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 November 30, 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)
(716) 394-7900
---------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
The Registrant's Former Fiscal Year was September 1 through August 31.
- -------------------------------------------------------------------------------
(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 January 11, 1996 is set forth below.
Number of Shares
Class Outstanding
----- -----------
Class A Common Stock, Par Value $.01 Per Share 16,246,046
Class B Convertible Common Stock, Par Value $.01 Per Share 3,365,958
<PAGE>
Part 1 - Financial Information
Item 1. Financial Statements
<TABLE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<S> <C> <C>
November 30, 1995 August 31, 1995
(Unaudited) (Audited)
(in thousands)
ASSETS
------
CURRENT ASSETS:
Cash and cash investments $ 1,294 $ 4,180
Accounts receivable, net 191,671 115,448
Inventories, net 368,597 256,811
Prepaid expenses and other
current assets 24,886 25,070
----------- -------------
Total current assets 586,448 401,509
PROPERTY, PLANT AND EQUIPMENT, NET 249,370 217,505
OTHER ASSETS 263,172 166,907
----------- -------------
Total assets $ 1,098,990 $ 785,921
=========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 125,500 $ -
Current maturities of long-
term debt 44,544 29,133
Accounts payable 74,403 62,091
Accrued federal and state excise taxes 16,106 15,633
Other accrued expenses and
liabilities 77,352 67,896
----------- -------------
Total current liabilities 337,905 174,753
----------- -------------
LONG-TERM DEBT, less current maturities 337,808 198,859
----------- -------------
DEFERRED INCOME TAXES 49,827 49,827
----------- -------------
OTHER LIABILITIES 10,468 10,600
----------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Class A Common Stock, $.01 par value-
Authorized, 60,000,000 shares;
Issued, 17,411,832 shares at
November 30, 1995 and 17,400,082
shares at August 31, 1995 174 174
Class B Convertible Common Stock,
$.01 par value-Authorized,
20,000,000 shares; Issued 3,991,683
shares at November 30, 1995
and 3,996,683 shares at August 31, 1995 40 40
Additional paid-in capital 220,519 219,894
Retained earnings 149,690 139,278
----------- -------------
370,423 359,386
----------- -------------
Less-Treasury stock-
Class A Common Stock, 1,165,786
shares at November 30, 1995 and
1,186,655 shares at August
31, 1995, at cost (5,234) (5,297)
Class B Convertible Common Stock,
625,725 at November 30, 1995 and
August 31, 1995, at cost (2,207) (2,207)
----------- -------------
(7,441) (7,504)
----------- -------------
Total stockholders' equity 362,982 351,882
----------- -------------
Total liabilities and stockholder's equity $1,098,990 $ 785,921
The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
</TABLE>
<PAGE>
<TABLE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Retained Earnings
Three Months Ended November 30,
-------------------------------
(in thousands, except share data)
<S> <C> <C>
1995 1994
---- ----
(Unaudited) (Unaudited)
GROSS SALES $ 391,186 $ 317,420
Less - Excise taxes (105,601) (73,878)
----------- -------------
Net sales 285,585 243,542
COST OF PRODUCT SOLD (208,332) (174,382)
----------- -------------
Gross profit 77,253 69,160
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (50,104) (45,064)
NONRECURRING RESTRUCTURING
EXPENSES (1,748) (345)
----------- -------------
Operating income 25,401 23,751
INTEREST INCOME 110 242
INTEREST EXPENSE (8,157) (7,193)
----------- -------------
Income before provision for
federal and state income
taxes 17,354 16,800
PROVISION FOR FEDERAL AND
STATE INCOME TAXES (6,942) (6,468)
----------- -------------
NET INCOME 10,412 10,332
RETAINED EARNINGS, BEGINNING 139,278 98,258
----------- -------------
RETAINED EARNINGS, ENDING $ 149,690 $ 108,590
=========== =============
SHARE DATA :
Net income per common
and common
equivalent share:
Primary $.52 $.61
Fully Diluted $.52 $.61
Weighted average shares
outstanding:
Primary 20,103,679 16,996,099
Fully Diluted 20,103,679 16,998,036
Dividend per share None None
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended November 30,
(in thousands)
<S> <C> <C>
1995 1994
------- --------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 10,412 $ 10,332
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation of property, plant and equipment 5,229 5,061
Amortization of intangible assets 2,105 1,505
Deferred tax provision - 5
Gain on sale of property, plant and equipment (6) -
Change in assets and liabilities, net of effects
from purchase of businesses:
Accounts receivable, net (76,223) (40,612)
Inventories, net (95,771) (50,170)
Prepaid expenses 568 6,442
Accounts payable 12,311 (7,993)
Accrued federal and state excise taxes 473 (948)
Other accrued expenses and liabilities 16,301 14,466
Other (137) (863)
--------- ---------
Total adjustments (135,150) (73,107)
--------- ---------
Net cash used in operating activities (124,738) (62,775)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property,
plant and equipment 58 -
Purchases of property, plant and equipment,
net of minor disposals (6,974) (5,754)
Payment of accrued earn-out amounts (10,000) -
--------- ---------
Net cash used in investing activities (16,916) (5,754)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of notes payable, short-term borrowings 125,500 77,100
Repayment of notes payable - (47,000)
Repayment of notes payable from equity
offering proceeds - (22,100)
Principal payments of long-term debt (640) (402)
Proceeds of Term Loan, long-term debt 13,219 47,000
Repayment of Term Loan from equity
offering proceeds, long-term debt - (82,000)
Proceeds from equity offering, net - 103,313
Proceeds from employee stock purchases 659 -
Exercise of employee stock options 30 -
--------- ---------
Net cash provided by financing activities 138,768 75,911
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH INVESTMENTS (2,886) 7,382
CASH AND CASH INVESTMENTS, beginning of period 4,180 1,495
--------- ---------
CASH AND CASH INVESTMENTS, end of period $ 1,294 $ 8,877
========= =========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Fair value of assets acquired $ 144,936 $ -
Liabilities assumed 3,155 -
--------- ---------
Cash paid 141,781 -
Less - Amounts borrowed 141,781 -
--------- ---------
Net cash paid for acquisition $ - $ -
========= =========
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
November 30, 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 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 Annual Report on Form 10-K, for the
fiscal year ended August 31, 1995.
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Year end change:
On January 11, 1996, the Company changed its fiscal year end from the
twelve month period ending August 31 to the twelve month period ending on the
last day of February. The accompanying consolidated financial statements for the
three month period ended November 30, 1995, are based on the newly adopted
fiscal year.
The consolidated financial statements for the three month period ended
November 30, 1994, are based on the Company's old fiscal year end, August 31,
1995.
Other:
Certain fiscal 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 94%, 94%,
and 96% at November 30, 1995, August 31, 1995, and November 30, 1994,
respectively. Replacement cost of the inventories determined on a FIFO basis
approximated $355,509,000, $240,895,000 and $339,629,000 at November 30, 1995,
August 31, 1995, and November 30, 1994, respectively. At November 30, 1995,
August 31, 1995, and November 30, 1994, the net realizable value of the
Company's inventories was in excess of $368,597,000, $256,811,000, and
$351,223,000, respectively.
Elements of cost include materials, labor and overhead and consist of
the following:
<TABLE>
<S> <C> <C> <C>
November 30, August 31, November 30,
1995 1995 1994
---- ---- ----
(in thousands)
Raw materials and supplies $ 19,195 $ 19,753 $ 33,723
Wines and distilled spirits in process 276,614 174,399 257,431
Finished case goods 72,788 62,659 60,069
$ 368,597 $ 256,811 $ 351,223
</TABLE>
4) PROPERTY, PLANT AND EQUIPMENT:
The major components of the property, plant and equipment are as follows:
November 30, August 31,
1995 1995
---- ----
(in thousands)
Land $ 16,322 $ 15,257
Buildings and improvements 77,323 65,084
Machinery and equipment 217,257 197,266
Motor vehicles 5,242 5,204
Construction in progress 17,831 12,171
333,975 294,982
Less - Accumulated depreciation (84,605) (77,477)
$ 249,370 $ 217,505
<PAGE>
5) OTHER ASSETS:
The major components of other assets are as follows:
November 30, August 31,
1995 1995
---- ----
(in thousands)
Goodwill $ 135,604 $ 70,141
Distribution rights, agency license
agreements and trademarks 115,426 83,536
Other 23,559 23,187
274,589 176,864
Less - Accumulated amortization (11,417) (9,957)
$ 263,172 $ 166,907
<PAGE>
6) OTHER ACCRUED EXPENSES AND LIABILITIES:
The major components of accrued expenses and
liabilities are as follows:
November 30, August 31,
1995 1995
---- ----
(in thousands)
Accrued Earn-out Amounts $ - $ 10,000
Accrued loss on noncancelable grape
contracts 8,900 10,862
Other 68,452 47,034
------- -------
$ 77,352 $ 67,896
7) OTHER LIABILITIES:
The major components of other liabilities are as follows:
November 30, August 31,
1995 1995
---- ----
(in thousands)
Accrued loss on noncancelable grape
contracts $ 7,374 $ 7,374
Other 3,094 3,226
$ 10,468 $ 10,600
8) ACQUISITIONS:
The following table sets forth unaudited pro forma consolidated results
of operations of the Company for the three months ended November 30, 1995, and
1994. The three month unaudited pro forma consolidated results of operations for
the period ended November 30, 1994, gives effect to the UDG Acquisition as if it
occurred on September 1, 1994. 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 pro forma consolidated results of
operations do not purport to represent what the Company's financial position or
results of operations would actually have been if the UDG Acquisition in fact
had occurred on such date or at the beginning of the period indicated or to
project the Company's financial position or the results of operations at any
future date or for any future period.
<PAGE>
<TABLE>
<S> <C> <C>
November 30, November 30,
1995 1994
---- ----
(in thousands, except share data)
Net sales $ 285,585 $ 276,520
Income before taxes $ 17,354 $ 22,435
Net income $ 10,412 $ 13,798
Share data:
Net income per common share:
Primary $.52 $.81
Fully diluted $.52 $.81
Weighted average shares outstanding:
Primary 20,103,679 16,996,099
Fully diluted 20,103,679 16,998,036
</TABLE>
9) BORROWINGS:
Borrowings consist of the following at November 30, 1995:
<TABLE>
<S> <C> <C> <C>
Current Long-term Total
======= ========= =====
(in thousands)
Notes Payable:
Senior Credit Facility:
Revolving Credit Loans $ 125,500 $ - $ 125,500
=========== ========= ===========
Long-term Debt:
Senior Credit Facility:
Term loan, variable rate, original proceeds
$246,000, due in installments through August 2001 $ 40,000 $ 206,000 $ 246,000
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 651 485 1,136
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% secured by cash surrender
value of officers' life insurance policies - 967 967
Notes payable at prime, due September 1996 3,775 - 3,775
---------- --------- ----------
$ 44,544 $ 337,808 $ 382,352
=========== ========= ===========
</TABLE>
<PAGE>
10) 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 substantially all of the branded wine
bottling operations at the Monterey Cellars winery in Gonzales, California were
moved to the Mission Bell winery located in Madera, California. The Monterey
Cellars winery will continue to be used as a crushing, winemaking and contract
bottling facility. The Central Cellars winery was closed in the fourth quarter
of fiscal 1995, and is expected to be sold. In the three months ended November
30, 1995, the expenses incurred in connection with the Restructuring Plan
reduced income before taxes and net income by approximately $1,748,000 and
$1,049,000, respectively, or $.05 per share on a fully diluted basis. These
charges primarily represent incremental, nonrecurring expenses of $3,326,000
incurred for overtime and freight expenses resulting from inefficiencies related
to the Restructuring Plan, offset by a reduction in the accrual for
restructuring expenses of $1,578,000, primarily for severance and facility
holding and closure costs. The Company expended approximately $2,395,000 during
the three months ended November 30, 1995, for capital expenditures to expand
storage capacity. During the three months ended November 30, 1995, an additional
9 jobs were eliminated under the Restructuring Plan, bringing the total jobs
eliminated to 170. As of November 30, 1995 and August 31, 1995, the Company had
accrued approximately $1,530,000 and $4,251,000, respectively, relating to the
Restructuring Plan.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
- ------- -----------------------------------------------------------
and Results of Operations
-------------------------
Results of Operations of the Company
On January 11, 1996, the Company changed its fiscal year end from the
twelve month period ending August 31 to the twelve month period ending the last
day of February. The Company believes that this change creates a better planning
cycle by allowing the Company to take into account new costs from the fall grape
harvest, other inventory costs, summer sales of imported beer products and
holiday shipments of all of the Company's products in its fiscal year planning
process. The accompanying consolidated financial statements for the three month
period ended November 30, 1995, are based on the newly adopted fiscal year.
Accordingly, the quarterly results reflect the effect of seasonal factors
primarily related to the timing of advertising expenditures and inventory levels
during the six months ending February 29, 1996.
On September 1, 1995, the Company acquired from United Distillers
Glenmore, Inc. and certain of its North American affiliates (collectively,
"UDG") the Mr. Boston, Canadian LTD, Skol, Old Thompson, Kentucky Tavern,
Glenmore and di Amore distilled spirits brands; the rights to the Fleischmann's
and Chi-Chi's distilled spirits brands under long term license agreements; the
U.S. rights to the Inver House, Schenley and El Toro distilled spirits brands;
related inventories and other assets; and two production facilities located in
Owensboro, Kentucky, and Albany, Georgia; and, in addition, the 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"). Also, in addition to the assets acquired in the transaction, at
closing, the Company purchased from UDG certain brandy inventories and packaging
supplies related to the contract production arrangements with UDG. 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. (See "Financial Liquidity and Capital Resources" below in
this Item 2). The UDG Acquisition is significant to the Company and will have a
material impact on the Company's future results of operations. The UDG
Acquisition has significantly strengthened the Company's position in the United
States distilled spirits industry. The Company believes that, as a result of the
UDG Acquisition, its distilled spirits market share in the United States has
doubled to approximately 8%. The UDG Acquisition also gave the Company a
significantly larger presence in the cordial and liqueur categories, which are
more profitable than most other distilled spirits categories.
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:
<PAGE>
<TABLE>
<S> <C> <C>
Three Months Ended
November 30,
1995 1994
---- ----
Net sales............................................ 100.0% 100.0%
Cost of product sold................................. 72.9 71.6
------ ------
Gross profit....................................... 27.1 28.4
Selling, general and administrative expenses......... 17.6 18.5
Nonrecurring restructuring expenses.................. 0.6 0.1
------- -------
Operating income..................................... 8.9 9.8
Interest expense, net................................ 2.8 2.9
------- -------
Income before provision for income taxes........... 6.1 6.9
Provision for federal and state income taxes......... 2.5 2.7
------- -------
Net income 3.6% 4.2%
======= =======
</TABLE>
Three Months Ended November 30, 1995 ("First Quarter 1996") Compared to Three
Months Ended November 30, 1994 ("First Quarter 1995")
Net Sales
Net sales for the Company's First Quarter 1996 increased to $285.6
million from $243.5 million for First Quarter 1995, an increase of $42.1
million, or approximately 17%. This increase resulted primarily from (i) the
inclusion of $28.0 million of net sales of products and services from the UDG
Acquisition; (ii) $10.5 million of additional net sales of the Company's
imported beer brands; and (iii) $7.4 million of increased net sales of the
Company's branded wine products; partially offset by (iv) lower grape juice
concentrate sales due to the timing of shipments.
For purposes of computing the net sales and unit volume comparative
data below, sales of products acquired in the UDG Acquisition have been included
in the entire period for First Quarter 1996 and included for the same period
during First Quarter 1995, 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 1996 and First Quarter 1995:
<PAGE>
<TABLE>
First Quarter 1996 Compared to First Quarter 1995
Net Sales Unit Volume
--------- -----------
<C> <C> <C> <C> <C>
% Increase % Increase
1996 1995 (Decrease) 1996 1995 (Decrease)
--------- --------- --------- ------- -------- -----------
Branded Beverage
Alcohol Products $ 254,077 $ 246,507 3.1% 15,347 14,800 3.7%
Branded Wine Products $ 145,916 $ 138,530 5.3% 8,036 7,815 2.8%
Non-varietal Wines $ 63,864 $ 61,765 3.4% 4,023 4,057 (0.8)%
Varietal Wines $ 39,998 $ 33,487 19.4% 1,900 1,564 21.5%
Sparkling Wines $ 26,903 $ 26,389 1.9% 1,160 1,127 2.9%
Dessert Wines $ 15,150 $ 16,889 (10.3)% 954 1,066 (10.5)%
Beer $ 61,486 $ 50,985 20.6% 4,957 4,127 20.1%
Spirits (1) $ 46,761 $ 57,047 (18.0)% 2,353 2,844 (17.3)%
(1) The spirits category includes for both years presented a number of the
Company's brandy products which were previously only included under the Branded
Beverage Alcohol Products category.
</TABLE>
Net sales and unit volume of the Company's branded beverage alcohol
products for First Quarter 1996 increased 3.1% and 3.7%, respectively, as
compared to First Quarter 1995. These increases were primarily due to increased
net sales and unit volume of the Company's imported beer brands and varietal
table wine brands.
Net sales of the Company's branded wine products increased $7.4
million, or 5.3%, for First Quarter 1996 as compared to First Quarter 1995. Unit
volume of the Company's branded wine products increased 221,000 cases, or 2.8%.
Of the $7.4 million increase in net sales, (i) $3.9 million was due to increased
shipments, primarily of the Company's varietal table wines and sparkling wines,
partially offset by lower shipments of dessert wines and non-varietal table
wines; and (ii) $3.5 million was due to higher average selling prices per case
due to a combination of price increases and a change in the product mix in favor
of higher-priced categories. The Company believes that the increase in sales of
its branded wine products was substantially due to the fulfillment of a backlog
of orders at the end of fiscal 1995 caused by production and shipping delays
associated with the relocation of West Coast bottling operations to the
Company's Mission Bell winery under the Restructuring Plan. The Company believes
that the backlog of unfilled orders from August 1995 was substantially
eliminated in First Quarter 1996.
Net sales and unit volume of the Company's non-varietal table wine
brands for First Quarter 1996 increased by 3.4% and decreased by 0.8%,
respectively, as compared to First Quarter 1995. Net sales increased due to
higher average selling prices on most of the Company's non-varietal table wine
brands. The Company began a program of price increases on many of its
non-varietal wine table brands in October 1995. The Company believes that the
volume decline is consistent with a general change in consumer preferences from
non-varietal table wines to varietal table wines and, in addition, may reflect
the impact of the Company's First Quarter 1996 price increases.
Net sales and unit volume of the Company's varietal table wine brands
for First Quarter 1996 increased 19.4% and 21.5%, respectively, as compared to
First Quarter 1995. Although the Company has begun to implement price increases
on most of its varietal table wine brands in response to grape cost increases
and to phase out introductory pricing on varietal wine line extensions for most
of the Company's California wine brands in the latter part of fiscal 1995,
average pricing has not returned to First Quarter 1995 levels.
Net sales and unit volume of the Company's sparkling wine brands
increased by 1.9% and 2.9%, respectively, in First Quarter 1996 as compared to
First Quarter 1995.
Net sales and unit volume of the Company's dessert wine brands
decreased by 10.3% and 10.5%, respectively, in First Quarter 1996 as compared to
First Quarter 1995, reflecting the continuing general decline in consumption of
dessert wines.
Net sales and unit volume of the Company's beer brands for First
Quarter 1996 increased by 20.6% and 20.1%, respectively, as compared to First
Quarter 1995. These increases were largely due to continued sales growth of
Corona and the Company's other Mexican beer brands.
Net sales and unit volume of the Company's distilled spirits brands
declined by 18.0% and 17.3%, respectively, in First Quarter 1996 as compared to
First Quarter 1995. Excluding the impact of the UDG Acquisition, net sales and
unit volume of the Company's distilled spirits brands grew by 5.4% and 5.3%,
respectively, in First Quarter 1996, led by higher brandy, tequila, vodka and
liqueur sales, offset by lower whiskey, gin and mezcal sales. Sales of the
brands acquired in the UDG Acquisition were substantially lower than in First
Quarter 1995, accounting for lower overall spirits sales. The Company believes
<PAGE>
that UDG shipped a disproportionate amount of its annual volume in the period
corresponding to the Company's First Quarter 1995, relative to the Company's
historical shipment experience.
Gross Profit
The Company's gross profit increased to $77.3 million in First Quarter
1996 from $69.2 million in First Quarter 1995. The UDG Acquisition contributed
$10.0 million to gross profits in First Quarter 1996, and additional imported
beer volume accounted for $3.2 million of increased gross profits. These
increases were partially offset by lower gross profits in the Company's branded
wine business and a change in the mix of sales toward lower-margin products.
Gross profit as a percentage of net sales decreased to 27.1% for First
Quarter 1996 from 28.4% in First Quarter 1995. The gross profit percentage was
positively affected by the UDG Acquisition, as gross profit as a percentage of
net sales on the business acquired from UDG was substantially higher than the
average for the Company in First Quarter 1996. Excluding the UDG Acquisition,
the Company's gross margin declined by 2.3% due to higher raw material costs
and, in particular, higher grape costs in the 1995 harvest and, to a lesser
extent, a change in category mix.
The Company uses the LIFO method of inventory valuation, which has
resulted in the realization of higher costs in First Quarter 1996. The Company
has initiated a program of price increases on certain products during First
Quarter 1996 in some of its markets and plans price increases on certain
products in Second Quarter 1996 in the remainder of its markets. The higher
costs of products sold have not been, nor does the Company expect the higher
costs to be, fully absorbed by these price increases during these periods. The
Company plans to increase its prices further on certain products in the first
quarter of its new fiscal year. The Company sells its products in a highly
competitive environment; therefore, there can be no assurance that the Company
will not have to lower prices in the future to maintain its competitive
position, nor is there assurance that the price increases the Company has
implemented or contemplates will fully absorb the higher cost of products sold.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $50.1 million in
First Quarter 1996, an increase of $5.0 million, or 11.2%, as compared to First
Quarter 1995. The increase was driven by advertising, promotion and selling
expenses related to the brands acquired in the UDG Acquisition, partially offset
by lower seasonal advertising expenses related to the change in the Company's
fiscal year.
Selling, general and administrative expenses as a percent of net sales
declined to 17.6% in First Quarter 1996 from 18.5% in First Quarter 1995, as
general and administrative efficiencies related to economies of scale and lower
seasonal advertising expenses related to the change in the Company's fiscal year
were partially offset by higher advertising and promotion as a percent of net
sales of the brands acquired in the UDG Acquisition.
Nonrecurring Restructuring Expenses
In First Quarter 1996, the Company incurred net restructuring charges
of $1.7 million, which represents $3.3 million of incremental, nonrecurring
expenses such as overtime and freight expense related to production and shipment
delays associated with the Restructuring Plan, offset by a reduction of $1.6
million in accrued liabilities associated with the Restructuring Plan to take
into account lower than expected expenses for severance and facility holding and
closure costs.
Interest Expense, Net
Net interest expense increased $1.1 million to $8.0 million in First
Quarter 1996 as compared to First Quarter 1995. The increase resulted from
borrowings related to the UDG Acquisition, partially offset by reductions in the
Company's Term Loan and Revolving Credit Loans using proceeds of the Company's
November 18, 1994, public equity offering.
Net Income
Net income increased to $10.4 million in First Quarter 1996 from $10.3
million in First Quarter 1995, an increase of $0.1 million, or 0.8%. The
increase in net income was due to pretax operating income of $4.4 million from
the UDG Acquisition, partially offset by an increase in pretax nonrecurring
restructuring charges of $1.4 million, additional pretax cost of product sold
and selling, general and administrative expenses of $1.3 million, and an
increase in pretax interest expense of $1.1 million. In addition, the Company's
effective income tax rate increased to 40.0% in First Quarter 1996 from 38.5% in
First Quarter 1995 due to changes in its mix of business in a number of states.
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
<PAGE>
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.
Cash Flows - First Quarter 1996
Operating Activities
Net cash used in operating activities in First Quarter 1996 was $124.7
million. The net cash used in operating activities for First Quarter 1996
resulted principally from an increase in current assets, offset in part by
higher current liabilities and net income adjusted for noncash items. The
increase in current assets resulted principally from a $95.8 million increase in
inventories as a result of the purchase of grapes from the 1995 harvest and a
$76.2 million increase in accounts receivable primarily due to higher seasonal
sales and sales of products and services from the UDG Acquisition. Current
liabilities increased principally due to higher grape purchases, accrued income
taxes, and accruals for promotion and advertising related to higher seasonal
sales.
Investing Activities and Financing Activities
Net cash used in investing activities in First Quarter 1996 was $16.9
million, resulting primarily from a $10.0 million Earn-Out payment (as defined
below) and $7.0 million of capital expenditures. Included in the capital
expenditures is $2.4 million associated with the Restructuring Plan.
Net cash provided by financing activities in First Quarter 1996 was
$138.8 million, resulting primarily from $125.5 million of Revolving Loan
borrowings under the Company's Credit Facility (as defined below) to fund higher
net seasonal working capital requirements and $13.2 million of increased Term
Loan facility borrowings used to fund the purchase of inventories, excess
borrowings, transaction costs and bank fees in connection with the UDG
Acquisition. The total increase in the Company's Term Loan facility was $155.0
million which included the $13.2 million and $141.8 million used to finance the
UDG Acquisition.
As of November 30, 1995, under its Credit Facility, the Company had
outstanding Term Loans of $246.0 million bearing interest at 6.6%, $125.5
million of Revolving Loans bearing interest at 6.8%, $4.3 million of Revolving
Letters of Credit and $25.0 million under the Barton Letter of Credit. As of
November 30, 1995, under the Credit Facility, $55.2 million of Revolving Loans
were available to be drawn by the Company.
On January 11, 1996, the Company's Board of Directors authorized the
repurchase of up to $30 million of its Class A 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.
The Company's Credit Facility
On September 1, 1995, the Company and a syndicate of 20 banks (the
"Syndicate Banks"), entered into a Third Amended and Restated Credit Agreement
(the "Credit Facility"). The Credit Facility provides for (i) a $246 million
Term Loan facility due in August 2001, (ii) a $185 million Revolving Loan
facility which expires in June 2001 and (iii) the existing $25 million standby
irrevocable Barton Letter of Credit, which expires in December 1996.
The Revolving Loans and the Term Loan 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 (1) the federal funds rate for such day plus
1/2 of 1%, or (2) the Chase prime commercial lending rate. A Eurodollar rate
loan bears interest at LIBOR plus a margin of .75%. The interest rate margin for
Eurodollar rate loans may be decreased by up to .25% or increased by up to .5%
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.
Quarterly principal payments of $10.0 million commenced on December 15,
1995, with 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.
<PAGE>
As of December 20, 1995, the Credit Facility was amended to permit the
use of Revolving Loans to purchase up to $30.0 million of the Company's common
stock. As of January 10, 1996, the Credit Facility was amended to accommodate
the change in the Company's fiscal year end.
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"). As of November 30,
1995, aggregate payments of $42.3 million were made as a result of satisfaction
of certain performance goals and the achievement of targets for earnings before
interest and taxes. The final remaining payment is contingent upon Barton
achieving certain targets for earnings before interest and taxes in the twelve
months ending August 31, 1996, and is to be made in an amount up to $15.0
million by 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.
Restructuring Plan
As a result of the Restructuring Plan, the Company incurred an after-tax
restructuring charge in First Quarter 1996 of approximately $1.0 million, or
$.05 per share on a fully diluted basis. These charges primarily represent
incremental, nonrecurring expenses incurred for overtime and freight expenses
resulting from inefficiencies related to the Restructuring Plan, offset by a
reduction in the accrual for restructuring expenses primarily for severance and
facility holding and closure costs. During First Quarter 1996, the Company
expended approximately $2.4 million for capital expenditures associated with the
Restructuring Plan.
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 1996 transition period. During the last three fiscal
years, the Company has not incurred, nor does it expect to incur in its 1996
transition period, 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.
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.
In connection with an investigation in the State of New Jersey into
regulatory trade practices in the beverage alcohol industry, one employee of the
Company was arrested in March 1994 and another employee subsequently came under
investigation in connection with providing "free goods" to retailers in
violation of New Jersey beverage alcohol laws. A proposed consent order has been
received from the appropriate regulatory agency by the Company which would, when
finalized, fully resolve the matter without any material effect on the Company.
<PAGE>
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
is due to be 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.
Item 5. Other Information
Change in Fiscal Year
On January 11, 1996, the Registrant's Board of Directors determined to
change the Registrant's fiscal year. The Registrant's new fiscal year will be
March 1 to the last day of February. The Registrant's report covering the
transition period of September 1, 1995 to February 29, 1996 will be filed on
Form 10-K.
Item 6. Exhibits and Reports on Form 8-K
(a) See Index to Exhibits located on Page of this Report.
(b) The following Reports on Form 8-K were filed with the
Securities and Exchange Commission during the quarter ended
November 30, 1995.
1. Form 8-K dated August 29, 1995. This Form 8-K reported information
under Item 2 (Acquisition or Disposition of Assets), Item 5 (Other
Events) and Item 7 (Financial Statements, Pro Forma Financial
Information and Exhibits).
2. Form 8-K/A Amendment No. 1 to Form 8-K dated August 29, 1995. This Form
8-K/A reported information under Item 7 (Financial Statements, Pro
Forma Financial Information and Exhibits). The following financial
statements were filed with this Form 8-K/A:
The United Distillers Glenmore, Inc. Statement of Assets and
Liabilities Related to the Product Lines Acquired by the
Company through its wholly-owned subsidiary, Barton
Incorporated, as of September 1, 1995 and the related
Statements of Identified Income and Expenses of the Product
Lines Acquired for each of the three years in the period ended
December 31, 1994 and the report of Price Waterhouse LLP,
independent auditors, thereon, together with the notes
thereto;
The unaudited Interim Financial Statements of Product Lines
Acquired by the Company through its wholly-owned subsidiary,
Barton Incorporated, for the eight months ended August 31,
1995 and 1994, together with the notes thereto; and
The pro forma condensed consolidated balance sheet (unaudited)
as of May 31, 1995 and the pro forma condensed consolidated
statement of income (unaudited) for the nine months ended May
31, 1995 and the pro forma condensed consolidated statement of
income (unaudited) for the year ended August 31, 1994, and the
notes thereto.
3. Form 8-K dated October 31, 1995. This Form 8-K reported information
under Item 5 (Other Events) and included the Company's Condensed
Consolidated Statement of Income for (i) the three months ended August
31, 1995 (unaudited), (ii) the three months ended August 31, 1994
(unaudited), (iii) the fiscal year ended August 31, 1995, and (iv) the
fiscal year ended August 31, 1994.
<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: January 16, 1996 By: /s/ Richard Sands
----------------------------
Richard Sands, President and
Chief Executive Officer
Dated: January 16, 1996 By: /s/ Lynn K. Fetterman
----------------------------
Lynn K. Fetterman, Senior
Vice President and Chief
Financial Office
(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).
2.10 Asset Purchase Agreement among Barton Incorporated (a wholly-owned
subsidiary of the Registrant), United Distillers Glenmore, Inc.,
Schenley Industries Inc., Medley Distilling Company, United Distillers
Manufacturing, Inc., and The Viking Distillery, Inc., dated August 29,
1995 (filed as Exhibit 2(a) to the Registrant's Current Report on Form
8-K, dated August 29, 1995 and incorporated herein by reference).
(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 Annual Report on Form 10-K for the
fiscal year ended August 31, 1993 and incorporated herein by
reference).
3.2 Amended and Restated By-laws of the Registrant (filed herewith).
(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).
(10) Material Contracts
10.1 Amendment No. 1, dated as of December 20, 1995, 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).
10.2 Amendment No. 2, dated as of January 10, 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).
10.3 Letter agreement, addressing compensation, between the Registrant and
Lynn Fetterman, dated March 22, 1990 (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.
(24) Power of Attorney.
Not applicable.
(27) Financial Data Schedule.
Financial Data Schedule (filed herewith).
(99) Additional Exhibits.
Not applicable.
EXHIBIT 3.1
BY-LAWS
OF
CANANDAIGUA WINE COMPANY, INC.
(AS AMENDED AND RESTATED ON JANUARY 11, 1996)
ARTICLE I
STOCKHOLDERS
SECTION 1.1 Annual Meetings. An annual meeting of stockholders shall be held for
the election of directors at such date, time and place, either within or without
the State of Delaware, as may be designated by resolution of the Board of
Directors from time to time. Any other proper business may be transacted at the
annual meeting.
SECTION 1.2 Special Meetings. Special meetings of stockholders for any purpose
or purposes may be called at any time by the Board of Directors, or by a
committee of the Board of Directors which has been duly designated by the Board
of Directors, and whose powers and authority, as expressly provided in a
resolution of the Board of Directors, include the power to call such meetings,
but such special meetings may not be called by any other person or persons.
SECTION 1.3 Notice of Meetings. Whenever stockholders are required or permitted
to take any action at a meeting, a written notice of the meeting shall be given
which shall state the place, date and hour of the meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called. Unless
otherwise provided by law, the written notice of any meeting shall be given not
less than ten nor more than fifty days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, such notice shall be
deemed to be given when deposited in the mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.
SECTION 1.4 Adjournments. Any meeting of stockholders, annual or special, may
adjourn from time to time to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 1.5 Quorum. The Corporation's authorized capital stock consists of
60,000,000 shares designated as Class A Common Stock (the "Class A Common") and
20,000,000 shares designated as Class B Common Stock (the "Class B Common"). At
each meeting of stockholders, except as otherwise provided by law, the
Corporation's Restated Certificate of Incorporation or these By-Laws, the
holders of a majority of the outstanding aggregate voting power of the Class A
Common and the Class B Common, present in person or by proxy,
<PAGE>
shall constitute a quorum. In the absence of a quorum, the stockholders so
present may, by majority vote of such stockholders voting together as a single
class, adjourn the meeting from time to time in the manner provided in Section
1.4 of these By-Laws until a quorum shall attend. Shares of its own stock
belonging to the Corporation or to another corporation, if a majority of the
shares entitled to vote in the election of directors of such other corporation
is held, directly or indirectly, by the Corporation, shall neither be entitled
to vote nor be counted for quorum purposes; provided, however, that the
foregoing shall not limit the right of any corporation to vote stock, including
but not limited to its own stock, held by it in a fiduciary capacity.
SECTION 1.6 Voting. Except as otherwise provided by law, Section 2.2 of these
By-Laws pertaining to the election of directors, or the Corporation's Restated
Certificate of Incorporation, all elections and questions shall be decided by
majority vote of all outstanding shares of stock entitled to vote thereon,
present in person or by proxy, voting together as a single class, provided that
the holders of the Class A Common shall have one (1) vote per share and the
holders of the Class B Common shall have ten (10) votes per share. Except as
otherwise required by law or by the Restated Certificate of Incorporation, the
Board of Directors may require a larger vote upon any election or question.
SECTION 1.7 Organization. Meetings of stockholders shall be presided over by the
Chairman of the Board, if any, or in his absence by the Vice Chairman of the
Board, if any, or in his absence by the Chief Executive Officer, or in his
absence by the President or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
SECTION 1.8 Proxies. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him by proxy,
but no such proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date with the Secretary of
the Corporation.
SECTION 1.9 Fixing Date for Determination of Stockholders of Record. In order
that the Corporation may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or to express
consent to corporate action in writing without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of stock or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty nor less
than ten days before the date of such meeting, nor more than sixty days prior to
any other action. If no record date is fixed: (1) the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; and (2) the record
<PAGE>
date for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 1.10 List of Stockholders Entitled to Vote. The Secretary shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the offices of the transfer agent. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof and
may be inspected by any stockholder who is present. The stock ledger shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list of stockholders or the books of the Corporation, or to vote in
person or by proxy at any meeting of stockholders.
SECTION 1.11 Action by Consent of Stockholders. Unless otherwise restricted by
the Restated Certificate of Incorporation, any action required or permitted to
be taken at any annual or special meeting of the stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.1 Number; Qualifications. The Board of Directors shall consist of one
or more members, the number thereof to be determined from time to time by
resolution of the Board of Directors. Directors shall be elected at the annual
meeting of stockholders and each director elected shall hold office until his
successor is elected and qualified. Directors need not be stockholders.
SECTION 2.2 Election; Resignation; Removal; Vacancies. At every meeting of
stockholders called for the election of directors, the holders of Class A
Common, voting as a class, shall be entitled to elect one-fourth (1/4) of the
number of directors to be elected at such meeting (rounded, if the total number
of directors to be elected at such meeting is not divisible by four (4), to the
next higher whole number), and the holders of Class B Common, voting as a class,
shall be entitled to elect the remaining number of directors to be elected at
such meeting. A plurality of the votes cast shall be sufficient to elect. If the
number of outstanding Class B Common shares is less than 12 1/2% of the total
number of outstanding shares of Class A Common and Class B Common, then the
holders of the Class A Common
<PAGE>
shall be entitled to elect one-fourth (1/4) of the number of directors to be
elected at such meeting (rounded, if the total number of directors to be elected
at such meeting is not divisible by four (4), to the next higher whole number)
and shall be entitled to participate with the holders of the Class B Common
voting as a single class in the election of the remaining number of directors to
be elected at such meeting, provided that the holders of Class A Common shall
have one (1) vote per share and the holders of Class B Common shall have ten
(10) votes per share. If, during the interval between annual meetings for the
election of directors, the number of directors who have been elected by either
the holders of the Class A Common or the Class B Common shall, by reason of
resignation, death, retirement, disqualification or removal, be reduced, the
vacancy or vacancies in directors so created may be filled by a majority vote of
the remaining directors then in office, even if less than a quorum, or by a sole
remaining director. Any director so elected by the remaining directors to fill
any such vacancy may be removed from office by the vote of the holders of a
majority of the shares of the Class A Common and the Class B Common voting as a
single class, provided that the holders of Class A Common shall have one (1)
vote per share and the holders of Class B Common shall have ten (10) votes per
share.
SECTION 2.3 Regular Meetings. Regular meetings of the Board of Directors may be
held at such places within or without the State of Delaware and at such times as
the Board of Directors may from time to time determine, and if so determined
notices thereof need not be given.
SECTION 2.4 Special Meetings. Special meetings of the Board of Directors may be
held at any time or place within or without the State of Delaware whenever
called by the Chairman, Chief Executive Officer, the President, any
Vice-President, the Secretary, or by any two members of the Board of Directors.
At least one days' notice thereof shall be given by the person or persons
calling the meeting, either personally, by mail or by telegram.
SECTION 2.5 Telephonic Meetings Permitted. Members of the Board of Directors, or
any committee designated by the Board, may participate in a meeting of such
Board or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this By-Law shall
constitute presence in person at such meeting.
SECTION 2.6 Quorum; Vote Required for Action. At all meetings of the Board of
Directors a majority of the whole Board shall constitute a quorum for the
transaction of business. Except in cases in which the Restated Certificate of
Incorporation or these By-Laws otherwise provide, the vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
SECTION 2.7 Organization. Meetings of the Board of Directors shall be presided
over by the Chairman of the Board, if any, or in his absence by the Vice
Chairman of the Board, if any, or in his absence by the Chief Executive Officer,
or in his absence by the President, or in their absence by a chairman chosen at
the meeting. The Secretary shall act as secretary of the meeting, but in his
absence the chairman of the meeting may appoint any person to act as secretary
of the meeting.
<PAGE>
SECTION 2.8 Informal Action by Directors. Unless otherwise restricted by the
Restated Certificate of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board or
such committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board or committee.
ARTICLE III
COMMITTEES
SECTION 3.1 Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of the committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have
power or authority in reference to amending the Restated Certificate of
Incorporation of the Corporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of
dissolution, or amending these By-Laws; and, unless the resolution expressly so
provides, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock.
SECTION 3.2 Committee Rules. Unless the Board of Directors otherwise provides,
each committee designated by the Board may make, alter and repeal rules for the
conduct of its business. In the absence of such rules each committee shall
conduct its business in the same manner as the Board of Directors conducts its
business pursuant to Article II of these By-Laws.
ARTICLE IV
OFFICERS
SECTION 4.1 Executive Officers; Election; Qualifications; Term of Office;
Resignation; Removal; Vacancies. The Board of Directors shall choose a President
and Secretary, and it may, if it so determines, choose a Chairman of the Board
and a Vice Chairman of the Board from among its members. The Board of Directors
may also choose a Chief Executive Officer, one or more Vice-Presidents, one or
more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers,
and may choose such other officers as it may deem necessary, each of whom shall
have such titles and duties as shall be determined by the Board of Directors.
Each such officer shall hold office until the first meeting of the Board of
Directors after the annual meeting of stockholders next succeeding this
election, and until his
<PAGE>
successor is elected and qualified or until his earlier resignation or removal.
Any officer may resign at any time upon written notice to the Corporation. The
Board of Directors may remove any officer with or without cause at any time, but
such removal shall be without prejudice to the contractual rights of such
officer, if any, with the Corporation. Any number of offices may be held by the
same person. Any vacancy occurring in any office of the Corporation by death,
resignation, removal or otherwise may be filled for the unexpired portion of the
term by the Board of Directors at any regular or special meeting.
SECTION 4.2 Chairman of the Board. The Chairman of the Board, if there be one,
shall preside at all meetings of the Board of Directors and stockholders, and
shall perform such other duties as the Board may direct.
SECTION 4.3 Chief Executive Officer. The Board of Directors may designate
whether the Chairman of the Board, if one shall have been chosen, or the
President shall be the Chief Executive Officer of the Corporation. If a Chairman
of the Board has not been chosen, or if one has been chosen but not designated
Chief Executive Officer, then the President shall be the Chief Executive Officer
of the Corporation. The Chief Executive Officer shall be the principal executive
officer of the Corporation and shall in general supervise and control all of the
business and affairs of the Corporation, unless otherwise provided by the Board
of Directors. He shall preside at all meetings of the stockholders and shall see
that orders and resolutions of the Board of Directors are carried into effect.
He shall have general powers of supervision and shall be the final arbiter of
all differences among officers of the Corporation and his decision as to any
matter affecting the Corporation shall be final and binding as between the
officers of the Corporation subject only to the Board of Directors.
SECTION 4.4 President. If the Chairman of the Board has not been chosen Chief
Executive Officer or, if the Chairman of the Board has been so chosen, in the
event of his inability or refusal to act, the President shall perform the duties
of the Chief Executive Officer, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the Chief Executive Officer. At all
other times, the President shall have the active management of the business of
the Corporation under the general supervision of the Chief Executive Officer. In
general, he shall perform all duties incident to the office of President, and
such other duties as the Chief Executive Officer or the Board of Directors may
from time to time prescribe.
SECTION 4.5 Vice-Presidents. In the absence of the President or in the event of
his inability or refusal to act, the Vice-President (or in the event there be
more than one Vice-President, the Vice-Presidents in the order designated, or in
the absence of any designation, then in the order of their election) shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The
Vice-Presidents shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
SECTION 4.6 Secretary. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the Corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of
<PAGE>
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or Chief Executive Officer, under whose supervision he shall be. He
shall have custody of the corporate seal of the Corporation and he, or an
Assistant Secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his signature or by the
signature of such Assistant Secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his signature.
SECTION 4.7 Assistant Secretary. The Assistant Secretary, or if there be more
than one, the Assistant Secretaries in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
SECTION 4.8 Treasurer. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the Chief Executive Officer and the Board of Directors, at its regular meetings,
or when the Board of Directors so requires, an account of all his transactions
as Treasurer and of the financial condition of the Corporation. If required by
the Board of Directors, he shall give the Corporation a bond (which shall be
renewed every six years) in such sum and with such surety or sureties as shall
be satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and property of whatever kind in his possession or under his
control belonging to the Corporation.
SECTION 4.9 Assistant Treasurer. The Assistant Treasurer, or if there be more
than one, the Assistant Treasurers in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
ARTICLE V
STOCK
SECTION 5.1 Certificates. Every holder of stock shall be entitled to have a
certificate signed by or in the name of the Corporation by the Chairman or Vice
Chairman of the Board of Directors, if any, or the President or a
Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary, of the Corporation, certifying the class and number
of shares of the Corporation owned by him. Any of or all the signatures on the
certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall
<PAGE>
have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent, or registrar at the date of issue.
SECTION 5.2 Lost, Stolen or Destroyed Stock Certificates; Issuance of New
Certificates. The Corporation may issue a new certificate of stock in the place
of any certificate theretofore issued by it, alleged to have been lost, stolen
or destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the Corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
SECTION 5.3 Transfers of Stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
SECTION 5.4 Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of the State of Delaware.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Fiscal Year. The fiscal year of the Corporation shall be March 1 to
the last day of February, unless otherwise determined by resolution of the Board
of Directors.
SECTION 6.2 Seal. The corporate seal shall have the name of the Corporation
inscribed thereon and shall be in such form as may be approved from time to time
by the Board of Directors.
SECTION 6.3 Waiver of Notice of Meetings of Stockholders, Directors and
Committees. Any written waiver of notice, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the stockholders, directors, or member of a
committee of directors need be specified in any written waiver of notice.
SECTION 6.4 Interested Directors; Quorum. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any
<PAGE>
other corporation, partnership, association, or other organization in which one
or more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the Board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if: (1) the
material facts as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or (2)
the material facts as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (3) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof, or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
SECTION 6.5 Form of Records. Any records maintained by the Corporation in the
regular course of its business, including its stock ledger, books of account,
and minute books, may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, micro photographs, or any other information storage device,
provided that the records so kept can be converted into clearly legible form
within a reasonable time. The Corporation shall so convert any records so kept
upon the request of any person entitled to inspect the same.
SECTION 6.6 Amendment of By-Laws. These By-Laws may be altered or repealed, and
new By-Laws made, by the Board of Directors, but the stockholders may make
additional By-Laws and may alter and repeal any By-Laws whether adopted by them
or otherwise.
EXHIBIT 10.1
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of December 20, 1995, 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. 1, terms defined in the Credit Agreement are used herein as
defined therein.
Section 2. Amendments. Subject to the execution of this Amendment
by each Obligor, the Administrative Agent and each of the Banks, but effective
as of the date hereof, the Credit Agreement shall be amended as follows:
A. The definition of "Debt Ratio" in Section 1.01 of the Credit
Agreement is hereby amended in its entirety to read as follows:
"Debt Ratio" shall mean, as at the last day of any fiscal quarter
of the Company (the "day of determination"), the ratio of (a) the
average of the aggregate amounts of Indebtedness of the Company and its
Consolidated Subsidiaries as at such day and as at the last days of each
of the three immediately preceding fiscal quarters to (b) Operating Cash
Flow for the period of four consecutive fiscal quarters ending on such
day of determination. Notwithstanding the foregoing,
(i) for the purposes of determining Debt Ratio used in the
definition of Applicable Margin, Commitment Fee Percentage and
Letter of Credit Fee Percentage, the average amounts of
Indebtedness pursuant to clause (a) above as at the following
dates shall be determined as follows:
(A) as at February 28, 1996, an amount equal to (x)
the average of the aggregate amounts of Indebtedness of
the Company and its Consolidated
<PAGE>
Subsidiaries (other than any Indebtedness of the Company
and its Consolidated Subsidiaries in respect of Revolving
Loans and Revolving Letter of Credit Interest hereunder)
as at such day and as at the last day of the immediately
preceding fiscal quarter plus (y) $50,000,000 plus (z) the
aggregate amount paid in respect of repurchases of shares
of common stock of the Company on or before such date
pursuant to clause (iii) of Section 9.09 hereof; and
(B) as at May 31, 1996, an amount equal to (x) the
average of the aggregate amounts of Indebtedness of the
Company and its Consolidated Subsidiaries (other than any
Indebtedness of the Company and its Consolidated
Subsidiaries in respect of Revolving Loans and Revolving
Letter of Credit Interest hereunder) as at such day and as
at the last days of the immediately preceding two fiscal
quarters plus (y) $50,000,000 plus (z) the aggregate
amount paid in respect of repurchases of shares of common
stock of the Company on or before such date pursuant to
clause (iii) of Section 9.09 hereof;
(ii) for the purposes of determining Debt Ratio for all
other purposes of this Agreement, the average amounts of
Indebtedness pursuant to clause (a) above as at the following
dates shall be determined as follows:
(A) as at November 30, 1995, an amount equal to the
aggregate amount of Indebtedness of the Company and its
Consolidated Subsidiaries as at such day;
(B) as at February 28, 1996, an amount equal to the
average of the aggregate amounts of Indebtedness of the
Company and its Consolidated Subsidiaries as at such day
and as at the last day of the immediately preceding fiscal
quarter; and
(C) as at May 31, 1996, an amount equal to the
average of the aggregate amounts of Indebtedness of the
Company and its Consolidated Subsidiaries as at such day
and as at the last days of the immediately preceding two
fiscal quarters;
(iii) Operating Cash Flow pursuant to clause (b) above as
at the following dates shall be determined as follows:
(A) as at November 30, 1995, an amount equal to (x)
Operating Cash Flow for the fiscal quarter ending on such
day times (y) four;
(B) as at February 28, 1996, an amount equal to (x)
Operating Cash Flow for the period of two consecutive
fiscal quarters ending on such day times (y) two; and
<PAGE>
(C) as at May 31, 1996, an amount equal to (x)
Operating Cash Flow for the period of three fiscal
quarters ending on such day times (y) 1-1/3; and
(iv) Indebtedness as at the last day of each fiscal
quarter included in the determination of average Indebtedness
pursuant to clause (a) above shall be determined under the
assumption that any prepayment of Term Loans hereunder from the
proceeds of any Equity Issuance at any time during any such
fiscal quarter included in the calculation thereof shall have
been made in the first such fiscal quarter.
B. Section 2.12(b) of the Credit Agreement is hereby amended by
deleting the figure "$50,000,000" at the end thereof and inserting "$60,000,000"
in its place.
C. Section 9.09 of the Credit Agreement is hereby amended in its
entirety to read as follows:
"9.09 Dividend Payments. The Company will not, and will not
permit any of its Subsidiaries to, declare or make any Dividend Payment
at any time other than Dividend Payments in respect of (i) stock
appreciation rights as contemplated by the Stock Option Plan in an
aggregate amount not exceeding $500,000 in any fiscal year, (ii)
payments under the Barton Phantom Stock Plan in an aggregate amount not
exceeding $4,500,000 during the term of this Agreement and (iii)
repurchases for cash, on or after the effectiveness of Amendment No. 1
hereof, of shares of the outstanding common stock of the Company so long
as (x) the aggregate amount paid in respect of all such repurchases
shall not exceed $30,000,000 and (y) at the time of any such repurchase,
and after giving effect thereto, no Default or Event of Default shall
have occurred and be continuing hereunder. Nothing herein shall be
deemed to prohibit the payment of any dividends by Subsidiaries to the
Company and other Subsidiaries."
D. Section 9.10(b) of the Credit Agreement is hereby amended in
its entirety to read as follows:
"(b) Tangible Net Worth. The Company will not permit Tangible Net
Worth to be less than the following respective amounts (subject to
adjustment as provided in the last sentence of this Section 9.10(b)) at
any time during the following respective periods:
<TABLE>
<S> <C>
Period Amount
From 9/1/95 through 11/30/95 $ 85,000,000
From 12/1/95 through 2/28/96 $ 85,000,000
From 3/1/96 through 5/31/96 $100,000,000
From 6/1/96 through 8/31/96 $110,000,000
From 9/1/96 through 11/30/96 $125,000,000
From 12/1/96 through 2/28/97 $145,000,000
From 3/1/97 through 5/31/97 $160,000,000
From 6/1/97 through 8/31/97 $184,000,000
From 9/1/97 through 11/30/97 $195,000,000
From 12/1/97 through 2/28/98 $206,000,000
From 3/1/98 through 5/31/98 $217,000,000
From 6/1/98 through 8/31/98 $229,000,000
From 9/1/98 through 11/30/98 $240,000,000
From 12/1/98 through 2/28/99 $251,000,000
From 3/1/99 through 5/31/99 $262,000,000
From 6/1/99 through 8/31/99 $274,000,000
From 9/1/99 through 11/30/99 $285,000,000
From 12/1/99 through 2/28/00 $296,000,000
From 3/31/00 through 5/31/00 $308,000,000
From 6/1/00 and at all
times thereafter $319,000,000.
</TABLE>
<PAGE>
Notwithstanding the foregoing, each of the amounts set forth in the
schedule above for any date shall be reduced by the aggregate amount
paid in respect of repurchases of shares of common stock of the Company
on or before such date pursuant to clause (iii) of Section 9.09 hereof."
E. Section 9.13 of the Credit Agreement is hereby amended in its
entirety to read as follows:
"9.13 Use of Proceeds. The Company will use the proceeds of the
Loans hereunder solely to (a) finance the Glenmore Acquisition, (b)
provide working capital for the Company and its Subsidiaries, (c)
provide funds for repurchases of shares of common stock of the Company
pursuant to clause (iii) of Section 9.09 hereof and (d) pay the expenses
relating to the Glenmore Acquisition and the consummation of the
transactions contemplated hereby (in compliance with all applicable
legal and regulatory requirements); provided that, neither the
Administrative Agent nor any Bank shall have any responsibility as to
the use of any of such proceeds."
F. The last sentence of Section 9.16 of the Credit Agreement is
hereby amended in its entirety to read as follows:
"In addition, notwithstanding the provisions of clause (f) or (g)
of the last sentence of Section 9.05 hereof, the Company will not
consent to any modification, supplement or waiver of its Certificate of
Incorporation as in effect on the date hereof without the prior consent
of the Administrative Agent (with the approval of the Majority Banks),
provided that the Company may amend its Certificate of Incorporation to
authorize the issuance of one or more series of preferred stock (the
terms of which are to be determined by the board of directors of the
Company upon the designation of any such series), so long as prior to
the actual issuance of any such series of preferred stock, the Company
shall have first obtained the consent of the Administrative Agent
(granted with the approval of the Majority Banks)."
<PAGE>
Section 3. Miscellaneous. Except as herein provided, the Credit
Agreement shall remain unchanged and in full force and effect. This Amendment
No. 1 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. 1 by signing any such counterpart. This
Amendment No. 1 shall be governed by, and construed in accordance with, the law
of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 1 to be duly executed and delivered as of the day and year first above
written.
CANANDAIGUA WINE COMPANY, INC.
By /s/ Robert Sands
--------------------------------
Name: Robert Sands
Title: Executive Vice President
and General Counsel
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 Sands
--------------------------------
Name: Robert 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 Sands
--------------------------------
Name: Robert Sands
Title: Vice President
BARTON FINANCIAL CORPORATION
By /s/ David S. Sorce
--------------------------------
Name: David S. Sorce
Title: Vice President
<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/ Rick DaCosta By: /s/ Philip M. Smith
----------------------------- ------------------------------
Title: Assistant Vice President Title: Reg. Senior Vice President
FLEET BANK PNC BANK, NATIONAL ASSOCIATION
By: /s/ Martin K. Birminghan By: /s/ Tom Patridge
----------------------------- ------------------------------
Title: Vice President Title: Commercial Banking Officer
NATIONAL CITY BANK NATWEST BANK N.A.
By: /s/ Renold D. Thompson By: /s/ Michael M. Dwyer
----------------------------- ------------------------------
Title: Senior Vice President Title: Vice President
NBD BANK THE BANK OF NOVA SCOTIA
By: /s/ Karl I. Bell By: /s/ J. R. Trimble
----------------------------- ------------------------------
Title: Vice President Title: Senior Relationship
Manager
CREDIT SUISSE THE DAIWA BANK, LIMITED
By: /s/ Adrian Germann By: /s/ James Drumm
----------------------------- ------------------------------
Title: Associate Title: Vice President
By: /s/ Christopher J. Eldin By: /s/ William N. Paty
----------------------------- ------------------------------
Title: Member of Senior Management Title: Vice President & Manager
KEY BANK OF NEW YORK CHEMICAL BANK
By: /s/ Ken K. Conte By: /s/ J. Spillane
----------------------------- ------------------------------
Title: Senior Vice President Title: Vice President
COOPERATIVE CENTRAL RAIFFEISEN- LTCB TRUST COMPANY
BOERENLEENBANK B.A. "RABOBANK
NEDERLAND", NEW YORK BRANCH
By: /s/ By: /s/ Rene O. LeBlanc
----------------------------- ------------------------------
Title: Title: Senior Vice President
<PAGE>
CORESTATES BANK, N.A. DG BANK DEUTSCHE GENOSSEN-
SCHAFTSBANK, CAYMAN ISLAND BRANCH
By: /s/ Brian M. Haley By: /s/ Norah E. McCann
----------------------------- ------------------------------
Title: Vice President Title: Senior Vice President
By: /s/ Karen A. Brinkman
------------------------------
Title: Vice President
THE FUJI BANK LIMITED, THE SUMITOMO BANK, LIMITED
NEW YORK BRANCH NEW YORK BRANCH
By: /s/ By: /s/ Yasuhiro Obana
----------------------------- ------------------------------
Title: Title: Joint General Manager
THE ADMINISTRATIVE AGENT
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Administrative Agent
By /s/ Bruce S. Borden
----------------------------
Title: Vice President
<PAGE>
EXHIBIT 10.2
AMENDMENT NO. 2
AMENDMENT NO. 2 dated as of January 10, 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. 2, terms defined in the Credit Agreement are used herein as
defined therein.
Section 2. Amendments. Subject to the satisfaction of the
conditions set forth in Section 3 hereof, the Credit Agreement shall be amended
as follows:
A. The definition of "Excess Cash Flow" in Section 1.01 of the
Credit Agreement is hereby amended in its entirety to read as follows:
"Excess Cash Flow" shall mean for any period of four fiscal
quarters ending on August 31 in any fiscal year (the "Current
Calculation Period"), Adjusted Cash Flow for the Current Calculation
Period, minus the sum of (i) all payments made by the Company under
Sections 2.2, 2.3, 2.4, 2.5 and 2.6 of the Barton Stock Purchase
Agreement during the Current Calculation Period, plus (ii) the maximum
possible amount of all payments required to be made by the Company under
Sections 2.2, 2.3, 2.4, 2.5 and 2.6 of the Barton Stock Purchase
Agreement during the period of four fiscal quarters immediately
succeeding the Current Calculation Period, plus (iii) Fixed Charges for
the Current Calculation Period.
B. Section 1.02(b) of the Credit Agreement is hereby amended in
its entirety to read as follows:
"(b) To enable the ready and consistent determination of
compliance with the covenants set forth in Section 9 hereof, the Company
will not change the last day of its fiscal year from the last day of
August of each year, or the last days of the first three fiscal quarters
in each of its fiscal years from the last days of November, February and
May of each year, respectively, provided that, effective on February 29,
1996, the Company may change the last day of its fiscal year to the last
day of February of each year, in which case, without the consent of the
Majority Banks, the Company will not thereafter change the last day of
its fiscal year from the
<PAGE>
last day of February of each year, or the last days of the first three
fiscal quarters in each of its fiscal years from the last days of May,
August and November of each year, respectively."
C. 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 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
$50,000,000 (does not exceed $60,000,000 if the amendment to this
Section 2.12(b) provided pursuant to Amendment No. 1 hereto shall have
become effective)."
D. Section 2.12(g) of the Credit Agreement is hereby amended in
its entirety to read as follows:
"(g) Excess Cash Flow. Not later than the date 90 days after each
August 31, commencing with August 31, 1996, the Company shall prepay the
Loans (and/or provide cover for the Letter of Credit Liabilities as
specified in clause (i) below), and the Commitments shall be subject to
automatic reduction, in an aggregate amount equal to the excess of (A)
50% of Excess Cash Flow for the period of four fiscal quarters ending on
such August 31 over (B) the aggregate amount of prepayments of Term
Loans made during such period pursuant to Section 2.11 hereof and, after
the payment in full of the Term Loans, the aggregate amount of voluntary
reductions of Revolving Credit Commitments made during such period
pursuant to Section 2.06(b) hereof, such prepayment and reduction to be
effected in each case in the manner and to the extent specified in
clause (h) below."
E. The penultimate paragraph of Section 9.01 of the Credit
Agreement (i.e. the paragraph immediately following clause (h) of said Section
9.01) shall be amended by adding a new sentence at the end thereof to read as
follows:
"In addition, concurrently with the delivery pursuant to
paragraph (b) above of the audited financial statements of the Company
and its Consolidated Subsidiaries as at the end of any fiscal year
ending after August 31, 1996, the Company will deliver a calculation of
its independent certified public accountants setting forth the amount of
Excess Cash Flow for the period of four fiscal quarters ending on the
August 31 during such fiscal year."
F. The third sentence of Section 9.05 of the Credit Agreement is
hereby amended in its entirety to read as follows:
"The Company will not, nor will it permit any of its Subsidiaries
to, convey, sell, lease, transfer or otherwise dispose of, in one
transaction or a series of transactions, any part of its business or
Property, whether now owned or hereafter acquired (including, without
limitation, receivables and leasehold interests, but excluding (i) sales
and other dispositions of Property so long as the amount thereof sold in
any single fiscal year by the Company and its Subsidiaries shall not
have a fair market value in excess of $10,000,000 (in excess of
$5,000,000 for the short fiscal year ending February 29, 1996) and (ii)
any inventory or other Property sold or disposed of in the ordinary
course of business and on ordinary business terms)."
<PAGE>
G. Section 9.09 of the Credit Agreement is hereby amended in its
entirety to read as follows:
"9.09 Dividend Payments. The Company will not, and will not
permit any of its Subsidiaries to, declare or make any Dividend Payment
at any time other than Dividend Payments in respect of (i) stock
appreciation rights as contemplated by the Stock Option Plan in an
aggregate amount not exceeding $500,000 in any fiscal year (not
exceeding $250,000 for the short fiscal year ending February 29, 1996),
(ii) payments under the Barton Phantom Stock Plan in an aggregate amount
not exceeding $4,500,000 during the term of this Agreement and (iii)
repurchases for cash, on or after the effectiveness of Amendment No. 1
hereof, of shares of the outstanding common stock of the Company so long
as (x) the aggregate amount paid in respect of all such repurchases
shall not exceed $30,000,000 and (y) at the time of any such repurchase,
and after giving effect thereto, no Default or Event of Default shall
have occurred and be continuing hereunder. Nothing herein shall be
deemed to prohibit the payment of any dividends by Subsidiaries to the
Company and other Subsidiaries."
H. Section 9.11 of the Credit Agreement is hereby amended in its
entirety to read as follows:
"9.11 Interest Rate Protection Agreements. The Company will
within 60 days of the Effective Date and at all times thereafter until
August 31, 1997 maintain in full force and effect one or more Interest
Rate Protection Agreements with one or more of the Banks (and/or with a
bank or other financial institution having capital, surplus and
undivided profits of at least $500,000,000), which effectively enables
the Company (in a manner satisfactory to the Majority Banks), to protect
itself against three-month London interbank offered rates exceeding
8.75% per annum as to a notional principal amount at least equal to the
following respective amounts at the following respective dates:
Date Amount
---- ------
August 31, 1996 $ 60,000,000
August 31, 1997 $ 40,000,000"
I. The last sentence of Section 9.12 of the Credit Agreement is
hereby amended in its entirety to read as follows:
"Notwithstanding the foregoing, the Company may enter into
so-called split-dollar life insurance agreements substantially in the
form of Schedule VI hereto, so long as the aggregate amount of premiums
payable by the Company during any fiscal year pursuant to such
agreements shall not exceed $2,000,000 in the aggregate (not exceed
$1,000,000 during the short fiscal year ending February 29, 1996)."
Section 3. Conditions. Any amendment set forth in Section 2 above
shall become effective on the date hereof upon the execution of this Amendment
by each Obligor, the Administrative Agent and the requisite Banks under Section
12.04 of the Credit Agreement for such amendment.
Section 4. Effectiveness of Amendment No. 1. Each of the Banks
that has previously executed Amendment No. 1 to the Credit Agreement hereby
agrees that, anything in Section 2 thereof to the contrary notwithstanding, the
amendments to the Credit Agreement provided for in said Amendment No. 1
(excluding the modification to Section 2.12(b) of the Credit Agreement) shall be
deemed effective upon the execution of said Amendment No. 1 by the Majority
Banks.
<PAGE>
Section 5. Miscellaneous. Except as herein provided, the Credit
Agreement shall remain unchanged and in full force and effect. This Amendment
No. 2 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. 2 by signing any such counterpart. This
Amendment No. 2 shall be governed by, and construed in accordance with, the law
of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 2 to be duly executed and delivered as of the day and year first above
written.
CANANDAIGUA WINE COMPANY, INC.
By /s/ Robert Sands
--------------------------------
Name: Robert Sands
Title:
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 Sands
--------------------------------
Name: Robert 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 Sands
--------------------------------
Name: Robert Sands
Title: Vice President
BARTON FINANCIAL CORPORATION
By /s/ David S. Sorce
--------------------------------
Name: David S. Sorce
Title: Vice President
<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/ By: /s/ Philip M. Smith
----------------------------- ------------------------------
Title: Title: Regional Senior V.P.
FLEET BANK PNC BANK, NATIONAL ASSOCIATION
By: /s/ Martin K. Birminghan By: /s/ M. J. Williams
----------------------------- ------------------------------
Title: Assistant Vice President Title: Vice President
NATIONAL CITY BANK NATWEST BANK N.A.
By: /s/ Renold D. Thompson By: /s/ Neil Platt
----------------------------- ------------------------------
Title: Senior Vice President Title: V.P. P232
NBD BANK THE BANK OF NOVA SCOTIA
By: /s/ Karl I. Bell By: /s/ J. R. Trimble
----------------------------- ------------------------------
Title: Vice President Title: Senior Relationship
Manager
CREDIT SUISSE THE DAIWA BANK, LIMITED
By: /s/ Adrian Germann By: /s/
----------------------------- ------------------------------
Title: Associate Title:
By: /s/ Christopher J. Eldin
-----------------------------
Title: Member of Senior Management
KEY BANK OF NEW YORK CHEMICAL BANK
By: /s/ Ken K. Conte By: /s/ J. Spillane
----------------------------- ------------------------------
Title: Senior Vice President Title: Vice President
COOPERATIVE CENTRAL RAIFFEISEN- LTCB TRUST COMPANY
BOERENLEENBANK B.A. "RABOBANK
NEDERLAND", NEW YORK BRANCH
By: /s/ By: /s/ Y. Nakagowa
----------------------------- ------------------------------
Title: Title: Vice President
<PAGE>
CORESTATES BANK, N.A. DG BANK DEUTSCHE GENOSSEN-
SCHAFTSBANK, CAYMAN ISLAND BRANCH
By: /s/ Brian M. Haley By: /s/ Norah E. McCann
----------------------------- ------------------------------
Title: Vice President Title: SVP
By: /s/ Karen A. Brinkman
------------------------------
Title: Vice President
THE FUJI BANK LIMITED, THE SUMITOMO BANK, LIMITED
NEW YORK BRANCH NEW YORK BRANCH
By: /s/ Katsunori Nozawa By: /s/ Yasuhiro Obana
----------------------------- ------------------------------
Title: Vice President & Manager Title: Joint General Manager
THE ADMINISTRATIVE AGENT
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Administrative Agent
By /s/ Bruce S. Borden
----------------------------
Title: Vice President
<PAGE>
EXHIBIT 10.3
March 22, 1990
Mr. Lynn K. Fetterman
37 Vonn Eigen Drive
Convent Station, New Jersey 07961
Dear Lynn:
We are happy to confirm our offer of employment with Canandaigua Wine Company
(the "Company").
The position offered, subject to N.Y.S.L.A. and B.A.T.F. approval, is Vice
President of Finance reporting to the President of the Company. Responsibilities
include without limitation, and subject to change in the Company's discretion,
the treasury function, corporate secretary, budgeting, forecasting, cost
accounting, financial accounting, accounts receivables, accounts payables,
payroll, insurance, benefits, taxes, SEC compliance, cash management, bank
relations and interface with the corporate auditors.
The position shall commence April 9, 1990 and base gross compensation shall be
at a rate of $4,519.23 per bi-weekly pay period. The Company shall make all
deductions from this amount required by law. Your base gross compensation shall
be reviewed on or about April 9, 1991. You shall also be entitled to
compensation for days spent in preparation for assuming full time
responsibilities prior to April 9, 1990 at the rate of $452.00 per day. In
addition, during your employ you shall have an expense account of $207.70 per
week which amount shall be adjusted annually for inflation on your compensation
review date.
You shall be entitled to all corporate benefits extended to other employees at
your level. Descriptions and enrollment forms, among other things, are included
with this package. Of course, the Company reserves the right to modify such
benefit plans as it, in its sole discretion may decide.
Commencing with your full time employment you shall be eligible for the
Company's standard bonus program for employees at your level consisting of a
bonus potential of 30% of your base gross salary actually earned during a fiscal
year; one third of which is based on meeting personal objectives and two-thirds
of which is based on corporate performance. Of course, the Company reserves the
right to administer and modify such bonus program as it, in its sole discretion,
may decide and shall make all deductions from such bonus payment required by
law.
If during your employment with the Company, the Company terminates your
employment for any reason, except gross misconduct, the Company shall make
bi-weekly severance payments
<PAGE>
to you equalling your bi-weekly base gross compensation for nine (9) months from
the date of your execution of a mutually acceptable separation agreement.
The Company shall provide you with a relocation package in essentially the same
form as the one attached to this letter as Appendix A. Details may vary
somewhat, in the Company's sole discretion, as the package is adopted to the
specifics of the relocation contemplated hereby.
The Company agrees to purchase your current residence at a price equal to the
average of three appraisals obtained from three reputable real estate brokers.
Lastly, by executing this letter agreement you are acknowledging and agreeing
that your employment with Canandaigua Wine Company is at will, can be terminated
by you or the Company at any time, with or without cause and with or without
notice. You further understand and agree that this letter agreement constitutes
the entire agreement of the parties, there are no other written or oral
agreements of the parties and that this letter agreement cannot be modified or
amended except in writing executed by you and the President of the Company.
Lynn, if you are in agreement with the above, please execute both copies of this
letter agreement, retain one for your records and return one to us for ours.
We look forward to the leadership qualities you bring to our management team.
Yours truly,
CANANDAIGUA WINE COMPANY, INC. AGREED:
/S/ Richard Sands /S/ Lynn K. Fetterman
- ------------------ ----------------------
Richard Sands Lynn K. Fetterman
President Dated: 3/23/90
RS/km
Enc.
EXHIBIT 11
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended
------------------------------------------------------
November 30, 1995 November 30, 1994
------------------------- -------------------------
Net income per common and common equivalent share: Primary Fully Diluted Primary Fully Diluted
---------- ---------- ---------- ----------
(in thousands, except share and per share data)
Net income available to common shares $ 10,412 $ 10,412 $ 10,332 $ 10,332
Adjustments: - - - -
Net income available to common and common ---------- ---------- ---------- ----------
equivalent shares $ 10,412 $ 10,412 $ 10,332 $ 10,332
---------- ---------- ---------- ----------
Shares:
Weighted average common shares outstanding 19,605,064 19,605,064 16,497,647 16,497,647
Adjustments:
(1) Assumed exercise of incentive stock options 296,940 296,940 299,483 300,257
(2) Assumed exercise of options 201,675 201,675 198,969 200,132
Weighted average common and common equivalent ---------- ---------- ---------- ----------
shares outstanding 20,103,679 20,103,679 16,996,099 16,998,036
---------- ---------- ---------- ----------
Net income per common and common equivalent share $ 0.52 $ 0.52 $ 0.61 $ 0.61
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
Canandaigua Wine Company, Inc. and Subsidiaries
Financial Data Schedule
This schedule contains summary financial information extracted from the
Company's financial statements for the Quarter ended November 30, 1995 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> 4-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> NOV-30-1995
<CASH> 1,294
<SECURITIES> 0
<RECEIVABLES> 191,671
<ALLOWANCES> 0
<INVENTORY> 368,597
<CURRENT-ASSETS> 586,448
<PP&E> 333,975
<DEPRECIATION> 84,605
<TOTAL-ASSETS> 1,098,990
<CURRENT-LIABILITIES> 337,905
<BONDS> 337,808
<COMMON> 214
0
0
<OTHER-SE> 362,768
<TOTAL-LIABILITY-AND-EQUITY> 1,098,990
<SALES> 285,585
<TOTAL-REVENUES> 285,585
<CGS> 208,332
<TOTAL-COSTS> 208,332
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,157
<INCOME-PRETAX> 17,354
<INCOME-TAX> 6,942
<INCOME-CONTINUING> 10,412
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,412
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.52
</TABLE>
