FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended May 31, 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 June 17, 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 15,481,481
Class B Common Stock, Par Value $.01 Per Share 3,296,976
<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>
May 31, 1998 February 28, 1998
------------ -----------------
(unaudited)
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash investments $ 765 $ 1,232
Accounts receivable, net 169,592 142,615
Inventories, net 362,915 394,028
Prepaid expenses and other current assets 22,055 26,463
------------ ------------
Total current assets 555,327 564,338
PROPERTY, PLANT AND EQUIPMENT, net 243,663 244,035
OTHER ASSETS 264,457 264,786
------------ ------------
Total assets $ 1,063,447 $ 1,073,159
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 80,000 $ 91,900
Current maturities of long-term debt 24,118 24,118
Accounts payable 44,020 52,055
Accrued Federal and state excise taxes 21,342 17,498
Other accrued expenses and liabilities 95,795 97,763
------------ ------------
Total current liabilities 265,275 283,334
------------ ------------
LONG-TERM DEBT, less current maturities 303,311 309,218
------------ ------------
DEFERRED INCOME TAXES 59,237 59,237
------------ ------------
OTHER LIABILITIES 5,827 6,206
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value-
Authorized, 1,000,000 shares;
Issued, none at May 31, 1998, and
February 28, 1998 - -
Class A Common Stock, $.01 par value-
Authorized, 60,000,000 shares;
Issued, 17,653,316 shares at May 31, 1998,
and 17,604,784 shares at February 28, 1998 177 176
Class B Convertible Common Stock, $.01 par value-
Authorized, 20,000,000 shares;
Issued, 3,922,701 shares at May 31, 1998,
and 3,956,183 shares at February 28, 1998 39 40
Additional paid-in capital 232,638 231,687
Retained earnings 233,961 220,346
------------ ------------
466,815 452,249
------------ ------------
Less-Treasury stock-
Class A Common Stock, 2,180,625 shares at
May 31, 1998, and 2,199,320 shares at
February 28, 1998, at cost (34,811) (34,878)
Class B Convertible Common Stock, 625,725 shares
at May 31, 1998, and February 28, 1998, at cost (2,207) (2,207)
------------ ------------
(37,018) (37,085)
------------ ------------
Total stockholders' equity 429,797 415,164
------------ ------------
Total liabilities and stockholders' equity $ 1,063,447 $ 1,073,159
============ ============
<FN>
The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
</FN>
</TABLE>
<PAGE>
- 2 -
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the Three Months Ended May 31,
---------------------------------------
1998 1997
--------------- ---------------
(unaudited) (unaudited)
GROSS SALES $ 422,869 $ 411,038
Less - Excise taxes (109,941) (105,027)
-------------- --------------
Net sales 312,928 306,011
COST OF PRODUCT SOLD (219,992) (225,279)
-------------- --------------
Gross profit 92,936 80,732
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (61,332) (55,225)
-------------- --------------
Operating income 31,604 25,507
INTEREST EXPENSE, net (8,527) (8,479)
-------------- --------------
Income before provision for Federal
and state income taxes 23,077 17,028
PROVISION FOR FEDERAL AND
STATE INCOME TAXES (9,462) (6,982)
-------------- --------------
NET INCOME $ 13,615 $ 10,046
============== ==============
SHARE DATA:
Earnings per common share:
Basic $ 0.73 $ 0.54
============== ==============
Diluted $ 0.70 $ 0.53
============== ==============
Weighted average common shares
outstanding:
Basic 18,748 18,770
Diluted 19,328 19,045
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE>
- 3 -
<TABLE>
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
For the Three Months Ended May 31,
----------------------------------
1998 1997
----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,615 $ 10,046
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation of property, plant and equipment 6,000 6,411
Amortization of intangible assets 2,508 2,357
Amortization of discount on long-term debt 93 85
Stock-based compensation expense 25 66
Gain on sale of property, plant and equipment - (1,031)
Change in operating assets and liabilities:
Accounts receivable, net (26,957) (13,769)
Inventories, net 31,114 36,340
Prepaid expenses and other current assets 4,628 2,791
Accounts payable (8,035) (10,101)
Accrued Federal and state excise taxes 3,844 3,971
Other accrued expenses and liabilities (1,969) 10,494
Other assets and liabilities, net (2,097) (491)
---------- ----------
Total adjustments 9,154 37,123
---------- ----------
Net cash provided by operating activities 22,769 47,169
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (5,628) (6,626)
Purchase of joint venture minority interest (706) -
Proceeds from sale of property, plant and equipment - 5,818
---------- ----------
Net cash used in investing activities (6,334) (808)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments of notes payable (11,900) (35,500)
Principal payments of long-term debt (6,000) (10,116)
Proceeds from employee stock purchases 650 204
Exercise of employee stock options 348 273
Purchase of treasury stock - (9,233)
Payment of issuance costs of long-term debt - (378)
---------- ----------
Net cash used in financing activities (16,902) (54,750)
---------- ----------
NET DECREASE IN CASH AND CASH INVESTMENTS (467) (8,389)
CASH AND CASH INVESTMENTS, beginning of period 1,232 10,010
---------- ----------
CASH AND CASH INVESTMENTS, end of period $ 765 $ 1,621
========== ==========
<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
MAY 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) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Certain May 1997 balances have been reclassified to conform with current
year presentation.
3) INVENTORIES:
Inventories are valued at the lower of cost (computed in accordance with
the last-in, first-out (LIFO) or first-in, first-out (FIFO) methods) or market.
Substantially all of the inventories are valued using the LIFO method. Elements
of cost include materials, labor and overhead and consist of the following:
May 31, February 28,
1998 1998
----------- ------------
(in thousands)
Raw materials and supplies $ 14,225 $ 14,439
Wine and distilled spirits in process 269,108 304,037
Finished case goods 96,102 92,948
--------- ---------
379,435 411,424
Less - LIFO reserve (16,520) (17,396)
--------- ---------
$ 362,915 $ 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 $0.5 million, or $0.03 per share on a diluted basis, lower for the
three months ended May 31, 1998, and reported net income would have been $1.4
million, or $0.07 per share on a diluted basis, higher for the three months
ended May 31, 1997.
<PAGE>
- 5 -
4) 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
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 Three Months
Ended May 31,
--------------------
1998 1997
-------- --------
(in thousands, except per share data)
Income applicable to common shares $ 13,615 $ 10,046
======== ========
Weighted average common shares outstanding - basic 18,748 18,770
Stock options 580 275
-------- --------
Weighted average common shares outstanding - diluted 19,328 19,045
======== ========
EARNINGS PER COMMON SHARE - BASIC $ 0.73 $ 0.54
======== ========
EARNINGS PER COMMON SHARE - DILUTED $ 0.70 $ 0.53
======== ========
5) 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.
6) 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
<PAGE>
- 6 -
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:
May 31, February 28,
1998 1998
--------- ------------
(in thousands)
Balance Sheet Data:
Current assets $ 453,925 $ 460,618
Noncurrent assets $ 395,382 $ 395,225
Current liabilities $ 104,497 $ 102,207
Noncurrent liabilities $ 61,899 $ 61,784
For the Three Months
Ended May 31,
-----------------------
1998 1997
--------- ---------
(in thousands)
Income Statement Data:
Net sales $ 262,578 $ 261,274
Gross profit $ 58,212 $ 53,332
Income before provision for Federal
and state income taxes $ 23,045 $ 21,215
Net income $ 13,545 $ 12,665
7) SUBSEQUENT EVENTS:
INCREASE IN NUMBER OF AUTHORIZED SHARES OF CLASS A COMMON STOCK -
In June 1998, the Company's Board of Directors approved, subject to the
approval of the stockholders of the Company, an increase in the number of
authorized shares of Class A Common Stock to 120,000,000 shares and the
aggregate number of authorized shares of the Company to 141,000,000 shares.
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.
<PAGE>
- 7 -
BANK CREDIT AGREEMENT AMENDMENT -
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.
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 May 31, 1998 ("First Quarter 1999"), compared to the three months
ended May 31, 1997 ("First Quarter 1998"), and (ii) financial liquidity and
capital resources for First Quarter 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.
RESULTS OF OPERATIONS
- ---------------------
FIRST QUARTER 1999 COMPARED TO FIRST 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 First Quarter
1999 and First Quarter 1998.
First Quarter 1999 Compared to First Quarter 1998
--------------------------------------------------------------
Net Sales Unit Volume
------------------------------- ---------------------------
%Increase/ %Increase/
1999 1998 (Decrease) 1999 1998 (Decrease)
-------- -------- ---------- ------ ------ ----------
Wine $118,788 $125,439 (5.3%) 6,140 6,720 (8.6%)
Beer 118,796 97,614 21.7% 9,467 7,748 22.2%
Spirits 51,830 50,362 2.9% 2,606 2,549 2.2%
Other (a) 23,514 32,596 (27.9%) N/A N/A N/A
-------- -------- ------ ------ ------ -----
$312,928 $306,011 2.3% 18,213 17,017 7.0%
======== ======== ====== ====== ====== =====
(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>
- 8 -
Net sales for First Quarter 1999 increased to $312.9 million from $306.0
million for First Quarter 1998, an increase of $6.9 million, or 2.3%. This
increase resulted primarily from (i) $21.2 million of additional beer sales,
largely Mexican beers, and (ii) $1.5 million of additional spirits sales. These
increases were partially offset by (i) $9.1 million of lower nonbranded sales,
primarily grape juice concentrate sales, and (ii) $6.7 million of lower wine
sales, primarily the result of lower table wine volume. Unit volume for branded
beverage alcohol products for First Quarter 1999 increased 7.0% as compared to
First Quarter 1998. The unit volume increase was the result of the increased
sales of the Company's Mexican beer brands and its spirits brands. These
increases were partially offset by lower unit volume of the Company's wine
brands, primarily table wine. To address lower wine sales, the Company is
implementing 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 $92.9 million for First Quarter
1999 from $80.7 million for First Quarter 1998, an increase of $12.2 million, or
15.1%. As a percent of net sales, gross profit increased to 29.7% for First
Quarter 1999 from 26.4% for First Quarter 1998. The dollar increase in gross
profit resulted primarily from cost structure improvements and higher average
selling prices related to branded wine sales, and additional beer unit volume,
partially offset by lower table wine unit volume and lower nonbranded unit
volume, primarily grape juice concentrate.
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 an addition of $0.9 million and
a reduction of $2.4 million in First Quarter 1999 and First Quarter 1998,
respectively, due to the Company's LIFO accounting method.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $61.3 million for
First Quarter 1999 from $55.2 million for First Quarter 1998, an increase of
$6.1 million, or 11.1%. The dollar increase in selling, general and
administrative expenses resulted principally from higher advertising and
promotion costs associated with the increased unit volume of beer and spirits
products and the programs implemented to improve the Company's wine sales.
Selling, general and administrative expenses as a percent of net sales increased
to 19.6% for First Quarter 1999 as compared to 18.0% for First Quarter 1998. The
increase in percent of net sales resulted from the programs implemented to
improve the Company's wine sales and from a change in the sales mix driven by an
increase in net sales of branded products (which have a higher percent of
marketing and selling costs relative to sales), and a decrease in net sales of
nonbranded products (which have relatively little associated marketing and
selling costs).
NET INCOME
As a result of the above factors, net income increased to $13.6 million for
First Quarter 1999 from $10.0 million for First Quarter 1998, an increase of
$3.6 million, or 35.5%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for First Quarter 1999
were $40.1 million, an increase of $5.8 million
<PAGE>
- 9 -
over EBITDA of $34.3 million for First 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.
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.
FIRST QUARTER 1999 CASH FLOWS
OPERATING ACTIVITIES
Net cash provided by operating activities for First Quarter 1999 was $22.8
million, which resulted from $22.3 million in net income adjusted for noncash
items, plus $0.5 million representing the net change in operating assets and
liabilities. The net change in operating assets and liabilities resulted
primarily from a $31.1 million seasonal decrease in inventory levels, partially
offset by a $27.0 million increase in accounts receivable, principally the
result of increased beer sales.
INVESTING ACTIVITIES AND FINANCING ACTIVITIES
Net cash used in investing activities for First Quarter 1999 was $6.3
million, which resulted primarily from $5.6 million of capital expenditures,
including $2.7 million for vineyards.
Net cash used in financing activities for First Quarter 1999 was $16.9
million, which resulted primarily from net repayments of $11.9 million of
revolving loan borrowings under the Company's bank credit agreement plus
principal payments of $6.0 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. The
Company is currently in the process of seeking an increase in its capacity under
the bank credit agreement in order to increase its flexibility to make such
repurchases. The repurchased shares will become treasury shares and may be used
for general corporate purposes. No shares have been repurchased as of June 22,
1998.
<PAGE>
- 10 -
DEBT
Total debt outstanding as of May 31, 1998, amounted to $407.4 million, a
decrease of $17.8 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 48.7% as of
May 31, 1998, from 50.6% as of February 28, 1998.
As of May 31, 1998, under its bank credit agreement, the Company had
outstanding term loans of $134.0 million bearing interest at 6.4%, $80.0 million
of revolving loans bearing interest at 6.3%, undrawn revolving letters of credit
of $3.4 million, and $101.6 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 May 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.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Index to Exhibits located on Page 15 of this Report.
(b) No Reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended May 31, 1998.
<PAGE>
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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: June 22, 1998 By: /s/ Thomas F. Howe
-----------------------------------
Thomas F. Howe, Vice President,
Corporate Reporting and Controller
Dated: June 22, 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: June 22, 1998 By: /s/ Thomas F. Howe
-----------------------------------
Thomas F. Howe, Controller
Dated: June 22, 1998 By: /s/ Thomas S. Summer
-----------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
CANANDAIGUA WINE COMPANY, INC.
Dated: June 22, 1998 By: /s/ Thomas F. Howe
-----------------------------------
Thomas F. Howe, Controller
Dated: June 22, 1998 By: /s/ Thomas S. Summer
-----------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
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CANANDAIGUA EUROPE LIMITED
Dated: June 22, 1998 By: /s/ Thomas F. Howe
-----------------------------------
Thomas F. Howe, Controller
Dated: June 22, 1998 By: /s/ Thomas S. Summer
-----------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
ROBERTS TRADING CORP.
Dated: June 22, 1998 By: /s/ Thomas F. Howe
-----------------------------------
Thomas F. Howe, Controller
Dated: June 22, 1998 By: /s/ Thomas S. Summer
-----------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
BARTON INCORPORATED
Dated: June 22, 1998 By: /s/ Alexander L. Berk
-----------------------------------
Alexander L. Berk, President and
Chief Operating Officer
Dated: June 22, 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: June 22, 1998 By: /s/ Alexander L. Berk
-----------------------------------
Alexander L. Berk, Executive
Vice President
Dated: June 22, 1998 By: /s/ Raymond E. Powers
-----------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
<PAGE>
- 13 -
BARTON BEERS, LTD.
Dated: June 22, 1998 By: /s/ Alexander L. Berk
-----------------------------------
Alexander L. Berk, Executive Vice
President
Dated: June 22, 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: June 22, 1998 By: /s/ Alexander L. Berk
-----------------------------------
Alexander L. Berk, President
Dated: June 22, 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: June 22, 1998 By: /s/ Alexander L. Berk
-----------------------------------
Alexander L. Berk, President
Dated: June 22, 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: June 22, 1998 By: /s/ Alexander L. Berk
-----------------------------------
Alexander L. Berk, President
Dated: June 22, 1998 By: /s/ Raymond E. Powers
-----------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
<PAGE>
- 14 -
BARTON FINANCIAL CORPORATION
Dated: June 22, 1998 By: /s/ Raymond E. Powers
-----------------------------------
Raymond E. Powers, President and
Secretary
Dated: June 22, 1998 By: /s/ Charles T. Schlau
-----------------------------------
Charles T. Schlau, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
STEVENS POINT BEVERAGE CO.
Dated: June 22, 1998 By: /s/ Alexander L. Berk
-----------------------------------
Alexander L. Berk, Executive Vice
President
Dated: June 22, 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: June 22, 1998 By: /s/ Alexander L. Berk
-----------------------------------
Alexander L. Berk, President
Dated: June 22, 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: June 22, 1998 By: /s/ Alexander L. Berk
-----------------------------------
Alexander L. Berk, President
Dated: June 22, 1998 By: /s/ Raymond E. Powers
-----------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
<PAGE>
- 15 -
INDEX TO EXHIBITS
(2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR
SUCCESSION.
Not applicable.
(3) ARTICLES OF INCORPORATION AND BY-LAWS.
3.1(a) Certificate of Amendment of the Certificate of Incorporation of the
Company (filed as Exhibit 3.1(a) to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended August 31, 1997 and incorporated
herein by reference).
3.1(b) Restated Certificate of Incorporation of the Company (filed as Exhibit
3.1 to the Company's Transition Report on Form 10-K for the Transition
Period from September 1, 1995 to February 29, 1996 and incorporated
herein by reference).
3.2 Amended and Restated By-Laws of the Company (filed as Exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 1997 and incorporated herein by reference).
(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).
<PAGE>
- 16 -
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).
(10) MATERIAL CONTRACTS.
Not applicable.
(11) STATEMENT RE COMPUTATION OF PER SHARE EARNINGS.
Computation of per share earnings (filed herewith).
(15) LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION.
Not applicable.
(18) LETTER RE CHANGE IN ACCOUNTING PRINCIPLES.
Not applicable.
(19) REPORT FURNISHED TO SECURITY HOLDERS.
Not applicable.
(22) PUBLISHED REPORT REGARDING MATTERS SUBMITTED TO A VOTE OF SECURITY
HOLDERS.
Not applicable.
(23) CONSENTS OF EXPERTS AND COUNSEL.
Not applicable.
(24) POWER OF ATTORNEY.
Not applicable.
(27) FINANCIAL DATA SCHEDULE.
Financial Data Schedule (filed herewith).
(99) ADDITIONAL EXHIBITS.
Not applicable.
EXHIBIT 11
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(in thousands, except per share data)
For the Three Months Ended May 31,
-----------------------------------
1998 1997
---------------- ----------------
Basic Diluted Basic Diluted
------- ------- ------- -------
Income applicable to common shares $13,615 $13,615 $10,046 $10,046
Adjustments -- -- -- --
------- ------- ------- -------
Income applicable to common shares $13,615 $13,615 $10,046 $10,046
------- ------- ------- -------
Shares:
Weighted average common shares outstanding 18,748 18,748 18,770 18,770
Adjustments:
Stock options -- 580 -- 275
------- ------- ------- -------
Adjusted weighted average common shares
outstanding 18,748 19,328 18,770 19,045
------- ------- ------- -------
Earnings per common share $ 0.73 $ 0.70 $ 0.54 $ 0.53
======= ======= ======= =======
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's May 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> 3-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> MAY-31-1998
<CASH> 765
<SECURITIES> 0
<RECEIVABLES> 169,592
<ALLOWANCES> 0
<INVENTORY> 362,915
<CURRENT-ASSETS> 555,327
<PP&E> 362,443
<DEPRECIATION> 118,780
<TOTAL-ASSETS> 1,063,447
<CURRENT-LIABILITIES> 265,275
<BONDS> 303,311
0
0
<COMMON> 216
<OTHER-SE> 429,581
<TOTAL-LIABILITY-AND-EQUITY> 1,063,447
<SALES> 312,928
<TOTAL-REVENUES> 312,928
<CGS> 219,992
<TOTAL-COSTS> 219,992
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,527
<INCOME-PRETAX> 23,077
<INCOME-TAX> 9,462
<INCOME-CONTINUING> 13,615
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,615
<EPS-PRIMARY> 0.73
<EPS-DILUTED> 0.70
</TABLE>
