SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 29, 1996
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Canandaigua Wine Company, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-7570 16-0716709
____________________ ___________ ___________________
(State or other
jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
116 Buffalo Street, Canandaigua, New York 14424
_____________________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 394-7900
__________________
Not Applicable
__________________________________________________________________
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
The Registrant released on April 29, 1996 the following
announcement with respect to the preliminary results of its operations for
the six month transition period ended February 29, 1996:
CANANDAIGUA WINE COMPANY, INC. ANNOUNCES PRELIMINARY RESULTS
Canandaigua, NY, April 29, 1996 -- Canandaigua Wine Company, Inc.
(NASDAQ: WINEA and WINEB) announced today unaudited preliminary results of
operations for its six month transition period ended February 29, 1996
(referred to as "Fiscal 96"). The Company previously announced a change in
its fiscal year end from August 31 to the last day of February.
During the Fiscal 96 six month transition period, the Company had
gross sales of $738 million and net sales of $535 million as compared to
gross sales of $592 million and net sales of $454 million, respectively, in
the same period a year ago. This 25% increase in gross sales and 18%
increase in net sales is primarily attributable to sales of spirits brands
such as Fleischmann and Mr. Boston acquired in September, 1995 (the "UDG
Acquisition"), which were not under the Company's ownership in the previous
period, and increased sales of the Company's beer and varietal wine products.
Unit volume of the Company's branded products increased 17% in
Fiscal 96 over the same period a year ago. This increase was primarily due
to the addition of spirits brands from the UDG Acquisition, a 25% increase
in imported beer volume and a 22% increase in varietal wine volume. The
Company also had increased sparkling wine volume of approximately 3% during
Fiscal 96 over the same period a year ago. Including, for comparison
purposes, sales of spirits brands from the UDG Acquisition in the first two
quarters of fiscal 1995 before the Company's acquisition thereof, unit
volumes of the Company's branded products increased approximately 7% in
Fiscal 96 including the effect of lower non-varietal, spirits and dessert
wine volume which declined 5%, 3% and 5%, respectively.
The Company expects to report net income of approximately $3.3
million or approximately $0.17 per share fully diluted for Fiscal 96 as
compared to $20.3 million or $1.11 per share in the same period a year ago.
The Company estimates that Fiscal 96 net income, which was lower than
expected, was reduced by the amounts and for the reasons set forth below:
* Approximately $13 million due to non recurring costs and expenses and the
timing of recognition of costs and expenses related to the change in the
Company's fiscal year end.
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* Approximately $6.7 million due to higher selling, general and
administrative expenses in the wine division and corporate area related to
additional personnel employed by the Company during Fiscal 96 and higher
advertising and promotional expenses as compared to the same period a year
ago. The addition of personnel and the higher advertising and promotional
expenses were related in large part to the Company's acquisition of the
Inglenook and Almaden brands and related assets in August 1994. These
increased expenses were expected and the Company continues to believe that
this acquisition is highly synergistic.
* Approximately $3.8 million by reason of lower gross margins due primarily
to higher grape costs. The Company implemented a series of selling price
increases which on an annualized basis would fully offset these higher
costs from the 1995 grape harvest. Under the last-in, first-out method of
costing ("LIFO"), higher costs expected to occur within the fiscal year
are fully reflected each quarter the Company reports its results of
operations. Increases in wine and grape juice concentrate selling prices,
however, are generally implemented as higher cost inventories are used
later in the fiscal year. Initially, this timing difference results in
increased selling prices not fully absorbing higher costs on a reported basis.
The reduction in net income was offset, in part, by the strong
performance of the Company's beer and spirits division, Barton. Exclusive
of the impact of the UDG Acquisition, Barton contributed an additional $3.9
million to the Company's net income in Fiscal 96. Barton's strong
performance was led by substantial increases in its imported beer sales and
modest increases in spirits sales excluding newly acquired products. In
addition, the UDG Acquisition contributed $3.1 million to the Company's net
income in Fiscal 96 including the impact of the interest expense associated
with the acquisition financing. Both the gross margin and the operating
margin from the UDG Acquisition were significantly higher than the Company's
average margins in Fiscal 96.
The Company also announced today that it expects fully diluted
net income per share for the twelve months ending February 28, 1997 ("Fiscal
97"), to be in the range of $2.30 to $2.50. The Company does not, however,
necessarily expect its projected fully diluted net income per share for each
quarter of Fiscal 97 to follow historical patterns on a quarterly basis.
These projected results assume increased grape costs from the upcoming
harvest. The Company would expect to increase its wine and grape juice
concentrate selling prices to offset fully these higher costs on an
annualized basis. Under LIFO, higher costs expected to occur within the
fiscal year are fully reflected each quarter the Company reports its results
of operations. Increases in wine and grape juice concentrate selling prices,
however, are generally implemented as higher cost inventories are used later
in the fiscal year. Initially, this timing difference results in increased
selling prices not fully absorbing higher costs on a reported basis.
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Richard Sands, President and Chief Executive Officer of the
Company, said, "While we are disappointed with Fiscal 96 results, we are
confident that we are positioned to realize the benefits of our acquisition
strategy and continued internal growth." Mr. Sands added, "Our Fiscal 96 sales
trends were very positive, driven by strong volume growth and increased market
share in both imported beer and varietal wine. The initial six months of
our UDG Acquisition have met our expectations, making significant
contributions to our overall profitability. We implemented selling price
increases by the end of Fiscal 96 to offset increased grape costs from the
fall 1995 harvest. In addition, we are in the process of increasing selling
prices further, particularly on our varietal wines, to improve profit
margins further."
Canandaigua Wine Company, Inc., headquartered in Canandaigua, New
York, is a leading producer and marketer of more than 125 national and regional
beverage alcohol brands. It is the second largest supplier of wines, the
fourth largest importer of beers and the fourth largest supplier of distilled
spirits in the United States. The Company's beverage alcohol brands are
marketed in five general categories and include the following principal
brands:
Table Wines: Almaden, Inglenook, Paul Masson, Taylor California
Cellars, Cribari, Manischewitz, Taylor New York, Marcus
James, Deer Valley and Dunnewood
Sparkling Wines: Cook's, J. Roget, Great Western and Taylor New York
Dessert Wines: Richards Wild Irish Rose, Cisco and Taylor New York
Imported Beers: Corona, St. Pauli Girl, Modelo Especial, and Tsingtao
Distilled Spirits: Fleischmann, Barton, Mr. Boston, Canadian LTD, Ten High
Bourbon, Montezuma Tequila, Inver House Scotch and Monte Alban Mezcal.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995: The statements contained in this Release
which are not historical facts are forward-looking statements. Any
projections of future results of operations, and in particular, the
Company's expected fully diluted net income per share for Fiscal 96 and
Fiscal 97, should in no manner be construed as a guarantee that these
results will in fact occur. The forward-looking statements contained
herein are subject to risks and uncertainties that could cause actual
results to differ materially from those set forth in the forward-looking
statements as follows:
* The Company's expected results of operations for Fiscal 96 are subject to
the completion of the audit of such results by the Company's independent
public accountants.
* The Company is in a highly competitive environment and its dollar sales
and unit volume could be negatively affected by its inability to maintain
or increase prices, changes in geographic or product mix, a general decline
in beverage alcohol consumption or the decision of its wholesale customers,
retailers or consumers to purchase competitive products instead of the
Company's products. Wholesaler, retailer and consumer purchasing decisions
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are influenced by, among other things, the perceived absolute or relative
overall value of the Company's products, including their quality or pricing,
compared to competitive products. Unit volume and dollar sales could also be
affected by pricing, purchasing, financing, operational, advertising or
promotional decisions made by wholesalers and retailers which could affect
their supply, or consumer demand for, the Company's products.
* The Company could experience raw material supply, production or shipment
difficulties which could adversely affect its ability to supply goods to its
customers. The Company could also experience higher than expected increases in
its cost of product sold if raw materials such as grapes or packaging materials
are in short supply or if the Company experiences increased overhead costs.
* The Company could experience higher than expected selling, general and
administrative expenses if it finds it necessary to increase its number of
personnel or its advertising or promotional expenditures to maintain its
competitive position or for other reasons.
* The Company believes that its future results of operations are
inherently difficult to predict due to the Company's use of the last-in,
first-out costing method ("LIFO"), particularly as it relates to the
Company's purchase of grapes from the 1996 fall harvest. Preliminary
indications are that grape costs are likely to be higher than last year's
costs. However, the Company is currently unable to predict with any
certainty the magnitude of such increases.
* The Company is currently undergoing a reengineering effort involving the
evaluation of its business processes and organizational structure and could
make changes in its business in response to this effort which are not
currently contemplated.
* The Company could experience difficulties or delays in the development,
production, testing and marketing of new products, and the failure of
manufacturing economies related to such matters as bottling line speeds and
warehousing capabilities to develop when planned.
* The Company could experience changes in its ability to obtain or hedge
against foreign currency, foreign exchange rates and fluctuations in those
rates. The Company could also be affected by nationalizations or unstable
governments or legal systems or intergovernmental disputes. These currency,
economic and political uncertainties may affect the Company's results,
especially to the extent these matters, or the decisions, policies or
economic strength of the Company's suppliers, affect the Company's Mexican,
German, Chinese and other imported beer products.
* The forward-looking statements contained herein are based on estimates
which the Company believes are reasonable. This means that the Company's
actual results could differ materially from such estimates as a result of
being negatively affected as above described or otherwise positively affected.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Canandaigua Wine Company, Inc.
Dated: April 29, 1996 By:/s/ Robert Sands
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Robert Sands
Executive Vice President and
General Counsel
