SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2 TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 9, 1999
-------------
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
ENGLAND AND WALES CANANDAIGUA LIMITED 98-0198402
NEW YORK POLYPHENOLICS, INC. 16-1546354
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
incorporation or No.)
organization)
300 WillowBrook Office Park, Fairport, New York 14450
----------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 218-2169
--------------
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
(1) The Diageo Inc. Statement of Assets and Liabilities Related to
the Product Lines Sold to Canandaigua Brands, Inc. as of April 9,
1999, and the Statement of Identified Income and Expenses Related
to the Product Lines Sold to Canandaigua Brands, Inc. for the
year ended December 31, 1998, and the report of KPMG LLP,
independent auditors, thereon, together with the notes thereto,
are located at pages 2 through 11 of this Report.
(2) The Diageo Inc. Statements of Identified Income and Expenses
Related to the Product Lines Sold to Canandaigua Brands, Inc.
(unaudited) for the three months ended March 31, 1999 and 1998,
together with the notes thereto, are located at pages 12 through
14 of this Report.
(b) PRO FORMA FINANCIAL INFORMATION.
The pro forma condensed combined balance sheet (unaudited) as of
February 28, 1999, the pro forma condensed combined statement of
income (unaudited) for the year ended February 28, 1999, and the pro
forma combined statement of income (unaudited) for the six months
ended August 31, 1999, and the notes thereto, are located at pages 15
through 23 of this Report.
(c) EXHIBITS.
See Index to Exhibits.
<PAGE>
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DIAGEO INC.
Financial Statements of Product Lines Sold to
Canandaigua Brands, Inc.
As of April 9, 1999 and for the Year ended December 31, 1998
(With Independent Auditors' Report Thereon)
<PAGE>
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DIAGEO INC.
Table of Contents
Page
Independent Auditors' Report 4
Statement of Assets and Liabilities Related to the Product Lines
Sold to Canandaigua Brands, Inc. 5
Statement of Identified Income and Expenses Related to the Product
Lines Sold to Canandaigua Brands, Inc. 6
Notes to Financial Statements Related to the Product Lines Sold
to Canandaigua Brands, Inc. 7-11
<PAGE>
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[KPMG Logo]
Stamford Square
3001 Summer Street
Stamford, CT 06905
Independent Auditors' Report
The Board of Directors
Diageo Inc.:
We have audited the accompanying statement of assets and liabilities related to
the product lines sold to Canandaigua Brands, Inc. as of April 9, 1999 and the
related statement of identified income and expenses for the year ended December
31, 1998. These statements are the responsibility of Diageo Inc.'s management.
Our responsibility is to express an opinion on these statements based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying financial statements were prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and for
inclusion in the Form 8-K/A of Canandaigua Brands, Inc., as described in Note 1
and are not intended to be a complete presentation of the financial position and
results of operations of the product lines sold to Canandaigua Brands, Inc.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets and liabilities related to the product lines
sold to Canandaigua Brands, Inc. as of April 9, 1999 and the related statement
of identified income and expenses for the year ended December 31, 1998 pursuant
to the asset purchase agreement referred to in Note 1, in conformity with
generally accepted accounting principles.
/s/ KPMG LLP
June 24, 1999
[Graphic] KPMG LLP. KPMG LLP, a U.S. limited liability partnership, is
a member of KPMG International, a Swiss association.
<PAGE>
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DIAGEO INC.
Statement of Assets and Liabilities Related to the Product Lines
Sold to Canandaigua Brands, Inc.
April 9, 1999
(In thousands)
Current assets:
Inventories $ 53,593
Other current assets 116
--------
Total current assets 53,709
Net property, plant and equipment 24,622
Excess of pension plan assets over projected benefit obligation 262
--------
Total assets 78,593
--------
Current liabilities:
Current installments of obligations under capital leases 34
Accrued expenses 829
Other liabilities 109
--------
Total current liabilities 972
Obligations under capital leases, excluding current installments 467
Other liabilities 220
--------
Total liabilities 1,659
--------
Total assets less liabilities $ 76,934
========
See accompanying notes to financial statements.
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DIAGEO INC.
Statement of Identified Income and Expenses Related to the Product Lines
Sold to Canandaigua Brands, Inc.
For the Year ended December 31, 1998
(In thousands)
Net sales (net of federal and state excise taxes of $49,771) $ 68,555
Cost of goods sold 28,300
--------
Gross profit 40,255
Advertising and promotional expenditure 5,308
Allocated selling and marketing expenditure (note 1) 4,904
--------
Excess of identified income over expenses $ 30,043
========
See accompanying notes to financial statements.
<PAGE>
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DIAGEO INC.
Notes to Financial Statements of the Product Lines Sold to
Canandaigua Brands, Inc.
As of April 9, 1999 and for the Year Ended December 31, 1998
(In thousands)
(1) SALE OF CERTAIN ASSETS AND BASIS OF PRESENTATION
On April 9, 1999, Diageo Inc., UDV Canada Inc., and United Distillers
Canada Inc. (collectively "UDV") sold to Canandaigua Brands, Inc. ("CBI")
certain assets used in the manufacturing, marketing, sales and distribution
of Canadian Whiskey, as defined in the asset purchase agreement by and
among UDV and CBI dated February 21, 1999 ("the Agreement").
The statement of assets and liabilities related to the product lines sold
to CBI and the related statement of identified income and expenses were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission and for inclusion in CBI's Form 8-K/A
requirements and are not intended to be a complete presentation of the
financial position and results of operations of the product lines sold to
CBI. In accordance with the Agreement, the statement of assets and
liabilities related to the product lines sold to CBI consists only of
inventories, property, plant & equipment and certain factory-related
accruals and assets. Similarly the related statement of identified income
and expenses consists of net sales (sales after a deduction for federal and
state excise taxes), cost of goods sold, advertising and promotional
expense, and an allocation of selling and marketing overhead only.
Selling and marketing overhead has been allocated based on the proportion
of net sales of the product lines sold to CBI to total net sales for UDV or
its predecessor companies. Management believes this allocation to be
reasonable in the circumstances; however, there can be no assurance that
such allocation will be indicative of the future results of operations or
what the results of operations of the product lines sold would have been
had it been a separate, stand-alone entity during the period covered.
Prior to the sale, the product lines sold were an integral part of UDV's
businesses, and did not constitute separate legal or reporting entities for
which financial statements or allocations of various operating and
corporate overhead were prepared. These product lines were included in the
consolidated financial statements of the ultimate parent company, Diageo
plc, a company incorporated in the United Kingdom.
Due to the omission of various operating overhead and other corporate level
expenses and certain assets and liabilities excluded in accordance with the
terms of the Agreement, the statements presented are not indicative of the
future financial condition or future results of operations of the product
lines sold to CBI.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue is recognized upon shipment of goods to distributors and brokers.
(Continued)
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DIAGEO INC.
Notes to Financial Statements of the Product Lines Sold to
Canandaigua Brands, Inc.
As of April 9, 1999 and for the Year Ended December 31, 1998
(In thousands)
COST OF GOODS SOLD
Cost of goods sold ("COGS") for finished goods cases includes the cost of
packaging materials, liquids, other raw materials, labor and production
overheads necessary to manufacture and prepare for shipment the finished
case goods.
COGS for aged bulk liquid includes the distillation costs of grains,
cereals, distillery labor, overheads required to produce the original
spirit, the costs of the aging warehouse allocated to the maturing liquids,
and dump and fill where appropriate.
INVENTORIES
Inventories are stated at the lower of cost or market. All inventories
include overheads on a full cost absorption basis or in the case of
contracted supply, on a full contracted cost. Cost is determined by
specific lots or vintages for maturing whiskey. Other inventories,
including packaging and containers, are valued at standard cost.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated
depreciation computed using the straight-line method at rates calculated to
amortize the cost of assets over their estimated useful lives, as follows:
Buildings and building improvements 15-40 years
Machinery, equipment and fixtures and fittings 10-30 years
FOREIGN EXCHANGE
Foreign-based assets and liabilities have been translated into US dollars
at the exchange rate in effect at April 9, 1999 and revenues and expenses
have been translated at the average exchange rate for the year ended
December 31, 1998.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(Continued)
<PAGE>
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DIAGEO INC.
Notes to Financial Statements of the Product Lines Sold to
Canandaigua Brands, Inc.
As of April 9, 1999 and for the Year Ended December 31, 1998
(In thousands)
(3) INVENTORIES
The components of inventories at April 9, 1999 are as follows:
Raw materials and packaging $ 2,697
Aged bulk liquor 43,949
Finished goods 6,947
--------
$ 53,593
========
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at April 9, 1999 are summarized as follows:
Land, buildings and building improvements $ 10,957
Machinery, equipment and fixtures and fittings 13,665
--------
$ 24,622
========
(5) LEASES
In connection with the manufacturing, marketing, sales and distribution of
Canadian Whiskey, UDV had entered into various operating lease commitments.
These operating lease commitments have not been transferred to CBI as
described in the Agreement.
Certain capital leases have been transferred to CBI. At April 9, 1999, the
gross amount of machinery and equipment and related accumulated
amortization recorded under these leases were as follows:
Machinery and equipment $ 628
Less accumulated amortization 195
-----
$ 433
=====
(Continued)
<PAGE>
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DIAGEO INC.
Notes to Financial Statements of the Product Lines Sold to
Canandaigua Brands, Inc.
As of April 9, 1999 and for the Year Ended December 31, 1998
(In thousands)
Future minimum capital lease payments as of April 9, 1999 are:
Year to April 8,
2000 $ 70
2001 70
2002 70
2003 70
2004 70
Thereafter 368
-----
Total minimum lease payments 718
Less amount representing interest (at 7.4%) 217
-----
Present value of net minimum capital
lease payments 501
Less current installments of obligations
under capital leases 34
-----
Obligations under capital leases, excluding
current installments $ 467
=====
(6) PENSION BENEFITS
CBI assumed the rights and obligations under the Pension Plan for Unionized
Employees of United Distillers & Vintners Canada Inc. ("Valleyfield Plan")
and the Palliser Distiller Division of United Distillers & Vintners Canada
Inc. Employees' Pension Plan ("Lethbridge Plan"), formerly operated by UDV.
The plans' sponsors are Canadian corporations which were not previously
subject to the requirements of SFAS No. 87 with respect to the accounting
for, and disclosure of, pension plan information. It was not feasible to
retroactively apply SFAS No. 87 to the plan information as of the effective
date of the pronouncement of December 31, 1989. In applying the provisions
of SFAS No. 87 as of April 9, 1999, UDV has estimated that the unrecognized
transition asset (liability) would have been fully amortized at that date.
(Continued)
<PAGE>
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DIAGEO INC.
Notes to Financial Statements of the Product Lines Sold to
Canandaigua Brands, Inc.
As of April 9, 1999 and for the Year Ended December 31, 1998
(In thousands)
The following sets forth the plans' benefit obligations, fair value of plan
assets and funded status at April 9, 1999:
VALLEYFIELD LETHBRIDGE
PLAN PLAN TOTAL
----------- ---------- -----------
Fair value of plan assets $ 11,011 $ 1,363 $ 12,374
Projected pension benefit
obligation 10,220 1,892 12,112
-------- ------- --------
Prepaid (accrued) benefit
cost required $ 791 $ (529) $ 262
======== ======= ========
Weighted average assumption as of April 9, 1999:
Discount rate 6%
(7) COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL REMEDIATION COSTS
Under the terms of the Agreement, UDV will retain liability for all
material environmental remediation costs in existence on April 9, 1999.
Accordingly, CBI has not assumed liability for any material environmental
remediation costs and therefore a provision has not been made.
<PAGE>
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DIAGEO INC.
Statements of Identified Income and Expenses Related to the Product Lines
Sold to Canandaigua Brands, Inc.
(unaudited)
(in thousands)
For the Three Months ended March 31,
------------------------------------
1999 1998
-------- --------
Net sales (net of federal and state
excise taxes of $10,290 and $14,027
in 1999 and 1998, respectively) $ 14,174 $ 19,321
Cost of goods sold 5,732 8,002
-------- --------
Gross profit 8,442 11,319
Advertising and promotional expenditure 731 2,210
Allocated selling and marketing
expenditure (note 1) 1,226 1,226
-------- --------
Excess of identified income over expenses $ 6,485 $ 7,883
======== ========
See accompanying notes to these statements.
<PAGE>
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DIAGEO INC.
Notes to Statements of Identified Income and Expenses Related to
the Product Lines Sold to Canandaigua Brands, Inc.
For the Three Months Ended March 31, 1999 and 1998
(1) SALE OF CERTAIN ASSETS AND BASIS OF PRESENTATION
On April 9, 1999, Diageo Inc., UDV Canada Inc., and United Distillers
Canada Inc. (collectively "UDV") sold to Canandaigua Brands, Inc. ("CBI")
certain assets used in the manufacturing, marketing, sales and distribution
of Canadian Whiskey, as defined in the asset purchase agreement by and
among UDV and CBI dated February 21, 1999 ("the Agreement").
The statements of identified income and expenses were prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission and are not intended to be a complete presentation of
the results of operations of the product lines sold to CBI. The statements
of identified income and expenses consist of net sales (sales after a
deduction for federal and state excise taxes), cost of goods sold,
advertising and promotional expense, and an allocation of selling and
marketing overhead only.
For the three months ended March 31, 1998, selling and marketing overhead
has been allocated based on the proportion of annual net sales of the
product lines sold to CBI to total annual net sales for UDV or its
predecessor companies (the "1998 Allocation"). For the three months ended
March 31, 1999, selling and marketing overhead has been estimated based on
the 1998 Allocation. Management believes this allocation to be reasonable
in the circumstances; however, there can be no assurance that such
allocation will be indicative of the future results of operations or what
the results of operations of the product lines sold would have been had it
been a separate, stand-alone entity during the periods covered.
Prior to the sale, the product lines sold were an integral part of UDV's
businesses, and did not constitute separate legal or reporting entities for
which financial statements or allocations of various operating and
corporate overhead were prepared. These product lines were included in the
consolidated financial statements of the ultimate parent company, Diageo
plc, a company incorporated in the United Kingdom. Due to the omission of
various operating overhead and other corporate level expenses, the
statements presented are not indicative of the future results of operations
of the product lines sold to CBI.
The statements of identified income and expenses were prepared without
audit pursuant to the rules and regulations of the Securities and Exchange
Commission applicable to interim reporting and reflect, in the opinion of
management, all adjustments necessary to present fairly the statements of
identified income and expenses for the periods covered. 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
statements and related notes should be read in conjunction with the
financial statements and related notes of the product lines sold to CBI as
of April 9, 1999, and for the year ended December 31, 1998, included
elsewhere in this Report.
(Continued)
<PAGE>
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DIAGEO INC.
Notes to Statements of Identified Income and Expenses Related to
the Product Lines Sold to Canandaigua Brands, Inc.
For the Three Months Ended March 31, 1999 and 1998
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue is recognized upon shipment of goods to distributors and brokers.
COST OF GOODS SOLD
Cost of goods sold ("COGS") for finished goods cases includes the cost of
packaging materials, liquids, other raw materials, labor and production
overheads necessary to manufacture and prepare for shipment the finished
case goods.
COGS for aged bulk liquid includes the distillation costs of grains,
cereals, distillery labor, overheads required to produce the original
spirit, the costs of the aging warehouse allocated to the maturing liquids,
and dump and fill where appropriate.
FOREIGN EXCHANGE
Foreign-based revenues and expenses have been translated into U.S. dollars
at the average exchange rate for the three months ended March 31, 1999 and
1998, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
<PAGE>
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PRO FORMA COMBINED FINANCIAL DATA
(UNAUDITED)
On April 9, 1999, Canandaigua Brands, Inc., through a wholly-owned
subsidiary (collectively with Canandaigua Brands, Inc. and its other affiliates,
the "Company"), acquired several well-known Canadian whisky brands from
affiliates of Diageo plc in an asset acquisition. The purchased assets were
acquired from Diageo Inc., UDV Canada Inc., and United Distillers Canada Inc.
(hereafter collectively referred to as "Diageo Inc."). The assets acquired in
the transaction were the intellectual property associated with the acquired
brands; two production facilities in Canada; equipment and fixtures used in
connection with the acquired brands; case goods and bulk whisky inventories; and
other assets associated with the acquired brands. In connection with the
transaction, the Company also entered into multi-year agreements with Diageo
Inc. pursuant to which the Company will provide packaging and distilling
services for various brands retained by Diageo Inc.
On December 1, 1998, the Company acquired control of Matthew Clark plc
("Matthew Clark") and has since acquired all of Matthew Clark's outstanding
shares (the "Matthew Clark Acquisition"). The results of operations of Matthew
Clark have been included in the Company's consolidated results of operations
since the date of the Matthew Clark Acquisition, December 1, 1998.
The following pro forma financial data of the Company consists of (i) a pro
forma condensed combined balance sheet (unaudited) as of February 28, 1999 (the
"Pro Forma Balance Sheet"), (ii) a 1999 fiscal year pro forma condensed combined
statement of income (unaudited) (the "1999 Pro Forma Statement of Income") and
(iii) a 2000 six months pro forma combined statement of income (unaudited) (the
"2000 Six Months Pro Forma Statement of Income") (collectively, the "Pro Forma
Statements").
The Pro Forma Balance Sheet reflects the combination of the balance sheet
of the Company as of February 28, 1999, and the statement of assets and
liabilities related to the product lines acquired from Diageo Inc. as of April
9, 1999 (the "Diageo Product Lines"), as adjusted for the Diageo Product Lines
acquisition. The Pro Forma Balance Sheet is presented as if the acquisition of
the Diageo Product Lines was consummated on February 28, 1999.
The 1999 Pro Forma Statement of Income reflects the combination of (i) the
income statement of the Company for the year ended February 28, 1999, (ii) the
income statement of Matthew Clark for the nine months ended November 30, 1998,
as adjusted for the Matthew Clark Acquisition, and (iii) the statement of
identified income and expenses related to the Diageo Product Lines for the year
ended December 31, 1998, as adjusted for the Diageo Product Lines acquisition.
The 1999 Pro Forma Statement of Income is presented as if the acquisitions were
consummated on March 1, 1998.
The 2000 Six Months Pro Forma Statement of Income reflects the combination
of (i) the income statement of the Company for the six months ended August 31,
1999, and (ii) the statement of identified income and expenses related to the
Diageo Product Lines for the period March 1, 1999 through April 8, 1999, as
adjusted for the Diageo Product Lines acquisition. The results of operations of
the Diageo Product Lines have been included in the Company's consolidated
results of operations since the date of the Diageo Product Lines acquisition,
April 9, 1999. The 2000 Six Months Pro Forma Statement of Income is presented as
if the acquisition was consummated on March 1, 1998.
<PAGE>
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The Pro Forma Statements should be read in conjunction with (i) the
separate historical financial statements of the Company, Matthew Clark (included
in the Current Report on Form 8-K/A dated December 1, 1998) and the Diageo
Product Lines (included herein), and the notes thereto and (ii) the accompanying
notes to the Pro Forma Statements. The Pro Forma Statements are based upon
currently available information and upon certain assumptions that the Company
believes are reasonable under the circumstances. The Pro Forma Statements do not
purport to represent what the Company's financial position or results of
operations would actually have been if the aforementioned transactions had in
fact occurred on such date or at the beginning of the period indicated, nor do
they project the Company's financial position or the results of operations at
any future date or for any future period.
<PAGE>
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<TABLE>
CANANDAIGUA BRANDS, INC. AND DIAGEO PRODUCT LINES
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF FEBRUARY 28, 1999
(UNAUDITED)
(in thousands)
<CAPTION>
Pro Forma
Historical Adjustments
---------------------------- -------------
Diageo
Company Product Lines
as of as of
February 28, April 9, For the Pro Forma
1999 1999 Acquisition Combined
----------- ------------- ------------- -----------
ASSETS
------
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash and cash investments $ 27,645 $ 14,500 (c) $ 42,145
Accounts receivable, net 260,433 260,433
Inventories, net 508,571 $ 53,593 (3,154)(a) 559,010
Prepaid expenses and other current assets 59,090 116 59,206
----------- -------- --------- -----------
Total current assets 855,739 53,709 11,346 920,794
PROPERTY, PLANT AND EQUIPMENT, net 428,803 24,622 2,044 (a) 455,469
OTHER ASSETS 509,234 262 112,976 (a) 626,472
4,000 (b)
----------- -------- --------- -----------
Total assets $ 1,793,776 $ 78,593 $ 130,366 $ 2,002,735
=========== ======== ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 87,728 $ 87,728
Current maturities of long-term debt 6,005 $ 34 6,039
Accounts payable 122,746 122,746
Accrued Federal and state excise taxes 49,342 49,342
Other accrued expenses and liabilities 149,451 938 $ 7,300 (b) 157,689
----------- -------- --------- -----------
Total current liabilities 415,272 972 7,300 423,544
LONG-TERM DEBT, less current maturities 831,689 467 200,000 (c) 1,032,156
DEFERRED INCOME TAXES 88,179 88,179
OTHER LIABILITIES 23,364 220 23,584
----------- -------- --------- -----------
Total liabilities 1,358,504 1,659 207,300 1,567,463
STOCKHOLDERS' EQUITY 435,272 435,272
DIAGEO INC.'s INVESTMENT IN DIAGEO PRODUCT LINES 76,934 (76,934)(d) 0
----------- -------- --------- -----------
Total liabilities and stockholders' equity $ 1,793,776 $ 78,593 $ 130,366 $ 2,002,735
=========== ======== ========= ===========
<FN>
See accompanying Notes to the Pro Forma Condensed Combined Balance Sheet.
</FN>
</TABLE>
<PAGE>
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CANANDAIGUA BRANDS, INC. AND DIAGEO PRODUCT LINES
NOTES TO THE PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF FEBRUARY 28, 1999
(UNAUDITED)
(in thousands)
(a) Reflects the estimated purchase accounting adjustments for the Diageo
Product Lines acquisition based upon a preliminary appraisal of the assets
and liabilities assumed. For purchase accounting, Diageo Product Lines
assets have been recorded at estimated fair market value subject to
adjustment based upon the results of an independent appraisal. The
estimated amounts recorded for assets and liabilities acquired from Diageo
Inc. are not expected to differ materially from the final assigned values.
Purchase accounting adjustments were recorded to decrease inventory by
$3,154, to increase property, plant and equipment by $2,044, to record
$81,172 reflecting the value of the tradenames and other intangible assets
acquired, and to record the excess of purchase cost over fair market value
of net assets acquired of $31,804. These adjustments are required to record
these assets at their estimated fair market values. The calculation of
excess purchase cost over fair market value of net assets acquired is as
follows:
Cash paid $ 185,500
Financing costs 4,000
Direct acquisition costs 3,300
-----------
Total purchase cost 192,800
Net book value of Diageo Product Lines (76,934)
Financing costs capitalized (4,000)
Increase in appraised net assets (80,062)
-----------
Excess of purchase cost over fair market value
of net assets acquired $ 31,804
===========
(b) Reflects the liability for capitalized financing costs of $4,000 and direct
acquisition costs of $3,300.
(c) Reflects borrowings of $200 million from the sale of 8.5% Senior
Subordinated Notes due 2009 (the "Notes") used in connection with the
Diageo Product Lines acquisition. Proceeds in excess of the cash paid at
closing of $14,500 were available for general corporate purposes. The
sources and application of funds in connection with the Diageo Product
Lines acquisition are as follows:
Sources of funds:
Proceeds from the sale of the Notes $ 200,000
Accrued liabilities 7,300
-----------
Total sources of funds $ 207,300
===========
Application of funds:
Cash purchase price $ 185,500
Payment of financing costs 4,000
Payment of direct acquisition costs 3,300
Excess cash drawn down 14,500
-----------
Total application of funds $ 207,300
===========
(d) Reflects the elimination of Diageo Inc.'s investment in Diageo Product
Lines.
<PAGE>
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<TABLE>
CANANDAIGUA BRANDS, INC., MATTHEW CLARK plc AND DIAGEO PRODUCT LINES
1999 FISCAL YEAR PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED FEBRUARY 28, 1999
(UNAUDITED)
(in thousands, except per share data)
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS
------------------------------------------------- ------------------------------
US GAAP Diageo Product
Company Matthew Clark Lines
For the For the For the For the
Year Ended Nine Months Ended Year Ended For the Diageo Product
February 28, November 30, December 31, Matthew Clark Lines Pro Forma
1999 1998 1998 Acquisition Acquisition Combined
------------ ----------------- -------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
GROSS SALES $ 1,984,801 $ 701,048 $ 118,326 $ 2,804,175
Less - excise taxes (487,458) (180,894) (49,771) (718,123)
----------- ---------- --------- --------- --------- -----------
NET SALES 1,497,343 520,154 68,555 2,086,052
COST OF PRODUCT SOLD (1,049,309) (352,763) (28,300) $ 1,473 (a) $ 320 (A) (1,428,579)
----------- ---------- --------- --------- --------- -----------
Gross profit 448,034 167,391 40,255 1,473 320 657,473
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (299,526) (148,910) (10,212) 1,937 (a) (2,845)(B) (452,493)
6,493 (b) (400)(C)
970 (c)
NONRECURRING CHARGES (2,616) (18,891) (21,507)
----------- ---------- --------- --------- --------- -----------
Operating income (loss) 145,892 (410) 30,043 10,873 (2,925) 183,473
INTEREST EXPENSE, net (41,462) (6,389) (26,627)(d) (17,000)(D) (91,478)
----------- ---------- --------- --------- --------- -----------
Income (loss) before income
taxes 104,430 (6,799) 30,043 (15,754) (19,925) 91,995
(PROVISION FOR) BENEFIT FROM
INCOME TAXES (42,521) (1,253) 11,023 (e) (4,047)(E) (36,798)
----------- ---------- --------- --------- --------- -----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS $ 61,909 $ (8,052) $ 30,043 $ (4,731)(f) $ (23,972) $ 55,197
=========== ========== ========= ========= ========= ===========
SHARE DATA:
Earnings per common share:
Basic $ 3.38 $ 3.02
=========== ===========
Diluted $ 3.30 $ 2.94
=========== ===========
Weighted average common shares
outstanding:
Basic 18,293 18,293
Diluted 18,754 18,754
<FN>
See accompanying Notes to the Pro Forma Condensed Combined Statement of Income.
</FN>
</TABLE>
<PAGE>
- 20 -
CANANDAIGUA BRANDS, INC., MATTHEW CLARK plc AND DIAGEO PRODUCT LINES
NOTES TO THE PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED FEBRUARY 28, 1999
(UNAUDITED)
(in thousands)
MATTHEW CLARK ACQUISITION PRO FORMA ADJUSTMENTS:
(a) Reflects the adjusted depreciation expense related to the acquired
property, plant and equipment of Matthew Clark on the assumption that the
Matthew Clark Acquisition had taken place on March 1, 1998. These assets
have been restated at their estimated fair market values and depreciated
using the Company's depreciation methods over the remaining useful lives of
the assets. The decrease in depreciation expense of $3,410, as compared to
that recorded by Matthew Clark, was allocated to cost of product sold and
selling, general and administrative expenses as indicated.
(b) Reflects a decrease in amortization expense of intangible assets of $6,493
based upon their appraised values, using the straight-line method and
estimated useful lives, predominately 40 years.
(c) Reflects the amortization expense of capitalized financing costs of $107
over the term of the Credit Agreement used to finance the Matthew Clark
Acquisition (72 months) using the effective interest method, net of $1,077
of amortization expense recorded under the Company's previously existing
credit agreement.
(d) Reflects the additional interest expense incurred on the debt to finance
the Matthew Clark Acquisition and the incremental interest expense on the
Company's and Matthew Clark's existing borrowings, resulting from the
higher interest rate in the Credit Agreement. The overall effective
interest rate was 8.8% per annum.
(e) Reflects the tax effect of the pro forma adjustments and the repatriation
of profits, excluding the impact of nondeductible items, primarily
goodwill, using an effective tax rate of 40%.
(f) Does not reflect the extraordinary treatment for the after tax write-off of
$11.4 million ($0.61 per diluted share), representing the net book value of
bank fees resulting from the extinguishment of debt remaining under the
Company's previously existing credit agreement and the bank fees associated
with the new Credit Agreement, tax effected at the Company's historical
rate of 41%.
DIAGEO PRODUCT LINES ACQUISITION PRO FORMA ADJUSTMENTS:
(A) Reflects a reduction in depreciation expense of $320 related to the
acquired property, plant and equipment of the Diageo Product Lines on the
assumption that the Diageo Product Lines acquisition had taken place on
March 1, 1998. These assets have been restated at their estimated fair
market values and depreciated using the Company's depreciation methods over
the remaining useful lives of the assets.
(B) Reflects amortization expense of intangible assets of $2,845 based upon
their appraised values, using the straight-line method and estimated useful
lives, predominately 40 years.
(C) Reflects the amortization expense of capitalized financing costs associated
with the Notes used to finance the acquisition of the purchase of the
Diageo Product Lines over the life of the loan, ten years.
<PAGE>
- 21 -
(D) Reflects the additional interest expense incurred on the Notes to finance
the Diageo Product Lines acquisition at an effective interest rate of 8.5%
per annum.
(E) Reflects the additional tax expense on the adjusted income for the Diageo
Product Lines, using an effective tax rate of 40%.
<PAGE>
- 22 -
<TABLE>
CANANDAIGUA BRANDS, INC. AND DIAGEO PRODUCT LINES
2000 SIX MONTHS PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED AUGUST 31, 1999
(UNAUDITED)
(in thousands, except per share data)
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS
------------------------------------ --------------
Company Diageo Product
For the Six Lines For the
Months Ended For the Period Diageo Product
August 31, March 1 - April 8, Lines Pro Forma
1999 1999 Acquisition Combined
------------ ------------------ -------------- -----------
<S> <C> <C> <C> <C>
GROSS SALES $ 1,519,834 $ 14,264 $ 1,534,098
Less - excise taxes (368,085) (6,000) (374,085)
----------- -------- -------- -----------
NET SALES 1,151,749 8,264 1,160,013
COST OF PRODUCT SOLD (806,499) (3,698) $ 34 (a) (810,163)
----------- -------- -------- -----------
Gross profit 345,250 4,566 34 349,850
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (235,821) (1,188) (304)(b) (237,356)
(43)(c)
NONRECURRING CHARGES (5,510) (5,510)
----------- -------- -------- -----------
Operating income (loss) 103,919 3,378 (313) 106,984
INTEREST EXPENSE, net (50,675) (1,816)(d) (52,491)
----------- -------- -------- -----------
Income (loss) before income
taxes 53,244 3,378 (2,129) 54,493
PROVISION FOR INCOME TAXES (21,297) (500)(e) (21,797)
----------- -------- -------- -----------
NET INCOME (LOSS) $ 31,947 $ 3,378 $ (2,629) $ 32,696
=========== ======== ======== ===========
SHARE DATA:
Earnings per common share:
Basic $ 1.78 $ 1.82
=========== ===========
Diluted $ 1.73 $ 1.77
=========== ===========
Weighted average common shares
outstanding:
Basic 17,994 17,994
Diluted 18,459 18,459
<FN>
See accompanying Notes to the Pro Forma Combined Statement of Income.
</FN>
</TABLE>
<PAGE>
- 23 -
CANANDAIGUA BRANDS, INC. AND DIAGEO PRODUCT LINES
NOTES TO THE PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED AUGUST 31, 1999
(UNAUDITED)
(in thousands)
DIAGEO PRODUCT LINES ACQUISITION PRO FORMA ADJUSTMENTS:
(a) Reflects a reduction in depreciation expense of $34 related to the acquired
property, plant and equipment of the Diageo Product Lines on the assumption
that the Diageo Product Lines acquisition had taken place on March 1, 1998.
These assets have been restated at their estimated fair market values and
depreciated using the Company's depreciation methods over the remaining
useful lives of the assets.
(b) Reflects amortization expense of intangible assets of $304 based upon their
appraised values, using the straight-line method and estimated useful
lives, predominately 40 years.
(c) Reflects the amortization expense of capitalized financing costs associated
with the Notes used to finance the acquisition of the purchase of the
Diageo Product Lines over the life of the loan, ten years.
(d) Reflects the additional interest expense incurred on the Notes to finance
the Diageo Product Lines acquisition at an effective interest rate of 8.5%
per annum.
(e) Reflects the additional tax expense on the adjusted income for the Diageo
Product Lines, using an effective tax rate of 40%.
<PAGE>
- 24 -
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: November 22, 1999 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Senior Vice
President and Chief Financial
Officer
SUBSIDIARIES
BATAVIA WINE CELLARS, INC.
Dated: November 22, 1999 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Treasurer
CANANDAIGUA WINE COMPANY, INC.
Dated: November 22, 1999 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Treasurer
CANANDAIGUA EUROPE LIMITED
Dated: November 22, 1999 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Treasurer
CANANDAIGUA LIMITED
Dated: November 22, 1999 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Finance Director
(Principal Financial Officer and
Principal Accounting Officer)
POLYPHENOLICS, INC.
Dated: November 22, 1999 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
and Treasurer
<PAGE>
- 25 -
ROBERTS TRADING CORP.
Dated: November 22, 1999 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, President and
Treasurer
BARTON INCORPORATED
Dated: November 22, 1999 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
BARTON BRANDS, LTD.
Dated: November 22, 1999 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
BARTON BEERS, LTD.
Dated: November 22, 1999 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
BARTON BRANDS OF CALIFORNIA, INC.
Dated: November 22, 1999 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
BARTON BRANDS OF GEORGIA, INC.
Dated: November 22, 1999 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
BARTON DISTILLERS IMPORT CORP.
Dated: November 22, 1999 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
BARTON FINANCIAL CORPORATION
Dated: November 22, 1999 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
<PAGE>
- 26 -
STEVENS POINT BEVERAGE CO.
Dated: November 22, 1999 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
MONARCH IMPORT COMPANY
Dated: November 22, 1999 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
THE VIKING DISTILLERY, INC.
Dated: November 22, 1999 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
<PAGE>
- 27 -
INDEX TO EXHIBITS
(1) UNDERWRITING AGREEMENT
Not Applicable.
(2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR SUCCESSION
Not Applicable.
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
Not Applicable.
(16) LETTER RE CHANGE IN CERTIFYING ACCOUNTANT
Not Applicable.
(17) LETTER RE DIRECTOR RESIGNATION
Not Applicable.
(20) OTHER DOCUMENTS OR STATEMENTS TO SECURITY HOLDERS
Not Applicable.
(23) CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of KPMG LLP (filed herewith).
(24) POWER OF ATTORNEY
Not Applicable.
(27) FINANCIAL DATA SCHEDULE
Not Applicable.
(99) ADDITIONAL EXHIBITS
None
EXHIBIT 23.1
------------
[KPMG Logo]
Stamford Square
3001 Summer Street
Stamford, CT 06905
Consent of Independent Auditors
The Board of Directors
Canandaigua Brands, Inc.:
We consent to the incorporation by reference in the registration statements
(Nos. 33-26694, 33-56557 and 333-88391) on Form S-8 and (No. 333-67037) on Form
S-3 of Canandaigua Brands, Inc. of our report dated June 24, 1999, with respect
to the statement of assets and liabilities related to the product lines sold to
Canandaigua Brands, Inc. as of April 9, 1999 and the related statement of
identified income and expenses for the year ended December 31, 1998, which
report appears in the Form 8-K/A Amendment No. 2 of Canandaigua Brands, Inc.
dated April 9, 1999.
/s/ KPMG LLP
November 22, 1999
[Graphic] KPMG LLP. KPMG LLP, a U.S. limited liability partnership, is
a member of KPMG International, a Swiss association.
