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 August 31, 1998
---------------
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
DELAWARE CANANDAIGUA BRANDS, INC. 16-0716709
AND ITS SUBSIDIARIES:
NEW YORK BATAVIA WINE CELLARS, INC. 16-1222994
NEW YORK CANANDAIGUA WINE COMPANY, INC. 16-1462887
NEW YORK CANANDAIGUA EUROPE LIMITED 16-1195581
NEW YORK ROBERTS TRADING CORP. 16-0865491
DELAWARE BARTON INCORPORATED 36-3500366
DELAWARE BARTON BRANDS, LTD. 36-3185921
MARYLAND BARTON BEERS, LTD. 36-2855879
CONNECTICUT BARTON BRANDS OF CALIFORNIA, INC. 06-1048198
GEORGIA BARTON BRANDS OF GEORGIA, INC. 58-1215938
NEW YORK BARTON DISTILLERS IMPORT CORP. 13-1794441
DELAWARE BARTON FINANCIAL CORPORATION 51-0311795
WISCONSIN STEVENS POINT BEVERAGE CO. 39-0638900
ILLINOIS MONARCH IMPORT COMPANY 36-3539106
GEORGIA THE VIKING DISTILLERY, INC. 58-2183528
(State or other (Exact name of registrant as (I.R.S. Employer
jurisdiction of specified in its charter) Identification No.)
incorporation or
organization)
300 WILLOWBROOK OFFICE PARK, FAIRPORT, NEW YORK 14450
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
(716) 393-4130
-----------------------------------------------------
(Registrants' telephone number, including area code)
-----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
Indicate by check mark whether the Registrants (1) have 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
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding with respect to each of the classes of common
stock of Canandaigua Brands, Inc., as of September 23, 1998, is set forth below
(all of the Registrants, other than Canandaigua Brands, Inc., are direct or
indirect wholly-owned subsidiaries of Canandaigua Brands, Inc.):
CLASS NUMBER OF SHARES OUTSTANDING
----- ----------------------------
Class A Common Stock, Par Value $.01 Per Share 14,626,510
Class B Common Stock, Par Value $.01 Per Share 3,248,187
<PAGE>
- 1 -
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<CAPTION>
August 31, 1998 February 28, 1998
--------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash investments $ 1,473 $ 1,232
Accounts receivable, net 154,550 142,615
Inventories, net 345,972 394,028
Prepaid expenses and other current assets 37,550 26,463
----------- -----------
Total current assets 539,545 564,338
PROPERTY, PLANT AND EQUIPMENT, net 246,157 244,035
OTHER ASSETS 262,004 264,786
----------- -----------
Total assets $ 1,047,706 $ 1,073,159
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 63,000 $ 91,900
Current maturities of long-term debt 24,118 24,118
Accounts payable 65,624 52,055
Accrued Federal and state excise taxes 21,561 17,498
Other accrued expenses and liabilities 101,569 97,763
----------- -----------
Total current liabilities 275,872 283,334
----------- -----------
LONG-TERM DEBT, less current maturities 297,407 309,218
----------- -----------
DEFERRED INCOME TAXES 59,237 59,237
----------- -----------
OTHER LIABILITIES 5,445 6,206
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value-
Authorized, 1,000,000 shares;
Issued, none at August 31, 1998, and
February 28, 1998 -- --
Class A Common Stock, $.01 par value-
Authorized, 120,000,000 shares;
Issued, 17,802,475 shares at August 31, 1998,
and 17,604,784 shares at February 28, 1998 178 176
Class B Convertible Common Stock, $.01 par value-
Authorized, 20,000,000 shares;
Issued, 3,873,912 shares at August 31, 1998,
and 3,956,183 shares at February 28, 1998 39 40
Additional paid-in capital 234,992 231,687
Retained earnings 249,733 220,346
----------- -----------
484,942 452,249
----------- -----------
Less-Treasury stock-
Class A Common Stock, 3,029,505 shares at
August 31, 1998, and 2,199,320 shares at
February 28, 1998, at cost (72,990) (34,878)
Class B Convertible Common Stock, 625,725 shares
at August 31, 1998, and February 28, 1998, at cost (2,207) (2,207)
----------- -----------
(75,197) (37,085)
----------- -----------
Total stockholders' equity 409,745 415,164
----------- -----------
Total liabilities and stockholders' equity $ 1,047,706 $ 1,073,159
=========== ===========
<FN>
The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
</FN>
</TABLE>
<PAGE>
- 2 -
<TABLE>
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
<CAPTION>
For the Six Months Ended August 31, For the Three Months Ended August 31,
----------------------------------- -------------------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
GROSS SALES $ 880,150 $ 820,326 $ 457,281 $ 409,288
Less - Excise taxes (217,836) (212,791) (107,895) (107,764)
--------- --------- --------- ---------
Net sales 662,314 607,535 349,386 301,524
COST OF PRODUCT SOLD (467,767) (442,044) (247,775) (216,765)
--------- --------- --------- ---------
Gross profit 194,547 165,491 101,611 84,759
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (128,786) (111,483) (67,454) (56,258)
--------- --------- --------- ---------
Operating income 65,761 54,008 34,157 28,501
INTEREST EXPENSE, net (15,952) (16,024) (7,425) (7,545)
--------- --------- --------- ---------
Income before provision for
Federal and state income taxes 49,809 37,984 26,732 20,956
PROVISION FOR FEDERAL AND STATE
INCOME TAXES (20,422) (15,573) (10,960) (8,591)
--------- --------- --------- ---------
NET INCOME $ 29,387 $ 22,411 $ 15,772 $ 12,365
========= ========= ========= =========
SHARE DATA:
Earnings per common share:
Basic $ 1.57 $ 1.20 $ 0.85 $ 0.67
========= ========= ========= =========
Diluted $ 1.53 $ 1.18 $ 0.83 $ 0.65
========= ========= ========= =========
Weighted average common shares
outstanding:
Basic 18,669 18,665 18,589 18,559
Diluted 19,168 19,002 19,051 18,962
<FN>
The accompanying notes to consolidated financial statements are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
- 3 -
<TABLE>
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
For the Six Months Ended August 31,
-----------------------------------
1998 1997
----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 29,387 $ 22,411
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of property, plant and equipment 11,952 12,625
Amortization of intangible assets 5,015 4,699
Deferred tax provision 900 4,900
Amortization of discount on long-term debt 189 172
Stock-based compensation expense 51 350
Gain on sale of property, plant and equipment (3) (883)
Change in operating assets and liabilities:
Accounts receivable, net (11,935) (17,518)
Inventories, net 48,056 (8,131)
Prepaid expenses and other current assets (10,867) 1,285
Accounts payable 11,339 57,408
Accrued Federal and state excise taxes 4,063 2,669
Other accrued expenses and liabilities 2,906 1,584
Other assets and liabilities, net (2,549) (717)
-------- --------
Total adjustments 59,117 58,443
-------- --------
Net cash provided by operating activities 88,504 80,854
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (14,098) (18,213)
Purchase of joint venture minority interest (716) --
Proceeds from sale of property, plant and equipment 27 8,512
-------- --------
Net cash used in investing activities (14,787) (9,701)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of treasury stock (36,014) (9,233)
Net repayments of notes payable (28,900) (27,800)
Principal payments of long-term debt (12,000) (40,409)
Exercise of employee stock options 2,154 741
Proceeds from employee stock purchases 1,284 204
Payment of issuance costs of long-term debt -- (388)
-------- --------
Net cash used in financing activities (73,476) (76,885)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH INVESTMENTS 241 (5,732)
CASH AND CASH INVESTMENTS, beginning of period 1,232 10,010
-------- --------
CASH AND CASH INVESTMENTS, end of period $ 1,473 $ 4,278
======== ========
<FN>
The accompanying notes to consolidated financial statements are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
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CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1998
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 fairly the financial information for Canandaigua Brands, 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
February 28, 1998.
2) INVENTORIES:
Inventories are valued at the lower of cost (computed in accordance with
the last-in, first-out (LIFO) or first-in, first-out (FIFO) methods) or market.
Substantially all of the inventories are valued using the LIFO method. Elements
of cost include materials, labor and overhead and consist of the following:
August 31, February 28,
1998 1998
---------- ------------
(in thousands)
Raw materials and supplies $ 14,395 $ 14,439
Wine and distilled spirits in process 231,442 304,037
Finished case goods 118,280 92,948
---------- ----------
364,117 411,424
Less - LIFO reserve (18,145) (17,396)
---------- ----------
$ 345,972 $ 394,028
========== ==========
Information related to the FIFO method of inventory valuation may be useful
in comparing operating results to those companies not using the LIFO method of
inventory valuation. If the FIFO method had been used, reported net income would
have been $0.4 million, or $0.02 per share on a diluted basis, higher for the
six months ended August 31, 1998, and reported net income would have been $1.7
million, or $0.09 per share on a diluted basis, higher for the six months ended
August 31, 1997.
<PAGE>
- 5 -
3) BORROWINGS:
BANK CREDIT AGREEMENT -
In June 1998, the bank credit agreement was amended to, among other things,
eliminate the requirement that the Company reduce the outstanding balance of the
revolving loan facility to less than $60,000,000 for thirty consecutive days
during the six months ending each August 31. In July 1998, the revolving loan
facility under the bank credit agreement was increased by $100.0 million to
$285.0 million.
4) RETIREMENT SAVINGS AND PROFIT SHARING RETIREMENT PLAN:
Effective March 1, 1998, the Company's existing retirement savings and
profit sharing retirement plans and the Barton profit sharing and 401(k) plan
were merged into the Canandaigua Brands, Inc. 401(k) and Profit Sharing Plan
(the Plan). The Plan covers substantially all employees, excluding those
employees covered by collective bargaining agreements. The 401(k) portion of the
Plan permits eligible employees to defer a portion of their compensation (as
defined in the Plan) on a pretax basis. Participants may defer up to 10% of
their compensation for the year, subject to limitations of the Plan. The Company
makes a matching contribution of 50% of the first 6% of compensation a
participant defers. The amount of the Company's contribution under the profit
sharing portion of the Plan is in such discretionary amount as the Board of
Directors may annually determine, subject to limitations of the Plan.
5) STOCKHOLDERS' EQUITY:
STOCK REPURCHASE AUTHORIZATION -
In June 1998, the Company's Board of Directors authorized the repurchase of
up to $100,000,000 of its Class A Common Stock and Class B Convertible Common
Stock. The Company may finance such purchases, which will become treasury
shares, through cash generated from operations or through the bank credit
agreement.
INCREASE IN NUMBER OF AUTHORIZED SHARES OF CLASS A COMMON STOCK -
In July 1998, the stockholders of the Company approved an increase in the
number of authorized shares of Class A Common Stock from 60,000,000 shares to
120,000,000 shares, thereby increasing the aggregate number of authorized shares
of the Company to 141,000,000 shares.
6) EARNINGS PER COMMON SHARE:
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," (SFAS No. 128) effective February 28,
1998. Basic earnings per common share excludes the effect of common stock
equivalents and is computed by dividing income available to common stockholders
by the weighted average number of common shares outstanding during the period
for Class A Common Stock and Class B Convertible Common Stock. Diluted earnings
per common share reflects the potential dilution that could result if securities
or other contracts to issue common stock were exercised or converted into common
stock. Diluted earnings per common share assumes the exercise of stock options
using the treasury stock method and assumes the conversion of convertible
<PAGE>
- 6 -
securities, if any, using the "if converted" method. Historical earnings per
common share have been restated to conform with the provisions of SFAS No. 128.
The computation of basic and diluted earnings per common share is as
follows:
For the Six Months For the Three Months
Ended August 31, Ended August 31,
------------------ --------------------
1998 1997 1998 1997
------- ------- ------- -------
(in thousands, except per share data)
Income applicable to common shares $29,387 $22,411 $15,772 $12,365
======= ======= ======= =======
Weighted average common shares
outstanding - basic 18,669 18,665 18,589 18,559
Stock options 499 337 462 403
------- ------- ------- -------
Weighted average common shares
outstanding - diluted 19,168 19,002 19,051 18,962
======= ======= ======= =======
EARNINGS PER COMMON SHARE - BASIC $ 1.57 $ 1.20 $ 0.85 $ 0.67
======= ======= ======= =======
EARNINGS PER COMMON SHARE - DILUTED $ 1.53 $ 1.18 $ 0.83 $ 0.65
======= ======= ======= =======
7) SUMMARIZED FINANCIAL INFORMATION - SUBSIDIARY GUARANTORS:
The subsidiary guarantors are wholly owned and the guarantees are full,
unconditional, joint and several obligations of each of the subsidiary
guarantors. Summarized financial information for the subsidiary guarantors is
set forth below. Separate financial statements for the subsidiary guarantors of
the Company are not presented because the Company has determined that such
financial statements would not be material to investors. The subsidiary
guarantors comprise all of the direct and indirect subsidiaries of the Company,
other than the nonguarantor subsidiaries which individually, and in the
aggregate, are inconsequential. There are no restrictions on the ability of the
subsidiary guarantors to transfer funds to the Company in the form of cash
dividends or loan repayments; however, except for limited amounts, the
subsidiary guarantors may not loan funds to the Company.
The following table presents summarized financial information for
subsidiary guarantors in connection with all of the Company's 8.75% Senior
Subordinated Notes:
August 31, February 28,
1998 1998
---------- ------------
(in thousands)
Balance Sheet Data:
Current assets $440,223 $460,618
Noncurrent assets $394,917 $395,225
Current liabilities $121,729 $102,207
Noncurrent liabilities $ 62,010 $ 61,784
<PAGE>
- 7 -
For the Six Months For the Three Months
Ended August 31, Ended August 31,
-------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
(in thousands)
Income Statement Data:
Net sales $552,352 $514,338 $289,774 $253,064
Gross profit $122,885 $106,425 $ 64,673 $ 53,093
Income before provision for
Federal and state income
taxes $ 50,451 $ 41,448 $ 27,406 $ 20,233
Net income $ 29,766 $ 24,768 $ 16,221 $ 12,103
8) ACCOUNTING PRONOUNCEMENT:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. SFAS No. 133 requires that every
derivative be recorded as either an asset or liability in the balance sheet
measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting. The Company is required to adopt SFAS No. 133 on a prospective basis
for interim periods and fiscal years beginning March 1, 2000. The Company
believes the effect of adoption on its financial statements will not be
material.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
INTRODUCTION
- ------------
The following discussion and analysis summarizes the significant factors
affecting (i) consolidated results of operations of the Company for the three
months ended August 31, 1998 ("Second Quarter 1999"), compared to the three
months ended August 31, 1997 ("Second Quarter 1998"), and for the six months
ended August 31, 1998 ("Six Months 1999"), compared to the six months ended
August 31, 1997 ("Six Months 1998"), and (ii) financial liquidity and capital
resources for Six Months 1999. This discussion and analysis should be read in
conjunction with the Company's consolidated financial statements and notes
thereto included herein and in the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 1998.
The Company is a leading producer and marketer of beverage alcohol brands.
The Company is principally a producer and supplier of wine and an importer and
producer of beer and distilled spirits in the United States. The Company's
beverage alcohol brands are marketed in three general categories: wine, beer and
distilled spirits.
<PAGE>
- 8 -
RESULTS OF OPERATIONS
- ---------------------
SECOND QUARTER 1999 COMPARED TO SECOND QUARTER 1998
NET SALES
The following table sets forth the net sales (in thousands of dollars) and
unit volume (in thousands of cases), if applicable, for branded beverage alcohol
products and other products and services sold by the Company for Second Quarter
1999 and Second Quarter 1998.
Second Quarter 1999 Compared to Second Quarter 1998
-------------------------------------------------------------------
Net Sales Unit Volume
--------------------------------- -----------------------------
%Increase/ %Increase/
1999 1998 (Decrease) 1999 1998 (Decrease)
-------- -------- ---------- ------ ------ ----------
Wine $132,064 $122,099 8.2% 6,654 6,442 3.3%
Beer 141,133 108,383 30.2% 11,177 8,691 28.6%
Spirits 50,183 51,372 (2.3%) 2,488 2,575 (3.4%)
Other (a) 26,006 19,670 32.2% N/A N/A N/A
-------- -------- ----- ------ ------ -----
$349,386 $301,524 15.9% 20,319 17,708 14.7%
======== ======== ===== ====== ====== =====
(a) Other consists primarily of nonbranded concentrate sales, contract
bottling and other production services and bulk product sales, none of
which are sold in case quantities.
Net sales for Second Quarter 1999 increased to $349.4 million from $301.5
million for Second Quarter 1998, an increase of $47.9 million, or 15.9%. This
increase resulted primarily from (i) $32.8 million of additional beer sales,
largely Mexican beers, (ii) $10.0 million of additional wine sales, resulting
primarily from the introduction of new wine brands and (iii) $6.3 million of
additional nonbranded sales, primarily grape juice concentrate sales. Unit
volume for branded beverage alcohol products for Second Quarter 1999 increased
14.7% as compared to Second Quarter 1998. The unit volume increase was the
result of the increased sales of the Company's beer brands, primarily Mexican
beer, and the introduction of new wine brands. Notwithstanding an overall
increase in net sales and unit volume of its wine brands primarily due to the
introduction of new products, the Company has experienced a decline in many of
its other wine brands. The Company is addressing this through implementation of
various programs, such as addressing noncompetitive consumer prices of its wine
products on a market-by-market basis as well as increasing its promotional
activities where appropriate.
GROSS PROFIT
The Company's gross profit increased to $101.6 million for Second Quarter
1999 from $84.8 million for Second Quarter 1998, an increase of $16.8 million,
or 19.9%. As a percent of net sales, gross profit increased to 29.1% for Second
Quarter 1999 from 28.1% for Second Quarter 1998. The dollar increase in gross
profit resulted primarily from additional beer unit volume, introduction of new
wine brands and unit cost improvements in wine and spirits brands.
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
<PAGE>
- 9 -
valuation ("FIFO") only, gross profit reflected a reduction of $1.6 million and
$0.6 million in Second Quarter 1999 and Second Quarter 1998, respectively, due
to the Company's LIFO accounting method.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $67.5 million for
Second Quarter 1999 from $56.3 million for Second Quarter 1998, an increase of
$11.2 million, or 19.9%. The dollar increase in selling, general and
administrative expenses resulted principally from higher advertising costs
associated with the introduction of new wine brands and increased beer sales,
and higher promotion costs related to the growth in beer sales as well as
programs implemented to improve the Company's wine sales. Selling, general and
administrative expenses as a percent of net sales increased to 19.3% for Second
Quarter 1999 as compared to 18.7% for Second Quarter 1998. The increase in
percent of net sales resulted primarily from advertising costs associated with
the introduction of new wine brands and promotion costs related to programs
implemented to improve the Company's wine sales.
NET INCOME
As a result of the above factors, net income increased to $15.8 million for
Second Quarter 1999 from $12.4 million for Second Quarter 1998, an increase of
$3.4 million, or 27.6%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Second Quarter
1999 were $42.6 million, an increase of $5.6 million over EBITDA of $37.0
million for Second Quarter 1998. 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.
SIX MONTHS 1999 COMPARED TO SIX MONTHS 1998
NET SALES
The following table sets forth the net sales (in thousands of dollars) and
unit volume (in thousands of cases), if applicable, for branded beverage alcohol
products and other products and services sold by the Company for Six Months 1999
and Six Months 1998.
Six Months 1999 Compared to Six Months 1998
-------------------------------------------------------------------
Net Sales Unit Volume
--------------------------------- -----------------------------
%Increase/ %Increase/
1999 1998 (Decrease) 1999 1998 (Decrease)
-------- -------- ---------- ------ ------ ----------
Wine $250,852 $247,538 1.3% 12,794 13,162 (2.8%)
Beer 259,929 205,996 26.2% 20,644 16,439 25.6%
Spirits 102,013 101,734 0.3% 5,094 5,124 (0.6%)
Other (a) 49,520 52,267 (5.3%) N/A N/A N/A
-------- -------- ----- ------ ------ -----
$662,314 $607,535 9.0% 38,532 34,725 11.0%
======== ======== ===== ====== ====== =====
(a) Other consists primarily of nonbranded concentrate sales, contract
bottling and other production services and bulk product sales, none of
which are sold in case quantities.
<PAGE>
- 10 -
Net sales for Six Months 1999 increased to $662.3 million from $607.5
million for Six Months 1998, an increase of $54.8 million, or 9.0%. This
increase resulted primarily from (i) $53.9 million of additional beer sales,
largely Mexican beers, and (ii) $3.3 million of additional wine sales, resulting
primarily from the introduction of new wine brands. Unit volume for branded
beverage alcohol products for Six Months 1999 increased 11.0% as compared to Six
Months 1998. The unit volume increase was the result of the increased sales of
the Company's beer brands, primarily Mexican beer.
GROSS PROFIT
The Company's gross profit increased to $194.5 million for Six Months 1999
from $165.5 million for Six Months 1998, an increase of $29.1 million, or 17.6%.
As a percent of net sales, gross profit increased to 29.4% for Six Months 1999
from 27.2% for Six Months 1998. The dollar increase in gross profit resulted
primarily from additional beer unit volume, unit cost improvements in wine and
spirits brands, introduction of new wine brands and higher average selling
prices related to wine sales.
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, gross profit reflected a reduction of $0.7 million and
$2.9 million in Six Months 1999 and Six Months 1998, respectively, due to the
Company's LIFO accounting method.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $128.8 million
for Six Months 1999 from $111.5 million for Six Months 1998, an increase of
$17.3 million, or 15.5%. The dollar increase in selling, general and
administrative expenses resulted principally from higher advertising costs
associated with the Company's wine sales, primarily the introduction of new wine
brands, and increased beer sales, and higher promotion costs related to both
programs implemented to improve the Company's wine sales and the growth in beer
sales. Selling, general and administrative expenses as a percent of net sales
increased to 19.4% for Six Months 1999 as compared to 18.4% for Six Months 1998.
The increase in percent of net sales resulted primarily from advertising costs
associated with the introduction of new wine brands and promotion costs related
to programs implemented to improve the Company's wine sales.
NET INCOME
As a result of the above factors, net income increased to $29.4 million for
Six Months 1999 from $22.4 million for Six Months 1998, an increase of $7.0
million, or 31.1%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Six Months 1999
were $82.7 million, an increase of $11.4 million over EBITDA of $71.3 million
for Six Months 1998. 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.
<PAGE>
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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. The Company will continue to use its
short-term borrowings to support its working capital requirements. The Company
believes that cash provided by operating activities and its financing
activities, primarily short-term borrowings, will provide adequate resources to
satisfy its working capital, liquidity and anticipated capital expenditure
requirements for both its short-term and long-term capital needs.
SIX MONTHS 1999 CASH FLOWS
OPERATING ACTIVITIES
Net cash provided by operating activities for Six Months 1999 was $88.5
million, which resulted from $47.5 million in net income adjusted for noncash
items, plus $41.0 million representing the net change in operating assets and
liabilities. The net change in operating assets and liabilities resulted
primarily from a $48.1 million decrease in inventory levels.
INVESTING ACTIVITIES AND FINANCING ACTIVITIES
Net cash used in investing activities for Six Months 1999 was $14.8
million, which resulted primarily from $14.1 million of capital expenditures,
including $4.4 million for vineyards.
Net cash used in financing activities for Six Months 1999 was $73.5
million, which resulted primarily from repurchases of $36.0 million of the
Company's Class A Common Stock, net repayments of $28.9 million of revolving
loan borrowings under the Company's bank credit agreement and principal payments
of $12.0 million of long-term debt.
During June 1998, the Company's Board of Directors authorized the
repurchase of up to $100.0 million of its Class A Common Stock and Class B
Common Stock. The repurchase of shares of common stock will be accomplished,
from time to time, depending upon market conditions, through open market or
privately negotiated transactions. The Company may finance such repurchases
through cash generated from operations or through the bank credit agreement. In
July 1998, the revolving loan facility under the bank credit agreement was
increased by $100.0 million to $285.0 million in order to increase its
flexibility to make such purchases . The repurchased shares will become treasury
shares and may be used for general corporate purposes. As of September 28, 1998,
the Company had purchased 1,018,836 shares of Class A Common Stock at an
aggregate cost of $44.9 million, or at an average cost of $44.05 per share.
<PAGE>
- 12 -
DEBT
Total debt outstanding as of August 31, 1998, amounted to $384.5 million, a
decrease of $40.7 million from February 28, 1998, resulting primarily from the
net repayments of revolving loan borrowings and principal payments of long-term
debt. The ratio of total debt to total capitalization decreased to 48.4% as of
August 31, 1998, from 50.6% as of February 28, 1998.
As of August 31, 1998, under its bank credit agreement, the Company had
outstanding term loans of $128.0 million bearing interest at 6.3%, $63.0 million
of revolving loans bearing interest at 6.3%, undrawn revolving letters of credit
of $8.4 million, and $213.6 million in revolving loans available to be drawn.
During June 1998, the bank credit agreement was amended to, among other things,
eliminate the requirement that the Company reduce the outstanding balance of the
revolving loan facility to less than $60,000,000 for thirty consecutive days
during the six months ending each August 31.
As of August 31, 1998, the Company had outstanding $195.0 million aggregate
principal amount of 8 3/4% Senior Subordinated Notes due December 2003. The
notes are unsecured and subordinated to the prior payment in full of all senior
indebtedness of the Company, which includes the bank credit agreement. The notes
are guaranteed, on a senior subordinated basis, by substantially all of the
Company's operating subsidiaries.
ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. SFAS No. 133 requires that every
derivative be recorded as either an asset or liability in the balance sheet
measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting. The Company is required to adopt SFAS No. 133 on a prospective basis
for interim periods and fiscal years beginning March 1, 2000. The Company
believes the effect of adoption on its financial statements will not be
material.
YEAR 2000 ISSUE
The Company has in place detailed programs to address Year 2000 readiness
in its internal systems and with its key customers and suppliers. The Year 2000
issue is the result of computer logic that was written using two digits rather
than four to define the applicable year. Any computer logic that processes
date-sensitive information may recognize the date using "00" as the year 1900
rather than the year 2000, which could result in miscalculations or system
failures.
Pursuant to the Company's readiness programs, all major categories of
information technology systems and non-information technology systems (i.e.,
equipment with embedded microprocessors) in use by the Company, including
manufacturing, sales, financial and human resources, are being inventoried and
assessed. In addition, plans are being developed for the required systems
modifications or replacements. With respect to its information technology
systems, the Company has completed the
<PAGE>
- 13 -
entire assessment phase and approximately 50% of the remediation phase. With
respect to its non-information technology systems, the Company has completed
approximately 80% of the assessment phase and approximately 40% of the
remediation phase. Selected areas, both internal and external, will be tested to
assure the integrity of the Company's remediation programs. The testing is
expected to be completed by September 1999. The Company plans to have all
internal mission-critical information technology and non-information technology
systems Year 2000 compliant by September 1999.
The Company is also communicating with its major customers, suppliers and
financial institutions to assess the potential impact on the Company's
operations if those third parties fail to become Year 2000 compliant in a timely
manner. While this process is not yet complete, based upon responses to date, it
appears that many of those customers and suppliers have only indicated that they
have in place Year 2000 readiness programs, without specifically confirming that
they will be Year 2000 compliant in a timely manner. Risk assessment, readiness
evaluation, action plans and contingency plans related to the Company's
significant customers and suppliers are expected to be completed by September
1999. The Company's key financial institutions have been surveyed and it is the
Company's understanding that they are or will be Year 2000 compliant on or
before December 31, 1999.
The costs incurred to date related to its Year 2000 activities have not
been material to the Company, and, based upon current estimates, the Company
does not believe that the total cost of its Year 2000 readiness programs will
have a material adverse impact on the Company's results of operations or
financial condition.
The Company's readiness programs also include the development of
contingency plans to protect its business and operations from Year 2000-related
interruptions. These plans should be complete by September 1999 and, by way of
examples, will include back-up procedures, identification of alternate
suppliers, where possible, and increases in safety inventory levels. Based upon
the Company's current assessment of its non-information technology systems, the
Company does not believe it necessary to develop an extensive contingency plan
for those systems. There can be no assurances, however, that any of the
Company's contingency plans will be sufficient to handle all problems or issues
which may arise.
The Company believes that it is taking reasonable steps to identify and
address those matters that could cause serious interruptions in its business and
operations due to Year 2000 issues. However, delays in the implementation of new
systems, a failure to fully identify all Year 2000 dependencies in the Company's
systems and in the systems of its suppliers, customers and financial
institutions, a failure of such third parties to adequately address their
respective Year 2000 issues, or a failure of a contingency plan could have a
material adverse effect on the Company's business, financial condition and
results of operations. For example, the Company would experience a material
adverse impact on its business if significant suppliers of beer, glass or
telecommunications systems fail to timely provide the Company with necessary
inventories or services due to Year 2000 systems failures.
The statements set forth herein concerning Year 2000 issues which are not
historical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements. In particular, the costs associated with the
Company's Year 2000 programs and the time-frame in which the Company plans to
complete Year 2000 modifications are based upon management's best estimates.
These estimates were derived from internal assessments and assumptions of future
events. These estimates may be adversely affected by the continued availability
of personnel and system resources, and by the failure of significant third
parties to properly address Year 2000 issues. Therefore, there can be no
guarantee that any estimates, or other
<PAGE>
- 14 -
forward-looking statements will be achieved, and actual results could differ
significantly from those contemplated.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Stockholders of Canandaigua Brands, Inc., held on
July 21, 1998 (the "Annual Meeting"), the holders of the Company's Class A
Common Stock (the "Class A Stock"), voting as a separate class, elected
management's slate of director nominees designated to be elected by the holders
of the Class A Stock, and the holders of the Company's Class B Common Stock (the
"Class B Stock"), voting as a separate class, elected management's slate of
director nominees designated to be elected by the holders of the Class B Stock.
In addition, at the Annual Meeting, the holders of Class A Stock and the
holders of Class B Stock, voting together as a single class, voted upon the
following proposals:
(i) Proposal to amend and restate the Company's Restated Certificate
of Incorporation, as presently amended, to incorporate a prior
amendment and to increase the number of authorized shares of the
Class A Common Stock of the Company from 60,000,000 to
120,000,000, thereby increasing the aggregate number of
authorized shares of the Company to 141,000,000.
(ii) Proposal to ratify the selection of Arthur Andersen LLP,
Certified Public Accountants, as the Company's independent
auditors for the fiscal year ending February 28, 1999.
Set forth below is the number of votes cast for, against or withheld, as
well as the number of abstentions and broker nonvotes, as applicable, as to each
of the foregoing matters.
I. The results of the voting for the election of Directors of the Company
are as follows:
Directors Elected By the Holders of Class A Stock:
--------------------------------------------------
Nominee For Withheld
------- --- --------
Thomas C. McDermott 13,248,797 128,410
Paul L. Smith 13,249,427 127,780
<PAGE>
- 15 -
Directors Elected By the Holders of Class B Stock:
--------------------------------------------------
Nominee For Withheld
------- --- --------
George Bresler 31,515,390 10,540
James A. Locke, III 31,516,410 9,520
Marvin Sands 31,516,410 9,520
Richard Sands 31,511,310 14,620
Robert Sands 31,511,310 14,620
Bertram E. Silk 31,516,410 9,520
II. The proposal to amend and restate the Company's Restated Certificate
of Incorporation, as amended, was approved with the following votes:
For: 43,046,325
Against: 1,804,141
Abstain: 52,671
Broker Nonvotes: 0
III. The selection of Arthur Andersen LLP was ratified with the following
votes:
For: 44,799,615
Against: 11,230
Abstain: 92,292
Broker Nonvotes: 0
ITEM 5. OTHER INFORMATION.
Any notice of a proposal that is submitted outside the processes of Rule
14a-8 promulgated under the Securities Exchange Act of 1934, as amended (the
"Act"), and which a stockholder intends to bring forth at the Company's 1999
Annual Meeting of Stockholders will be untimely for purposes of Rule 14a-4 of
the Act, if received by the Company after February 16, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) See Index to Exhibits located on Page 20 of this Report.
(b) No Reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended August 31, 1998.
<PAGE>
- 16 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CANANDAIGUA BRANDS, INC.
Dated: September 28, 1998 By: /s/ Thomas F. Howe
------------------------------------
Thomas F. Howe, Vice President,
Corporate Reporting and Controller
Dated: September 28, 1998 By: /s/ Thomas S. Summer
------------------------------------
Thomas S. Summer, Senior Vice
President and Chief Financial
Officer (Principal Financial Officer
and Principal Accounting Officer)
SUBSIDIARIES
BATAVIA WINE CELLARS, INC.
Dated: September 28, 1998 By: /s/ Thomas F. Howe
------------------------------------
Thomas F. Howe, Controller
Dated: September 28, 1998 By: /s/ Thomas S. Summer
------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
CANANDAIGUA WINE COMPANY, INC.
Dated: September 28, 1998 By: /s/ Thomas F. Howe
------------------------------------
Thomas F. Howe, Controller
Dated: September 28, 1998 By: /s/ Thomas S. Summer
------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
- 17 -
CANANDAIGUA EUROPE LIMITED
Dated: September 28, 1998 By: /s/ Thomas F. Howe
------------------------------------
Thomas F. Howe, Controller
Dated: September 28, 1998 By: /s/ Thomas S. Summer
------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
ROBERTS TRADING CORP.
Dated: September 28, 1998 By: /s/ Thomas F. Howe
------------------------------------
Thomas F. Howe, Controller
Dated: September 28, 1998 By: /s/ Thomas S. Summer
------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
BARTON INCORPORATED
Dated: September 28, 1998 By: /s/ Alexander L. Berk
------------------------------------
Alexander L. Berk, President and
Chief Executive Officer
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
BARTON BRANDS, LTD.
Dated: September 28, 1998 By: /s/ Alexander L. Berk
------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
<PAGE>
- 18 -
BARTON BEERS, LTD.
Dated: September 28, 1998 By: /s/ Alexander L. Berk
------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
BARTON BRANDS OF CALIFORNIA, INC.
Dated: September 28, 1998 By: /s/ Alexander L. Berk
------------------------------------
Alexander L. Berk, President
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
BARTON BRANDS OF GEORGIA, INC.
Dated: September 28, 1998 By: /s/ Alexander L. Berk
------------------------------------
Alexander L. Berk, President
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
BARTON DISTILLERS IMPORT CORP.
Dated: September 28, 1998 By: /s/ Alexander L. Berk
------------------------------------
Alexander L. Berk, President
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
<PAGE>
- 19 -
BARTON FINANCIAL CORPORATION
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, President and
Secretary
Dated: September 28, 1998 By: /s/ Charles T. Schlau
------------------------------------
Charles T. Schlau, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
STEVENS POINT BEVERAGE CO.
Dated: September 28, 1998 By: /s/ Alexander L. Berk
------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
MONARCH IMPORT COMPANY
Dated: September 28, 1998 By: /s/ Alexander L. Berk
------------------------------------
Alexander L. Berk, President
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
THE VIKING DISTILLERY, INC.
Dated: September 28, 1998 By: /s/ Alexander L. Berk
------------------------------------
Alexander L. Berk, President
Dated: September 28, 1998 By: /s/ Raymond E. Powers
------------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
<PAGE>
- 20 -
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 Company (filed herewith).
3.2 Amended and Restated By-Laws of the Company (filed herewith).
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES.
4.1 Indenture, dated as of December 27, 1993, among the Company, its
Subsidiaries and The Chase Manhattan Bank (as successor to Chemical Bank)
(filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended November 30, 1993 and incorporated herein by
reference).
4.2 First Supplemental Indenture, dated as of August 3, 1994, among the
Company, Canandaigua West, Inc. and The Chase Manhattan Bank (as successor
to Chemical Bank) (filed as Exhibit 4.5 to the Company's Registration
Statement on Form S-8 (Registration No. 33-56557) and incorporated herein
by reference).
4.3 Second Supplemental Indenture, dated August 25, 1995, among the Company, V
Acquisition Corp. (a subsidiary of the Company now known as The Viking
Distillery, Inc.) and The Chase Manhattan Bank (as successor to Chemical
Bank) (filed as Exhibit 4.5 to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1995 and incorporated herein by
reference).
4.4 Third Supplemental Indenture, dated as of December 19, 1997, among the
Company, Canandaigua Europe Limited, Roberts Trading Corp. and The Chase
Manhattan Bank (filed as Exhibit 4.4 to the Company's Annual Report on Form
10-K for the fiscal year ended February 28, 1998 and incorporated herein by
reference).
4.5 Indenture with respect to the 8 3/4% Series C Senior Subordinated Notes Due
2003, dated as of October 29, 1996, among the Company, its Subsidiaries and
Harris Trust and Savings Bank (filed as Exhibit 4.2 to the Company's
Registration Statement on Form S-4 (Registration No. 333-17673) and
incorporated herein by reference).
4.6 First Supplemental Indenture, dated as of December 19, 1997, among the
Company, Canandaigua Europe Limited, Roberts Trading Corp. and Harris Trust
and Savings Bank (filed as Exhibit 4.6 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1998 and incorporated
herein by reference).
4.7 Credit Agreement between the Company, its principal operating subsidiaries,
and certain banks for which The Chase Manhattan Bank acts as Administrative
Agent, dated as of December 19, 1997 (filed as Exhibit 4.7 to the Company's
Annual Report on Form 10-K for the fiscal year ended February 28, 1998 and
incorporated herein by reference).
<PAGE>
- 21 -
4.8 Amendment No. 1 to Credit Agreement, dated as of June 19, 1998, between the
Company, its principal operating subsidiaries, and certain banks for which
The Chase Manhattan Bank acts as Administrative Agent (filed herewith).
4.9 Tranche II Revolving Agreement (Series A), dated as of July 15, 1998,
between the Company, its principal operating subsidiaries, and certain
banks for which The Chase Manhattan Bank acts as Administrative Agent
(including identification of the omitted annex thereto) (filed herewith).
(10) MATERIAL CONTRACTS.
10.1 Amendment No. 1 to Credit Agreement, dated as of June 19, 1998, between the
Company, its principal operating subsidiaries, and certain banks for which
The Chase Manhattan Bank acts as Administrative Agent (incorporated by
reference to Exhibit 4.8, filed herewith).
10.2 Tranche II Revolving Agreement (Series A), dated as of July 15, 1998,
between the Company, its principal operating subsidiaries, and certain
banks for which The Chase Manhattan Bank acts as Administrative Agent
(including identification of the omitted annex thereto) (incorporated by
reference to Exhibit 4.9, 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.
<PAGE>
- 22 -
(27) FINANCIAL DATA SCHEDULE.
Financial Data Schedule (filed herewith).
(99) ADDITIONAL EXHIBITS.
Not applicable.
EXHIBIT 3.1
-----------
RESTATED
CERTIFICATE OF INCORPORATION
OF
CANANDAIGUA BRANDS, INC.
DULY ADOPTED IN ACCORDANCE WITH SECTIONS 245 AND 242
OF THE DELAWARE GENERAL CORPORATION LAW
INCORPORATED ON DECEMBER 4, 1972 UNDER THE NAME
CANANDAIGUA WINE COMPANY, INC.
This is a Restated Certificate of Incorporation which amends and restates
the Restated Certificate of Incorporation of Canandaigua Brands, Inc., as
amended, to authorize the issuance of an additional sixty million (60,000,000)
shares of Class A Common Stock and to incorporate a prior amendment which
changed the name of the Corporation to Canandaigua Brands, Inc.
1. NAME. The name of the Corporation is Canandaigua Brands, Inc.
2. ADDRESS; REGISTERED AGENT. The address of the registered office in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at such address is The Corporation
Trust Company.
3. PURPOSES. The nature of business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. CAPITALIZATION; GENERAL AUTHORIZATION. The total number of shares of
stock which the Corporation shall have authority to issue is One Hundred
Forty-One Million (141,000,000) consisting of:
(a) Class A Common. One Hundred Twenty Million (120,000,000) shares
designated as Class A Common Stock, having a par value of One Cent ($.01)
per share (the "Class A Common");
(b) Class B Common. Twenty Million (20,000,000) shares designated as
Class B Common Stock, having a par value of One Cent ($.01) per share (the
"Class B Common"); and
(c) Preferred Stock. One Million (1,000,000) shares designated as
Preferred Stock, having a par value of One Cent ($.01) per share (the
"Preferred Stock").
5. RIGHTS AND LIMITATIONS. The designations, powers, preferences and
relative participation, optional or other special rights and the qualifications,
limitations and restrictions thereof in respect of each class of capital stock
of the Corporation are as follows:
(i) Class A Common and Class B Common. The Class A Common and Class B
Common shall be identical in all respects and shall entitle the holders thereof
to the same rights,
<PAGE>
2
privileges and limitations, except as otherwise provided herein. The relative
rights, privileges and limitations are as follows:
(a) Voting Rights. The holders of Class A Common and Class B Common
shall have the following rights:
(i) The holders of Class A Common and Class B Common shall be
entitled to vote as separate classes on all matters as to which a
class vote is now, or hereafter may be, required by law.
(ii) The number of authorized shares of Class A Common and/or
Class B Common may be increased or decreased (but not below the number
of shares thereof then outstanding) by the majority vote of all Class
A Common and 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.
(iii) At every meeting of shareholders called for the election of
directors, the holders of the 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 evenly divisible by four (4), to the
next higher whole number), and the holders of the Class B Common,
voting as a class, shall be entitled to elect the remaining number of
directors to be elected at such meeting. Irrespective of the
foregoing, 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
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 evenly divisible by
four (4), to the next higher whole number) and shall be entitled to
participate with the holders of the Class B Common shares 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 the 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 the Class B Common shall have ten (10) votes per share.
<PAGE>
3
(iv) The holders of Class A Common and Class B Common shall in
all matters not specified in Sections 5(i)(a)(i), 5(i)(a)(ii) and
5(i)(a)(iii) vote together 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.
(v) There shall be no cumulative voting of any shares of either
the Class A Common or the Class B Common.
(b) Dividends. Subject to the rights of the Class A Common set forth
in Paragraph 5(i)(c) hereof, the Board of Directors, acting in its sole
discretion, may declare in accordance with law a dividend payable in cash,
in property or in securities of the Corporation, on either the Class A
Common or the Class B Common or both.
(c) Cash Dividends. The Board of Directors may, in its sole
discretion, declare cash dividends payable only to holders of Class A
Common or to both the holders of Class A Common and Class B Common, but not
only to holders of Class B Common. A cash dividend in any amount may be
paid on the Class A Common if no cash dividend is to be paid on the Class B
Common. If a cash dividend is to be paid on the Class B Common, a cash
dividend shall also be paid on the Class A Common in an amount per share
thereof which exceeds the amount of the cash dividend paid on each share of
Class B Common by at least ten percent (10%) (rounded up, if necessary, to
the nearest one-hundredth of a cent).
(d) Convertibility. Each holder of record of a share of Class B Common
may at any time or from time to time, without cost to such holder and at
such holder's option, convert any whole number or all of such holder's
shares of Class B Common into fully paid and nonassessable shares of Class
A Common at the rate of one share of Class A Common for each share of Class
B Common surrendered for conversion. Any such conversion may be effected by
any holder of Class B Common by surrendering such holder's certificate or
certificates for the shares of Class B Common to be converted, duly
endorsed, at the office of the Corporation or the office of any transfer
agent for the Class A Common, together with a written notice for the
Corporation at such office that such holder elects to convert all or a
specified number of such shares of Class B Common. Promptly thereafter, the
Corporation shall issue and deliver to such holder a certificate or
certificates for the number of shares of Class A Common to which such
holder shall be entitled as aforesaid. Such conversion shall be made as of
the close of business on the date of such surrender and the person or
persons entitled to receive the shares of Class A Common issuable on such
conversion shall be treated for all purposes as the record holder or
holders of such shares of Class A Common on such date. The Corporation will
at all times reserve and keep available, solely for the purpose of issue
upon conversion of the outstanding shares of Class B Common, such number of
shares of Class A Common as shall be issuable upon the conversion of all
such outstanding shares, provided that the foregoing shall not be
considered to preclude the Corporation from satisfying its obligations in
respect of the conversion of the outstanding shares of Class B Common by
delivery of shares of Class A Common which are held in the treasury of the
Corporation.
<PAGE>
4
(e) Rights Upon Liquidation. Holders of Class A Common and Class B
Common shall have identical rights in the event of liquidation, and shall
be treated as a single class for purposes thereof.
(ii) Preferred Stock. Subject to the terms contained in any designation of
a series of Preferred Stock, the Board of Directors is expressly authorized, at
any time and from time to time, to fix, by resolution or resolutions, the
following provisions for shares of any class or classes of Preferred Stock of
the Corporation or any series of any class of Preferred Stock:
(a) the designation of such class or series, the number of shares to
constitute such class or series which may be increased or decreased (but
not below the number of shares of that class or series then outstanding) by
resolution of the Board of Directors, and the stated value thereof if
different from the par value thereof;
(b) whether the shares of such class or series shall have voting
rights, in addition to any voting rights provided by law, and, if so, the
terms of such voting rights;
(c) the dividends, if any, payable on such class or series, whether
any such dividends shall be cumulative, and, if so, from what dates, the
conditions and dates upon which such dividends shall be payable, and the
preference or relation which such dividends shall bear to the dividends
payable on any shares of stock of any other class or any other series of
the same class;
(d) whether the shares of such class or series shall be subject to
redemption by the Corporation, and, if so, the times, prices and other
conditions of such redemption;
(e) the amount or amounts payable upon shares of such series upon, and
the rights of the holders of such class or series in, the voluntary or
involuntary liquidation, dissolution or winding up, or upon any
distribution of the assets, of the Corporation;
(f) whether the shares of such class or series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to and
manner in which any such retirement or sinking fund shall be applied to the
purchase or redemption of the shares of such class or series for retirement
or other corporate purposes and the terms and provisions relative to the
operation thereof;
(g) whether the shares of such class or series shall be convertible
into, or exchangeable for, shares of stock of any other class or any other
series of the same class or any other securities and, if so, the price or
prices or the rate or rates of conversion or exchange and the method, if
any, of adjusting the same, and any other terms and conditions of
conversion or exchange;
(h) the limitations and restrictions, if any, to be effective while
any shares of such class or series are outstanding upon the payment of
dividends or the making of other distributions on, and upon the purchase,
redemption or other acquisition by the Corporation of the Common Stock or
shares of stock of any other class or any other series of the same class;
<PAGE>
5
(i) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issue of any additional stock,
including additional shares of such class or series or of any other series
of the same class or of any other class;
(j) the ranking (be it pari passu, junior or senior) of each class or
series vis-a-vis any other class or series of any class of Preferred Stock
as to the payment of dividends, the distribution of assets and all other
matters; and
(k) any other powers, preferences and relative, participating,
optional and other special rights, and any qualifications, limitations and
restrictions thereof, insofar as they are not inconsistent with the
provisions of this Restated Certificate of Incorporation, to the full
extent permitted in accordance with the laws of the State of Delaware.
The powers, preferences and relative, participating, optional and other
special rights of each class or series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding.
6. BY-LAWS. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or repeal
the By-Laws of the Corporation.
7. LIABILITY OF DIRECTORS. A member of the Corporation's Board of Directors
shall not be personally liable to the Corporation or its shareholders for
monetary damages for a breach of fiduciary duty as a director, except for
liability of the director (i) for any breach of the director's duty of loyalty
to the Corporation or its shareholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law, relating to the
payment of unlawful dividends or unlawful stock repurchases or redemptions, or
(iv) for any transaction from which the director derived an improper personal
benefit. If the Delaware General Corporation Law is amended after approval by
the shareholders of this Paragraph to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended. Any
repeal or modification of this Paragraph by the shareholders of the Corporation
shall not adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
8. INDEMNIFICATION.
(a) Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he
or she is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation or of a partnership, joint venture, trust
or other enterprise, including service with respect to an employee benefit
plan (hereinafter an "indemnitee"), whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or
agent or in any other capacity while serving as
<PAGE>
6
a director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the
Delaware General Corporation Law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide broader indemnification
rights than such law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in
connection therewith and such indemnification shall continue as to an
indemnitee who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the indemnitee's heirs, executors and
administrators; provided, however, that, except as provided in subparagraph
(b) hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation. The right to indemnification conferred in
this Paragraph shall be a contract right and shall include the right to be
paid by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition (hereinafter an "advancement
of expenses"), provided, however, that, if the Delaware General Corporation
Law requires, an advancement of expenses incurred by an indemnitee in his
or her capacity as a director or officer (and not in any other capacity in
which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision
from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for
such expenses under this Paragraph or otherwise.
(b) Right of Indemnitee to Bring Suit. If a claim under subparagraph
(a) of this Paragraph is not paid in full by the Corporation within sixty
days after a written claim has been received by the Corporation, except in
the case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty days, the indemnitee may at any time
thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the indemnitee shall be entitled
to be paid also the expense of prosecuting or defending such suit. In (i)
any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right
to an advancement of expenses) it shall be a defense that, and (ii) in any
suit by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking the Corporation shall be entitled to recover
such expenses upon final adjudication that, the indemnitee has not met the
applicable standard of conduct set forth in the Delaware General
Corporation Law. Neither the failure of the Corporation (including its
Board of Directors, independent legal counsel, or its shareholders) to have
made a determination prior to the commencement of such suit that
indemnification of the indemnitee is proper in the circumstance because the
indemnitee has met the applicable
<PAGE>
7
standard of conduct sets forth in the Delaware General Corporation Law, nor
an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its shareholders) that the
indemnitee has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of
conduct or, in the case of such a suit brought by the indemnitee, be a
defense to such suit. In any suit brought by the indemnitee to enforce a
right to indemnification or to an advancement of expenses hereunder, or by
the Corporation to recover an advancement of expenses pursuant to the terms
of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Paragraph or otherwise shall be on the Corporation.
(c) Non-Exclusivity of Rights. The rights of indemnification and to
the advancement of expenses conferred in this Paragraph shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, this Restated Certificate of Incorporation, by-law,
agreement, vote of shareholders or disinterested directors or otherwise.
(d) Insurance. The Corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such
expense, liability or loss under the Delaware General Corporation Law.
(e) Indemnification of Employees and Agents of the Corporation. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification, and to the advancement of
expenses to any employee or agent of the Corporation to the fullest extent
of the provisions of this Paragraph with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
The undersigned hereby certifies that the amendments and changes made in
this Restated Certificate of Incorporation were duly adopted in accordance with
the provisions of Sections 245 and 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, the undersigned has executed this Restated Certificate
of Incorporation as of the 22nd day of July, 1998.
---- ----
/s/ Richard Sands
------------------------
Richard Sands, President
EXHIBIT 3.2
-----------
BY-LAWS
OF
CANANDAIGUA BRANDS, INC.
(AS AMENDED AND RESTATED ON SEPTEMBER 18, 1998)
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 sixty 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 120,000,000 shares designated as Class A Common Stock (the "Class A Common"),
20,000,000 shares designated as Class B Common Stock (the "Class B Common") and
1,000,000 shares designated as Preferred Stock (the "Preferred Stock"). 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 shares
representing a majority of the votes entitled to be cast at the meeting by the
holders of all outstanding shares entitled to vote, present in person or
represented by proxy, shall constitute a quorum. In the absence of a quorum, the
stockholders so present
<PAGE>
2
may adjourn the meeting from time to time in the manner provided in Section 1.4
of these By-Laws until a quorum shall attend. Such an adjournment may be
approved by the affirmative vote of a majority of the votes entitled to be cast
by the stockholders present or represented by proxy at such meeting
notwithstanding that a quorum is not present. 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. At each meeting of stockholders (a) each holder of
Class A Common present in person or represented by proxy at the meeting and
entitled to vote on a matter shall be entitled to cast one (1) vote for each
share of Class A Common held by such holder, (b) each holder of Class B Common
present in person or represented by proxy at the meeting and entitled to vote on
a matter shall be entitled to cast ten (10) votes for each share of Class B
Common held by such holder and (c) each holder of Preferred Stock present in
person or represented by proxy at the meeting shall be entitled to such voting
rights as shall be provided for in the Certificate of Designations relating to
the Preferred Stock held by such holder. 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 classes of stock shall
vote together as a single class and the affirmative vote of a majority of the
votes entitled to be cast by stockholders present in person or represented by
proxy at the meeting and entitled to vote on the matter shall be the act of the
stockholders. 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 in
any manner permitted by the General Corporation Law of the State of Delaware,
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
<PAGE>
3
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 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.
SECTION 1.12 BUSINESS AT MEETINGS OF STOCKHOLDERS. At an annual meeting of
the stockholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (c) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive
<PAGE>
4
offices of the Corporation not less than 120 days before the date of the
Corporation's proxy statement that was released to stockholders in connection
with its previous annual meeting of stockholders. If the date of the annual
meeting has been changed by more than 30 days from the date of the previous
year's annual meeting or if no annual meeting was held during the previous year,
then the notice must be received a reasonable time before the Corporation begins
to print and mail its proxy materials. A stockholder's notice to the Secretary
shall set forth as to each matter the stockholder proposes to bring before the
annual meeting: (w) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (x) the name, address and telephone number of the stockholder
proposing such business, (y) the class and number of shares of the Corporation
which are beneficially owned by the stockholder, and (z) any material interest
of the stockholder in such business. A stockholder who makes a proposal shall
provide the Corporation with such additional information regarding the proposal
as shall be reasonably requested by the Corporation, including, without
limitation, any information necessary for the Corporation to comply with federal
securities laws. The Chairman of the annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 1.12, and
if he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
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 evenly 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. Irrespective of the foregoing, 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 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 evenly 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. In each case, the directors
shall be elected by a plurality of the votes entitled to be cast by the
stockholders who are present in person or represented by proxy at the meeting
and entitled to vote on the election of directors. If, during
<PAGE>
5
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.
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.
<PAGE>
6
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 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,
<PAGE>
7
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
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
<PAGE>
8
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 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.
<PAGE>
9
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 he 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 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
<PAGE>
10
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 4.8
-----------
[EXECUTION COPY]
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of June 19, 1998, between CANANDAIGUA BRANDS,
INC., a corporation duly organized and validly existing under the laws of the
State of Delaware (the "Borrower"); each of the Subsidiaries of the Borrower
identified under the caption "SUBSIDIARY GUARANTORS" on the signature pages
hereto (individually, a "Subsidiary Guarantor" and, collectively the "Subsidiary
Guarantors" and, together with the Borrower, the "Obligors"); and THE CHASE
MANHATTAN BANK, as administrative agent for the Lenders (in such capacity,
together with its successors in such capacity, the "Administrative Agent").
The Borrower, the Subsidiary Guarantors, certain lenders and the
Administrative Agent are parties to a Credit Agreement dated as of December 19,
1997 (the "Credit Agreement"). The Obligors and the Administrative Agent (the
Administrative Agent having been previously authorized by the Required Lenders
under the Credit Agreement) 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 and delivery hereof by each
of the parties hereto, the Credit Agreement shall be amended as follows:
2.01. The definitions of "Excess Cash Flow" and "Fixed Charges" in Section
1.01 of the Credit Agreement are hereby amended in their entirety to read as
follows:
"Excess Cash Flow" means, for any fiscal year, the sum of (a) Adjusted
Cash Flow for such fiscal year (determined without regard to the Adjustment
Amount) minus (b) Fixed Charges for such fiscal year plus (c) the sum (if
positive), or minus the sum (if negative), of the aggregate amount of
"change in operating assets and liabilities, net of effects from purchases
of businesses" as set forth on the consolidated statements of cash flows
for the Borrower and its Subsidiaries for such fiscal year, excluding,
however, any portion of such amount attributable to non-cash adjustments
(other than any non-cash adjustments related to Acquisitions) plus (d) the
aggregate amount (if positive), or minus the aggregate amount (if
negative), of "(repayment of) proceeds from notes payable, short-term
borrowings" as set forth on the consolidated statements of cash flows for
the Borrower and its Subsidiaries for such fiscal year (excluding
borrowings the proceeds of which are applied to make Restricted Payments
permitted under Section 7.05(b) and excluding also the repayment of
short-term borrowings from the proceeds of an Equity Issuance or Debt
Incurrence).
"Fixed Charges" means, for any period, the sum, for the Borrower and
its Consolidated Subsidiaries (determined on a consolidated basis without
duplication in
<PAGE>
2
accordance with GAAP), of the following: (a) all payments of principal of
Indebtedness scheduled to be made during such period plus (b) all Interest
Expense for such period plus (c) the aggregate amount of federal and state
taxes paid during such period to the extent that net operating income for
such period pursuant to clause (a) of the definition of "Operating Cash
Flow" in this Section has been calculated before giving effect to such
taxes plus (d) the aggregate amount of Restricted Payments made pursuant to
Section 7.05 (other than pursuant to clause (a)(i) thereof or pursuant to
paragraph (b) thereof) during such period.
2.02. Section 2.11(b) of the Credit Agreement is hereby amended in its
entirety to read as
follows:
"(b) Intentionally Left Blank. This paragraph (b) has been
intentionally left blank".
2.03. A new Section 4.18 is hereby added to the Credit Agreement to read as
follows:
"SECTION 4.18. Year 2000 Issues. Any reprogramming required to permit
the proper functioning, prior to, during and following the year 2000, of
(i) the Borrower's computer systems and (ii) equipment containing embedded
microchips (including systems and equipment supplied by others or with
which the Borrower's systems interface) and the testing of all such systems
and equipment, as so reprogrammed, will be completed consistent with
prudent operating practices. The cost to the Borrower of such reprogramming
and testing and of the reasonably foreseeable consequences of year 2000 to
the Borrower (including reprogramming errors and the failure of others'
systems or equipment) will not be material in amount."
2.04. Section 6.08 of the Credit Agreement is hereby amended by adding a
new sentence at the end thereof to read as follows:
"In addition to the foregoing, the proceeds of Tranche II Loans may be
used to finance the repurchase of shares of stock of the Borrower permitted
under Section 7.05."
2.05. Section 7.05(b) of the Credit Agreement is hereby amended in its
entirety to read as follows:
"(b) The Borrower may make Restricted Payments consisting of
repurchases of its capital stock, provided that:
(i) the aggregate amount of all such Restricted Payments made
during the term of this Agreement shall not exceed $100,000,000;
<PAGE>
3
(ii) after giving effect to any such Restricted Payment, the
Borrower shall be in compliance, on a pro forma basis, with Section
7.08 during the four quarter period most-recently ended under the
assumption that such Restricted Payment, and any related borrowing,
shall have been made or incurred at the beginning of such period (and,
to the extent requested by the Administrative Agent, the Borrower
shall have delivered a calculation demonstrating such pro forma
compliance satisfactory to the Administrative Agent); and
(iii) the Borrower will not make any Restricted Payment under
this paragraph (b) unless at the time thereof, and after giving effect
thereto, no Default shall have occurred and be continuing."
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.
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 BRANDS, INC.
By: /s/ Thomas S. Summer
-----------------------------
Title: SR. Vice President and
Chief Financial Officer
BATAVIA WINE CELLARS, INC.
CANANDAIGUA EUROPE LIMITED
CANANDAIGUA WINE COMPANY, INC
ROBERTS TRADING CORP.
By: /s/ Thomas S. Summer
-----------------------------
Title: Treasurer
<PAGE>
4
BARTON INCORPORATED
BARTON BRANDS, LTD.
BARTON BEERS, LTD.
BARTON BRANDS OF CALIFORNIA, INC.
BARTON BRANDS OF GEORGIA, INC.
BARTON DISTILLERS IMPORT CORP.
MONARCH IMPORT COMPANY
STEVENS POINT BEVERAGE CO.
THE VIKING DISTILLERY, INC.
By: /s/ Robert Sands
-----------------------------
Title: Vice President
BARTON FINANCIAL CORPORATION
By: /s/ David S. Sorce
-----------------------------
Title: Vice President
THE CHASE MANHATTAN BANK, as
Administrative Agent
By: /s/ Carol A. Ulmer
-----------------------------
Title: Vice President
EXHIBIT 4.9
-----------
[EXECUTION COPY]
TRANCHE II REVOLVING AGREEMENT (SERIES A)
-----------------------------------------
TRANCHE II REVOLVING AGREEMENT (SERIES A) dated as of July 15, 1998 between
CANANDAIGUA BRANDS, INC., the Tranche II Revolving Lenders party hereto and THE
CHASE MANHATTAN BANK, as Administrative Agent.
Canandaigua Brands, Inc., the Subsidiary Guarantors named therein, the
lenders named therein (including the Tranche II Revolving Lenders party hereto),
The Chase Manhattan Bank, as Administrative Agent, and Credit Suisse First
Boston, The First National Bank of Chicago, Fleet National Bank and The Bank of
Nova Scotia, as Co-Agents, are parties to a Credit Agreement dated as of
December 19, 1997 (the "Credit Agreement"). Terms defined in the Credit
Agreement are used herein as defined therein.
Pursuant to Section 2.01(c) of the Credit Agreement, the Borrower has
requested the Lenders to issue commitments to provide up to $100,000,000 of
Tranche II Revolving Commitments (Series A) (the "Series A Commitments"). The
Tranche II Revolving Lenders signatory to this Agreement have agreed to extend
such commitments and, accordingly, the parties hereto hereby agree as follows:
SECTION 1. SERIES A COMMITMENTS. Each Tranche II Revolving Lender executing
this Agreement hereby agrees, subject to the terms and conditions set forth in
the Credit Agreement, to make Tranche II Revolving Loans (herein, the "Series A
Loans") to the Borrower, and to participate in Swingline Loans and Letters of
Credit as provided in Sections 2.05 and 2.06, respectively, of the Credit
Agreement, from time to time during the Revolving Availability Period, in an
aggregate principal amount that will not result in (i) such Lender's Tranche II
Revolving Exposure in respect of Loans and participations in Swingline Loans and
Letters of Credit made pursuant to its Series A Commitment (herein, such
Lender's "Series A Exposure") exceeding such Lender's Series A Commitment, (ii)
the sum of the total Series A Exposures of all of the Tranche II Revolving
Lenders exceeding $100,000,000 or (iii) the sum of the total Tranche II
Revolving Exposures (including the Series A Exposures) of all of the Lenders
exceeding $200,000,000. Within the foregoing limits and subject to the terms and
conditions set forth herein and in the Credit Agreement, the Borrower may
borrow, prepay and reborrow Series A Loans.
SECTION 2. REPAYMENT, ETC. The Borrower hereby acknowledges and confirms
that it has agreed, under the terms of the Credit Agreement, to repay any
amounts of Series A Loans borrowed under the Credit Agreement when and as the
same become due and payable. The Borrower agrees that the interest options and
Applicable Rates on any Series A Loans (and on any Letters of Credit issued
under the Series A Commitments) shall be the same as those
<PAGE>
2
presently provided for Revolving Loans (or Letters of Credit) under the Credit
Agreement, and that the facility fee in respect of the Series A Commitments
shall be the same as that presently provided for Revolving Commitments under the
Credit Agreement. The Borrower hereby agrees upon the effectiveness of this
Agreement as provided in Section 3 below to pay to each Tranche II Revolving
Lender executing this Agreement an upfront fee equal to 1/8 of 1% of such
Tranche II Revolving Lender's Series A Commitments as set forth in Annex I
hereto.
SECTION 3. MISCELLANEOUS. This Agreement shall be construed in accordance
with and governed by the law of the State of New York. This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and any
separate letter agreements with respect to fees payable to the Administrative
Agent constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings,
oral or written, relating to the subject matter hereof. This Agreement shall
become effective when it shall have been executed by the Administrative Agent
and when the Administrative Agent shall have received counterparts hereof which,
when taken together, bear the signatures of each of the other parties hereto,
and thereafter shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
CANANDAIGUA BRANDS, INC.
By /s/ Thomas S. Summer
-----------------------------------
Title: SR. Vice President and Chief
Financial Officer
By its signature below each Subsidiary Guarantor acknowledges and consents
to the foregoing Agreement and confirms that the obligations of the Borrower in
respect of Series A Loans under the Credit Agreement are entitled to the
benefits of the Guarantee of each Subsidiary Guarantor in Article III of the
Credit Agreement and shall constitute "Guaranteed Obligations" (as defined
therein) under and for all purposes of the Credit Agreement.
SUBSIDIARY GUARANTORS
---------------------
BATAVIA WINE CELLARS, INC.
CANANDAIGUA EUROPE LIMITED
CANANDAIGUA WINE COMPANY, INC
ROBERTS TRADING CORP. BARTON FINANCIAL CORPORATION
By /s/ Thomas S. Summer By /s/ David S. Sorce
-------------------------------- ----------------------------------
Title: Treasurer Title: Vice President
BARTON INCORPORATED
BARTON BRANDS, LTD.
BARTON BEERS, LTD.
BARTON BRANDS OF CALIFORNIA, INC.
BARTON BRANDS OF GEORGIA, INC.
BARTON DISTILLERS IMPORT CORP.
MONARCH IMPORT COMPANY
STEVENS POINT BEVERAGE CO.
THE VIKING DISTILLERY, INC.
By /s/ Robert Sands
--------------------------------
Title: Vice President
<PAGE>
4
TRANCHE II REVOLVING LENDERS
----------------------------
THE CHASE MANHATTAN BANK,
as Tranche II Revolving Lender and as
Administrative Agent
By /s/ Carol A. Ulmer
-----------------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA
as Tranche II Revolving Lender and as
Co-Agent
By /s/ J. Alan Edwards
-----------------------------------
Title: Authorized Signatory
CREDIT SUISSE FIRST BOSTON
as Tranche II Revolving Lender and as
Co-Agent
By /s/ Chris T. Horgan
-----------------------------------
Title: Vice President
By /s/ Joel Gladowski
-----------------------------------
Title: Managing Director
THE FIRST NATIONAL BANK OF CHICAGO
as Tranche II Revolving Lender and as
Co-Agent
By /s/ Amy L. Robbins
-----------------------------------
Title: Vice President
<PAGE>
5
FLEET NATIONAL BANK
as Tranche II Revolving Lender and as
Co-Agent
By /s/ Martin K. Birmingham
-----------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK
By /s/ Robert A. Brown
-----------------------------------
Title: Vice President
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By /s/ Jim Brown
-----------------------------------
Title: Vice President
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A. "RABOBANK
NEDERLAND", NEW YORK BRANCH
DSR
By /s/ Angelo J. Balestrieri
-----------------------------------
Title: Vice President
By /s/ W. Pieter c. Kodde
-----------------------------------
Title: Vice President
SANWA BANK LTD.
By /s/ Stephen C. Small
-----------------------------------
Title: Vice President & Area Manager
<PAGE>
6
STATE STREET BANK AND TRUST COMPANY
By /s/ Christopher Del Signore
-----------------------------------
Title: Assistant Vice President
SUNTRUST BANK, ATLANTA
By /s/ Robert V. Honeycutt
-----------------------------------
Title: Vice President
By /s/ F. Steven Parrish
-----------------------------------
Title: Vice President
WELLS FARGO BANK, N.A.
By /s/ Clifford Lawrence
-----------------------------------
Title: Vice President
<PAGE>
TRANCHE II REVOLVING AGREEMENT (SERIES A)
AMONG THE COMPANY, ITS PRINCIPAL OPERATING SUBSIDIARIES,
AND CERTAIN BANKS FOR WHICH THE CHASE MANHATTAN BANK
ACTS AS ADMINISTRATIVE AGENT
THE OMITTED ANNEX
-----------------
ANNEX I - Commitments
EXHIBIT 11
----------
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(in thousands, except per share data)
For the Six Months Ended August 31,
---------------------------------------
1998 1997
----------------- -----------------
Basic Diluted Basic Diluted
------- ------- ------- -------
Income applicable to common shares $29,387 $29,387 $22,411 $22,411
Adjustments -- -- -- --
------- ------- ------- -------
Income applicable to common shares $29,387 $29,387 $22,411 $22,411
------- ------- ------- -------
Shares:
Weighted average common shares
outstanding 18,669 18,669 18,665 18,665
Adjustments:
Stock options -- 499 -- 337
------- ------- ------- -------
Adjusted weighted average common
shares outstanding 18,669 19,168 18,665 19,002
------- ------- ------- -------
Earnings per common share $ 1.57 $ 1.53 $ 1.20 $ 1.18
======= ======= ======= =======
For the Three Months Ended August 31,
---------------------------------------
1998 1997
----------------- -----------------
Basic Diluted Basic Diluted
------- ------- ------- -------
Income applicable to common shares $15,772 $15,772 $12,365 $12,365
Adjustments -- -- -- --
------- ------- ------- -------
Income applicable to common shares $15,772 $15,772 $12,365 $12,365
------- ------- ------- -------
Shares:
Weighted average common shares
outstanding 18,589 18,589 18,559 18,559
Adjustments:
Stock options -- 462 -- 403
------- ------- ------- -------
Adjusted weighted average common
shares outstanding 18,589 19,051 18,559 18,962
------- ------- ------- -------
Earnings per common share $ 0.85 $ 0.83 $ 0.67 $ 0.65
======= ======= ======= =======
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's August 31, 1998 Form 10-Q and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000016918
<NAME> CANANDAIGUA BRANDS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
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