<PAGE>
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 May 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
COMMISSION FILE NUMBER 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)
(716)394-7900
-------------
(Registrant's telephone number including area code)
NONE
----
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
The number of shares outstanding of each of the Registrant's classes of common
stock, as of July 9, 1996, is set forth below:
CLASS NUMBER OF SHARES OUTSTANDING
----- ----------------------------
Class A Common Stock, Par Value $.01 Per Share 16,313,136
Class B Common Stock, Par Value $.01 Per Share 3,330,458
<PAGE>
Part 1 - Financial Information
Item 1. Financial Statements
<TABLE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<CAPTION>
May 31, 1996 February 29, 1996
------------ -----------------
(unaudited) (audited)
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash investments $ 2,623 $ 3,339
Accounts receivable, net 150,326 142,471
Inventories, net 312,403 341,838
Prepaid expenses and other current assets 20,769 30,372
----------- -----------
Total current assets 486,121 518,020
PROPERTY, PLANT AND EQUIPMENT, NET 253,179 250,638
OTHER ASSETS 283,727 285,922
----------- -----------
Total assets $ 1,023,027 $ 1,054,580
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 89,900 $ 111,300
Current maturities of long-term debt 40,796 40,797
Accounts payable 51,925 59,730
Accrued Federal and state excise taxes 18,834 19,699
Other accrued expenses and liabilities 69,582 68,440
----------- -----------
Total current liabilities 271,037 299,966
----------- -----------
LONG-TERM DEBT, less current maturities 317,455 327,616
----------- -----------
DEFERRED INCOME TAXES 58,194 58,194
----------- -----------
OTHER LIABILITIES 12,371 12,298
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Class A Common Stock, $.01 par value-
Authorized, 60,000,000 shares;
Issued, 17,445,582 shares at
May 31, 1996 and 17,423,082 shares
at February 29, 1996 174 174
Class B Convertible Common Stock, $.01 par value-
Authorized, 20,000,000 shares;
Issued 3,969,183 shares at
May 31, 1996 and 3,991,683 shares
at February 29, 1996 40 40
Additional paid-in capital 221,729 221,133
Retained earnings 151,101 142,600
----------- -----------
373,044 363,947
----------- -----------
Less-Treasury stock-
Class A Common Stock, 1,200,446 shares at
May 31, 1996 and 1,165,786 shares at
February 29, 1996, at cost (6,867) (5,234)
Class B Convertible Common Stock, 625,725
shares at May 31, 1996 and
February 29, 1996, at cost (2,207) (2,207)
----------- -----------
(9,074) (7,441)
----------- -----------
Total stockholders' equity 363,970 356,506
----------- -----------
Total liabilities and stockholders' equity $ 1,023,027 $ 1,054,580
=========== ===========
<FN>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
</TABLE>
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)
For the Three Months Ended May 31,
----------------------------------
1996 1995
---- ----
(unaudited) (unaudited)
GROSS SALES $ 376,829 $ 295,414
Less - Excise taxes (100,336) (72,644)
------------ ------------
Net sales 276,493 222,770
COST OF PRODUCT SOLD (203,586) (159,508)
------------ ------------
Gross profit 72,907 63,262
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (49,943) (38,834)
NONRECURRING RESTRUCTURING EXPENSES -- (968)
------------ ------------
Operating income 22,964 23,460
INTEREST EXPENSE, net (8,795) (6,163)
------------ ------------
Income before provision
for Federal and state
income taxes 14,169 17,297
PROVISION FOR FEDERAL AND
STATE INCOME TAXES (5,668) (6,660)
------------ ------------
NET INCOME $ 8,501 $ 10,637
============ ============
SHARE DATA:
Net income per common and common
equivalent share:
Primary $ .43 $ .53
============ ============
Fully diluted $ .43 $ .53
============ ============
Weighted average common shares
outstanding:
Primary 19,895,580 19,974,882
Fully diluted 19,895,580 20,012,386
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
<TABLE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
For the Three Months Ended May 31,
----------------------------------
1996 1995
---- ----
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,501 $ 10,637
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of property, plant and equipment 6,177 3,531
Amortization of intangible assets 2,407 1,485
Loss on sale of property, plant and equipment 182 --
Change in assets and liabilities, net of effects
from purchases of businesses:
Accounts receivable, net (7,855) 2,327
Inventories, net 29,435 30,609
Prepaid expenses 4,533 654
Accounts payable (9,206) (4,161)
Accrued Federal and state excise taxes (865) (9,686)
Other accrued expenses and liabilities 6,212 (5,138)
Other (138) (2,158)
-------- --------
Total adjustments 30,882 17,463
-------- --------
Net cash provided by operating activities 39,383 28,100
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment 5,057 --
Purchases of property, plant and equipment,
net of minor disposals (13,957) (8,968)
-------- --------
Net cash used in investing activities (8,900) (8,968)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable, short-term borrowings (21,400) (7,000)
Principal payments of long-term debt (10,162) (7,094)
Proceeds from employee stock purchases 657 633
Purchase of treasury stock (294) --
Exercise of employee stock options -- 65
-------- --------
Net cash used in financing activities (31,199) (13,396)
-------- --------
NET (DECREASE) INCREASE IN CASH AND CASH INVESTMENTS (716) 5,736
CASH AND CASH INVESTMENTS, beginning of period 3,339 3,090
-------- --------
CASH AND CASH INVESTMENTS, end of period $ 2,623 $ 8,826
======== ========
<FN>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
</TABLE>
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1996
1) MANAGEMENT'S 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 the financial information for Canandaigua Wine Company, Inc. and its
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 Transition Report on Form 10-K, for the transition
period from September 1, 1995 to February 29, 1996.
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Certain May 1995 balances have been reclassified to conform with current
year presentation.
3) 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 93% at May 31,
1996, and 94% at February 29, 1996 and May 31, 1995. Replacement cost of the
inventories determined on a FIFO basis is approximately $309,288,000,
$332,849,000, and $273,707,000 at May 31, 1996, February 29, 1996, and May 31,
1995, respectively. The net realizable value of the Company's inventories is in
excess of $312,403,000, $341,838,000, and $289,226,000 at May 31, 1996, February
29, 1996, and May 31, 1995, respectively.
Elements of cost include materials, labor and overhead and consist of the
following:
May 31, February 29, May 31,
1996 1996 1995
---- ---- ----
(IN THOUSANDS)
Raw materials and supplies $ 22,861 $ 24,197 $ 26,641
Wines and distilled spirits in process 210,256 254,956 201,527
Finished case goods 79,286 62,685 61,058
-------- -------- --------
$312,403 $341,838 $289,226
======== ======== ========
If the FIFO method of inventory valuation had been used, reported net
income would have been $3.5 million, or $.18 per share, higher for the three
months ended May 31, 1996; and reported net income would have been $1.6 million,
or $.08 per share, lower for the three months ended May 31, 1995.
<PAGE>
4) PROPERTY, PLANT AND EQUIPMENT:
The major components of property, plant and equipment are as follows:
May 31, February 29,
1996 1996
---- ----
(IN THOUSANDS)
Land $ 16,271 $ 16,867
Buildings and improvements 72,235 76,694
Machinery and equipment 228,182 226,432
Motor vehicles 5,307 5,814
Construction in progress 24,207 12,404
--------- ---------
346,202 338,211
Less - Accumulated depreciation (93,023) (87,573)
--------- ---------
$ 253,179 $ 250,638
========= =========
5) OTHER ASSETS:
The major components of other assets are as follows:
May 31, February 29,
1996 1996
---- ----
(IN THOUSANDS)
Goodwill $ 156,489 $ 156,489
Distribution rights, agency license
agreements and trademarks 119,316 119,316
Other 23,335 23,123
--------- ---------
299,140 298,928
Less - Accumulated amortization (15,413) (13,006)
--------- ---------
$ 283,727 $ 285,922
========= =========
6) OTHER ACCRUED EXPENSES AND LIABILITIES:
The major components of other accrued expenses and liabilities are as
follows:
May 31, February 29,
1996 1996
---- ----
(IN THOUSANDS)
Accrued Earn-Out amounts $13,848 $13,848
Accrued advertising and drives 12,589 7,999
Accrued interest 8,855 5,766
Escrow holdback 7,620 7,620
Accrued salaries and commissions 6,588 9,333
Other 20,082 23,874
------- -------
$69,582 $68,440
======= =======
<PAGE>
7) ACQUISITIONS:
The following table sets forth the unaudited pro forma consolidated results
of operations of the Company for the three months ended May 31, 1996 and 1995.
The three month unaudited pro forma consolidated results of operations for the
period ended May 31, 1995, gives effect to the UDG Acquisition as if it occurred
on March 1, 1995. The unaudited pro forma consolidated results of operations 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 unaudited pro forma consolidated results of
operations are based upon currently available information and upon certain
assumptions that the Company believes are reasonable under the circumstances.
The unaudited pro forma consolidated results of operations do not purport to
represent what the Company's consolidated results of operations would actually
have been if the UDG Acquisition in fact had occurred on such date or to project
the Company's consolidated results of operations at any future date or for any
future period.
For the Three Months Ended May 31,
----------------------------------
1996 1995
---- ----
(IN THOUSANDS, EXCEPT SHARE DATA)
Net sales $ 276,493 $ 244,856
Income before provision for Federal
and state income taxes $ 14,169 $ 19,463
Net income $ 8,501 $ 11,969
Share data:
Net income per common and
common equivalent share:
Primary $ .43 $ .60
Fully diluted $ .43 $ .60
Weighted average common shares outstanding:
Primary 19,895,580 19,974,882
Fully diluted 19,895,580 20,012,386
<PAGE>
8) BORROWINGS:
Borrowings consist of the following at May 31, 1996:
Current Long-term Total
------- --------- -----
(IN THOUSANDS)
Notes Payable:
Senior Credit Facility:
Revolving Credit Loans $ 89,900 $ -- $ 89,900
======== ======== ========
Long-term Debt:
Senior Credit Facility:
Term loan, variable rate, aggregate
proceeds of $246,000, due in
installments through August 2001 $ 40,000 $186,000 $226,000
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 11.5%, due in monthly
installments through fiscal 1998 678 132 810
Industrial Development Agencies:
7.5% 1980 issue, original proceeds
$2,370, due in annual installments
of $118 through fiscal 2000 118 356 474
Other Long-term Debt:
Loans payable - 5.0% secured by cash
surrender value of officers' life
insurance policies -- 967 967
-------- -------- --------
$ 40,796 $317,455 $358,251
======== ======== ========
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THE INFORMATION IN THIS ITEM 2 CONTAINS FORWARD-LOOKING STATEMENTS. THE
COMPANY DESIRES TO TAKE ADVANTAGE OF THE "SAFE HARBOR" WHICH IS AFFORDED SUCH
STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WHEN THEY
ARE ACCOMPANIED BY MEANINGFUL CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE
FORWARD-LOOKING STATEMENTS. SUCH CAUTIONARY STATEMENTS ARE SET FORTH UNDER THE
HEADING "IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS" BELOW IN
THIS ITEM 2.
RESULTS OF OPERATIONS OF THE COMPANY
The Company's results of operations over recent years have been
significantly impacted by acquisitions. As previously reported, on September 1,
1995, the Company acquired certain distilled spirits brands and related assets
from United Distillers Glenmore, Inc., and certain of its North American
affiliates (collectively, "UDG"); and, in addition, this transaction included
multiyear agreements under which UDG will supply the Company with bulk whisky
and the Company will supply UDG with services including continued packaging of
various UDG brands not acquired by the Company (the "UDG Acquisition"). The
Company financed the UDG Acquisition through an amendment to its then-existing
bank credit facility, primarily through an increase in the term loan facility
under that credit facility.
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:
Three Months Ended
May 31,
1996 1995
---- ----
Net sales 100.0% 100.0%
Cost of product sold 73.6 71.6
Gross profit 26.4 28.4
Selling, general and administrative expenses 18.1 17.4
Nonrecurring restructuring expenses 0.0 0.4
Operating income 8.3 10.6
Interest expense, net 3.2 2.8
Income before provision for income taxes 5.1 7.8
Provision for Federal and state income taxes 2.0 3.0
Net income 3.1% 4.8%
<PAGE>
THREE MONTHS ENDED MAY 31, 1996 ("FIRST QUARTER 1997"), COMPARED TO THREE MONTHS
ENDED MAY 31, 1995 ("MAY 1995 QUARTER")
NET SALES
Net Sales for the Company's First Quarter 1997 increased to $276.5 million
from $222.8 million for the May 1995 Quarter, an increase of $53.7 million, or
approximately 24.1%. This increase resulted primarily from (i) the inclusion of
$24.3 million of net sales of products and services from the UDG Acquisition;
(ii) $12.6 million of additional imported beer sales, primarily Mexican beers;
(iii) $12.6 million of additional grape juice concentrate sales; and (iv) $4.9
million of increased net sales of branded wine products generated from selling
price increases implemented between October 1995 and May 1996, partially offset
by lower unit volume of branded wine products.
FOR PURPOSES OF COMPUTING THE NET SALES AND UNIT VOLUME COMPARATIVE DATA
FOR THE TABLE BELOW AND FOR THE REMAINDER OF THE DISCUSSION OF NET SALES, SALES
OF PRODUCTS ACQUIRED IN THE UDG ACQUISITION HAVE BEEN INCLUDED IN THE ENTIRE
PERIOD FOR FIRST QUARTER 1997 AND INCLUDED FOR THE SAME PERIOD DURING THE MAY
1995 QUARTER, WHICH WAS PRIOR TO THE UDG ACQUISITION.
The table below sets forth the net sales (in thousands of dollars) and unit
volumes (in thousands of cases) for the branded beverage alcohol products,
branded wine products, each category of branded wine product, beer and spirits
brands sold by the Company for First Quarter 1997 and the May 1995 Quarter:
<TABLE>
Three Months Ended May 31, 1996, Compared to Three Months Ended May 31, 1995
----------------------------------------------------------------------------
<CAPTION>
Net Sales Unit Volume
-------------------------------- ------------------------------
% Inc/ % Inc/
1996 1995 (Dec) 1996 1995 (Dec)
---- ---- ----- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Branded Beverage
Alcohol Products (1) $242,036 $223,267 8.4% 14,919 14,140 5.5%
Branded Wine Products $123,659 $118,783 4.1% 6,670 6,917 -3.6%
Non-varietal Table Wines $ 54,696 $ 54,695 0.0% 3,401 3,601 -5.5%
Varietal Table Wines $ 39,263 $ 35,252 11.4% 1,635 1,650 -0.9%
Dessert Wines $ 17,472 $ 17,499 -0.2% 1,093 1,150 -5.0%
Sparkling Wines $ 12,227 $ 11,337 7.9% 541 515 4.9%
Beer $ 72,856 $ 60,245 20.9% 5,845 4,880 19.8%
Spirits $ 45,522 $ 43,426 4.8% 2,403 2,335 2.9%
<FN>
(1) The sum of net sales and unit volume amounts from the categories do not
equal total Branded Beverage Alcohol Products because miscellaneous items
affecting net sales and unit volume are included in total Branded Beverage
Alcohol Products but are not reflected in the category information.
</TABLE>
<PAGE>
Net sales and unit volume of the Company's branded beverage alcohol
products for First Quarter 1997 increased 8.4% and 5.5%, respectively, as
compared to the May 1995 Quarter. The net sales increases resulted from higher
imported beer sales and price increases on most of the Company's branded wine
products, particularly varietal table wine brands. Unit volume increases were
led by substantial growth in the Company's imported beer brands and increases in
its sparkling wine and spirits brands, partially offset by declines in unit
volume of non-varietal table wine brands, varietal table wine brands and dessert
wine brands.
Net sales of the Company's branded wine products increased $4.9 million, or
4.1%, for First Quarter 1997 as compared to the May 1995 Quarter. Unit volume of
the Company's branded wine products declined by 3.6%. The Company believes that
these declines could be the result of the impact of the Company's price
increases. The $4.9 million increase in net sales was due to $9.1 million
resulting from higher average selling prices per case, virtually all of which
was due to price increases; partially offset by $4.2 million of lower net sales
resulting from the decline in unit volume.
Net sales of the Company's non-varietal table wine brands were essentially
unchanged from a year ago. Unit volume decreased by 5.5%, which may reflect the
impact of the price increases.
Net sales of the Company's varietal table wine brands increased by $4.0
million, or 11.4%, primarily as a result of price increases between October 1995
and May 1996. Unit volume of the Company's varietal table wine brands was
essentially unchanged as compared to the same period last year. The Company
believes that the rate of growth of the entire varietal table wine category has
slowed at the retail level as a result of industry-wide price increases.
However, the Company believes its retail rate of growth of varietal table wine
products, except white zinfandel, still exceeds that of the industry. The
Company's white zinfandel products, however, which constitute a large percentage
of the Company's varietal sales have declined at retail while the white
zinfandel category has increased. The Company believes that this may be due to
the impact of the price increases which may have unfavorably affected the
Company's price positioning of its white zinfandel products versus its
competitors. The Company's varietal performance also reflects comparison of the
May 1995 Quarter which had significant new product introductions to the First
Quarter 1997 which did not include new product introductions in this category.
Net sales and unit volume of the Company's dessert wine brands declined
0.2% and 5.0%, respectively, for the First Quarter 1997 as compared to the May
1995 Quarter. Net sales and unit volume of the Company's sparkling wine brands
for First Quarter 1997 increased 7.9% and 4.9%, respectively, as compared to the
May 1995 Quarter.
Net sales and unit volume of the Company's beer brands for First Quarter
1997 continued to grow substantially, increasing 20.9% and 19.8%, respectively,
as compared to the May 1995 Quarter. These increases were driven largely by
continued sales growth of Corona and the Company's other Mexican beer brands.
The Company believes that the growth in Mexican
<PAGE>
imported beers is related to the growth of the Hispanic population in the
Company's distribution areas, the continued popularity of imported beers in
general and the narrowing price gap between imported beers and domestic beers.
The Company does not anticipate that sales of imported beers will continue to
grow at this rate in the future.
Net sales and unit volume of the Company's distilled spirit brands
increased by 4.8% and 2.9%, respectively, for First Quarter 1997 as compared to
the May 1995 Quarter. Excluding the impact of the UDG Acquisition, spirits net
sales and unit volume grew by 18.8% and 7.2%, respectively, reflecting strong
brandy sales and increases in liqueurs, tequila and vodka. Net sales and unit
volume of the brands acquired in the UDG Acquisition decreased by 8.7% and 2.3%,
respectively. The decline in net sales of these brands over and above the
decline in unit volume generally reflects lower pricing of these brands to be
more in line with the rest of the Company's portfolio.
GROSS PROFIT
The Company's gross profit increased to $72.9 million in First Quarter 1997
from $63.3 million in the May 1995 Quarter, an increase of $9.6 million, or
15.2%. This change in gross profit resulted primarily from (i) approximately
$10.3 million of gross profit from sales generated from the business acquired
from UDG; (ii) approximately $5.8 million of additional gross profit from
increases in beer sales; and (iii) approximately $6.5 million of lower gross
profit primarily due to increased costs of products sold, particularly higher
grape costs expected in the fall 1996 harvest and reflected in the Company's
cost of products sold under the last-in-first-out method of accounting for
inventory valuation ("LIFO"), mitigated, in part, by higher selling prices of
branded wine products and additional grape juice concentrate sales. However, the
Company may not be able to fully offset these higher costs through additional
selling price increases of its branded wine products.
First Quarter 1997 results reflect a reduction in gross profit of
approximately $5.9 million due to LIFO, based on an annual estimate of $23.5
million for the LIFO adjustment. The Company previously estimated that gross
profit will be negatively impacted as a result of LIFO by $13.0 million related
to higher grape costs. Although the increase in the Company's estimated impact
of LIFO on the Company's operating income was partially offset as a result of
higher than expected net sales and lower than expected selling, general and
administrative expenses, the Company cannot predict the extent, if any, of
positive offsetting factors throughout the remainder of Fiscal 1997.
Notwithstanding this, the Company is not revising its April 29, 1996 estimate of
fully diluted net income per share of $2.30 to $2.50 for Fiscal 1997.
Gross profit as a percentage of net sales was 26.4% for First Quarter 1997
as compared to 28.4% in the May 1995 Quarter. The decline in the gross profit
margin was due to higher costs, particularly grape costs, of wine and
concentrate products, as well as an unfavorable change in product mix as sales
of grape juice concentrate, which has a lower gross profit margin than most of
the Company's other products, increased as a percentage of total sales in First
Quarter 1997 as
<PAGE>
compared to the May 1995 Quarter. The Company initiated price increases on its
varietal wine and sparkling wine products during First Quarter 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for First Quarter 1997
increased $11.1 million as compared to the May 1995 Quarter. Of this amount,
$5.4 million related to the UDG Acquisition, $4.5 million was due to additional
sales, marketing and administrative expenses related to the Company's growth,
and $1.2 million was due to advertising and promotion expenses associated with
increased unit volume exclusive of sales related to the UDG Acquisition.
INTEREST EXPENSE, NET
Net interest expense totaled $8.8 million in First Quarter 1997, an
increase of $2.6 million as compared to the May 1995 Quarter. This increase was
due to $3.0 million of additional interest expense from the UDG Acquisition
financing, partially offset by $0.4 million of reduced interest expense as the
Company's average debt outstanding was lower as compared to the May 1995 Quarter
exclusive of debt from the UDG Acquisition financing.
NET INCOME
Net income for First Quarter 1997 was $8.5 million, a decrease of $2.1
million as compared to $10.6 million in the May 1995 Quarter. The decrease in
net income was driven primarily by higher cost of products sold primarily as a
result of anticipated grape cost increases from the upcoming fall harvest;
higher selling, general and administrative expenses and increased interest
expense; partially offset by higher net sales.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
GENERAL
The Company's principal use of cash in its operating activities is for
purchasing and carrying inventory of raw materials, inventories in process 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 runs through October. 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 operating activities to repay its short-term
borrowings.
<PAGE>
CASH FLOWS - FIRST QUARTER 1997
OPERATING ACTIVITIES
Net cash provided by operating activities in First Quarter 1997 was $39.4
million. The net cash provided by operating activities for First Quarter 1997
resulted principally from a net decrease in current assets (primarily a $29.4
million net decrease in inventories) plus net income adjusted for noncash items.
INVESTING ACTIVITIES AND FINANCING ACTIVITIES
Net cash used in investing activities in First Quarter 1997 was $8.9
million, resulting primarily from $14.0 million of capital expenditures, offset
in part by proceeds of $5.1 million from the sale of the Company's Central
Cellars winery, located in Lodi, California, during May 1996.
Net cash used in financing activities in First Quarter 1997 was $31.2
million, resulting principally from repayment of $21.4 million of Revolving Loan
borrowings under the Company's Credit Facility (as defined below) plus $10.2
million of principal payments of long-term debt.
As of May 31, 1996, under its Credit Facility, the Company had outstanding
Term Loans of $226.0 million bearing interest at 6.2%, $89.9 million of
Revolving Loans bearing interest at 6.5%, $9.5 million of Revolving Letters of
Credit and $13.7 million under the Barton Letter of Credit. As of May 31, 1996,
under the Credit Facility, $85.6 million of Revolving Loans were available to be
drawn by the Company.
During January 1996, the Company's Board of Directors authorized the
repurchase of up to $30.0 million of the Company's Class A Common Stock and
Class B Common Stock. The repurchase of shares of common stock will be
accomplished, from time to time, depending upon market conditions, through open
market or privately negotiated transactions. The Company may finance such
repurchases through cash generated from operations or through the Credit
Facility. The repurchased shares will become treasury shares and may be used for
general corporate purposes. As of July 11, 1996, the Company had repurchased
175,000 shares of Class A Stock, at an aggregate cost of $5,433,750, or at an
average price of $31.05 per share.
THE COMPANY'S CREDIT FACILITY
On September 1, 1995, the Company, its principal operating subsidiaries,
and a syndicate of 20 banks, (the "Syndicate Banks") for which The Chase
Manhattan Bank (National Association) ("Chase") acts as Administrative Agent,
entered into the Third Amended and Restated Credit Agreement. (This Agreement
amended and restated the Second Amendment and Restatement dated as of August 5,
1994 of Amendment and Restatement of Credit Agreement dated June 29, 1993.) This
Third Amended and Restated Credit Agreement was further amended (i) as of
December 20, 1995, to permit the use of Revolving Loans to purchase up to
<PAGE>
$30.0 million of the Company's common stock, (ii) as of January 10, 1996, to
accommodate the change in the Company's fiscal year end, and (iii) as of May 17,
1996, to, among other things, modify certain financial covenants, effective as
of February 29, 1996, to which the Company is subject. (The Third Amended and
Restated Credit Agreement, as amended, is referred to as the "Credit Facility".)
As of September 1, 1995, the Credit Facility provided for (i) a $246.0 million
Term Loan facility due in August 2001 ("Term Loans"), (ii) a $185.0 million
Revolving Loan facility which expires in June 2001 ("Revolving Loans"), and
(iii) a $25.0 million irrevocable standby Letter of Credit (the "Barton Letter
of Credit"), which is related to earn-out payments in connection with the
Company's acquisition of Barton Incorporated. On January 1, 1996, the face
amount of the Barton Letter of Credit was reduced to $13.7 million. The Barton
Letter of Credit will expire on December 31, 1996.
The Term Loans and the Revolving Loans, at the Company's option, can be
either a base rate loan or a Eurodollar rate loan. In addition, the Revolving
Loans can be a money market loan. A base rate loan bears interest at the rate
per annum equal to the higher of (i) the Federal Funds rate for such day plus
1/2 of 1%, or (ii) the Chase prime commercial lending rate. A Eurodollar rate
loan bears interest at LIBOR plus a margin. The interest rate margin for a
Eurodollar rate loan may be decreased by up to 0.50% or increased by up to 0.25%
depending on the Company's debt coverage ratio (as defined in the Credit
Facility). The interest rate on a money market loan is determined by a
competitive bid process among the Syndicate Banks. As of May 31, 1996, the
interest rate margin on a Eurodollar rate loan was 0.75% and increased to 1% on
June 15, 1996.
As of July 9, 1996, the Company had outstanding Term Loans in a principal
amount of $216.0 million bearing interest at 6.5% with quarterly principal
payments of $10.0 million and a final payment of $16.0 million in August 2001.
The Company may prepay the principal of the Term Loans and the Revolving Loans
at its discretion and must prepay the principal with 65% of its annual excess
cash flow, proceeds from the sale of certain assets and 50% of the net proceeds
of any issuance of equity.
The $185.0 million Revolving Loan facility may be utilized by the Company
either in the form of Revolving Loans or as Revolving Letters of Credit up to a
maximum of $20.0 million. Additionally, availability of Revolving Loans is
subject to a formula based on the amount of certain eligible receivables and
certain eligible inventory and is reduced by the amount of Revolving Letters of
Credit. As of July 9, 1996, there were outstanding Revolving Loans of $74.0
million bearing interest at 6.6%, undrawn Revolving Letters of Credit of $10.0
million and $101.0 million available to be drawn in Revolving Loans. The
Revolving Loans are required to be prepaid in such amounts that, for a period of
at least thirty consecutive days at any time during the fiscal quarters ending
on May 31 and August 31 of each fiscal year, the aggregate outstanding principal
amount of Revolving Loans together with drawn and undrawn Revolving Letters of
Credit will not exceed $60.0 million plus the amount expended by the Company
relating to certain capital expenditures at any time during fiscal 1997 up to
$17.5 million.
<PAGE>
Each of the Company's operating subsidiaries has guaranteed, jointly and
severally, the Company's obligations under the Credit Facility. The Syndicate
Banks have been given security interests in substantially all of the assets of
the Company and its subsidiaries. The Company and its subsidiaries are subject
to customary secured lending covenants including those restricting additional
liens, the incurrence of additional indebtedness, the sale of assets, the
payment of dividends, transactions with affiliates, the making of certain
investments and certain other fundamental changes. The Company and its
subsidiaries are also required to maintain a minimum level of interest rate
protection instruments and the following financial covenants above specified
levels: debt coverage ratio; tangible net worth; fixed charges ratio; and
operating cash flow to interest expense. Among the most restrictive covenants
contained in the Credit Facility, the Company is required to maintain a fixed
charges ratio not less than 1.0 to 1.0 at the last day of each fiscal quarter
for the most recent four quarter periods.
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 wastewater 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 wastewater 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 1997 fiscal year. During the last three fiscal years,
the Company has not incurred, nor does it expect to incur in its 1997 fiscal
year, any material expenditures related to remediation of previously
contaminated sites or other nonrecurring environmental matters.
The Company believes that cash provided by operating activities will
provide sufficient funds to meet all of its anticipated short and long-term debt
service and capital expenditure requirements. 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 provided by operating activities
will provide adequate resources to satisfy its working capital, liquidity and
anticipated capital expenditure requirements for at least the next four fiscal
quarters.
----------------------------
IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
The Company makes forward-looking statements from time to time and desires
to take advantage of the "safe harbor" which is afforded such statements under
the Private Securities Litigation Reform Act of 1995 when they are accompanied
by meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from those in the forward-looking
statements.
<PAGE>
The statements contained in the foregoing "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in this
Quarterly Report on Form 10-Q which are not historical facts are forward-looking
statements that involve risks and uncertainties that could cause actual results
to differ materially from those set forth in the forward-looking statements. Any
projections of future results of operations, and in particular, the Company's
estimated fully diluted net income per share for Fiscal 1997, should not be
construed in any manner as a guarantee that such results will in fact occur.
There can be no assurance that any forward-looking statement will be realized or
that actual results will not be significantly higher or lower than set forth in
such forward-looking statement. In addition to the risks and uncertainties of
ordinary business operations, the forward-looking statements of the Company
contained in this Quarterly Report on Form 10-Q are also subject to the
following risks and uncertainties:
The Company is in a highly competitive environment and its dollar sales and
unit volume could be negatively affected by its inability to maintain or
increase prices, changes in geographic or product mix, a general decline in
beverage alcohol consumption or the decision of its wholesale customers,
retailers or consumers to purchase competitive products instead of the
Company's products. The Company believes its branded wine unit volume was
negatively impacted by its selling price increases and the affect these
price increases had on the competitive positioning of its branded wine
products. This could limit the Company's ability to increase the selling
prices of its branded wine products further to offset anticipated higher
costs from the 1996 grape harvest, and could require selling price
decreases of its branded wine products in the future to maintain volume.
Wholesaler, retailer and consumer purchasing decisions are influenced by,
among other things, the perceived absolute or relative overall value of the
Company's products, including their quality or pricing, compared to
competitive products. Unit volume and dollar sales could also be affected
by pricing, purchasing, financing, operational, advertising or promotional
decisions made by wholesalers and retailers which could affect their
supply, or consumer demand for, the Company's products.
The Company could experience raw material supply, production or shipment
difficulties which could adversely affect (i) its ability to supply goods
to its customers and (ii) the willingness of its wholesale or retail
customers to purchase the Company's products. The Company could also
experience higher than expected increases in its cost of product sold if
raw materials such as grapes or packaging materials are in short supply or
if the Company experiences increased overhead costs.
The Company could experience higher than expected selling, general and
administrative expenses if it finds it necessary to increase its number of
personnel or its advertising or promotional expenditures to maintain its
competitive position or for other reasons.
<PAGE>
The Company believes that its future results of operations are inherently
difficult to predict due to the Company's use of the last-in-first-out
method of accounting for inventory valuation ("LIFO"), particularly as it
relates to the Company's purchase of grapes from the 1996 fall harvest. In
particular, the Company found it necessary to revise its estimate of the
impact of LIFO in First Quarter 1997 versus its previous estimate. There
are no assurances that the Company may not have to revise this estimate
further.
The Company is currently undergoing a reengineering effort involving the
evaluation of its business processes and organizational structure and could
make changes in its business in response to this effort which are not
currently contemplated.
The Company could experience difficulties or delays in the development,
production, testing and marketing of new products.
Manufacturing economies related to such matters as bottling line speeds and
warehousing capabilities could fail to develop when planned.
The Company could experience changes in its ability to obtain or hedge
against foreign currency, foreign exchange rates and fluctuations in those
rates. The Company could also be affected by nationalizations or unstable
governments or legal systems or intergovernmental disputes. These currency,
economic and political uncertainties may affect the Company's results,
especially to the extent these matters, or the decisions, policies or
economic strength of the Company's suppliers, affect the Company's Mexican,
German, Chinese and other imported beer products.
The forward-looking statements contained herein are based on estimates
which the Company believes are reasonable. This means that the Company's
actual results could differ materially from such estimates as a result of
being negatively affected as above described or otherwise positively
affected. The Company did experience both positive factors and negative
factors in First Quarter 1997 relative to its expectations, and the
negative factors were not fully offset by the positive factors. The Company
can give no assurances that positive factors will offset negative factors
throughout Fiscal 1997.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and its subsidiaries are subject to litigation from time to
time in the ordinary course of business. Although the amount of any liability
with respect to such litigation cannot be determined, in the opinion of
management, such liability will not have a material adverse effect on the
Company's financial condition or results of operations.
On November 13, 1995, a purported stockholder of the Company filed a class
action in the United States District Court for the Southern District of New
York, VENTRY, ET AL. V. CANANDAIGUA WINE COMPANY, INC., ET AL. (the "Ventry
Class Action"). On November 16, 1995, another purported stockholder of the
Company filed a class action in the United States District Court for the
Southern District of New York, BRICKELL PARTNERS, ET AL. V. CANANDAIGUA WINE
COMPANY, INC., ET AL. (the "Brickell Class Action"). On December 6, 1995, a
third purported stockholder of the Company filed a class action in the United
States District Court for the Southern District of New York, BABICH, ET AL. V.
CANANDAIGUA WINE COMPANY, INC., ET AL. (and this class action together with the
Brickell Class Action and the Ventry Class Action, the "Class Actions"). The
defendants in the Class Actions are the Company, Richard Sands and Lynn K.
Fetterman. The Class Actions have been consolidated and a consolidated complaint
was filed on January 16, 1996. The Class Actions assert violations of Section
10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder and seek to recover damages in an unspecified amount which allegedly
the class members sustained by purchasing the Company's common stock at
artificially inflated prices. The complaints in the Class Actions allege that
the Company's public documents and statements were materially incomplete and, as
a result, misleading.
The Class Actions were filed after the Company announced its results of
operations for the year ended August 31, 1995, on November 9, 1995. These
results were below the expectations of analysts and on November 10, 1995, the
price of the Company's Class A common stock fell approximately 38% and the price
of the Company's Class B common stock fell approximately 30%.
The Company believes that the Class Actions are without merit and intends
to vigorously defend the Class Actions. To that end, on April 8, 1996, the
Company filed a motion to dismiss the consolidated complaint. That motion is
fully briefed, and it is awaiting oral argument and decision by the Court.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) See Index to Exhibits located on Page 20 of this Report.
(b) The following Report on Form 8-K was filed by the Company with the
Securities and Exchange Commission during the quarter ended May 31,
1996:
Form 8-K dated April 29, 1996. This Form 8-K reported information
under Item 5 (Other Events).
<PAGE>
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: July 11, 1996 By: /s/ Richard Sands
---------------------
Richard Sands, President and
Chief Executive Officer
Dated: July 11, 1996 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.
Not applicable.
(3) ARTICLES OF INCORPORATION AND BY-LAWS.
3.1 Restated Certificate of Incorporation of the Registrant (filed as Exhibit
3.1 to the Registrant's Transition Report on Form 10-K for the transition
period from September 1, 1995 to February 29, 1996 and incorporated herein
by reference).
3.2 Amended and Restated By-laws of the Registrant (filed as Exhibit 3.2 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended
November 30, 1995 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).
4.5 Second Supplemental Indenture dated August 25, 1995, among the Registrant,
V Acquisition Corp. (a subsidiary of the Registrant now known as The Viking
Distillery, Inc.) and Chemical Bank (filed as Exhibit 4.5 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended August
31, 1995 and incorporated herein by reference).
<PAGE>
(10) MATERIAL CONTRACTS.
10.1 Amendment No. 3, dated as of May 17, 1996, to Third Amended and Restated
Credit Agreement between the Registrant, its principal operating
subsidiaries, and certain banks for which The Chase Manhattan Bank
(National Association) acts as Administrative Agent (filed as Exhibit 10.24
to the Registrant's Transition Report on Form 10-K for the transition
period from September 1, 1995 to February 29, 1996 and incorporated herein
by reference).
10.2 Amendment No. 7 to the Canandaigua Wine Company, Inc. Stock Option and
Stock Appreciation Right Plan, dated March 8, 1996 (filed as Exhibit 10.8
to the Registrant's Transition Report on Form 10-K for the transition
period from September 1, 1995 to February 29, 1996 and incorporated herein
by reference).
10.3 Amendment No. 4, dated as of May 17, 1996, to Third Amended and Restated
Credit Agreement between the Registrant, its principal operating
subsidiaries, and certain banks for which The Chase Manhattan Bank
(National Association) acts as Administrative Agent (filed herewith).
(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.
(22) PUBLISHED REPORT REGARDING MATTERS SUBMITTED TO A VOTE OF SECURITY HOLDERS.
Not applicable.
(23) CONSENTS OF EXPERTS AND COUNSEL.
Not applicable.
<PAGE>
(24) POWER OF ATTORNEY.
Not applicable.
(27) FINANCIAL DATA SCHEDULE.
Financial Data Schedule (filed herewith).
(99) ADDITIONAL EXHIBITS.
Not applicable.
A:10Q96DR1.sa
<PAGE>
Execution Copy
EXHIBIT 10.3
AMENDMENT NO. 4
AMENDMENT NO. 4 dated as of May 17, 1996, between CANANDAIGUA WINE COMPANY,
INC., a corporation duly organized and validly existing under the laws of the
State of Delaware (the "COMPANY"); each of the Subsidiaries of the Company
identified under the caption "SUBSIDIARY GUARANTORS" on the signature pages
hereto (individually, a "SUBSIDIARY GUARANTOR" and, collectively the "SUBSIDIARY
GUARANTORS" and, together with the Company, the "OBLIGORS"); each of the lenders
that is a signatory hereto (individually, a "BANK" and, collectively, the
"BANKS"); and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), a national
banking association, as administrative agent for the Banks (in such capacity,
together with its successors in such capacity, the "ADMINISTRATIVE AGENT").
The Company, the Subsidiary Guarantors, the Banks and the Administrative
Agent are parties to a Third Amended and Restated Credit Agreement dated as of
September 1, 1995 (as modified and supplemented and in effect on the date
hereof, the "CREDIT AGREEMENT"). The Obligors and the Banks wish to amend the
Credit Agreement in certain respects and, accordingly, the parties hereto hereby
agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this Amendment No.
4, terms defined in the Credit Agreement are used herein as defined therein. In
addition, as used herein, "Amendment No. 3" means Amendment No. 3 to the Credit
Agreement dated as of the date hereof.
Section 2. AMENDMENTS. Subject to (i) the execution of this Amendment by
each Obligor, the Administrative Agent and each of the Banks, (ii) the
effectiveness of Amendment No. 3 (as provided in Section 3 thereof) and (iii)
the payment of the amendment fee specified in Section 3 hereof, but effective as
of February 29, 1996, the Credit Agreement shall be amended as follows:
A. The definition of "Operating Cash Flow", as such term is used in the
determination of the Debt Ratio for purposes of calculating the Applicable
Margin, the Commitment Fee Percentage and the Letter of Credit Fee Percentage,
is hereby amended as provided in Section 2.A of Amendment No. 3.
B. Section 2.12(b) of the Credit Agreement is hereby amended in its
entirety to read as follows:
"(b) REVOLVING CREDIT LOANS CLEAN-UP. The Company will from time to
time prepay the Revolving Credit Loans in such amounts as shall be
necessary so that for a period of
AMENDMENT NO. 4
<PAGE>
at least thirty consecutive days at any time during the fiscal quarters
ending on May 31 and August 31 of each fiscal year (commencing with the
fiscal quarters ending May 31, 1996 and August 31, 1996), the aggregate
outstanding principal amount of the Revolving Credit Loans together with
the Letter of Credit Liabilities in respect of Revolving Letters of Credit
does not exceed the sum of (i) $60,000,000 PLUS (ii) the lesser of (x) the
amount expended by the Company for the purchase of vineyards and for making
improvements on vineyards at any time during the fiscal year ending
February 28, 1997 and (y) $17,500,000."
Section 3. AMENDMENT FEE. As consideration to the Banks for amending the
Credit Agreement as set forth in Section 2 hereof, the Company shall pay to the
Administrative Agent for account of each Bank executing this Amendment an
amendment fee equal to 0.125% of the sum of such Bank's (i) Letter of Credit
Liabilities in respect of the Barton Letter of Credit PLUS (ii) Revolving Credit
Commitment PLUS (iii) outstanding Term Loans.
Section 4. MISCELLANEOUS. Except as herein provided, the Credit Agreement
shall remain unchanged and in full force and effect. This Amendment No. 4 may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same amendatory instrument and any of the parties hereto
may execute this Amendment No. 4 by signing any such counterpart. This Amendment
No. 4 shall be governed by, and construed in accordance with, the law of the
State of New York.
AMENDMENT NO. 4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 4 to
be duly executed and delivered as of the day and year first above written.
CANANDAIGUA WINE COMPANY, INC.
By /S/ ROBERT S. SANDS
--------------------------
Title: Executive Vice President
SUBSIDIARY GUARANTORS
BATAVIA WINE CELLARS, INC.
BISCEGLIA BROTHERS WINE COMPANY
CALIFORNIA PRODUCTS COMPANY
GUILD WINERIES & DISTILLERIES, INC.
(formerly known as Canandaigua
California Acquisition Corp.)
TENNER BROTHERS, INC.
WIDMER'S WINE CELLARS, INC.
VINTNERS INTERNATIONAL COMPANY, INC.
(formerly known as Canandaigua/Vintners
Acquisition Corp.)
By /S/ ROBERT S. SANDS
---------------------------
Title: Secretary
CANANDAIGUA WEST, INC.
BARTON INCORPORATED
BARTON BRANDS, LTD.
BARTON BEERS, LTD.
BARTON BRANDS OF CALIFORNIA, INC.
BARTON BRANDS OF GEORGIA, INC.
BARTON DISTILLERS IMPORT CORP.
STEVENS POINT BEVERAGE COMPANY
MONARCH WINE COMPANY,
LIMITED PARTNERSHIP
By Barton Management, Inc.,
Corporate General Partner
BARTON MANAGEMENT, INC.
V ACQUISITION CORP.
By /S/ ROBERT S. SANDS
----------------------------
Title: Vice President
BARTON FINANCIAL CORPORATION
By /S/ DAVID S. SORCE
----------------------------
Title: Vice President
AMENDMENT NO. 4
<PAGE>
BANKS
THE CHASE MANHATTAN BANK THE FIRST NATIONAL BANK OF CHICAGO
(NATIONAL ASSOCIATION),
ROCHESTER DIVISION
By /S/ DIANA LAURIA By /S/ J. GARLAND SMITH
--------------------------- --------------------------
Title: Vice President Title: Managing Director
WELLS FARGO BANK, N.A. MANUFACTURERS AND TRADERS TRUST
COMPANY
By /S/ LANCY GIN By /S/ PHILIP SMITH
--------------------------- ----------------------------
Title: Assistant Vice President Title: Regional Sr. Vice President
By /S/ PETER G. OLSON
---------------------------
Title: Senior Vice President
FLEET BANK PNC BANK, NATIONAL ASSOCIATION
By /S/ MARTIN K. BIRMINGHAM By /S/ THOMAS R. COLWELL
--------------------------- -----------------------------
Title: Assistant Vice President Title: Vice President
NATIONAL CITY BANK CORESTATES BANK, N.A.
By /S/ JED M. PARKER By /S/ BRIAN M. HALEY
--------------------------- ----------------------------
Title: Vice President Title: Vice President
THE FUJI BANK LIMITED, THE BANK OF NOVA SCOTIA
NEW YORK BRANCH
By /S/ J. ALAN EDWARDS
----------------------------
By /S/ TEIJITERAMOTO Title: Authorized Signatory
----------------------------
Title: Vice President and Manager
CREDIT SUISSE THE SUMITOMO BANK, LIMITED
NEW YORK BRANCH
By /S/ JOEL GLODOWSKI
----------------------------
Title: Member Senior Management By /S/ Y. KAWAMURA
---------------------------
Title: Joint General Manager
By /S/ CHRIS T. HORGAN
---------------------------- By
Title: Associate ---------------------------
Title
KEY BANK OF NEW YORK CHEMICAL BANK
By /S/ TIMOTHY A. MERRIMAN By /S/ J. SPILLANE
---------------------------- ---------------------------
Title: Vice President Title: Vice President
AMENDMENT NO. 4
<PAGE>
COOPERATIVE CENTRAL RAIFFEISEN- LTCB TRUST COMPANY
BOERENLEENBANK B.A. "RABOBANK
NEDERLAND", NEW YORK BRANCH
By /S/ JOANNA M. SOLOWSKI By /S/ RENE' O. LEBLANC
------------------------------ ---------------------------
Title: Vice President Title: Senior Vice President
By /S/ ROBERT S. BUCKLIN
------------------------------
Title: Deputy General Manager
DG BANK DEUTSCHE GENOSSEN- NBD BANK
SCHAFTSBANK, CAYMAN ISLAND
By By /S/ J. GARLAND SMITH
------------------------------ ----------------------------
Title: Title: Managing Director
By
------------------------------
Title:
THE ADMINISTRATIVE AGENT
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Administrative Agent
By /S/ CAROL A. ULMER
-------------------------
Title: Vice President
AMENDMENT NO. 4
<PAGE>
<TABLE>
EXHIBIT 11
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
(in thousands, except per share data)
(unaudited)
<CAPTION>
For the Three Months Ended May 31,
-------------------------------------------------------
1996 1995
--------------------------- ------------------------
FULLY FULLY
Net income per common and common equivalent share: PRIMARY DILUTED PRIMARY DILUTED
<S> <C> <C> <C> <C>
Net income available to common and common equivalent
shares $ 8,501 $ 8,501 $ 10,637 $ 10,637
Adjustments -- -- -- --
--------- --------- --------- --------
Net income available to common and common equivalent
shares $ 8,501 $ 8,501 $ 10,637 $ 10,637
========= ========= ========= ========
Shares:
Weighted average common shares outstanding 19,629 19,629 19,532 19,532
Adjustments:
(1) Assumed exercise of incentive stock options 210 210 290 303
(2) Assumed exercise of stock options 57 57 153 177
--------- --------- --------- --------
Weighted average common and common equivalent shares
outstanding 19,896 19,896 19,975 20,012
========= ========= ========= ========
Net income per common and common equivalent share $ .43 $ .43 $ .53 $ .53
========= ========= ========= ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from the Company's May
31, 1996 Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000016918
<NAME> CANANDAIGUA WINE COMPANY, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> MAY-31-1996
<CASH> 2,623
<SECURITIES> 0
<RECEIVABLES> 150,326
<ALLOWANCES> 0
<INVENTORY> 312,403
<CURRENT-ASSETS> 486,121
<PP&E> 346,202
<DEPRECIATION> 93,023
<TOTAL-ASSETS> 1,023,027
<CURRENT-LIABILITIES> 271,037
<BONDS> 317,455
0
0
<COMMON> 214
<OTHER-SE> 363,756
<TOTAL-LIABILITY-AND-EQUITY> 1,023,027
<SALES> 276,493
<TOTAL-REVENUES> 276,493
<CGS> 203,586
<TOTAL-COSTS> 253,529
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,795
<INCOME-PRETAX> 14,169
<INCOME-TAX> 5,668
<INCOME-CONTINUING> 8,501
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,501
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
</TABLE>
