequent Event - Agreement to Import Mexican Beers
On March 31, 1994, Barton Beers, Ltd., a wholly owned
subsidiary of the Company, entered into a new agreement under
which it will continue importing, marketing and distributing
Corona Extra, Corona Light, Coronita, Negra Modelo, Modelo
Especial and Pacifico Beers in the twenty-five primarily western
states of the United States. The agreement is retroactive to
January 1, 1994 and continues through December 31, 1998. The new
agreement contains substantially similar provisions as the
previous agreement, including certain performance criteria.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations of the Company
The Company has realized significant growth in sales and
profitability over the last two fiscal years primarily as a
result of acquisitions. The Company acquired substantially all
of the assets of Guild Wineries and Distilleries on October 1,
1991, all of the outstanding capital stock of Barton Incorporated
("Barton") on June 29, 1993 ("Barton Acquisition") and
substantially all of the assets of Vintners International
Company, Inc. ("Vintners") on October 15, 1993 ("Vintners
Acquisition"). Management expects the Barton Acquisition and
Vintners Acquisition to have a substantial impact on future
results of the Company's operations. The Company's results of
operations for the quarter ended February 28, 1994 include the
results of operations of Barton and Vintners for the complete
period. The Company's results of operations for the six months
ended February 28, 1994 include the results of operations of
Barton for the complete period and include the results of the
operations of Vintners' assets from October 15, 1993, the date of
the Vintners Acquisition.
The following table sets forth, for the periods indicated,
certain items in the Company's consolidated statements of income
expressed as percentage of net sales:
<TABLE>
Three Months Ended Six Months Ended
February 28, February 28,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of product sold 70.2 69.9 70.7 69.8
Gross profit 29.8 30.1 29.3 30.2
Selling, general and
administrative expenses 20.0 19.4 20.2 19.8
Operating Income 9.8 10.7 9.1 10.4
Interest expense, net 3.2 2.6 2.8 2.3
Income before provision for
income taxes 6.6 8.1 6.3 8.1
Provision for federal and
state income taxes 2.5 3.1 2.4 3.1
Net income 4.1% 5.0% 3.9% 5.0%
</TABLE>
Three Months Ended February 28, 1994 ("Second Quarter 1994")
Compared to Three Months Ended February 28, 1993 ("Second Quarter
1993")
Net Sales
Net sales for the Company's Second Quarter 1994 increased to
$140 million from $58.8 million for Second Quarter 1993, an
increase of $81.2 million, or approximately 138%. This increase
resulted from the inclusion of $ 52.4 million of Barton's net
sales and $31.4 million of net sales of Vintners' products during
Second Quarter 1994. Excluding the impact of the Barton and
Vintners Acquisitions, the Company's net sales decreased $2.6
million, or 4.4%, when compared to the same period a year ago.
This was principally due to a decrease in net sales of the
Company's non-branded products, specifically grape juice
concentrate.
Wine
For purposes of computing the comparative data for the
Company's branded wine products set forth below, sales in the
Second Quarter of 1994 of branded wine products acquired from
Vintners have been compared with sales of Vintners' branded wine
products during Second Quarter 1993 prior to the Vintners
Acquisition.
Net sales and unit volume of the Company's branded wine
products each declined 6.0% as compared to the same period a year
ago. These decreases were principally a result of a decline in
net sales and unit volume of branded wine products acquired from
Vintners.
Net sales and unit volume of the Company's varietal table
wine brands for Second Quarter 1994 decreased 6.3% and 0.2%,
respectively, resulting primarily from decreases in sales of
varietal table wine brands acquired from Vintners, which were
offset, in part, by increased sales of the Company's varietal
table wine brands, exclusive of varietal table wine brands
acquired from Vintners. Net sales and unit volume of the
Company's generic table wine brands for the same period were
down 5.2% and 4.8%, respectively, principally due to lower sales
of generic table wine brands acquired from Vintners, which were
also offset, in part, by increased sales of the Company's generic
table wine brands, exclusive of generic table wine brands
acquired from Vintners. Net sales and unit volume of sparkling
wine brands decreased 9.0% and 7.9%, respectively, due to a
general decline in most of the Company's sparkling wine brands.
Net sales and unit volume of the Company's dessert wine brands
were down 4.6% and 8.3%, respectively, in Second Quarter 1994
versus the same period a year ago. The Company's net sales and
unit volume of dessert wine brands have declined over the last
three years. These declines can be attributed to a general
decline in dessert wine consumption in the United States.
The Company believes that the net sales and unit volume
declines on brands acquired from Vintners reflect the effects of
non-competitive pricing on certain brands which occurred prior to
the Vintners Acquisition. The Company has implemented strategies
to address this area which the Company believes has negatively
impacted the operating results for brands acquired from Vintners.
Imported Beer
Net sales and unit volume of the Company's beer brands for
Second Quarter 1994 increased by 11.8% and 12.7%, respectively,
when compared to Barton's net sales and unit volume for the same
period a year ago. These increases resulted primarily from
increased sales of the Company's Corona Extra brand and other
Mexican beer brands, and increased sales of its St. Pauli Girl
brand.
On March 31, 1994, Barton Beers, Ltd., a wholly owned
subsidiary of the Company, entered into a new agreement under
which it will continue importing, marketing and distributing
Corona Extra, Corona Light, Coronita, Negra Modelo, Modelo
Especial and Pacifico Beers in the twenty-five primarily western
states in the United States. The new agreement has a term of
five years, ending December 31, 1998, and contains substantially
similar provisions as the previous agreement, including certain
performance criteria.
Spirits
Net sales and unit volume of the Company's spirits case goods
for Second Quarter 1994 were up 1.5% and up 0.6%, respectively,
as compared to Barton's net sales and unit volume for the same
period a year ago. This increase in net sales was primarily due
to higher net sales of the Company's blended whiskeys, tequila
and Scotch whisky, which was offset in large part by decreased
net sales of the Company's liqueur, vodka and bourbon brands.
On February 4, 1994, the Company paid $5.1 million to Hiram
Walker & Sons, Inc. ("Hiram") for the extension of licenses to
use the brand names Ten High Bourbon Whiskey, Lauder's Scotch
Whisky, Northern Light Blended Canadian Whisky, Imperial Blended
Whiskey, Crystal Palace Vodka and Gin and certain other spirits
brands, for varying periods, the longest of which terminates in
2116. The Company also entered into extensions of certain whisky
supply arrangements with affiliates of Hiram in connection with
the extension of such licenses.
Gross Profit
Gross profit increased to $41.7 million in Second Quarter
1994 from $17.7 million in Second Quarter 1993, an increase of
$24.0 million, or approximately 136%. This increase in gross
profit resulted from the inclusion of Barton's and Vintners'
operations into those of the Company. Gross profit as a
percentage of net sales decreased to 29.8% in Second Quarter 1994
from 30.1% in Second Quarter 1993. The Company's gross margin
decreased primarily as a result of the inclusion of Barton's
operations into those of the Company, which was partially offset
by higher gross margins associated with the Company's operation
of the Vintners' assets.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to
$28.0 million in Second Quarter 1994 from $11.4 million in Second
Quarter 1993, an increase of $16.6 million, or approximately
145%. This increase resulted from the inclusion of Barton's and
Vintners' selling, general and administrative expenses into the
Company's and higher advertising and promotional spending on
brands of the Company owned prior to the Barton and Vintners
Acquisitions.
Interest Expense, Net
Interest expense, net increased to $4.5 million in Second
Quarter 1994 from $1.5 million in Second Quarter 1993, an
increase of $3.0 million. This increase principally resulted
from financing activities related to the Vintners Acquisition and
Barton Acquisition.
Net Income
Net income increased to $5.7 million in Second Quarter 1994
from $3.0 million in Second Quarter 1993, an increase of $2.8
million, or 94.0%. This increase resulted primarily from the
inclusion of the operations of Barton and Vintners into those of
the Company.
Six Months Ended February 28, 1994 ("First Half of Fiscal 1994")
Compared to Six Months Ended February 28, 1993 ("First Half of
Fiscal 1993")
Net Sales
Net sales for the First Half of Fiscal 1994 increased to
$294.5 million from $129.9 million for the First Half of Fiscal
1993, an increase of $164.6 million, or approximately 127%.
This increase resulted from the inclusion of $118.7 million of
Barton's net sales during the First Half of Fiscal 1994 and $53.5
million of net sales of Vintners' products from October 15, 1993,
the date of the Vintners Acquisition. Excluding the impact of
the Barton and Vintners Acquisitions, the Company's net sales
decreased $7.6 million, or 5.9%, when compared to the same period
a year ago. This was principally due to a decrease in net sales
of the Company's non-branded products, specifically grape juice
concentrate, and to lower sales of the Company's dessert wines.
Wine
For purposes of computing the comparative data for the
Company's branded wine products set forth below, sales of branded
wine products acquired from Vintners have been included in the
First Half of 1994 from October 15, 1993 (the date of the
Vintners Acquisition) through February 28, 1994, and included for
the same period during the First Half of 1993 prior to the
Vintners Acquisition.
Net sales and unit volume of the Company's branded wine
products for the First Half of Fiscal 1994 declined 6.2% and
7.8%, respectively, as compared to the same period a year ago.
Net sales of the Company's branded products declined less than
unit volume due to higher prices of certain brands and a
favorable change in product mix. These decreases were due to
lower sales of branded wine products acquired from Vintners and,
to a lesser extent, to lower sales of the Company's branded
wine products, exclusive of branded wine products acquired from
Vintners.
Net sales and unit volume of the Company's varietal table
wine brands for the First Half of Fiscal 1994 increased 3.7% and
8.8%, respectively, reflecting increases in substantially all of
the Company's varietal table wine brands exclusive of varietal
table wine brands acquired from Vintners which declined
significantly. Net sales and unit volume of the Company's
generic table wine brands for the same period were down 8.0% and
7.6%, respectively, principally due to lower sales of generic
table wine brands acquired from Vintners. Net sales and unit
volume of sparkling wine brands decreased 1.8% and 3.3%,
respectively, principally due to lower sales of sparkling wine
brands acquired from Vintners. Excluding sales of sparkling wine
brands acquired from Vintners, the Company's sales of sparkling
wine brands were up slightly while unit volume was down slightly.
Net sales and unit volume of the Company's dessert wine brands
were down 13.3% and 15.6%, respectively, in First Half of Fiscal
1994 versus the same period a year ago. The Company's net sales
and unit volume of dessert wine brands have declined over the
last three years. These declines can be attributed to a general
decline in dessert wine consumption in the United States. During
the First Half of Fiscal 1994, net sales of branded dessert wines
constituted less than 12% of the Company's overall net sales.
Imported Beer
Net sales and unit volume of the Company's beer brands for
the First Half of Fiscal 1994 increased by 11.6% and 13.0%,
respectively, when compared to Barton's net sales and unit volume
for the same period a year ago, which was prior to the Barton
Acquisition. These increases resulted primarily from increased
sales of the Company's Corona Extra brand and other Mexican beer
brands, and increased sales of its St. Pauli Girl brand. The
Company's new agreement to distribute Corona Extra and its other
Mexican beer brands expires in December 1998. (See discussion
under Imported Beer -- Second Quarter 1994 compared to Second
Quarter 1993.)
Spirits
Net sales and unit volume of the Company's spirits case goods
for the First Half of Fiscal 1994 were down 1.4 % and up
slightly, respectively, as compared to Barton's net sales and
unit volume for the same period a year ago. This decrease in net
sales was primarily due to lower net sales of the Company's aged
whiskey (i.e., bourbon and Scotch brands), which was offset in
large part by increased net sales of the Company's liqueur and
blended whiskey brands. The Company also had increased net sales
of its tequila and rum brands.
Gross Profit
Gross profit increased to $86.3 million in the First Half of
Fiscal 1994 from $39.2 million in the First Half of Fiscal 1993,
an increase of $47.1 million, or approximately 120%. This
increase in gross profit resulted from the inclusion of Barton's
and Vintners' operations into the Company's. Gross profit as a
percentage of net sales decreased to 29.3% in the First Half of
Fiscal 1994 from 30.2% in the First Half of Fiscal 1993. The
Company's gross margin decreased primarily as a result of the
inclusion of Barton's and Vintners' operations into the Company.
Selling, General and Administrative Expenses
<PAGE>
Selling, general and administrative expenses increased to
$59.7 million in the First Half of Fiscal 1994 from $25.7 million
in the First Half of Fiscal 1993, an increase of $33.9 million,
or approximately 132%. This increase resulted from the inclusion
of Barton's and Vintners' selling, general and administrative
expenses into the Company's and higher advertising and
promotional spending on brands of the Company owned prior to the
Barton and Vintners Acquisitions.
Interest Expense, Net
Interest expense, net increased to $8.3 million in the First
Half of Fiscal 1994 from $2.9 million in the First Half of Fiscal
1993, an increase of $5.4 million. This increase principally
resulted from financing activities related to the Vintners
Acquisition and Barton Acquisition.
Net Income
Net income increased to $11.4 million in the First Half of
Fiscal 1994 from $6.6 million in the First Half of Fiscal 1993,
an increase of $4.8 million, or approximately 74%. This increase
resulted primarily from the inclusion of the operations of Barton
and Vintners into those of the Company.
Financial Liquidity and Capital Resources
The Company's principal use of cash in its operating
activities is for purchasing and carrying inventory of raw
materials and finished goods. The Company's primary source of
liquidity has historically been cash flow from operations, except
during the annual fall grape harvest when the Company has relied
on short-term borrowings. The annual grape crush normally begins
in August and runs through November. The Company generally
begins purchasing grapes in August with payments for such grapes
beginning to come due in September. The Company's short-term
borrowings to support such purchases generally reach their
highest levels in November or December. Historically, the
Company has used cash flow from operations to repay its short-
term borrowings. The Company believes that as a result of the
Vintners Acquisition, and to a lesser extent, the Barton
Acquisition, it will have increased short-term borrowing needs.
A description of the Company's credit facility and other
indebtedness is provided in Note 5 to the Company's financial
statements in Part 1 of this report.
Working Capital Requirements
As of February 28, 1994 the Company's Current Assets and
Liabilities increased from August 31, 1993 due in large part to
the Vintners Acquisition. Net of the effect of the Vintners
Acquisition, but including changes since the date of that
Acquisition, current assets decreased principally as a result of
normal seasonal sales trends resulting in lower accounts
receivable and inventory levels. Current Liabilities similarly
decreased due primarily to a decrease in accounts payable
associated with the grape harvest offset by increased short-term
borrowings to partially fund those payments. As of February 28,
1994, $51 million was outstanding under the revolving loans under
<PAGE>
the Company's credit facility and $41 million was available to be
drawn down by the Company.
As part of the consideration for Barton, the Company agreed
to make payments to the former stockholders of Barton ("Barton
Stockholders") of up to an aggregate of $57.3 million which are
payable to the Barton Stockholders over a three-year period upon
the satisfaction of certain performance goals. The first payment
of $4.0 million was paid to the Barton Stockholders on December
31, 1993. The remaining payments are as follows: (i) up to
$28.3 million is to be made on December 30, 1994; (ii) up to
$10.0 million is to be made on November 30, 1995; and (iii) up to
$15.0 million is to be made on November 29, 1996. With respect
to the performance goals for the December 30, 1994 payment,
Barton has satisfied some but not all of the goals. If Barton
satisfies the remaining goals the entire $28.3 million will be
due the Barton Stockholders on December 30, 1994. Such payment
obligations are secured in part by a $28.2 million letter of
credit issued under the Company's credit facility and are subject
to acceleration in certain events.
As part of the acquisition of Vintners, the Company held back
from the Cash Consideration approximately 10% of the then
estimated net current assets of Vintners purchased by the
Company. Final determination of the net current asset amount is
expected to occur prior to the end of the Company's 1994 fiscal
year. If the finally determined net current asset amount exceeds
the closing estimate, $8.4 million plus such excess will be paid
by the Company. If the finally determined net current asset
amount is less than the closing estimate, $8.4 million minus the
deficiency will be paid by the Company. See Note 5 to the
Company's financial statements in Part 1 of this report. The
Company expects that the amount to be paid will not exceed $7.7
million. Such amount will be deposited into an escrow account
established to reimburse the Company for any indemnification
claims arising out of the Vintners Acquisition. As of February
28, 1994, no adjustment to the established escrow was required
and the Final Net Current Asset Amount has not been determined.
On February 4, 1994, the Company paid $5.1 million to Hiram
Walker & Sons, Inc. for the extension of licenses to use the
brand names Ten High Bourbon Whiskey, Lauder's Scotch Whisky,
Northern Light Blended Canadian Whisky and certain other spirits
brands, for varying periods, the longest of which terminates in
2116. This payment was funded from cash flows from operations.
Capital expenditures for property, plant and equipment during
fiscal 1994 are not expected to vary materially from amounts
expended in fiscal 1993.
The Company believes that cash flow from operations will
provide sufficient funds to meet all of its anticipated short and
long-term debt service obligations and the major cash
requirements described above. The Company is not aware of any
potential impairment to its liquidity and believes that the
revolving loans available under its credit facility and cash flow
from operations will provide adequate resources to satisfy its
working capital, liquidity and anticipated capital expenditure
requirements for at least the next four fiscal quarters.
<PAGE>
Financing Activities
During the six months ended February 28, 1994, the Company
completed the acquisition of Vintners. The cash portion of the
purchase price was funded by revolving loans associated with the
1993 harvest and a $130 million subordinated bank loan (the
"Subordinated Bank Loan"). On December 27, 1993, the public
offering and sale of the Company's 8.75% Senior Subordinated
Notes (the "Notes") was completed, the proceeds of which,
together with additional borrowings under the Company's credit
facility, were used to repay in full the Subordinated Bank Loan.
A description of the Notes is set forth in Note 5 to the
Company's financial statements in Part 1 of this report. Such
description is qualified in its entirety by reference to the
complete text of the Indenture covering the Notes, a copy of
which has been filed with the Securities and Exchange Commission.
In addition, the Company called its 7% Convertible
Subordinated Debentures Due 2011 for redemption on November 19,
1993. Prior to such redemption substantially all of the
convertible debentures were converted into shares of the
Company's Class A Common Stock.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Stockholders held on
January 20, 1994 (the "Annual Meeting"), the holders of the
Company's Class A Common Stock (the "Class A Stock"), voting as a
separate class, elected management's slate of director nominees
designated to be elected by the holders of the Class A Stock and
the holders of the Company's Class B Convertible Common Stock
(the "Class B Stock"), voting as a separate class, elected
management's slate of director nominees designated to be elected
by the holders of the Class B Stock. In addition, at the Annual
Meeting, the holders of Class A Stock and the holders of Class B
Stock, voting together as a single class, (i) approve and
ratified Amendment Nos. 3 and 4 to the Company's Stock Option and
Stock Appreciation Right Plan (the "Stock Option and SAR Plan")
and (ii) approved and ratified the selection of Arthur Andersen &
Co., Certified Public Accountants, as the Company's independent
auditors for the fiscal year ending August 31, 1994.
Amendment No. 3 to the Stock Option and SAR Plan (a)
increased the number of shares of the Company's Class A Common
Stock available for the grant of stock options and stock
appreciation rights ("SARs") to a maximum of 2,000,000 and (b)
allowed the Company to grant conditional options under the Stock
Option and SAR Plan. Amendment No. 4 increased the number of
shares of Class A Common Stock available for the grant of options
and SARs to a maximum of 3,000,000.
Set forth below is the number of votes cast for, against or
withheld, as well as the number of abstentions, as applicable, as
to the foregoing matters.
I. The balloting for the election of Directors of the Company
resulted as follows:
Directors Elected By Class A Stockholders:
James Locke, III:
For: 5,731,476; Withheld: 55,401
George Bresler:
For: 5,731,476; Withheld: 55,401
Directors Elected By Class B Stockholders:
Marvin Sands
For: 28,394,870; Withheld: 297,100
Richard Sands:
For: 28,392,170; Withheld: 299,800
Ellis Goodman:
For: 28,394,870; Withheld: 297,100
Robert Sands:
For: 28,394,870; Withheld: 297,100
Bertram Silk:
For: 28,394,870; Withheld: 297,100
<PAGE>
Sir Harry Solomon:
For: 28,394,870; Withheld: 297,100
II. The proposal submitted to the stockholders to approve and
ratify Amendment Nos. 3 and 4 to the Company's Stock Option
and Stock Appreciation Right Plan was adopted by the
following vote:
For: 30,262,673
Against: 4,191,511
Abstain: 24,663
III. The proposal submitted to the stockholders to approve and
ratify the selection of Arthur Andersen & Co. as the
Company's independent auditors for the fiscal year ending
August 31, 1994 was adopted by the following vote:
For: 34,414,227
Against: 58,056
Abstain: 6,564
Item 5. Other Information
As discussed in Item 2 of Part I of this Report, on March
31, 1994 the Company entered into a new agreement under which
it will continue importing, marketing and distributing
certain Mexican beers. With respect to this matter, on March
31, 1994, the Company issued the following press release:
"Canandaigua Wine Company, Inc. (`Canandaigua')
(NASDAQ: WINE A, WINE B) announced today that its
Barton Beers, Ltd. division (`Barton') has entered
into a new agreement under which it will continue
importing, marketing and distributing Corona Extra,
the No. 2 Imported Beer in the U.S. market, Corona
Light, Coronita, Negra Modelo, Modelo Especial and
Pacifico Beers in 25 primarily western states of the
United States. The new agreement has a term of five
years, and contains substantially similar provisions
as the previous agreements.
Ellis Goodman, Chief Executive Officer Beers and
Spirits of Canandaigua said, `We are gratified by
the continued confidence which has been placed in
Barton by Cerveceria Modelo S.A. de C.V. Corona's
parent company, and are proud of our 15-year
association with these brands, which are the most
popular and successful Mexican consumer products
sold in the United States. We believe our strong
sales, marketing and promotional efforts will
continue to drive the success of these brands.'
Canandaigua Wine Company, Inc. is the second
largest supplier of wines, fourth largest
importer of beers and eighth largest supplier of
distilled spirits in the United States. The
Company's principal brands include Corona beer,
<PAGE>
Richards Wild Irish Rose wines, Paul Masson
wines, Taylor California Cellars wines, Cook's
sparkling wines, St. Pauli Girl beer, Cisco
wines, Cribari wines, Manischewitz wines, Barton
gin and vodka, Tsingtao beer, Ten High bourbon
and Montezuma tequila."
Item 6. Exhibits and Reports on Form 8-K
(a) See Index to Exhibits located on Page 30 of this Report.
(b) The following Current Report on Form 8-K/A was filed with
the Securities and Exchange Commission during the quarter
ended February 28, 1994:
During December 1993 the Company filed Form 8-K/A dated
October 15, 1993 (Amendment No. 2). This Form 8-K/A amended
the Form 8-K dated October 15, 1993 and reported information
under Item 7 (Financial Statements, Pro Forma Financial
Information and Exhibits). This Form 8-K/A did not amend any
financial statements previously filed; the sole purpose for
filing this Form 8-K/A was to include a Consent of Ernst &
Young, Independent Auditors.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, each Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CANANDAIGUA WINE COMPANY, INC.
Dated: April 11, 1994 By:/s/ Richard Sands
_____________________________
Richard Sands, President and
Chief Executive Officer
Dated: April 11, 1994 By:/s/ Lynn K. Fetterman
_____________________________
Lynn K. Fetterman, Senior
Vice President, Chief
Financial Officer and
Secretary (Principal
Financial Officer and
Principal Accounting Officer)
SUBSIDIARIES
Batavia Wine Cellars, Inc.
Dated: April 11, 1994 By:/s/ Richard Sands
_____________________________
_
Richard Sands, Vice President
Dated: April 11, 1994 By:/s/ Lynn K. Fetterman
_____________________________
_
Lynn K. Fetterman, Secretary
and Treasurer (Principal
Financial Officer and
Principal Accounting Officer)
Bisceglia Brothers Wine Co.
Dated: April 11, 1994 By:/s/ Richard Sands
_____________________________
_
Richard Sands, Vice President
Dated: April 11, 1994 By:/s/ Lynn K. Fetterman
_____________________________
_
Lynn K. Fetterman, Secretary
(Principal Financial Officer
and Principal Accounting
Officer)
California Products Company
Dated: April 11, 1994 By:/s/ Richard Sands
_____________________________
_
<PAGE>
Richard Sands, Vice President
Dated: April 11, 1994 By:/s/ Lynn K. Fetterman
_____________________________
_
Lynn K. Fetterman, Secretary
(Principal Financial Officer
and Principal Accounting
Officer)
Guild Wineries & Distilleries, Inc.
Dated: April 11, 1994 By:/s/ Chris Kalabokes
_____________________________
_
Chris Kalabokes, Chief
Executive Officer
Dated: April 11, 1994 By:/s/ Lynn K. Fetterman
_____________________________
_
Lynn K. Fetterman, Secretary
and Treasurer (Principal
Financial Officer and
Principal Accounting Officer)
Tenner Brothers, Inc.
Dated: April 11, 1994 By:/s/ Richard Sands
_____________________________
_
Richard Sands, Vice President
Dated: April 11, 1994 By:/s/ Lynn K. Fetterman
_____________________________
_
Lynn K. Fetterman, Secretary
(Principal Financial Officer
and Principal Accounting
Officer)
<PAGE>
Widmer's Wine Cellars, Inc.
Dated: April 11, 1994 By:/s/ Richard Sands
_____________________________
_
Richard Sands, Vice President
Dated: April 11, 1994 By:/s/ Lynn K. Fetterman
_____________________________
_
Lynn K. Fetterman, Secretary
(Principal Financial Officer
and Principal Accounting
Officer)
Barton Incorporated
Dated: April 11, 1994 By:/s/ Richard Sands
_____________________________
_
Richard Sands, Vice President
Dated: April 11, 1994 By:/s/ Raymond E. Powers
_____________________________
_
Raymond E. Powers, Executive
Vice President (Principal
Financial Officer and
Principal Accounting Officer)
Barton Brands, Ltd.
Dated: April 11, 1994 By:/s/ Richard Sands
_____________________________
_
Richard Sands, Vice President
Dated: April 11, 1994 By:/s/ Raymond E. Powers
_____________________________
_
Raymond E. Powers, Executive
Vice President-Finance
(Principal Financial Officer
and Principal Accounting
Officer)
<PAGE>
Barton Beers, Ltd.
Dated: April 11, 1994 By:/s/ Richard Sands
_____________________________
_
Richard Sands, Vice President
Dated: April 11, 1994 By:/s/ Norman R. Goldstein
_____________________________
_
Norman R. Goldstein,
Treasurer (Principal
Financial Officer and
Principal Accounting Officer)
Barton Brands of California, Inc.
Dated: April 11, 1994 By:/s/ Richard Sands
_____________________________
_
Richard Sands, Vice President
Dated: April 11, 1994 By:/s/ Norman R. Goldstein
_____________________________
_
Norman R. Goldstein,
Treasurer (Principal
Financial Officer and
Principal Accounting Officer)
Barton Brands of Georgia, Inc.
Dated: April 11, 1994 By:/s/ Richard Sands
_____________________________
_
Richard Sands, Vice President
Dated: April 11, 1994 By:/s/ Norman R. Goldstein
_____________________________
_
Norman R. Goldstein,
Treasurer (Principal
Financial Officer and
Principal Accounting Officer)
Barton Distillers Import Corp.
Dated: April 11, 1994 By:/s/ Richard Sands
_____________________________
_
Richard Sands, Vice President
<PAGE>
Dated: April 11, 1994 By:/s/ Norman R. Goldstein
_____________________________
_
Norman R. Goldstein,
Treasurer (Principal
Financial Officer and
Principal Accounting Officer)
Barton Financial Corporation
Dated: April 11, 1994 By:/s/ Norman R. Goldstein
_____________________________
_
Norman R. Goldstein,
President and Treasurer
(Principal Financial Officer
and Principal Accounting
Officer)
Stevens Point Beverage Co.
Dated: April 11, 1994 By:/s/ Richard Sands
_____________________________
_
Richard Sands, Vice President
Dated: April 11, 1994 By:/s/ Norman R. Goldstein
_____________________________
_
Norman R. Goldstein,
Treasurer (Principal
Financial Officer and
Principal Accounting Officer)
Monarch Wine Company, Limited
Partnership
Dated: April 11, 1994 By:/s/ Richard Sands
_____________________________
_
Richard Sands, Vice President
Barton Management, Inc.,
General Partner
Dated: April 11, 1994 By:/s/ Norman R. Goldstein
_____________________________
_
Norman R. Goldstein, Vice
President and Treasurer,
Barton Management, Inc.,
General Partner (Principal
Financial Officer and
Principal Accounting Officer)
Barton Management, Inc.
<PAGE>
Dated: April 11, 1994 By:/s/ Richard Sands
_____________________________
_
Richard Sands, Vice President
Dated: April 11, 1994 By:/s/ Norman R. Goldstein
_____________________________
_
Norman R. Goldstein, Vice
President and Treasurer
(Principal Financial Officer
and Principal Accounting
Officer)
Vintners International Company,
Inc.
Dated: April 11, 1994 By:/s/ Richard Sands
_____________________________
_
Richard Sands, President
Dated: April 11, 1994 By:/s/ Lynn K. Fetterman
_____________________________
_
Lynn K. Fetterman, Secretary
and Treasurer (Principal
Financial Officer and
Principal Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
(2) Plan of acquisition, reorganization, arrangement, liquidation
or succession.
(a) Asset Sale Agreement between Vintners International
Company, Inc. and Canandaigua Wine Company, Inc. dated
September 14, 1993 (including a list briefly identifying
the contents of all omitted exhibits and schedules
thereto), is incorporated herein by reference to Exhibit
2(a) to the Company's Current Report on Form 8-K, dated
October 15, 1993.
(b) Amendment dated as of October 14, 1993 to Asset Sale
Agreement dated as of September 14, 1993 by and between
Vintners International Company, Inc. and Canandaigua Wine
Company, Inc., is incorporated herein by reference to
Exhibit 2(b) to the Company's Current Report on Form 8-K,
dated October 15, 1993.
(c) Amendment No. 2 dated as of January 18, 1994 to Asset
Sale Agreement dated as of September 14, 1993 by and
between Vintners International Company, Inc. and
Canandaigua Wine Company, Inc. is set forth in Exhibit
2.1 on page 33 of this Report.
(d) Amendment No. 1 dated as of October 15, 1993 to Amendment
and Restatement dated as of June 29, 1993 among
Canandaigua Wine Company, Inc., its Subsidiaries and
certain banks for which The Chase Manhattan Bank
(National Association) acts as agent (including a list
briefly identifying the contents of all omitted exhibits
and schedules thereto), is incorporated herein by
reference to Exhibit 2(c) to the Company's Current Report
on Form 8-K, dated October 15, 1993.
(e) Senior Subordinated Loan Agreement dated as of October
15, 1993 among Canandaigua Wine Company, Inc., its
Subsidiaries and certain banks for which The Chase
Manhattan Bank (National Association) acts as agent
(including a list briefly identifying the contents of all
omitted exhibits and schedules thereto), is incorporated
herein by reference to Exhibit 2(d) to the Company's
Current Report on Form 8-K, dated October 15, 1993.
(4) Instruments defining the rights of security holders,
including indentures.
(a) Indenture dated as of December 27, 1993 among Canandaigua
Wine Company, Inc., its Subsidiaries and Chemical Bank
(filed as Exhibit 4.1 to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended November 30,
1993 and incorporated herein by reference).
(10) Material Contracts
(a) The Canandaigua Wine Company, Inc. Stock Option and Stock
Appreciation Right Plan (filed as Appendix B of the
Canandaigua Wine Company, Inc. Definitive Proxy Statement
<PAGE>
dated December 23, 1987 and incorporated herein by
reference).
(b) Amendment No. 1 to the Canandaigua Wine Company, Inc.
Stock Option and Stock Appreciation Right Plan (filed as
Exhibit 10.1 to the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 1992 and
incorporated herein by reference).
(c) Amendment No. 2 to the Canandaigua Wine Company, Inc.
Stock Option and Stock Appreciation Right Plan (filed as
Exhibit 28 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended November 30, 1992 and
incorporated herein by reference).
(d) Amendment No. 3 to the Canandaigua Wine Company, Inc.
Stock Option and Stock Appreciation Right Plan (filed as
Exhibit 10.4 to the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 1993 and
incorporated herein by reference).
(e) Amendment No. 4 to the Canandaigua Wine Company, Inc.
Stock Option and Stock Appreciation Right Plan (filed as
Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended November 30, 1993 and
incorporated herein by reference).
(f) Amendment No. 5 to the Canandaigua Wine Company, Inc.
Stock Option and Stock Appreciation Right Plan is set
forth in Exhibit 10.1 on page 36 of this Report.
(g) Employment Agreement between Barton Incorporated and
Ellis M. Goodman dated as of October 1, 1991 as amended
by Amendment to Employment Agreement between Barton
Incorporated and Ellis M. Goodman dated as of June 29,
1993 (filed as Exhibit 10.5 to the Company's Annual
Report on Form 10-K for the fiscal year ended August 31,
1993 and incorporated herein by reference).
(h) Barton Incorporated Management Incentive Plan (filed as
Exhibit 10.6 to the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 1993 and
incorporated herein by reference).
(i) Ellis M. Goodman Split Dollar Insurance Agreement (filed
as Exhibit 10.7 to the Company's Annual Report on Form
10-K for the fiscal year ended August 31, 1993 and
incorporated herein by reference).
(j) Barton Brands, Ltd. Deferred Compensation Plan (filed as
Exhibit 10.8 to the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 1993 and
incorporated herein by reference).
(k) Marvin Sands Split Dollar Insurance Agreement (filed as
Exhibit 10.9 to the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 1993 and
incorporated herein by reference).
<PAGE>
(l) Amendment and Restatement dated as of June 29, 1993 of
Credit Agreement among Canandaigua Wine Company Inc., its
Subsidiaries and certain banks for which The Chase
Manhattan Bank (National Association) acts as agent
(filed as Exhibit 2(b) to the Company's Current Report on
Form 8-K dated June 29, 1993 and incorporated herein by
reference).
(m) Amendment No. 1 dated as of October 15, 1993 to Amendment
and Restatement dated as of June 29, 1993 of Credit
Agreement among Canandaigua Wine Company, Inc., its
Subsidiaries and certain banks for which The Chase
Manhattan Bank (National Association) acts as agent
(filed as Exhibit 2(c) to the Company's Current Report on
Form 8-K dated October 15, 1993 and incorporated herein
by reference).
(n) Senior Subordinated Loan Agreement dated as of October
15, 1993 among Canandaigua Wine Company, Inc., its
Subsidiaries and certain banks for which The Chase
Manhattan Bank (National Association) acts as Agent
(filed as Exhibit 2(d) to the Company's Current Report on
Form 8-K dated October 15, 1993 and incorporated herein
by reference).
(11) Statement re computation of per share earnings.
Computation of per share earnings is set forth in Exhibit 11
on page 38 of this Report.
(15) Letter re unaudited interim financial information.
Not applicable.
(18) Letter re change in accounting principles.
Not applicable.
(19) Report furnished to security holders.
Not applicable.
(22) Published report regarding matters submitted to a vote of
security holders.
Not applicable.
(23) Consents of experts and counsel.
Not applicable.
(24) Power of Attorney.
Not applicable.
(27) Financial Data Schedule.
Not applicable.
(99) Additional Exhibits.
Not applicable.
Exhibit 2.1
AMENDMENT NO. 2 TO ASSET SALE AGREEMENT
AMENDMENT NO. 2 dated as of January 18, 1994 to
ASSET SALE AGREEMENT dated as of September 14, 1993, as amended
(the "Agreement"), by and between NEW VICI, INC. (formerly named
Vintners International Company, Inc.), a Delaware corporation, and
VINTNERS INTERNATIONAL COMPANY, INC. (formerly named
Canandaigua/Vintners Acquisition Corp.), a New York corporation and the
assignee of CANANDAIGUA WINE COMPANY, INC., a Delaware
corporation (capitalized terms not otherwise defined herein shall have the
meanings designated in the Agreement);
W I T N E S S E T H:
WHEREAS, the parties hereto desire to amend certain
schedules to the Agreement in certain respects;
NOW, THEREFORE, in consideration of the premises and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Amendments to Schedules.
(a) Schedule 1(a)(i), Owned and Leased Real Property,
to the Agreement is hereby amended as follows:
(i) by amending item 4 of Section A in its entirety to
read as follows:
"4. Order Number 503751D dated as of July 20,
1993 (CA), consisting of Parcel 1, County of
Monterey, State of California, as shown on the map
filed November 18, 1988, in the Office of the
County Recorder of said County in Volume 17 of
Parcel maps, Page 142 (Parcel 1, North side of Metz
Road)."
(ii) by amending item 3 of SCHEDULE A to the
Chicago Title Company Title Report having Order No. 503751D in its entirety
to read as follows:
"3. The land referred to in this report is situated in the
State of California, County of Monterey and is
described as follows:
Parcel 1, County of Monterey, State of California,
as shown on the map filed November 18, 1988, in
the office of the County Recorder of said County in
Volume 17 of Parcel Maps, Page 142.A.P. No. 022-
281-009"
(b) Schedule 20, Permitted Encumbrances, is hereby
amended by amending item 1.d. under the title "Owned Properties" in its
entirety to read as follows:
"Order Number 503751D dated as of July 20,
1993 (CA), consisting of Parcel 1, County of
Monterey, State of California, as shown on the map
filed November 18, 1988, in the office of the County
Recorder of said County in Volume 17, of Parcel
Maps, Page 142 (Parcel 1, North Side of Metz
Road). The Permitted Encumbrances which affect
this Parcel are Items 1 through 15 of Schedule B
EXCEPT FOR ITEMS 4 (Deed of Trust), 8
(Financing Statement with Changes), 9 (Deed of
Trust with Modifications), 10 (Financing Statement
with Changes), 11 (Financing Statement with
Changes), 12 (Deed of Trust with Modifications), all
of which are to be released at Closing."
2. Full Force and Effect. Except as specifically
modified herein, the Agreement remains in full force and effect. No reference
to this Amendment No. 2 need be made in any instrument or document making
reference to the Agreement, any reference to the Agreement in any such
instrument or document to be deemed a reference to the Agreement as
amended hereby.
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment No. 2 as of the day and year first above written.
NEW VICI, INC.
By: /s/ Michael I. Gerdes
Michael I. Gerdes
President
VINTNERS INTERNATIONAL
COMPANY, INC.
(a New York corporation)
By: /s/ Richard Sands
Richard Sands
President
Consented and Agreed to:
CANANDAIGUA WINE COMPANY, INC.
By: /s/ Robert Sands
Robert Sands
Vice President and
General Counsel
Exhibit 10.1
Amendment No. 5
To The
Canandaigua Wine Company, Inc.
Stock Option And Stock Appreciation Right Plan
Pursuant to Paragraph 15 of the Canandaigua Wine
Company, Inc. Stock Option and Stock Appreciation Right
Plan (the "Plan"), the Board of Directors hereby amends
the Plan, effective upon the date hereof, as set forth
below.
Paragraph 17 of the Plan is hereby amended and
restated in its entirety as follows:
17. Administration. The Plan shall be
administered by the Committee as it may be
constituted from time to time. The Committee
shall consist of at least two members of the
Board selected by the Board, all of whom shall
be Disinterested Persons. A Disinterested
Person for purposes of the Plan is one who is
not, during the one-year period prior to
service on the Committee, or during such
service, granted or awarded equity securities
pursuant to the Plan or pursuant to any other
plan of the Company. Decisions of the
Committee concerning the interpretation and
construction of any provisions of the Plan or
of any option or SAR granted pursuant to the
Plan shall be final. The Company shall effect
the grant of options and SARs under the Plan in
accordance with the decisions of the Committee,
which may, from time to time, adopt rules and
regulations for carrying out the Plan. For
purposes of the Plan, an option or an SAR shall
be deemed to be granted when the written
agreement for the same is signed on behalf of
the Company by its duly authorized officer or
representative. Subject to the express
provisions of the Plan, the Committee shall
have the authority, in its discretion and
without limitation: to determine the
individuals to receive options and SARs,
whether an option is intended to be an
incentive stock option or a non-statutory stock
option, the times when such individuals shall
receive such options or SARs, the number of
Shares to be subject to each option or SAR, the
term of each option or SAR, the date when each
option or SAR shall become exercisable, or when
each SAR will mature, whether an option or SAR
shall be exercisable or mature in whole or in
part in installments, the form in which payment
of an SAR will be made (i.e., cash, Shares, or
any combination thereof), the number of Shares
to be subject to each installment, the date
each installment shall become exercisable or
mature, the term of each installment and the
option price of each option, to accelerate the
date of exercise of any option or SAR or
installment thereof, and to make all other
determinations necessary or advisable for
administering the Plan.
IN WITNESS WHEREOF, Canandaigua Wine Company, Inc.
has caused the instrument to be executed on February
10, 1994.
CANANDAIGUA WINE COMPANY, INC.
By: /s/ Richard Sands
_________________________
Its: President
<PAGE>
<TABLE>
EXHIBIT 11
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
FOR THE QUARTERS ENDED FEBRUARY 28, 1994 AND FEBRUARY 28, 1993
February 28, 1994 February 2
<S>
Net income per common
equivalent share: Fully Fully
Primary Diluted Primary Dilut
<C> <C> <C> <C>
Net income available to
common shares $5,741,233 $5,741,233 $2,951,847 $2,951,8
Adjustments:
Assumed exercise of
convertible debt ----- ----- ----- 651,0
Net income available to
common and common
equivalent shares $5,741,233 $5,741,233 $2,951,847 $3,602,8
Shares:
Weighted average common
shares outstanding 15,948,785 15,948,785 11,638,649 11,638,6
Adjustments:
(1) Assumed exercise of
stock options 180,251 180,251 ----- ---
(2) Assumed exercise of
convertible debt ----- ----- ----- 3,293,0
(3) Assumed exercise of
incentive stock
options 246,360 246,360 140,573 140,5
Total shares 16,375,396 16,375,396 11,779,222 15,072,3
Net income per common share $.35 $.35 $.25 $.24
</TABLE>
