<PAGE>
FORM 10-Q
Securities and Exchange Commission
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended November 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _________________
COMMISSION FILE NUMBER 0-7570
CANANDAIGUA WINE COMPANY, INC.
------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 16-0716709
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporataion or organization) Identification No.)
116 BUFFALO STREET, CANANDAIGUA, NEW YORK 14424
-----------------------------------------------
(Address of principal executive offices) (Zip Code)
(716) 394-7900
--------------
(Registrant's telephone number including area code)
None
----
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
The number of shares outstanding of each of the Registrant's classes of common
stock, as of January 10, 1997, is set forth below:
CLASS NUMBER OF SHARES OUTSTANDING
----- ----------------------------
Class A Common Stock, Par Value $.01 Per Share 15,547,625
Class B Common Stock, Par Value $.01 Per Share 3,330,458
<PAGE>
Page 1
Part 1 - Financial Information
Item 1. Financial Statements
<TABLE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<CAPTION>
November 30, 1996 February 29, 1996
----------------- -----------------
(unaudited) (audited)
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash investments $ 4,997 $ 3,339
Accounts receivable, net 198,106 142,471
Inventories, net 373,631 341,838
Prepaid expenses and other current assets 14,598 30,372
------------ ------------
Total current assets 591,332 518,020
PROPERTY, PLANT AND EQUIPMENT, NET 251,218 250,638
OTHER ASSETS 276,963 285,922
------------ ------------
Total assets $ 1,119,513 $ 1,054,580
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 130,000 $ 111,300
Current maturities of long-term debt 40,597 40,797
Accounts payable 79,567 59,730
Accrued Federal and state excise taxes 22,849 19,699
Other accrued expenses and liabilities 63,906 68,440
------------ ------------
Total current liabilities 336,919 299,966
------------ ------------
LONG-TERM DEBT, less current maturities 349,901 327,616
------------ ------------
DEFERRED INCOME TAXES 64,194 58,194
------------ ------------
OTHER LIABILITIES 9,934 12,298
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Class A Common Stock, $.01 par value-
Authorized, 60,000,000 shares;
Issued, 17,460,832 shares at November 30, 1996, and
17,423,082 shares at February 29, 1996 174 174
Class B Convertible Common Stock, $.01 par value-
Authorized, 20,000,000 shares;
Issued 3,956,183 shares at November 30, 1996, and
3,991,683 shares at February 29, 1996 40 40
Additional paid-in capital 222,026 221,133
Retained earnings 164,353 142,600
------------ ------------
386,593 363,947
------------ ------------
Less-Treasury stock-
Class A Common Stock, 1,913,207 shares at
November 30, 1996, and 1,165,786 shares at
February 29, 1996, at cost (25,821) (5,234)
Class B Convertible Common Stock, 625,725 shares
at November 30, 1996, and February 29, 1996, at cost (2,207) (2,207)
------------ ------------
(28,028) (7,441)
------------ ------------
Total stockholders' equity 358,565 356,506
------------ ------------
Total liabilities and stockholders' equity $ 1,119,513 $ 1,054,580
============ ============
<FN>
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets.
</FN>
</TABLE>
<PAGE>
Page 2
<TABLE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)
<CAPTION>
For the Nine Months Ended November 30, For the Three Months Ended November 30,
-------------------------------------- ---------------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
GROSS SALES $ 1,180,849 $ 983,955 $ 425,983 $ 391,186
Less - Excise taxes (307,405) (246,311) (108,250) (105,601)
----------- ----------- ----------- -----------
Net sales 873,444 737,644 317,733 285,585
COST OF PRODUCT SOLD (649,019) (534,449) (236,050) (208,332)
----------- ----------- ----------- -----------
Gross profit 224,425 203,195 81,683 77,253
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (161,139) (129,375) (58,269) (50,104)
NONRECURRING RESTRUCTURING EXPENSES -- (3,301) -- (1,748)
----------- ----------- ----------- -----------
Operating income 63,286 70,519 23,414 25,401
INTEREST EXPENSE, net (25,468) (19,507) (8,665) (8,047)
----------- ----------- ----------- -----------
Income before provision for Federal
and state income taxes 37,818 51,012 14,749 17,354
PROVISION FOR FEDERAL AND
STATE INCOME TAXES (16,065) (19,900) (6,438) (6,942)
----------- ----------- ----------- -----------
NET INCOME $ 21,753 $ 31,112 $ 8,311 $ 10,412
=========== =========== =========== ===========
SHARE DATA:
Net income per common and common
equivalent share:
Primary $ 1.10 $ 1.55 $ .42 $ .52
=========== =========== =========== ===========
Fully diluted $ 1.10 $ 1.55 $ .42 $ .52
=========== =========== =========== ===========
Weighted average common shares
outstanding:
Primary 19,864,901 20,038,649 19,617,854 20,103,679
Fully diluted 19,864,901 20,038,649 19,778,993 20,103,679
<FN>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
</FN>
</TABLE>
<PAGE>
Page 3
<TABLE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
For the Nine Months Ended November 30,
--------------------------------------
1996 1995
----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 21,753 $ 31,112
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of property, plant and equipment 18,662 11,011
Amortization of intangible assets 7,175 4,383
Loss (gain) on sale of property, plant and equipment 201 (39)
Amortization of discount on long-term debt 29 -
Deferred tax provision 10,000 19,175
Restructuring charges - fixed asset write-down - (2,050)
Change in operating assets and liabilities, net of effects
from purchase of business:
Accounts receivable, net (55,635) (70,417)
Inventories, net (31,793) (35,460)
Prepaid expenses 9,176 (3,106)
Accounts payable 18,510 28,966
Accrued Federal and state excise taxes 3,150 (7,458)
Other accrued expenses and liabilities 17,951 (7,812)
Other (3,815) (11,695)
---------- ----------
Total adjustments (6,389) (74,502)
---------- ----------
Net cash provided by (used in) operating activities 15,364 (43,390)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net of minor disposals (25,318) (32,753)
Payment of accrued earn-out amounts (13,848) (10,000)
Proceeds from sale of property, plant and equipment 5,171 1,394
---------- ----------
Net cash used in investing activities (33,995) (41,359)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt, net of discount 61,668 13,219
Net proceeds from notes payable, short-term borrowings 18,700 118,500
Principal payments of long-term debt (39,612) (51,072)
Purchases of treasury stock (19,997) -
Payment of issuance costs of long-term debt (1,478) -
Proceeds from employee stock purchases 998 1,292
Exercise of employee stock options 10 1,014
---------- ----------
Net cash provided by financing activities 20,289 82,953
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH INVESTMENTS 1,658 (1,796)
CASH AND CASH INVESTMENTS, beginning of period 3,339 3,090
---------- ----------
CASH AND CASH INVESTMENTS, end of period $ 4,997 $ 1,294
========== ==========
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 $ - $ -
========== ==========
Goodwill reduction on settlement of disputed final closing net
asset statement for Vintners Acquisition $ 5,894 $ -
========== ==========
<FN>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
</FN>
</TABLE>
<PAGE>
Page 4
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
(in thousands, except share data)
1) MANAGEMENT'S REPRESENTATIONS:
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission applicable to quarterly reporting on Form
10-Q and reflect, in the opinion of the Company, all adjustments necessary to
present the financial information for Canandaigua Wine Company, Inc. and its
subsidiaries. All such adjustments are of a normal recurring nature. Certain
information and footnote disclosures normally included in financial statements,
prepared in accordance with generally accepted accounting principles, have been
condensed or omitted as permitted by such rules and regulations. These
consolidated financial statements and related notes should be read in
conjunction with the consolidated financial statements and related notes,
included in the Company's Transition Report on Form 10-K, for the transition
period from September 1, 1995, to February 29, 1996.
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Certain November 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% at November
30, 1996, and February 29, 1996. Replacement cost of the inventories determined
on a FIFO basis is approximately $386,421, and $332,849, at November 30, 1996,
and February 29, 1996, respectively. The net realizable value of the Company's
inventories is in excess of $373,631, and $341,838, at November 30, 1996, and
February 29, 1996, respectively.
Elements of cost include materials, labor and overhead and consist of the
following:
November 30, February 29,
1996 1996
-------- --------
Raw materials and supplies $ 25,930 $ 24,197
Wines and distilled spirits in process 269,959 254,956
Finished case goods 77,742 62,685
-------- --------
$373,631 $341,838
======== ========
If the FIFO method of inventory valuation had been used, reported net
income would have been $12.5 million, or $.63 per share, higher for the nine
months ended November 30, 1996; and reported net income would have been $.1
million, or $.01 per share, lower for the nine months ended November 30, 1995.
<PAGE>
Page 5
4) ACQUISITIONS:
VINTNERS HOLDBACK -
On September 26, 1996, the Company reached a final settlement with the
company formerly known as Vintners International Company, Inc. and its lenders
on the disputed final closing net asset statement. As a result, the Company
recorded a purchase price reduction for the Vintners Acquisition, which reduced
recorded goodwill by approximately $5.9 million.
UNITED DISTILLERS -
The following table sets forth the unaudited pro forma consolidated results
of operations of the Company for the nine months ended November 30, 1996 and
1995. The nine month unaudited pro forma consolidated results of operations for
the period ended November 30, 1995, gives effect to the UDG Acquisition as if it
occurred on March 1, 1995. The unaudited pro forma consolidated results of
operations are presented after giving effect to certain adjustments for
depreciation, amortization of goodwill, interest expense on the acquisition
financing and related income tax effects. The unaudited pro forma consolidated
results of operations are based upon currently available information and upon
certain assumptions that the Company believes are reasonable under the
circumstances. The unaudited pro forma consolidated results of operations do not
purport to represent what the Company's consolidated results of operations would
actually have been if the UDG Acquisition in fact had occurred on such date or
to project the Company's consolidated results of operations at any future date
or for any future period.
For the Nine Months Ended
November 30,
---------------------------
1996 1995
----------- -----------
Net sales $ 873,444 $ 79,157
Income before provision for Federal and
state income taxes $ 37,818 $ 54,495
Net income $ 21,753 $ 33,254
Share data:
Net income per common and
common equivalent share:
Primary $ 1.10 $ 1.66
Fully diluted $ 1.10 $ 1.66
Weighted average common shares outstanding:
Primary 19,864,901 20,038,649
Fully diluted 19,864,901 20,038,649
<PAGE>
Page 6
5) BORROWINGS:
Borrowings consist of the following at November 30, 1996:
<TABLE>
<CAPTION>
Current Long-term Total
--------- --------- ---------
<S> <C> <C> <C>
Notes Payable:
Senior Credit Facility:
Revolving Credit Loans $ 130,000 $ - $ 130,000
========= ========= =========
Long-term Debt:
Senior Credit Facility:
Term loan, variable rate, aggregate
proceeds of $246,000, due in
installments through August 2001 $ 40,000 $ 157,000 $ 197,000
Senior Subordinated Notes:
8.75% redeemable after December 15, 1998,
due 2003 - 130,000 130,000
8.75% Series B redeemable after December 15, 1998,
due 2003 (less unamortized discount of $3,303 -
effective rate 9.76%) - 61,697 61,697
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 479 - 479
Industrial Development Agencies:
7.5% 1980 issue, original proceeds $2,370, due
in annual installments of $118 through fiscal 2000 118 237 355
Other Long-term Debt:
Loans payable - 5.0% secured by cash surrender value
of officers' life insurance policies - 967 967
--------- --------- ---------
$ 40,597 $ 349,901 $ 390,498
========= ========= =========
</TABLE>
<PAGE>
Page 7
On October 29, 1996, the Company issued $65.0 million of unsecured Series B
Senior Subordinated Notes (the "Series B Notes") due 2003 at a stated rate of
8.75% per annum. The net proceeds from the sale of the Series B Notes were used
to repay amounts outstanding under its bank credit facility, including revolving
loans. Interest on the Series B Notes will be payable semiannually on June 15
and December 15 of each year. The Series B Notes are redeemable at the option of
the Company, in whole or in part, on or after December 15, 1998. The Series B
Notes are unsecured and subordinated to the prior payment in full of all senior
indebtedness of the Company, which includes the credit facility and, the Series
B Notes are guaranteed, on a senior subordinated basis, by substantially all of
the Company's operating subsidiaries.
The indenture relating to the Series B Notes contains certain covenants,
including, but not limited to, (i) limitation on indebtedness; (ii) limitation
on restricted payments; (iii) limitation on transactions with affiliates; (iv)
limitation on senior subordinated indebtedness; (v) limitation on liens; (vi)
limitation on sale of assets; (vii) limitation on issuances of guarantees of and
pledges for indebtedness; (viii) restriction on transfer of assets; (ix)
limitation on subsidiary capital stock; (x) limitation on the creation of any
restriction on the ability of the Company's subsidiaries to make distributions
and other payments; and (xi) restrictions on mergers, consolidation and the
transfer of all or substantially all of the assets of the Company to another
person. The limitation on indebtedness covenant is governed by a rolling four
quarter fixed charge coverage ratio.
<PAGE>
Page 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS OF THE COMPANY
The Company's results of operations over recent years have been
significantly impacted by acquisitions. As previously reported, on September 1,
1995, the Company acquired certain distilled spirits brands and related assets
from United Distillers Glenmore, Inc., and certain of its North American
affiliates (collectively, "UDG"); and, in addition, this transaction included
multiyear agreements under which UDG will supply the Company with bulk whisky
and the Company will supply UDG with services including continued packaging of
various UDG brands not acquired by the Company (the "UDG Acquisition"). The
Company financed the UDG Acquisition through an amendment to its then-existing
bank credit facility, primarily through an increase in the term loan facility
under that bank credit facility.
The following table sets forth, for the periods indicated, certain items in
the Company's consolidated statements of income expressed as a percentage of net
sales:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30, November 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of product sold 74.3 72.9 74.3 72.5
----- ----- ----- -----
Gross profit 25.7 27.1 25.7 27.5
Selling, general and administrative expenses 18.4 17.6 18.4 17.5
Nonrecurring restructuring expenses 0.0 0.6 0.0 0.4
----- ----- ----- -----
Operating income 7.3 8.9 7.3 9.6
Interest expense, net 2.7 2.8 2.9 2.7
----- ----- ----- -----
Income before provision for income taxes 4.6 6.1 4.4 6.9
Provision for Federal and state income taxes 2.0 2.5 1.9 2.7
----- ----- ----- -----
Net income 2.6% 3.6% 2.5% 4.2%
</TABLE>
<PAGE>
Page 9
THREE MONTHS ENDED NOVEMBER 30, 1996 ("THIRD QUARTER 1997"), COMPARED TO
THREE MONTHS ENDED NOVEMBER 30, 1995("NOVEMBER 1995 QUARTER")
NET SALES
Net sales for the Company's Third Quarter 1997 increased to $317.7 million
from $285.6 million for the November 1995 Quarter, an increase of $32.1 million,
or approximately 11.3%. This increase resulted primarily from (i) $12.8 million
of additional beer sales, largely Mexican beers; (ii) $7.4 million of increased
sales of varietal table wine products due mainly to selling price increases
implemented between October 1995 and May 1996, as well as additional unit
volume; (iii) $6.0 million of additional sales of grape juice concentrate; and
(iv) $4.3 million of additional sales of distilled spirits.
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 products, beer and spirits
brands sold by the Company for Third Quarter 1997 and the November 1995 Quarter.
<TABLE>
Three Months Ended November 30, 1996, Compared to Three Months Ended November 30, 1995
--------------------------------------------------------------------------------------
<CAPTION>
Net Sales Unit Volume
----------------------------- -------------------------
%Inc/ %Inc/
1996 1995 (Dec) 1996 1995 (Dec)
---- ---- ----- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Branded Beverage
Alcohol Products (1) $277,159 $254,077 9.1 % 16,311 15,347 6.3 %
Branded Wine Products $152,224 $145,915 4.3 % 7,943 8,037 (1.2)%
Non-varietal Table Wines $ 59,599 $ 63,864 (6.7)% 3,727 4,023 (7.4)%
Varietal Table Wines $ 47,394 $ 39,998 18.5 % 2,020 1,900 6.3 %
Sparkling Wines $ 28,040 $ 26,903 4.2 % 1,142 1,160 (1.6)%
Dessert Wines $ 17,191 $ 15,150 13.5 % 1,054 954 10.5 %
Beer $ 74,314 $ 61,486 20.9 % 5,892 4,957 18.9 %
Spirits $ 51,045 $ 46,765 9.2 % 2,476 2,353 5.2 %
<FN>
(1) The sum of net sales amounts from the categories may not equal total
Branded Beverage Alcohol Products because miscellaneous items affecting net
sales may be included in total Branded Beverage Alcohol Products but not
reflected in the category information.
</FN>
</TABLE>
Net sales and unit volume of the Company's branded beverage alcohol
products for Third Quarter 1997 increased 9.1% and 6.3%, respectively, as
compared to the November 1995 Quarter. The net sales increase resulted from
additional imported beer volume, as well as price increases on most of the
Company's branded wine products, particularly varietal table wine brands. Unit
volume increases were largely the result of increased sales of the Company's
imported beer brands, spirits brands, varietal table wines and dessert wines.
These increases were partially offset by lower unit volume of non-varietal table
wines and sparkling wines.
Net sales and unit volume of the Company's non-varietal table wine products
decreased by 6.7% and 7.4%, respectively, in Third Quarter 1997 as compared to
the November 1995 Quarter, with increased sales of red non-varietals being more
than offset by decreased sales of white and blush non-varietals. The Company
believes that the overall decline reflects the impact of the Company's selling
price increases as well as changing consumer preferences among some of the
Company's product lines. In addition, the November 1995 Quarter included a
higher than normal level of shipments due to the fulfillment of backlog orders
remaining at the end of fiscal 1995 which were caused by production and shipping
delays associated with the relocation of the Company's West Coast bottling
operations.
<PAGE>
Page 10
Net sales and unit volume of the Company's varietal table wine brands
increased by 18.5% and 6.3%, respectively, as compared to the November 1995
Quarter. Net sales growth outpaced unit volume growth principally due to selling
price increases. Net sales and unit volume of the Company's varietal wine
products such as chardonnay, cabernet sauvignon and merlot, which represent more
than half of the Company's varietal wine volume, continued to increase
substantially. These sales more than offset continued declines in white
zinfandel net sales and unit volume. In addition, the November 1995 Quarter
included a higher than normal level of shipments due to the backlog of orders
discussed in the non-varietal table wine section above. The Company believes
that consumer demand for varietal table wines declined somewhat during the
Company's Third Quarter 1997 due to industry-wide price increases, although the
dollar volume of retail sales continued to grow.
Net sales of the Company's sparkling wines increased by 4.2% due to selling
price increases, while unit volume decreased by 1.6% as compared to the November
1995 Quarter. The Company believes that its sparkling wine retail sales trends
for Third Quarter 1997 were better than the industry as a whole.
Net sales and unit volume of the Company's dessert wine brands increased by
13.5% and 10.5%, respectively. The Company believes that these increases are not
indicative of long-term trends and reflect primarily a timing difference in
shipments of dessert wines between Third Quarter 1997 and second quarter 1997
relative to the same periods in the prior year.
Net sales and unit volume of the Company's beer products increased by 20.9%
and 18.9%, respectively, in Third Quarter 1997 as compared to the November 1995
Quarter. Net sales and unit volume increases were largely due to the Company's
Mexican beer brands, which represented over 70% of total beer sales. The Company
believes that its imported beer growth rate exceeds that of the industry.
During Third Quarter 1997 the Company renewed its exclusive Importer
Agreement with an affiliate of Grupo Modelo for the importation of their brands,
Corona Extra, Corona Light, Pacifico, Modelo Especial and Negra Modelo, in 25
states located primarily in the western United States. The Agreement has been
extended to December 31, 2006, with provisions for automatic five-year renewals
thereafter, provided that the Company is in compliance with the terms of the
Agreement.
Net sales and unit volume of the Company's distilled spirits brands
increased by 9.2% and 5.2%, respectively, for Third Quarter 1997 as compared to
the November 1995 Quarter due to substantial increases in brandy and
cordials/liqueurs sales, as well as increases in whiskey and tequila sales.
These increases were partially offset by declines in sales of the Company's
vodka products. Net sales and unit volume of the spirits brands acquired in the
UDG Acquisition increased by 6.1% and 6.4%, respectively, for Third Quarter 1997
as compared to the November 1995 Quarter (the first quarter in which the Company
owned the brands). Net sales and unit volume of the Company's spirits brands
exclusive of the UDG brands increased by 11.7% and 4.4%, respectively, for Third
Quarter 1997 as compared to the November 1995 Quarter. The Company believes that
its sales growth exceeds the industry growth rate.
<PAGE>
Page 11
GROSS PROFIT
The Company's gross profit increased to $81.7 million in Third Quarter 1997
from $77.3 million in the November 1995 Quarter, an increase of $4.4 million, or
5.7%. The change in gross profit resulted primarily from (i) approximately $4.4
million of additional gross profit from increases in beer sales; (ii)
approximately $3.2 million of gross profit from additional sales of spirits
brands; (iii) approximately $2.6 million of gross profit from additional unit
volume of nonbranded products, primarily bulk wine and grape juice concentrate;
and (iv) approximately $5.8 million of lower gross profit, primarily due to
increased cost of product sold, particularly higher grape costs in the fall 1996
harvest, which applied to both the Company's branded wines and grape juice
concentrate products. The Company believes that these increases in grape costs
were due to an imbalance in supply and demand in the varieties which the Company
purchases. The higher costs were partially offset by additional net sales
resulting primarily from selling price increases of the Company's branded wines
and grape juice concentrate products.
Gross profit as a percentage of net sales was 25.7% for Third Quarter 1997
as compared to 27.1% in the November 1995 Quarter. The decline in the gross
profit margin was largely due to higher costs, particularly grape costs, of wine
and grape juice concentrate products, partially offset by increased selling
prices on most of the Company's branded wines and grape juice concentrate
products and improved gross margins on the Company's beer and spirits products.
In general, the preferred method of accounting for inventory valuation is
the last-in, first-out method ("LIFO") because, in most circumstances, it
results in a better matching of costs and revenues. For comparison purposes to
companies using the first-in, first-out method of accounting for inventory
valuation ("FIFO") only, the Company's Third Quarter 1997 results reflect a
reduction in gross profit of approximately $8.0 million due to the Company's
LIFO accounting method, based on the Company's current estimate of a $29.0
million LIFO adjustment for the 1997 fiscal year. The Company previously
estimated that gross profit for the 1997 fiscal year would be negatively
impacted as a result of LIFO by $27.5 million. The LIFO adjustment for the full
1997 fiscal year will be revised, as appropriate, at the end of the fiscal year.
For comparison purposes, results for the Company's November 1995 Quarter
reflected a reduction to gross profit of approximately $2.8 million due to LIFO.
The Company's estimated LIFO adjustment for fiscal 1997 is a forward-looking
statement. The Company found it necessary to revise its estimate of the impact
of LIFO in the first quarter, second quarter and third quarter of the current
fiscal year versus its previous estimates due to the difficulty in projecting
grape costs from the 1996 harvest completed in Third Quarter 1997 and
anticipated levels of inventory on hand at the end of fiscal 1997. There are no
assurances that the Company's actual LIFO adjustment for fiscal 1997 will not
differ materially from its latest estimate.
<PAGE>
Page 12
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for Third Quarter 1997 were
$58.3 million, an increase of $8.2 million as compared to the November 1995
Quarter, due primarily to increased personnel and related expenses stemming from
the Company's reengineering efforts and the continued expansion of the Company's
management capabilities; increased selling, general and administrative expenses,
exclusive of advertising and promotion, related to the UDG Acquisition;
increased advertising and promotion expenses related to increased sales; and
other expenses consistent with the Company's growth.
INTEREST EXPENSE, NET
Net interest expense totaled $8.7 million in Third Quarter 1997, an
increase of $0.7 million as compared to the November 1995 Quarter, due primarily
to increased borrowing levels related to working capital needs.
PROVISION FOR FEDERAL AND STATE INCOME TAXES
The Company's effective tax rate for Third Quarter 1997 increased to 43.7%
from 40.0% for the November 1995 Quarter due to a higher effective tax rate in
California caused by statutory limitations on the Company's ability to utilize
certain deductions.
NET INCOME
As a result of the foregoing, net income for Third Quarter 1997 was $8.3
million, a decrease of $2.1 million as compared to the November 1995 Quarter.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Third Quarter 1997
was $32.0 million. EBITDA should not be construed as an alternative to operating
income or net cash flow from operating activities and should not be construed as
an indication of operating performance or as a measure of liquidity.
NINE MONTHS ENDED NOVEMBER 30, 1996 ("NINE MONTHS 1997"), COMPARED TO NINE
MONTHS ENDED NOVEMBER 30, 1995 ("NOVEMBER 1995 NINE MONTHS")
NET SALES
Net sales for the Company's Nine Months 1997 increased to $873.4 million
from $737.6 million for the November 1995 Nine Months, an increase of $135.8
million, or approximately 18.4%. This increase resulted primarily from (i) $52.1
million of additional imported beer sales, primarily Mexican beers; (ii) the
inclusion of $49.0 million of net sales of products and services from the UDG
Acquisition during the period from March 1, 1996, through August 31, 1996; (iii)
$19.8 million of increased net sales of the Company's varietal table wine
products resulting from selling price increases implemented between October 1995
and May 1996, as well as additional unit volume; (iv) $17.2 million of higher
sales of grape juice concentrate; (v) $7.6 million of additional sales of
spirits brands; partially offset by $5.1 million of decreased sales of the
Company's non-varietal table wine brands and a decrease of $4.8 million in sales
of other nonbranded products and services.
<PAGE>
Page 13
FOR PURPOSES OF COMPUTING THE NET SALES AND UNIT VOLUME COMPARATIVE DATA
FOR THE TABLE BELOW AND FOR THE REMAINDER OF THE DISCUSSION OF NET SALES, SALES
OF SPIRITS PRODUCTS ACQUIRED IN THE UDG ACQUISITION HAVE BEEN INCLUDED FOR THE
PERIOD FROM MARCH 1, 1995, THROUGH AUGUST 31, 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 products, beer and spirits
brands sold by the Company for Nine Months 1997 and the November 1995 Nine
Months:
<TABLE>
Nine Months Ended November 30, 1996, Compared to Nine Months Ended November 30, 1995
------------------------------------------------------------------------------------
<CAPTION>
Net Sales Unit Volume
----------------------------- ---------------------------
%Inc/ %Inc/
1996 1995 (Dec) 1996 1995 (Dec)
---- ---- ----- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Branded Beverage
Alcohol Products (1) $771,098 $697,512 10.5 % 47,008 43,421 8.2 %
Branded Wine Products $392,629 $377,095 4.1 % 20,809 21,485 (3.1)%
Non-varietal Table Wines $164,148 $169,258 (3.0)% 10,190 10,901 (6.5)%
Varietal Table Wines $124,419 $104,628 18.9 % 5,214 4,928 5.8 %
Sparkling Wines $ 54,127 $ 53,075 2.0 % 2,296 2,364 (2.9)%
Dessert Wines $ 49,935 $ 50,134 (0.4)% 3,109 3,292 (5.6)%
Beer $237,628 $185,514 28.1 % 18,964 14,985 26.6 %
Spirits (2) $141,266 $134,348 5.1 % 7,235 6,928 4.4 %
<FN>
(1) The sum of net sales and unit volume amounts from the categories may not
equal total Branded Beverage Alcohol Products because miscellaneous items
affecting net sales and unit volume may be included in total Branded
Beverage Alcohol Products but not reflected in the category information.
(2) For comparison purposes only, net sales of $41,514 and unit volume of 2,001
of distilled spirits brands acquired in the September 1, 1995, UDG
Acquisition have been included in the table for the nine months ended
November 30, 1995. These amounts represent net sales and unit volume of
those brands for the period March 1, 1995, through August 31, 1995, which
was prior to the UDG Acquisition.
</FN>
</TABLE>
Net sales and unit volume of the Company's branded beverage alcohol
products for Nine Months 1997 increased 10.5% and 8.2%, respectively, as
compared to the November 1995 Nine Months. The net sales increase resulted from
higher imported beer sales, price increases on most of the Company's branded
wine products, particularly varietal table wine brands, and increased sales of
the Company's spirits brands. Unit volume increases were led by substantial
growth in the Company's imported beer brands and increases in its varietal table
wine and spirits brands, partially offset by declines in unit volume of
non-varietal table wines, dessert wines and sparkling wines.
<PAGE>
Page 14
Net sales and unit volume of the Company's non-varietal table wine products
declined by 3.0% and 6.5%, respectively, for Nine Months 1997 as compared to the
November 1995 Nine Months. The Company believes that the decline in unit volume
reflects the impact of the Company's selling price increases and other
competitive pressures.
Net sales and unit volume of the Company's varietal table wine brands
increased by 18.9% and 5.8%, respectively. Net sales increased at a greater rate
than unit volume due to selling price increases instituted between October 1995
and May 1996. Net sales and unit volume of the Company's varietal table wine
products such as chardonnay, cabernet sauvignon and merlot, which represent more
than half of the Company's varietal table wine volume, increased substantially
in Nine Months 1997. While unit volume of white zinfandel products declined in
Nine Months 1997, net sales for these products were virtually unchanged due to
the Company's selling price increases.
Net sales of the Company's sparkling wines increased 2.0%, while unit
volume decreased by 2.9% during Nine Months 1997 as compared to the November
1995 Nine Months. The Company believes that the decline in unit volume is
consistent with industry trends as well as the impact of price increases
implemented in May 1996.
Net sales and unit volume of the Company's dessert wine brands declined by
0.4% and 5.6%, respectively, during Nine Months 1997. The Company believes that,
although the decline in unit volume was mitigated by selling price increases,
these results reflect the continuing trend of consumer preferences away from the
dessert wine category.
Net sales and unit volume of the Company's beer brands increased 28.1% and
26.6%, respectively, during Nine Months 1997. These increases were largely due
to the Company's Mexican beer brands, which represented over 70% of total beer
sales, which continued strong growth trends. The Company believes that the
growth in its Mexican beers is related to the growth of the Hispanic population
in the Company's distribution areas, the continued popularity of imported beers
in general and the narrowing retail price gap between imported beers and
domestic beers.
Net sales and unit volume of the Company's distilled spirits brands
increased by 5.1% and 4.4%, respectively, in Nine Months 1997 as compared to the
November 1995 Nine Months. Excluding the impact of the UDG Acquisition, spirits
net sales and unit volume increased by 8.8% and 2.9%, respectively, reflecting
strong brandy sales, increases in tequila and liqueurs and the introduction of a
number of new products. Net sales and unit volume of the brands acquired in the
UDG Acquisition increased by 1.0% and 6.4%, respectively, in Nine Months 1997,
with net sales growth lagging unit volume increases due to the impact of
downward selling price adjustments for these brands to be more in line with the
pricing strategy of the rest of the Company's spirits portfolio.
<PAGE>
Page 15
GROSS PROFIT
The Company's gross profit increased to $224.4 million in Nine Months 1997
from $203.2 million in the November 1995 Nine Months, an increase of $21.2
million, or 10.4%. This change in gross profit resulted primarily from (i)
approximately $20.5 million of gross profit from sales generated during the
period from March 1, 1996, through August 31, 1996, from the business acquired
from UDG; (ii) approximately $16.8 million of additional gross profit from
increases in beer sales; and (iii) approximately $16.1 million of lower gross
profit primarily due to increased cost of product sold, particularly higher
grape costs in the fall 1996 harvest and additional costs resulting from
inefficiencies in the production of wine and grape juice concentrate,
particularly at the Company's newly consolidated West Coast operations,
partially offset by additional net sales resulting primarily from selling price
increases of the Company's branded wines and grape juice concentrate products
and a partial reduction of certain grape contract loss reserves established in
connection with the 1993 Vintners Acquisition, which reduction corresponds to
the increase in grape costs relative to the contract pricing and the termination
of certain unfavorable contracts. The Company's increased production costs
stemmed from low bulk wine conversion rates and bottling inefficiencies. The
Company also experienced high imported concentrate and bulk freight costs. The
Company has instituted a series of steps to address these matters, including a
reengineering effort to redesign more effectively its work processes,
organizational structure and information systems.
Gross profit as a percentage of net sales was 25.7% for Nine Months 1997 as
compared to 27.5% in the November 1995 Nine Months. The decline in the gross
profit margin was due largely to higher costs, particularly grape costs, of wine
and grape juice concentrate products, partially offset by increased selling
prices on most of the Company's branded wines and grape juice concentrate
products. The Company has experienced significant increases in its cost of
grapes in both the 1995 and 1996 harvests. The Company believes that these
increases in grape costs were due to an imbalance in supply and demand in the
varieties which the Company purchases.
In general, the preferred method of accounting for inventory valuation is
the last-in, first-out method ("LIFO") because, in most circumstances, it
results in a better matching of costs and revenues. For comparison purposes to
companies using the first-in, first-out method of accounting for inventory
valuation ("FIFO") only, the Company's Nine Months 1997 results reflect a
reduction in gross profit of approximately $21.8 million due to the Company's
LIFO accounting method. For comparison purposes, results for the Company's
November 1995 Nine Months reflected an addition to gross profit of approximately
$0.2 million due to LIFO.
<PAGE>
Page 16
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for Nine Months 1997 were
$161.1 million, an increase of $31.8 million as compared to the November 1995
Nine Months. Of this amount, $13.9 million was due primarily to increased
personnel and related expenses stemming from the Company's reengineering efforts
and the continued expansion of the Company's management capabilities and other
expenses consistent with the Company's growth; $11.3 million related to the UDG
Acquisition; and $6.6 million was due to additional advertising, promotion and
selling expenses associated with increased unit volume exclusive of sales
related to the UDG Acquisition during the period from March 1, 1996, through
August 31, 1996.
INTEREST EXPENSE, NET
Net interest expense totaled $25.5 million in Nine Months 1997, an increase
of $6.0 million as compared to the November 1995 Nine Months, primarily due to
additional interest expense from the UDG Acquisition financing and increased
borrowing levels related to working capital needs.
PROVISION FOR FEDERAL AND STATE INCOME TAXES
The Company's effective tax rate for Nine Months 1997 increased to 42.5%
from 39.0% for the November 1995 Nine Months due to a higher effective tax rate
in California caused by statutory limitations on the Company's ability to
utilize certain deductions.
NET INCOME
As a result of the foregoing, net income for Nine Months 1997 was $21.8
million, a decrease of $9.4 million as compared to the November 1995 Nine
Months.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Nine Months 1997
was $89.1 million. EBITDA should not be construed as an alternative to operating
income or net cash flow from operating activities and should not be construed as
an indication of operating performance or as a measure of liquidity.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
GENERAL
The Company's principal use of cash in its operating activities is for
purchasing and carrying inventories. The Company's primary source of liquidity
has historically been cash flow from operations, except during the annual fall
grape harvests when the Company has relied on short-term borrowings. The annual
grape crush normally begins in August and runs through October. The Company
generally begins purchasing grapes in August with payments for such grapes
beginning to come due in September. The Company's short-term borrowings to
support such purchases generally reach their highest levels in November or
December. Historically, the Company has used cash flow from operating activities
to repay its short-term borrowings.
<PAGE>
Page 17
CASH FLOWS - NINE MONTHS 1997
OPERATING ACTIVITIES
Net cash provided by operating activities in Nine Months 1997 was $15.4
million. The net cash provided by operating activities for Nine Months 1997
resulted principally from net income adjusted for noncash items and a net
increase in operating liabilities (primarily an $18.5 million increase in
accounts payable associated with the 1996 grape harvest and an $18.0 million
increase in other accrued expenses and liabilities principally the result of an
increase of $7.2 million in accrued income taxes and an increase of $4.3 million
in accrued interest), partially offset by a net increase in operating assets
(primarily a $55.6 million increase in accounts receivable associated with
higher seasonal sales of products and a $31.8 million increase in inventories as
a result of the purchase of grapes from the 1996 grape harvest).
INVESTING ACTIVITIES AND FINANCING ACTIVITIES
Net cash used in investing activities in Nine Months 1997 was $34.0
million, resulting primarily from $25.3 million of capital expenditures and the
final $13.8 million earn-out payment to the former Barton stockholders, offset
in part by proceeds from the sale of property, plant and equipment of $5.2
million, resulting principally from the May 1996 sale of the Company's Central
Cellars winery, located in Lodi, California.
Net cash provided by financing activities in Nine Months 1997 was $20.3
million, resulting principally from net proceeds of $61.7 million from the
issuance of additional subordinated notes and net proceeds of $18.7 million from
revolving loan borrowings under the Company's bank credit facility, partially
offset by principal payments of $39.6 million of long-term debt and repurchases
of $20.0 million of the Company's Class A Common Stock.
As of November 30, 1996, under its bank credit facility, the Company had
outstanding term loans of $197.0 million bearing interest at 6.5%, $130.0
million of revolving loans bearing interest at 6.7%, $8.9 million of revolving
letters of credit and $13.7 million under the Barton Letter of Credit. As of
November 30, 1996, under the bank credit facility, $46.1 million of revolving
loans were available to be drawn by the Company.
During January 1996, the Company's Board of Directors authorized the
repurchase of up to $30.0 million of the Company's Class A Common Stock and
Class B Common Stock. The repurchase of shares of common stock will be
accomplished, from time to time, depending upon market conditions, through open
market or privately negotiated transactions. The Company may finance such
repurchases through cash generated from operations or through its bank credit
facility. The repurchased shares will become treasury shares and may be used for
general corporate purposes. As of January 10, 1997, the Company had repurchased
785,200 shares of Class A Common Stock at an aggregate cost of $20.7 million.
<PAGE>
Page 18
THE COMPANY'S BANK CREDIT FACILITY
As of January 10, 1997, under its bank credit facility, the Company had
outstanding term loans of $185.9 million bearing interest at 6.5% with quarterly
principal payments of $10.0 million and a final payment of $5.9 million in
August 2001, outstanding revolving loans of $70.0 million bearing interest at
6.4%, undrawn revolving letters of credit of $9.3 million and $105.7 million
available to be drawn in revolving loans.
SENIOR SUBORDINATED NOTES
On October 29, 1996, the Company issued $65.0 million aggregate principal
amount of 8 3/4% Series B Senior Subordinated Notes due 2003 (the "Series B
Notes"). The Company used the net proceeds from the sale of the Series B Notes
to repay amounts outstanding under its bank credit facility, including $50.0
million under revolving loans and approximately $9.6 million to repay and
permanently reduce term loans. The Company will continue to use the revolving
loans to support its working capital requirements. In addition, the Company
intends to use the revolving loans to complete the above-described and
previously announced stock repurchase program. Revolving loans repaid from the
net proceeds of the sale of the Series B Notes may be re-borrowed from time to
time.
The terms of the Series B Notes are substantially identical to those of the
Company's 8 3/4% Senior Subordinated Notes due 2003, which were issued in a
registered offering on December 27, 1993 and of which $130.0 million aggregate
principal amount is outstanding (the "Original Notes"). A brief description of
the Series B Notes is contained in Note 5 to the Company's financial statements
located in Part I of this Report on Form 10-Q. Such description is qualified in
its entirety by reference to the complete text of the Indenture covering the
Series B Notes, a copy of which has been filed with the Securities and Exchange
Commission.
As of November 30, 1996, the Company had outstanding an aggregate $195.0
million of 8 3/4% senior subordinated notes due 2003, being the Original Notes
and the Series B Notes.
OTHER
The Company's cash requirements have increased during the past twelve
months due to increased grape costs, operating inefficiencies at the Company's
West Coast wine operations and increased working capital needs from the
Company's expanded business. The Company believes that the revolving loans
available under its bank 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.
<PAGE>
Page 19
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.
With respect to the following described litigation, on November 8, 1996,
the District Court entered summary judgment in favor of the Company and the
other defendants. The Court's judgment resolves all claims against all of the
defendants in this litigation. The time period in which plantiffs could have
filed a notice of appeal to the United States Court of Appeals for the Second
Circuit expired on December 12, 1996, without any such notice being filed.
As previously reported in the Company's Quarterly Reports on Form 10-Q for
the quarterly periods ended May 31, 1996 and August 31, 1996, 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 were the
Company, Richard Sands and Lynn K. Fetterman. The Class Actions were
consolidated and a consolidated complaint was filed on January 16, 1996. The
Class Actions asserted violations of Section 10(b) of the Securities Exchange
Act of 1934 and Rule 10b-5 promulgated thereunder and sought to recover damages
in an unspecified amount which the class members allegedly sustained by
purchasing the Company's common stock at artificially inflated prices. The
complaints in the Class Actions alleged that the Company's public documents and
statements were materially incomplete and, as a result, misleading.
On April 8, 1996, the Company filed a motion to dismiss the consolidated
complaint and oral argument was held on September 25, 1996. After oral argument,
the Court stated that it intended to construe the Company's motion to dismiss as
a motion for summary judgment. As noted above, on November 8, 1996, the District
Court entered summary judgment in favor of the Company and the other defendants.
<PAGE>
Page 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) See Index to Exhibits located at Page 22 of this Report.
(b) The following Reports on Form 8-K were filed by the Company with the
Securities and Exchange Commission during the quarter ended November
30, 1996:
(i) Form 8-K dated September 5, 1996. This Form 8-K reported
information under Item 5 (Other Events);
(ii) Form 8-K dated October 11, 1996. This Form 8-K reported
information under Item 5 (Other Events) and included the
Company's unaudited Consolidated Statements of Income for the six
months ended August 31, 1996 and August 31, 1995 and for the
three months ended August 31, 1996 and August 31, 1995; and
(iii)Form 8-K dated October 29, 1996. This Form 8-K reported
information under Item 5 (Other Events).
<PAGE>
Page 21
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 14, 1997 By: /s/ Richard Sands
-------------------
Richard Sands, President and Chief
Executive Officer
Dated: January 14, 1997 By: /s/ Thomas F. Howe
--------------------
Thomas F. Howe, Vice President,
Corporate Reporting and Controller
(Principal Accounting Officer)
<PAGE>
Page 22
INDEX TO EXHIBITS
(2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR SUCCESSION
Not applicable.
(3) ARTICLES OF INCORPORATION AND BY-LAWS.
3.1 Restated Certificate of Incorporation of the Registrant (filed as Exhibit
3.1 to the Registrant's Transition Report on Form 10-K for the transition
period from September 1, 1995 to February 29, 1996 and incorporated herein
by reference).
3.2 Amended and Restated By-laws of the Registrant (filed as Exhibit 3.2 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended
November 30, 1995 and incorporated herein by reference).
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES.
4.1 Specimen of Certificate of Class A Common Stock of the Company (filed as
Exhibit 1.1 to the Registrant's Registration Statement on Form 8-A dated
April 28, 1992 and incorporated herein by reference).
4.2 Specimen of Certificate of Class B Common Stock of the Company (filed as
Exhibit 1.2 to the Registrant's Registration Statement on Form 8-A dated
April 28, 1992 and incorporated herein by reference).
4.3 Indenture dated as of December 27, 1993 among the Registrant, its
Subsidiaries and Chemical Bank (filed as Exhibit 4.1 to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended November 30,
1993 and incorporated herein by reference).
4.4 First Supplemental Indenture dated as of August 3, 1994 among the
Registrant, Canandaigua West, Inc. and Chemical Bank (filed as Exhibit 4.5
to the Registrant's Registration Statement on Form S-8 (Registration No.
33-56557) and incorporated herein by reference).
4.5 Second Supplemental Indenture dated August 25, 1995, among the Registrant,
V Acquisition Corp. (a subsidiary of the Registrant now known as The Viking
Distillery, Inc.) and Chemical Bank (filed as Exhibit 4.5 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended August
31, 1995 and incorporated herein by reference).
4.6 Indenture with respect to the 8 3/4% Series B Senior Subordinated Notes Due
2003 dated as of October 29, 1996 among the Registrant, its Subsidiaries
and Harris Trust and Savings Bank (filed as Exhibit 4.2 to the Registrant's
Registration Statement on Form S-4 (Registration No. 333-17673) and
incorporated heren by reference).
4.7 Exchange and Registration Rights Agreement dated as of October 29, 1996,
pertaining to the Registrant's $65,000,000 8 3/4% Series B Senior
Subordinated Notes Due 2003 (filed as Exhibit 4.8 to the Registrant's
Registration Statement on Form S-4 (Registration No. 333-17673) and
incorporated herein by reference).
<PAGE>
Page 23
(10) MATERIAL CONTRACTS.
10.1 Amendment No. 5, dated as of October 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
(successor by merger to The Chase Manhattan Bank, N.A.) acts as
administrative agent (filed as Exhibit 10.26 to the Registrant's
Registration Statement on Form S-4 (Registration No. 333-17673) and
incorporated herein by reference).
10.2 Amendment No. 8 to the Canandaigua Wine Company, Inc. Stock Option and
Stock Appreciation Right Plan (filed as Exhibit 10.27 to the Registrant's
Registration Statement on Form S-4 (Registration No. 333-17673) and
incorporated herein by reference).
(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.
<TABLE>
EXHIBIT 11
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
(in thousands, except per share data)
(unaudited)
<CAPTION>
For the Nine Months Ended November 30,
----------------------------------------------
1996 1995
--------------------- ---------------------
Fully Fully
Net income per common and common equivalent share: Primary Diluted Primary Diluted
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income available to common and common equivalent
shares $ 21,753 $ 21,753 $ 31,112 $ 31,112
Adjustments - - - -
--------- --------- --------- ---------
Net income available to common and common equivalent
shares $ 21,753 $ 21,753 $ 31,112 $ 31,112
========= ========= ========= =========
Shares:
Weighted average common shares outstanding 19,482 19,482 19,577 19,577
Adjustments:
(1) Assumed exercise of incentive stock options 363 363 282 282
(2) Assumed exercise of stock options 20 20 180 180
--------- --------- --------- ---------
Weighted average common and common equivalent shares
outstanding 19,865 19,865 20,039 20,039
========= ========= ========= =========
Net income per common and common equivalent share $ 1.10 $ 1.10 $ 1.55 $ 1.55
========= ========= ========= =========
<CAPTION>
For the Three Months Ended November 30,
----------------------------------------------
1996 1995
--------------------- ---------------------
Fully Fully
Net income per common and common equivalent share: Primary Diluted Primary Diluted
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income available to common and common equivalent
shares $ 8,311 $ 8,311 $ 10,412 $ 10,412
Adjustments - - - -
--------- --------- --------- ---------
Net income available to common and common equivalent
shares $ 8,311 $ 8,311 $ 10,412 $ 10,412
========= ========= ========= =========
Shares:
Weighted average common shares outstanding 19,337 19,337 19,605 19,605
Adjustments:
(1) Assumed exercise of incentive stock options 275 431 297 297
(2) Assumed exercise of stock options 6 11 202 202
--------- --------- --------- ---------
Weighted average common and common equivalent shares
outstanding 19,618 19,779 20,104 20,104
========= ========= ========= =========
Net income per common and common equivalent share $ .42 $ .42 $ .52 $ .52
========= ========= ========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's November 30, 1996 Form 10-Q and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000016918
<NAME> CANANDAIGUA WINE COMPANY, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> NOV-30-1996
<CASH> 4,997
<SECURITIES> 0
<RECEIVABLES> 198,106
<ALLOWANCES> 0
<INVENTORY> 373,631
<CURRENT-ASSETS> 591,332
<PP&E> 356,281
<DEPRECIATION> 105,063
<TOTAL-ASSETS> 1,119,513
<CURRENT-LIABILITIES> 336,919
<BONDS> 349,901
0
0
<COMMON> 214
<OTHER-SE> 358,351
<TOTAL-LIABILITY-AND-EQUITY> 1,119,513
<SALES> 873,444
<TOTAL-REVENUES> 873,444
<CGS> 649,019
<TOTAL-COSTS> 810,158
<OTHER-EXPENSES> 0
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<INCOME-TAX> 16,065
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<NET-INCOME> 21,753
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.10
</TABLE>
