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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 1995
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
CANANDAIGUA WINE COMPANY, INC.
_________________________________________________________________
(Exact Name of registrant as specified in its charter)
Delaware 16-0716709
___________________________ _______________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
116 Buffalo Street, Canandaigua, New York 14424
___________________________________________________________
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (716)394-7900
None
_________________________________________________________________
(Former Name, Former Address 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 was required 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 Registrant's classes of
common stock as of March 28, 1995 is set forth below.
Number of Shares
Class Outstanding
Class A Common Stock (Par Value $.01 Per Share) 16,128,593
Class B Common Stock (Par Value $.01 Per Share) 3,189,901
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<TABLE>
Part 1 - Financial Information
Item 1. Financial Statements
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
February 28, 1995 August 31, 1994
(Unaudited) (Audited)
(in thousands)
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ASSETS
CURRENT ASSETS:
<C> <C>
Cash and cash investments $ 3,090 $ 1,495
Accounts receivable, net 120,538 122,124
Inventories, net 319,836 301,053
Prepaid expenses and other current assets 26,298 29,377
Total current assets 469,762 454,049
PROPERTY, PLANT AND EQUIPMENT, NET 195,839 194,283
OTHER ASSETS 167,316 178,230
Total Assets $ 832,917 $ 826,562
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable $ 7,000 $ 19,000
Current maturities of long-term debt 37,857 31,001
Accounts payable 45,438 75,506
Accrued federal and state excise taxes 23,564 16,657
Other accrued expenses and liabilities 77,192 96,061
Total Current liabilities 191,051 238,225
LONG - TERM DEBT, less current maturities 239,791 289,122
DEFERRED INCOME TAXES 43,831 43,774
OTHER LIABILITIES 30,077 51,248
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Class A Common Stock, $ .01 par value-
Authorized: 60,000,000 shares;
Issued: 17,343,889 shares at February 28, 1995,
and 13,832,597 shares at August 31, 1994 173 138
Class B Convertible Common Stock, $.01 par value-
Authorized: 20,000,000 shares; Issued: 4,015,626 shares at
February 28, 1995, and 4,015,776 shares at August 31, 1994 40 40
Additional Paid-in Capital 216,967 113,348
Retained earnings 118,578 98,258
335,758 211,784
Less-Treasury stock-
Class A Common Stock, 1,215,296 shares at
February 28, 1995, and August 31, 1994, at cost (5,384) (5,384)
Class B Convertible Common Stock, 625,725 shares at
February 28, 1995, and August 31, 1994, at cost (2,207) (2,207)
(7,591) (7,591)
Total stockholders' equity 328,167 204,193
Total liabilities and stockholders' equity 832,917 826,562
The accompanying notes to consolidated financial statements are an integral part of these statements.
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CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Retained Earnings
Six Months Ended Three Months Ended
---------------- -----------------
February February February February
28,1995 28,1994 28, 1995 28, 1994
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ---------- ----------
(in thousands, except per share data)
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GROSS SALES $ 592,305 $ 406,572 $ 274,885 $ 192,618
Less - Excise taxes (137,820) (112,056) (63,942) (52,587)
Net sales 454,485 294,516 210,943 140,031
COST OF PRODUCT SOLD (327,694) (208,192) (153,312) (98,363)
Gross profit 126,791 86,324 57,631 41,668
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (79,925) (59,660) (34,861) (28,012)
NONRECURRING
RESTRUCTURING EXPENSES (685) -- (340) --
Operating income 46,181 26,664 22,430 13,656
INTEREST INCOME 335 74 93 36
INTEREST EXPENSE (13,476) (8,360) (6,283) (4,506)
Income before provision for federal
and state income taxes 33,040 18,378 16,240 9,186
PROVISION FOR FEDERAL AND
STATE INCOME TAXES (12,720) (6,983) (6,252) (3,445)
NET INCOME 20,320 11,395 9,988 5,741
RETAINED EARNINGS, BEGINNING 98,258 86,525 108,590 92,179
RETAINED EARNINGS, ENDING $ 118,578 $ 97,920 $118,578 $ 97,920
PER SHARE DATA
Net income per common and common
equivalent share:
Primary $ 1.11 $ .75 $ .50 $ .35
Fully Diluted $ 1.11 $ .72 $ .50 $ .35
Weighted average shares outstanding:
Primary 18,343,870 15,198,371 19,857,768 16,375,396
Fully diluted 18,346,513 16,307,830 19,861,643 16,375,396
Dividend per share None None None None
The accompanying notes to consolidated financial statements are an integral part of these statements.
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CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended Three Months Ended
---------------- -----------------
February February February February
28,1995 28,1994 28, 1995 28, 1994
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ---------- ----------
(in thousands) (in thousands)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 20,320 $ 11,394 $ 9,988 $ 5,741
Adjustments to reconcile net income to to net cash (used in)
provided by operating activities:
Depreciation of property, plant and equipment 9,786 4,733 4,725 2,439
Amortization of intangible assets 2,865 1,649 1,360 805
Change in deferred taxes 57 (248) 52 (248)
Accrued interest on converted debentures -- 161 -- (521)
Change in assets and liabilities, net of effects from purchase of
businesses:
Accounts receivable 1,586 4,601 42,198 31,919
Inventories (18,783) 4,738 31,387 14,425
Prepaid expenses 3,079 (678) (3,363) (3,423)
Accounts Payable (30,068) (41,440) (22,075) (12,832)
Accrued federal and state excise taxes 6,907 4,944 7,855 3,762
Other accrued expenses and liabilities (28,175) (4,863) (42,641) (8,645)
Other (3,817) (9,121) (2,954) (9,076)
Total adjustments (56,563) (35,524) 16,544 18,605
Net cash (used in) provided by operating activities (36,243) (24,130) 26,532 24,346
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net of minor disposals (11,342) (2,800) (5,588) (1,275)
Acquisition costs for purchase of business - net of cash acquired - 3 - -
Net cash used in investing activities (11,342) (2,797) (5,588) (1,275)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds of Notes Payable 57,100 30,681 (20,000) (19,500)
Repayment of Notes Payable from proceeds of Term Loan (47,000) - - -
Repayment of Notes Payable from equity offering proceeds (22,100) - - -
Principal payments of long-term debt (7,474) (2,440) (7,072) (2,038)
Proceeds of Term Loan, long-term debt 47,000 - - -
Repayment of Term Loan from equity offering proceeds, long-term debt (82,000) - - 545
Proceeds from equity offering, net 103,313 - - 10
Proceeds of employee stock purchase plan - 545 - -
Exercise of employee stock options 341 10 341 -
Fractional shares paid for debenture conversions - (3) - -
Net cash provided by (used in) financing activities 49,180 28,793 (26,731) (20,983)
NET INCREASE (DECREASE) IN CASH AND CASH INVESTMENTS 1,595 1,866 (5,787) 2,088
CASH AND CASH EQUIVALENTS, beginning of period 1,495 3,718 8,877 3,496
CASH AND CASH EQUIVALENTS, end of period $ 3,090 $ 5,584 $ 3,090 $ 5,584
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 14,068 $ 6,722 $ 10,526 $ 4,128
Income taxes $ 9,454 $ 8,008 $ 9,328 $ 6,579
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Fair value of assets acquired $ - $ 199,494 $ - $ -
Liabilities assumed $ - $ (52,662) $ - $ -
Consideration paid $ - $ 146,832 $ - $ -
Less - amounts borrowed $ - $(142,622) $ - $ -
Less - issuance of Class A Common Stock options $ - $ (4,210) $ - $ -
Net cash paid for acquisition $ - $ 0 $ - $ -
Issuance of Class A Common Stock for conversion of debentures $ - $ 58,960 $ - $ -
Write off unamortized deferred financing costs on debentures $ - $ (1,569) $ - $ -
Write off unpaid accrued interest on debentures through conversion date $ - $ 1,371 $ - $ -
Total addition to Stockholder's Equity from Conversion $ - $ 58,762 $ - $ -
The accompanying notes to consolidated financial statements are an integral part of these statements.
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CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
February 28, 1995
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 and related notes should be
read in conjunction with the consolidated financial statements and related
notes, included in the Company's Annual Report on Form 10-K, for the fiscal year
ended August 31, 1994.
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% at February
28, 1995, August 31, 1994, and February 28, 1994. Replacement cost of the
inventories determined on a FIFO basis approximated $306,991,000, $289,209,000
and $227,043,000 at February 28, 1995, August 31, 1994, and February 28, 1994,
respectively. At February 28, 1995, August 31, 1994, and February 28, 1994, the
net realizable value of the Company's inventories was in excess of $319,836,000,
$301,053,000 and $226,838,000, respectively.
Elements of cost include materials, labor and overhead and consist of the
following:
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February 28, 1995 August 31, 1994 February 28, 1994
----------------- --------------- -----------------
(in thousands)
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Raw materials and supplies $ 42,478 $ 36,477 $ 32,972
Wines and distilled spirits in process 212,483 199,183 145,943
Finished case goods 64,875 65,393 47,923
$ 319,836 $ 301,053 $ 226,838
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3) PROPERTY, PLANT AND EQUIPMENT:
The major components of the property, plant and equipment for the
Company are as follows:
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February 28, 1995 August 31, 1994
----------------- ---------------
(in thousands)
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Land $ 13,814 $ 13,814
Buildings and improvements 62,583 62,440
Machinery and equipment 168,767 168,222
Motor vehicles 2,552 2,552
Construction in progress 19,643 8,989
267,359 256,017
Less - Accumulated depreciation (71,520) (61,734)
$ 195,839 $ 194,283
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4) OTHER ASSETS:
The major components of other assets for the Company are as follows:
February 28, 1995 August 31, 1994
----------------- ---------------
(in thousands)
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Goodwill $ 79,511 $ 88,459
Distribution rights, agency license
agreements and trademarks 72,970 72,970
Other 23,195 22,296
175,676 183,725
Less - Accumulated amortization (8,360) (5,495)
$ 167,316 $ 178,230
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5) OTHER ACCRUED EXPENSES AND LIABILITIES:
The major components of other accrued expenses and liabilities for the Company are as follows:
February 28, 1995 August 31, 1994
----------------- --------------
(in thousands)
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Accrued Earn-out Amounts $ - $ 28,300
Accrued loss on noncancelable grape contracts 13,646 14,410
Other 63,546 53,351
$ 77,192 $ 96,061
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6) OTHER LIABILITIES
The Major components of other liabilities for the Company are as follows:
February 28, 1995 August 31, 1994
----------------- ---------------
(in thousands)
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Accrued loss on noncancelable
grape contracts $ 27,170 $ 48,254
Other 2,907 2,994
$ 30,077 $ 51,248
Effective July 1, 1995, the Company will give an option to certain growers to sell grapes to the Company
at agreed-upon prices.
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7) ACQUISITIONS:
The following table sets forth unaudited pro forma consolidated statements of
income of the Company for the six months ended February 28, 1995 and 1994. The
six-month pro forma consolidated statement of income for the period ended
February 28, 1994, gives effect to the Almaden/Inglenook Acquisition and the
Vintners Acquisition as if they occurred on September 1, 1993. The unaudited pro
forma consolidated statements of income are presented after giving effect to
certain adjustments for depreciation, amortization of goodwill, interest expense
on the acquisition financing and related income tax effects. The pro forma
consolidated statements of income are based upon currently available information
and upon certain assumptions that the Company believes reasonable under the
circumstances. The pro forma consolidated statements of income do not purport to
represent what the Company's results of operations would actually have been if
the aforementioned transactions in fact had occurred on such date or at the
beginning of the period indicated or to project the Company's financial position
or results of operations at any future date or for any future period.
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February 28, 1995 August 31, 1994
----------------- ---------------
(in thousands, except share and per share data)
<S> <C> <C>
Net sales $ 454,485 $ 438,213
Income from continuing operations 46,866 33,855
Net income $ 20,320 $ 12,016
Per share data:
Net income per common share:
Primary $1.11 $.79
Fully diluted $1.11 $.76
Weighted average shares outstanding:
Primary 18,343,870 15,198,371
Fully diluted 18,346,513 16,307,830
In February 1995, the Company entered into an agreement cancelling certain
of its long-term grape contracts acquired in connection with the
Almaden/Inglenook Acquisition. As a result, the estimated loss reserve at the
date of acquisition was reduced by approximately $13 million with a corresponding
reduction in goodwill.
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8) BORROWINGS:
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Borrowings consists of the following at February 28, 1995:
Current Long-Term Total
(in thousands)
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Notes Payable:
Senior Credit Facility:
Revolving Credit Loans $ 7,000 $ - $ 7,000
Long-term Debt:
Senior Credit Facility:
Term loan, variable rate, due in quarterly
installments of $7,000 through fiscal 2000 28,000 107,000 135,000
Senior Subordinated Notes:
8.75% redeemable after December 15, 1998, due 2003 - 130,000 130,000
Capitalized Lease Agreements:
Capitalized facility and equipment leases at interest
rates ranging from 8.9% to 18%, due in monthly
installments through fiscal 1997 787 1,350 2,137
Industrial Development Agencies:
7.50% 1980 issue, original proceeds $2,370, due in
annual installments of $118 through fiscal 1999 118 474 592
Other Long-term Debt:
Loans payable - 5% secured by cash surrender value of
officers' life insurance policies - 967 967
Notes payable at 1% below prime rate ($3,000) to prime
rate ($5,632), due in yearly
installments through fiscal 1995 8,632 - 8,632
Promissory note at prime rate, due in equal
yearly installments through fiscal 1996 320 - 320
$ 37,857 $ 239,791 $ 277,648
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9. STOCKHOLDERS' EQUITY:
Stock Offering
During November 1994, the Company completed a public offering and sold 3,000,000
shares of its Class A Common Stock, resulting in net proceeds to the Company of
approximately $95,428,000 after underwriters' discounts and commissions and
estimated expenses. In connection with the offering, 432,067 of the Vintners
Option Shares were exercised and the Company received proceeds of $7,885,000.
Under the terms of the amended Credit Agreement, approximately $82,000,000 was
used to repay a portion of the Term Loan under the Company's Credit Agreement.
The balance of net proceeds was used to repay Revolving Credit Loans under the
Credit Facility.
10. THE RESTRUCTURING PLAN:
The Company provided for costs to restructure the operations of its California
wineries (the Restructuring Plan) in the fourth quarter of fiscal 1994. Under
the Restructuring Plan, all bottling operations at the Central Cellars Winery in
Lodi, California, and the branded wine bottling operations at the Monterey
Cellars Winery in Gonzales, California, will be moved to the Mission Bell Winery
located in Madera, California, which was acquired by the Company in the
Almaden/Inglenook Acquisition. The Company anticipates that implementation of
the Restructuring Plan will result in approximately 260 jobs being eliminated.
As of February 28, 1995, 21 employees have been released and no facilities have
been closed. The Company has remaining accruals of approximately $8,491,000 and
$9,106,000 at February 28, 1995, and August 31, 1994, respectively, relating to
the Restructuring Plan. The Company expects that the Restructuring Plan will be
fully implemented by the end of fiscal 1995.
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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 recent years primarily as a result of acquisitions. The Company acquired
the outstanding capital stock of Barton Incorporated ("Barton") on June 29, 1993
(the "Barton Acquisition"), the assets of Vintners International Company, Inc.
("Vintners") on October 15, 1993 (the "Vintners Acquisition") and the Almaden,
Inglenook and other brands, a grape juice concentrate product line and related
assets from Heublein, Inc. (the "Almaden/Inglenook Product Lines") on August 5,
1994 (the "Almaden/Inglenook Acquisition"). Management expects the
Almaden/Inglenook Acquisition to have a substantial impact on future results of
the Company's operations. The Company's results of operations for the six months
ended February 28, 1994 include the results of operations of Vintners from
October 15, 1993, the date of the Vintners Acquisition, until the end of the
period. The Company's results of operations for the quarter and six months ended
February 28, 1995 include the results of operations of the Almaden/Inglenook
Product Lines for the complete periods.
On March 22, 1995, the Company announced that its spirits and beer
division, Barton Incorporated, and United Distillers Glenmore, Inc. ("UDG") had
entered into a letter of intent under which the Company, through its spirits and
beer division, will purchase from UDG certain assets including rights to the
Fleischmann, Skol, Mr. Boston, Canadian Ltd., Old Thompson, Kentucky Tavern, Chi
Chi's and di Amore spirits brands, and the U.S. rights to the Inver House,
Glenmore, Schenley and El Toro spirits brands, two production facilities and
related inventories and assets. In addition, the parties will enter into various
multi-year agreements under which UDG will supply the Company with bulk spirits
and the Company will provide various services to UDG, including the continued
packaging of various UDG brands (the "Proposed Acquisition"). The Proposed
Acquisition is subject to, among other matters, negotiation of definitive
agreements, receipt of regulatory approvals and approval of the parties'
respective boards of directors. In addition, consummation of the Proposed
Acquisition will require financing and the obtaining of appropriate consents
from the banking syndicate under its Credit Facility (as defined below under
"Financial Liquidity and Capital Resources"). The Company believes that
consummation of the Proposed Acquisition will be significant to the Company and
will have a material impact on the Company's future results of operations. The
Company further believes that consummation of the Proposed Acquisition will
significantly strengthen the Company's position in the United States spirits
industry by approximately doubling the Company's existing spirits market share
and by adding to the Company's portfolio product lines in the cordial and
liqueur categories in which the Company does not currently have significant
participation.
The following table sets forth, for the periods indicated, certain
items in the Company's consolidated statements of income expressed as a
percentage of net sales:
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Three Months Ended Six Months Ended
February 28, February 28,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales............................................100.0% 100.0% 100.0% 100.0%
Cost of product sold................................. 72.7 70.2 72.1 70.7
------ ------ ------ ------
Gross profit....................................... 27.3 29.8 27.9 29.3
Selling, general and administrative expenses......... 16.5 20.0 17.5 20.3
Nonrecurring restructuring expenses.................. .2 -- .2 --
-------- ---------- -------- --------
Operating income................................... 10.6 9.8 10.2 9.0
Interest expense, net................................ 2.9 3.2 2.9 2.8
------- ------- ------- -------
Income before provision for income taxes........... 7.7 6.6 7.3 6.2
Provision for federal and state income taxes......... 3.0 2.5 2.8 2.3
------- ------- ------- -------
Net Income......................................... 4.7% 4.1% 4.5% 3.9%
======= ======= ======= =======
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Second Quarter Ended February 28, 1995 ("Second Quarter 1995")
Compared to Second Quarter Ended February 28, 1994 ("Second Quarter 1994")
Net Sales
Net sales for the Company's Second Quarter 1995 increased to $210.9
million from $140.0 million for Second Quarter 1994, an increase of $70.9
million, or approximately 51%. This increase resulted primarily from the
inclusion of $62.6 million of net sales of products acquired in the
Almaden/Inglenook Acquisition. Net sales also benefited from increased net sales
of the Company's imported beers (primarily Mexican brands), non-branded products
and varietal table wine brands. Excluding the impact of the net sales resulting
from the Almaden/Inglenook Acquisition during Second Quarter 1995, the Company's
net sales increased $8.3 million, or approximately 6%, as compared to Second
Quarter 1994.
For purposes of computing the net sales and unit volume comparative
data below, sales of products acquired in the Almaden/Inglenook Acquisition have
been included in the entire period for Second Quarter 1995 and included for the
same period during Second Quarter 1994, which was prior to the Almaden/Inglenook
Acquisition.
Net sales and unit volume of the Company's branded beverage alcohol
products for Second Quarter 1995 increased 4.0% and 2.4%, respectively, as
compared to Second Quarter 1994. This increase was principally due to increased
net sales and unit volume of the Company's imported beer brands and, to a lesser
extent, varietal table wine brands and spirits brands.
Net sales and unit volume of the Company's branded wine products for
Second Quarter 1995 decreased 2.7% and 6.3%, respectively, as compared to Second
Quarter 1994. Net sales decreased primarily due to lower sales of most of the
Company's dessert wine brands and non-varietal table wine brands, partially
offset by an increase in sales of varietal table wine brands. Unit volume
declined primarily due to lower shipments of the Company's non-varietal table
wine brands and dessert wine brands.
Net sales and unit volume of the Company's varietal table wine brands
for Second Quarter 1995 increased 9.2% and 6.2%, respectively, as compared to
Second Quarter 1994, reflecting increases in many of the Company's varietal
table wine brands. Net sales and unit volume of the Company's non-varietal table
wine brands for the same periods were down 4.3% and 6.7%, respectively. Net
sales and unit volume of sparkling wine brands decreased 5.3% and 10.4%,
respectively, in Second Quarter 1995 as compared to Second Quarter 1994. Net
sales and unit volume of the Company's dessert wine brands were down 13.0% and
15.9%, respectively, in Second Quarter 1995 as compared to Second Quarter 1994.
Except for an increase in net sales during the Company's first quarter of fiscal
1995, 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.
Net sales and unit volume of the Company's beer brands for Second
Quarter 1995 increased by 26.3% and 25.5%, respectively, as compared to Second
Quarter 1994. These increases resulted primarily from increased sales of the
Company's Corona brand and its other Mexican beer brands.
Net sales and unit volume of the Company's spirits case goods for
Second Quarter 1995 were up 5.0% and 4.2%, respectively, as compared to Second
Quarter 1994. This increase in net sales and unit volume was primarily due to
higher sales of the Company's vodka and tequila brands, partially offset by
lower sales of aged whiskeys (i.e., bourbon, Scotch, Canadian and blended
whiskeys).
Gross Profit
Gross profit increased to $57.6 million in Second Quarter 1995 from
$41.7 million in Second Quarter 1994, an increase of $15.9 million, or
approximately 38%. This increase in gross profit resulted from the inclusion of
the operations of the Almaden/Inglenook Product Lines with those of the Company.
Gross profit as a percentage of net sales decreased to 27.3% for Second Quarter
1995 from 29.8% for Second Quarter 1994. The Company's gross profit as a
percentage of net sales decreased primarily as a result of reduced gross profit
percentages on the Company's table wine brands due to lower selling prices and
higher cost of goods sold associated with some of these brands.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $34.9 million
in Second Quarter 1995 from $28.0 million in Second Quarter 1994, an increase of
$6.9 million, or 24%. This increase resulted from the additional selling,
general and administrative expenses associated with the sales and marketing of
the products acquired in the Almaden/Inglenook Acquisition, increased
advertising and promotion expenditures for Vintners products, and increased
selling, general and administrative expenses within the Company's imported beer
and spirits division. As a percentage of net sales, selling, general and
administrative expenses declined to 16.5% in Second Quarter 1995 as compared to
20.0% in Second Quarter 1994.
Nonrecurring Restructuring Expenses
The Company previously announced a plan to restructure the operations
of its California wineries (the "Restructuring Plan"). The Restructuring Plan
will enable the Company to realize significant cost savings from the
consolidation of existing facilities and the facilities acquired in the
Almaden/Inglenook Acquisition. Under the Restructuring Plan, all bottling
operations at the Central Cellars Winery in Lodi, California, and the branded
wine bottling operations at the Monterey Cellars Winery in Gonzales, California,
will be moved to the Mission Bell Winery located in Madera, California, which
was acquired by the Company in the Almaden/Inglenook Acquisition. The Monterey
Cellars Winery will continue to be used as a crushing, winemaking and contract
bottling facility. The Central Cellars Winery and the Company's winery in
Soledad, California will be closed and offered for sale to reduce surplus
capacity. The Company anticipates that implementation of the Restructuring Plan
will result in approximately 260 jobs being eliminated. As a result of the
Restructuring Plan, in addition to a restructuring charge taken in the fourth
quarter of fiscal 1994 and the first quarter of fiscal 1995, the Company
incurred additional expenses related to the restructuring in Second Quarter 1995
of $340,000, which reduced after-tax income for Second Quarter 1995 by $210,000,
or $0.01 per share on a fully diluted basis. During Second Quarter 1995, 21
employees were released and, as of February 28, 1995, no facilities had been
closed. The Company expects to have the Restructuring Plan fully implemented by
the end of fiscal 1995. The Company anticipates that the Restructuring Plan will
result in net cost savings of approximately $1.7 million in fiscal 1995 and
approximately $13.3 million of annual net cost savings beginning in fiscal 1996.
(See "Financial Liquidity and Capital Resources.")
Interest Expense, Net
Net interest expense increased $1.7 million to $6.2 million in Second
Quarter 1995, as compared to Second Quarter 1994. This increase resulted
primarily from borrowings related to the Almaden/Inglenook Acquisition.
Net Income
Net income increased to $10.0 million in Second Quarter 1995 from $5.7
million in Second Quarter 1994, an increase of $4.3 million, or 74%. Fully
diluted earnings per share increased to $0.50 in Second Quarter 1995 from $0.35
in Second Quarter 1994, a 43% improvement. The increase in net income is due
primarily to the contributions of the Almaden and Inglenook brands and other
products acquired in the Almaden/Inglenook Acquisition, and to a lesser extent,
increased sales of imported beer brands. These contributions to net income more
than offset the $1.7 million of additional pretax net interest expense in Second
Quarter 1995 arising from borrowings related to the Almaden/Inglenook
Acquisition.
<PAGE>
Six Months Ended February 28, 1995 ("First Half of Fiscal 1995") Compared
to Six Months Ended February 28, 1994 ("First Half of Fiscal 1994")
Net Sales
Net sales for First Half of Fiscal 1995 increased to $454.5 million
from $294.5 million for First Half of Fiscal 1994, an increase of $160.0
million, or approximately 54%. This increase resulted from the inclusion of: (i)
$127.8 million of net sales of products acquired in the Almaden/Inglenook
Acquisition; (ii) an overall increase in net sales of Company products which
existed during both First Half of Fiscal 1995 and First Half of Fiscal 1994; and
(iii) an additional six weeks of net sales of Vintners' products during first
quarter of fiscal 1995 amounting to $16.4 million. The Vintners Acquisition was
consummated six weeks after the commencement of the first quarter of fiscal
1994. Excluding the impact of the additional six weeks of net sales of Vintners'
products during the first quarter of fiscal 1995 and all of the net sales
resulting from the Almaden/Inglenook Acquisition during First Half of Fiscal
1995, the Company's net sales increased $15.8 million, or 5.4%, as compared to
First Half of Fiscal 1994. This was principally due to increased net sales of
imported beer brands and varietal table wines.
For purposes of computing the net sales and unit volume comparative
data below, sales of products acquired in the Vintners and Almaden/Inglenook
Acquisitions have been included in the entire period for First Half of Fiscal
1995 and included for the same period during First Half of Fiscal 1994, part of
which was prior to the Vintners Acquisition, and all of which was prior to the
Almaden/Inglenook Acquisition.
Net sales and unit volume of the Company's branded beverage alcohol
products for First Half of Fiscal 1995 increased 4.8% and 4.3%, respectively, as
compared to First Half of Fiscal 1994. This increase was principally due to
increased net sales and unit volume of the Company's imported beer brands and
varietal table wine brands.
Net sales and unit volume of the Company's branded wine products for
First Half of Fiscal 1995 decreased slightly and 3.2%, respectively, as compared
to First Half of Fiscal 1994. These decreases resulted primarily from lower
sales of the Company's sparkling wine and non-varietal table wine brands.
Net sales and unit volume of the Company's varietal table wine brands
for First Half of Fiscal 1995 increased 16.5% and 13.9%, respectively, as
compared to First Half of Fiscal 1994, reflecting increases in most of the
Company's varietal table wine brands. Net sales and unit volume of the Company's
non-varietal table wine brands for First Half of Fiscal 1995 decreased 3.0% and
4.7%, respectively, as compared to First Half of Fiscal 1994. Net sales and unit
volume of the Company's sparkling wine brands for First Half of Fiscal 1995
decreased 11.6% and 13.3%, respectively, as compared to First Half of Fiscal
1994. Net sales and unit volume of the Company's dessert wine brands for First
Half of Fiscal 1995 decreased 4.3% and 8.8%, respectively, as compared to First
Half of Fiscal 1994.
Net sales and unit volume of the Company's beer brands for First Half
of Fiscal 1995 increased 24.7% and 24.5%, respectively, as compared to First
Half of Fiscal 1994. These increases resulted primarily from increased sales of
the Company's Corona brand and its other Mexican beer brands.
Net sales and unit volume of the Company's spirits brands for First
Half of Fiscal 1995 were essentially flat as compared to First Half of Fiscal
1994. The Company's sales increases in vodka, tequila, gin, and mezcal were
offset by decreased sales of aged whiskeys (i.e., bourbon, Canadian, Scotch, and
blended whiskeys).
Gross Profit
Gross profit for First Half of Fiscal 1995 increased to $126.8 million
from $86.3 million for First Half of Fiscal 1994, an increase of $40.5 million,
or approximately 47%. This increase resulted from the inclusion of the
Almaden/Inglenook and Vintners product lines with those of the Company, as well
as increased sales of imported beer brands. The Company's gross profit as a
percentage of net sales decreased to 27.9% for First Half of Fiscal 1995 from
29.3% for First Half of Fiscal 1994. The Company's gross profit percentage
decreased as a result of: (i) the inclusion of operations acquired in the
Almaden/Inglenook Acquisition, which had a lower gross profit percentage than
those of the Company's operations prior to that acquisition; (ii) reduced gross
profit percentages on the Company's table wine brands due to lower selling
prices and higher cost of goods sold associated with some of these brands; and
(iii) the impact of the increase in sales of imported beer brands, which
generally have a lower gross profit percentage than the Company's other branded
products.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for First Half of Fiscal
1995 increased to $79.9 million from $59.7 million for First Half of Fiscal
1994, an increase of $20.2 million, or approximately 34%. This increase resulted
primarily from the additional expenses associated with the sales and marketing
of the products acquired in the Almaden/Inglenook and Vintners Acquisitions. As
a percentage of net sales, selling, general and administrative expenses declined
to 17.6% in First Half of Fiscal 1995 as compared to 20.3% in First Half of
Fiscal 1994.
Nonrecurring Restructuring Expenses
As a result of the Restructuring Plan, in addition to a restructuring
charge taken in the fourth quarter of fiscal 1994, the Company incurred
additional expenses related to the restructuring in both the first quarter of
fiscal 1995 and Second Quarter 1995, which amounted to $685,000, and which
reduced after-tax income for First Half of Fiscal 1995 by $420,000, or $0.02 per
share on a fully diluted basis. Through February 28, 1995, a total of 21
employees had been released and no facilities had been closed. (See
"Nonrecurring Restructuring Expenses" under Second Quarter 1995 Compared to
Second Quarter 1994 and "Financial Liquidity and Capital Resources.")
<PAGE>
Interest Expense, Net
Net interest expense increased $4.9 million to $13.1 million in First
Half of Fiscal 1995, as compared to First Half of Fiscal 1994. The increase is
primarily due to borrowings related to the Vintners and Almaden/Inglenook
Acquisitions.
Net Income
Net income for First Half of Fiscal 1995 increased to $20.3 million
from $11.4 million for First Half of Fiscal 1994, an increase of $8.9 million,
or approximately 78%. Fully diluted earnings per share increased to $1.11 in
First Half of Fiscal 1995 from $0.72 in First Half of Fiscal 1994, a 53%
improvement. The increase in net income is due to the contributions of the
Almaden and Inglenook brands and other products acquired in the
Almaden/Inglenook Acquisition and to increased sales of imported beer brands.
These factors more than offset the $4.9 million of additional pretax net
interest expense in First Half of Fiscal 1995 arising from borrowings related to
the Vintners and Almaden/Inglenook Acquisitions.
Financial Liquidity and Capital Resources
General
The Company's principal use of cash in its operating activities is for
purchasing and carrying inventories 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 harvests when the Company has
relied on short-term borrowings. The annual grape crush normally begins in
August and continues 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.
Cash Flows
Cash Flows from Operating Activities
Net cash provided by operating activities in Second Quarter 1995 was
$26.5 million, an increase of $2.2 million over Second Quarter 1994. This
increase was principally the result of higher net income and larger reductions
in inventory and accounts receivable in Second Quarter 1995, offset by the $28.3
million payment made to the former Barton stockholders in December, 1994 (the
"Barton Payment"), which payment is part of the "Earn-Out" (as defined below),
and by higher tax and interest expenditures. Net cash used in operating
activities for First Half of Fiscal 1995, which was $36.2 million, resulted
principally from the Barton Payment and higher inventory purchases, partially
offset by higher net income adjusted for non-cash items. Higher inventory
purchases reflect the additional seasonal grape requirements brought about by
the Almaden/Inglenook Acquisition.
<PAGE>
Cash Flows from Investing Activities
Capital expenditures for the Company increased in Second Quarter 1995
to $5.6 million as compared to $1.3 million in Second Quarter 1994, and to $11.3
million in First Half of Fiscal 1995, as compared to $2.8 million in First Half
of Fiscal 1994. The increases are principally due to capital expenditures
related to newly acquired facilities, coupled with capital expenditures
associated with the Restructuring Plan.
Cash Flows from Financing Activities
Notes Payable were reduced by $20.0 million during Second Quarter 1995
through the application of cash provided by operating activities. Notes Payable
were $7.0 million on February 28, 1995. Principal payments of long-term debt
increased to $7.1 million in Second Quarter 1995 from $2.0 million in Second
Quarter 1994 due to the higher quarterly loan repayments required under the
Credit Facility (as defined below). Notes Payable were reduced by $12.0 million
in First Half of Fiscal 1995 through the application of $22.1 million from the
Offerings (as defined below) and $47.0 million from the proceeds of additional
long-term borrowings offset by net borrowings of $57.1 million during this
period for seasonal working capital needs and capital expenditures.
Debt, other than Notes Payable, decreased $42.5 million in First Half
of Fiscal 1995 due to scheduled debt repayments of $7.5 million and the use of
$82.0 million of proceeds from the Offerings to prepay debt, offset by
additional Term Loan borrowings of $47.0 million under the Credit Facility.
As of February 28, 1995, under its Credit Facility, the Company had
outstanding Term Loans of $135.0 million, $7.0 million of Revolving Loans, $2.2
million of Revolving Letters of Credit and $25.0 million under the Barton Letter
of Credit (as defined below). As of February 28, 1995, under the Credit
Facility, $175.8 million of Revolving Loans were available to be drawn by the
Company.
Stock Offering
On November 18, 1994, the Company completed a public sale of 3,937,744
shares of its Class A Common Stock at a price to the public of $33.50 per share
in simultaneous United States and international offerings (the "Offerings"). Of
the total number of shares sold in the Offerings, 3 million shares were sold by
the Company (the "Shares") and 937,744 shares were sold by certain selling
stockholders. The Company did not receive any of the proceeds from the sale of
Class A Stock owned individually by those selling stockholders. The Company used
the proceeds, net of underwriters' discounts and commissions, from the sale of
the Shares, which amounted to $96.3 million, together with $7.8 million of
proceeds it received from certain of the selling stockholders in connection with
their exercise of options to purchase 432,067 shares of the Company's Class A
Common Stock, which options were issued to them in connection with the Vintners
Acquisition, to repay indebtedness under the Credit Facility. On November 21,
1994, Term Loans in the amount of $82.0 million and Revolving Loans in the
amount of $22.1 million were prepaid with the proceeds from the Offerings. As a
result of this prepayment, the Term Loan commitment in the Credit Facility was
reduced to $142.0 million from $224.0 million.
The Company's Credit Facility
The Company and a syndicate of 21 banks for which The Chase Manhattan
Bank, N.A. acts as agent, entered into a Second Amendment and Restatement (as
amended) dated as of August 5, 1994 of Amendment and Restatement of Credit
Agreement dated June 29, 1993 (the "Credit Facility"). As of March 29, 1995, the
Company's Credit Facility provides for: (i) a $128.0 million Term Loan facility
due in December 1999; (ii) a $185 million Revolving Loan credit facility, which
expires in June 2000; and (iii) an existing $25.0 million letter of credit
related to the Barton Acquisition (the "Barton Letter of Credit"). Quarterly
principal payments of $7.0 million are required under the Credit Facility, with
a final quarterly principal payment of $2.0 million due in December 1999. As of
March 29, 1995, the Company had $128 million of Term Loans and $27.0 million of
Revolving Loans outstanding under the Credit Facility. The Term Loans borrowed
under the Credit Facility may be either base rate loans or eurodollar base rate
loans. Base rate loans have an interest rate equal to the higher of either the
Federal Funds rate plus 0.5% or the prime rate. Eurodollar rate loans currently
have an interest rate equal to LIBOR plus 1.0%. As of March 29, 1995, the
interest rates for base rate and eurodollar rate loans were 9.0% and 7.4%,
respectively.
Payments to Former Barton Stockholders
Pursuant to the Barton Acquisition, the Company is obligated to make
payments of up to an aggregate amount of $57.3 million to the former Barton
stockholders (the "Barton Stockholders"), which payments are payable over a
three-year period ending November 29, 1996 (the "Earn-Out"). The first payment
to the Barton Stockholders of $4.0 million was made on December 31, 1993, and
the second payment of $28.3 million was made on December 30, 1994, as a result
of satisfaction of certain performance goals and the achievement of targets for
earnings before interest and taxes. An accrual for the December 30, 1994 payment
was recorded in the financial statements as of August 31, 1994. The Company
funded this payment through Revolving Loans under its Credit Facility. The
remaining payments are contingent upon Barton achieving and exceeding certain
targets for earnings before interest and taxes and are to be made as follows: up
to $10.0 million is to be made on November 30, 1995; and up to $15.0 million is
to be made on November 29, 1996. Such payment obligations are fully secured by
the Company's standby irrevocable letter of credit under the Credit Facility
(i.e., the Barton Letter of Credit) and are subject to acceleration in certain
events. All Earn-Out payments will be accounted for as additional purchase price
for the Barton Acquisition when the contingencies have been satisfied and will
be allocated based upon the fair market value of the underlying assets. As a
result, as the Earn-Out payments are made, depreciation and amortization expense
will increase in the future over the remaining useful lives of these assets.
<PAGE>
Restructuring Plan
As a result of the Restructuring Plan, the Company incurred an
after-tax restructuring charge in the fourth quarter of fiscal 1994 of $14.9
million, or $0.91 per share on a fully diluted basis. Approximately 60% of the
restructuring charge relates to the revaluation of affected assets, which will
not involve cash expenditures. Implementation of the Restructuring Plan will
require net cash expenditures of approximately $27.1 million, including $20.0
million for capital expenditures. The capital expenditures will be funded
through the Credit Facility. Upon relocation of the bottling facilities and
other equipment from the Central Cellars and Soledad wineries, these wineries
will be closed and offered for sale. Net proceeds in excess of $10.0 million
received from the dispositions of discontinued operations and other assets must
be used to pay down Term Loans if the proceeds are not reinvested within one
year in similar assets. The Company anticipates that the Restructuring Plan will
result in net cost savings of approximately $1.7 million in fiscal 1995 and
approximately $13.3 million of annual net cost savings beginning in fiscal 1996.
Other
The Company engages in operations at its facilities for the purpose of
disposing of waste and by-products generated in its production process. These
operations include the treatment of waste water to comply with regulatory
requirements prior to disposal in public facilities or upon property owned by
the Company or others and do not constitute a material part of the Company's
overall cost of product sold. Expenditures for the purpose of maintaining or
improving the Company's waste water treatment facilities have not constituted a
material part of the Company's maintenance or capital expenditures over the last
three fiscal years and the Company does not expect to incur any such material
expenditures during its 1995 fiscal year. During the last three fiscal years,
the Company has not incurred, nor does it expect to incur in its 1995 fiscal
year, any material expenditures related to remediation of previously
contaminated sites or other non-recurring environmental matters.
In February 1995, the Company entered into an agreement cancelling
certain of its long-term grape contracts acquired in connection with the
Almaden/Inglenook Acquisition. As a result, the estimated loss reserve at the
date of the Almaden/Inglenook Acquisition was reduced by approximately $13
million with a corresponding reduction in goodwill.
The Company believes that cash flow from operations will provide
sufficient funds to meet all of its anticipated short and long-term debt
service. The Company is not aware of any potential impairment to its liquidity
and believes that the Revolving Loans available under the 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.
As noted above under "Results of Operations of the Company",
consummation of the Proposed Acquisition will require financing and the
obtaining of appropriate consents from the banking syndicate under its Credit
Facility.
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 19,
1995 (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, approved and ratified the
selection of Arthur Andersen LLP, Certified Public Accountants, as the Company's
independent auditors for the fiscal year ending August 31, 1995.
Set forth below is the number of votes cast for or against or withheld,
as well as the number of abstentions, as applicable, as to the foregoing
matters.
I. The results of the balloting for the election of
Directors of the Company were as follows:
Directors Elected by Class A Stockholders:
James Locke, III:
For: 12,910,966; Withheld: 7,503
George Bresler:
For: 12,908,817; Withheld: 9,652
Directors Elected by Class B Stockholders:
Marvin Sands:
For: 32,800,030; Withheld: 28,280
Richard Sands:
For: 32,799,360; Withheld: 28,950
Ellis Goodman:
For: 32,797,780; Withheld: 30,530
Robert Sands:
For: 32,800,030; Withheld: 28,280
Bertram Silk:
For: 32,800,030; Withheld: 28,280
Sir Harry Solomon:
For: 32,797,780; Withheld: 30,530
II. The proposal submitted to the stockholders to approve and
ratify the selection of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending August 31,
1995 was adopted by the following vote:
For: 45,620,302
Against: 9,083
Abstain: 117,394
Item 6. Exhibits and Reports on Form 8-K
(a) See Index to Exhibits located on Page 22 of this Report.
(b) There were no Reports on Form 8-K filed with the Securities
and Exchange Commission during the quarter ended February 28,
1995.
<PAGE>
<TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CANANDAIGUA WINE COMPANY, INC.
Dated: April 4, 1995 By: /s/ Richard Sands
--------------------
Richard Sands, President and
Chief Executive Officer
Dated: April 4, 1995 By: /s/ Lynn K. Fetterman
--------------------------
Lynn K. Fetterman, Senior Vice President
and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
(2) Plan of acquisition, reorganization, arrangement, liquidation or succession.
2.1 Asset Purchase Agreement dated August 2, 1991 between the Registrant
and Guild Wineries and Distilleries, as assigned to an acquiring
subsidiary (filed as Exhibit 2(a) to the Registrant's Report on Form
8-K dated October 1, 1991 and incorporated herein by reference).
2.2 Stock Purchase Agreement dated April 27, 1993 among the Registrant,
Barton Incorporated and the stockholders of Barton Incorporated,
Amendment No. 1 to Stock Purchase Agreement dated May 3, 1993, and
Amendment No. 2 to Stock Purchase Agreement dated June 29, 1993 (filed
as Exhibit 2(a) to the Registrant's Current Report on Form 8-K dated
June 29, 1993 and incorporated herein by reference).
2.3 Asset Sale Agreement dated September 14, 1993 between the Registrant
and Vintners International Company, Inc. (filed as Exhibit 2(a) to the
Registrant's Current Report on Form 8-K dated October 15, 1993 and
incorporated herein by reference).
2.4 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 the Registrant (filed as Exhibit 2(b) to the Registrant's
Current Report on Form 8-K dated October 15, 1993 and incorporated
herein by reference).
2.5 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 the Registrant (filed as Exhibit 2.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended February 28, 1994 and
incorporated herein by reference).
2.6 Asset Purchase Agreement dated August 3, 1994 between the Registrant
and Heublein, Inc. (filed as Exhibit 2(a) to the Registrant's Current
Report on Form 8-K dated August 5, 1994 and incorporated herein by
reference).
2.7 Amendment dated November 8, 1994 to Asset Purchase Agreement between Heublein, Inc. and Registrant
(filed as Exhibit 2.2 to the Registrant's Registration Statement on Form S-3 (Amendment No. 2)
(Registration No. 33-55997) filed with the Securities and Exchange Commission on November 8, 1994 and
incorporated herein by reference).
2.8 Amendment dated November 18, 1994 to Asset Purchase Agreement between
Heublein, Inc. and the Registrant (filed as Exhibit 2.8 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
August 31, 1994 and incorporated herein by reference).
2.9 Amendment dated November 30, 1994 to Asset Purchase Agreement between
Heublein, Inc. and the Registrant (filed as Exhibit 2.9 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended
November 30, 1994 and incorporated herein by reference).
(4) Instruments defining the rights of security holders, including indentures.
4.1 Specimen of Certificate of Class A Common Stock of the Company (filed
as Exhibit 1.1 to the Registrant's Registration Statement on Form 8-A,
dated April 28, 1992 and incorporated herein by reference).
4.2 Specimen of Certificate of Class B Common Stock of the Company (filed
as Exhibit 1.2 to the Registrant's Registration Statement on Form 8-A,
dated April 28, 1992 and incorporated herein by reference).
4.3 Indenture dated as of December 27, 1993 among the Registrant, its
Subsidiaries and Chemical Bank (filed as Exhibit 4.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended
November 30, 1993 and incorporated herein by reference).
4.4 First Supplemental Indenture dated as of August 3, 1994 among the Registrant, Canandaigua West,
Inc. and Chemical Bank (filed as Exhibit 4.5 to the Registrant's Registration Statement on Form
S-8 (Registration No. 33-56557) and incorporated herein by reference).
(10) Material Contracts.
Not Applicable.
(11) Statement re computation of per share earnings.
Computation of per share earnings (filed herewith).
(15) Letter re unaudited interim financial information.
Not applicable.
(18) Letter re change in accounting principles.
Not applicable.
(19) Report furnished to security holders.
Not applicable.
<PAGE>
(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.
Financial Data Schedule (filed herewith).
(99) Additional Exhibits.
Not applicable.
<S> <C>
</TABLE>
<PAGE>
<TABLE>
EXHIBIT 11
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(dollars in thousands, except share and per share data)
Six Months Ended
February 28, 1995 February 28, 1994
Primary Fully Diluted Primary Fully Diluted
<S> <C> <C> <C> <C>
Net income per common and common
equivalent share:
Net income available to common
shares $ 20,320 $ 20,320 $ 11,395 $ 11,395
Adjustments:
Assumed exercise of convertible
debt - - - 420
Net income available to common
and common equivalent shares $ 20,320 $ 20,320 $ 11,395 $ 11,815
Shares:
Weighted average common shares
outstanding 17,989,360 17,989,360 14,853,711 14,853,711
Adjustments:
(1) Assumed exercise of convertible
debt - - - 1,088,863
(2) Assumed exercise of incentive
stock options 283,554 284,648 227,018 238,419
(3) Assumed exercise of options 70,956 72,505 117,642 126,837
Weighted average common and common
equivalent shares outstanding 18,343,870 18,346,513 15,198,371 16,307,830
Net income per common and common
equivalent share $ 1.11 $ 1.11 $ 0.75 $ 0.72
Three Months Ended
Net income per common and common February 28, 1995 February 28, 1994
equivalent share: Primary Fully Diluted Primary Fully Diluted
Net income available to common
shares $ 9,988 $ 9,988 $ 5,741 $ 5,741
Adjustments:
Assumed exercise of convertible
debt - - - -
Net income available to common
and common equivalent shares $ 9,988 $ 9,988 $ 5,741 $ 5,741
Shares:
Weighted average common shares
outstanding 19,497,647 19,497,647 15,948,785 15,948,785
Adjustments:
(1) Assumed exercise of convertible
debt - - - -
(2) Assumed exercise of incentive
stock options 267,771 269,182 246,360 246,360
(3) Assumed exercise of options 92,350 94,814 180,251 180,251
Weighted average common and common
equivalent shares outstanding 19,857,768 19,861,643 16,375,396 16,375,396
Net income per common and common
equivalent share $ 0.50 $ 0.50 $ 0.35 $ 0.35
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements included within the Company's February 28, 1995,
Form 10-Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000016918
<NAME> CANANDAIGUA WINE COMPANY, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1994
<PERIOD-END> FEB-28-1995
<CASH> 3,090
<SECURITIES> 0
<RECEIVABLES> 120,538
<ALLOWANCES> 0
<INVENTORY> 319,836
<CURRENT-ASSETS> 469,762
<PP&E> 267,359
<DEPRECIATION> 71,520
<TOTAL-ASSETS> 832,917
<CURRENT-LIABILITIES> 191,051
<BONDS> 239,791
<COMMON> 213
0
0
<OTHER-SE> 327,954
<TOTAL-LIABILITY-AND-EQUITY> 832,917
<SALES> 454,485
<TOTAL-REVENUES> 454,485
<CGS> 327,694
<TOTAL-COSTS> 327,694
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,476
<INCOME-PRETAX> 33,040
<INCOME-TAX> 12,720
<INCOME-CONTINUING> 20,320
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,320
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.11
</TABLE>
