UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended February 29, 2000
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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 No. 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
Netherlands Canandaigua B.V. 98-0205132
Delaware Franciscan Vineyards, Inc. 94-2602962
California Allberry, Inc. 68-0324763
California Cloud Peak Corporation 68-0324762
California M.J. Lewis Corp. 94-3065450
California Mt. Veeder Corporation 94-2862667
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
Illinois Barton Canada, Ltd. 36-4283446
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
(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
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(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code (716) 218-2169
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each class Name of each exhange on which registered
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Class A Common Stock
(par value $.01 per share) New York Stock Exchange
Class B Common Stock
(par value $.01 per share) New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the common stock held by non-affiliates of
Canandaigua Brands, Inc., as of May 15, 2000, was $725,728,942.
The number of shares outstanding with respect to each of the classes of common
stock of Canandaigua Brands, Inc., as of May 15, 2000, 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 15,159,951
Class B Common Stock, par value $.01 per share 3,096,572
DOCUMENTS INCORPORATED BY REFERENCE
The proxy statement of Canandaigua Brands, Inc. to be issued for the annual
meeting of stockholders to be held July 18, 2000 is incorporated by reference in
Part III.
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PART I
ITEM 1. BUSINESS
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Unless the context otherwise requires, the term "Company" refers to
Canandaigua Brands, Inc. and its subsidiaries, and all references to "net sales"
refer to gross revenue less excise taxes and returns and allowances to conform
with the Company's method of classification. All references to "Fiscal 2000",
"Fiscal 1999" and "Fiscal 1998" shall refer to the Company's fiscal year ended
the last day of February of the indicated year.
Industry data disclosed in this Annual Report on Form 10-K has been
obtained from the following industry and government publications: Adams Liquor
Handbook; Adams Wine Handbook; Adams Beer Handbook; Adam's Media Handbook
Advance; The U. S. Wine Market: Impact Databank Review and Forecast; The U.S.
Beer Market: Impact Databank Review and Forecast; The U.S. Distilled Spirits
Markets: Impact Databank Review and Forecast; NACM; AC Nielsen; the Zenith Guide
and Office for National Statistics (U.K.). The Company has not independently
verified this data. References to positions within industries are based on unit
volume.
The Company is a leading producer and marketer of branded beverage alcohol
products in North America and the United Kingdom. According to available
industry data, the Company ranks as the second largest supplier of wine, the
second largest importer of beer and the fourth largest supplier of distilled
spirits in the United States. The Company's British subsidiary, Matthew Clark
plc ("Matthew Clark"), is a leading producer and marketer of cider, wine and
bottled water, and a leading independent beverage alcohol wholesaler in the
United Kingdom.
The Company is a Delaware corporation organized in 1972 as the successor to
a business founded in 1945. The Company has aggressively pursued growth in
recent years through acquisitions, brand development, new product offerings and
new distribution agreements. The recent acquisitions of Franciscan Vineyards,
Inc. ("Franciscan Estates") and Simi Winery, Inc. ("Simi"), the Black Velvet
Assets (as defined below) and Matthew Clark continued a series of strategic
acquisitions made by the Company since 1991 by which it has diversified its
offerings and as a result, increased its market share, net sales and cash flow.
The Company has also achieved internal growth by developing new products and
repositioning existing brands to focus on the fastest growing sectors of the
beverage alcohol industry.
The Company markets and sells more than 185 premier branded products in
North America and the United Kingdom. The Company's products are distributed by
more than 1,000 wholesalers in North America. In the United Kingdom, the Company
also distributes its own branded products and those of other companies to more
than 16,000 customers. The Company operates more than 20 production facilities
throughout the world and purchases products for resale from other producers.
ACQUISITIONS IN FISCAL 2000 AND FISCAL 1999
ACQUISITIONS OF FRANCISCAN ESTATES AND SIMI
On June 4, 1999, the Company purchased all of the outstanding capital stock
of Franciscan Estates and, in related transactions, purchased vineyards,
equipment and other vineyard related assets located in Northern California
(collectively, the "Franciscan Acquisition"). Franciscan Estates is one of the
foremost super-premium and ultra-premium wine companies in California.
Franciscan Estates' net sales for its fiscal year ended December 31, 1998, were
approximately $50 million on volume of approximately 600,000 cases. While the
super-premium and ultra-premium wine categories represented only 9% of the total
United States wine market by volume in 1997, they accounted for more than 25% of
sales dollars. Super-premium and ultra-premium wine sales in the United States
grew at an annual rate of 16% between 1995 and 1998 and Franciscan Estates
recorded a compound annual growth rate of more than 17% for the same period.
Also on June 4, 1999, the Company purchased all of the outstanding capital
stock of Simi. (The acquisition of the capital stock of Simi is hereafter
referred to as the "Simi Acquisition".) The Simi Acquisition included the Simi
winery (located in Healdsburg, California), equipment, vineyards, inventory and
worldwide ownership of the Simi brand name. Founded in 1876, Simi is one of the
oldest and best known wineries in California, combining a strong super-premium
and ultra-premium brand with a flexible and well-equipped facility and high
quality vineyards in the key Sonoma appellation. On February 29, 2000, Simi was
merged into Franciscan Estates.
The Franciscan and Simi Acquisitions have established the Company as a
leading producer and marketer of super-premium and ultra-premium wine. The
Franciscan Estates and Simi operations complement each other and offer synergies
in the areas of sales and distribution, grape usage and capacity utilization.
Together, Franciscan Estates and Simi represent the sixth largest presence in
the super-premium and ultra-premium wine categories. The Company operates
Franciscan Estates and Simi, and their properties, together as a separate
business segment (collectively, "Franciscan"). The Company's strategy is to
further penetrate the super-premium and ultra-premium wine categories, which
have higher gross profit margins than popularly-priced wine.
ACQUISITION OF BLACK VELVET CANADIAN WHISKY BRAND AND RELATED ASSETS
On April 9, 1999, in an asset acquisition, the Company acquired several
well-known Canadian whisky brands, including Black Velvet, the third best
selling Canadian whisky and the 16th best selling spirits brand in the United
States, production facilities located in Alberta and Quebec, Canada, case goods
and bulk whisky inventories and other related assets from affiliates of Diageo
plc (collectively, the "Black Velvet Assets"). Other principal brands acquired
in the transaction were Golden Wedding, OFC, MacNaughton, McMaster's and Triple
Crown. In connection with the transaction, the Company also entered into
multi-year agreements with affiliates of Diageo plc to provide packaging and
distilling services for various brands retained by the Diageo plc affiliates.
The addition of the Canadian whisky brands from this transaction
strengthens the Company's position in the North American distilled spirits
category and enhances the Company's portfolio of brands and category
participation. The acquired operations have been integrated with the Company's
existing spirits business.
ACQUISITION OF MATTHEW CLARK
On December 1, 1998, the Company acquired control of Matthew Clark and as
of February 28, 1999, had acquired all of Matthew Clark's outstanding shares
(the "Matthew Clark Acquisition"). Matthew Clark grew substantially in the 1990s
through a series of strategic acquisitions, including Grants of St. James's in
1993, the Gaymer Group in 1994 and Taunton Cider Co. in 1995. These acquisitions
served to solidify Matthew Clark's position within its key markets and
contributed to an increase in net sales to approximately $671 million for
Matthew Clark's fiscal year ended April 30, 1998. Matthew Clark has developed a
number of leading market positions, including positions as a leading independent
beverage supplier to the on-premise trade, the number one producer of branded
boxed wine, the number one branded producer of fortified British wine, the
number one branded bottler of sparkling water and the number two producer of
cider.
The Matthew Clark Acquisition strengthens the Company's position in the
beverage alcohol industry by providing the Company with a presence in the United
Kingdom and a platform for growth in the European market. The acquisition of
Matthew Clark also offers potential benefits including distribution
opportunities to market California-produced wine and U.S.-produced spirits in
the United Kingdom, as well as the potential to market Matthew Clark products in
the United States.
Through these and prior acquisitions, the Company has become more
competitive by diversifying its portfolio; developing strong market positions in
the growing beverage alcohol product categories of varietal table wine and
imported beer; strengthening its relationships with wholesalers; expanding its
distribution and enhancing its production capabilities; and acquiring additional
management, operational, marketing, and research and development expertise.
BUSINESS SEGMENTS
The Company operates primarily in the beverage alcohol industry in North
America and the United Kingdom. The Company reports its operating results in
five segments: Canandaigua Wine (branded popularly-priced wine and brandy, and
other, primarily grape juice concentrate); Barton (primarily beer and spirits);
Matthew Clark (branded wine, cider and bottled water, and wholesale wine, cider,
spirits, beer and soft drinks); Franciscan (primarily branded super-premium and
ultra-premium wine) and Corporate Operations and Other (primarily corporate
related items).
Information regarding net sales, operating income and total assets of each
of the Company's business segments and information regarding geographic areas is
set forth in Note 16 to the Company's consolidated financial statements located
in Item 8 of this Annual Report on Form 10-K.
CANANDAIGUA WINE
Canandaigua Wine produces, bottles, imports and markets wine and brandy in
the United States. It is the second largest supplier of wine in the United
States and exports wine to approximately 70 countries from the United States.
Canandaigua Wine sells table wine, dessert wine, sparkling wine and brandy. Its
leading brands include Almaden, Inglenook, Arbor Mist, Paul Masson,
Manischewitz, Taylor, Marcus James, Estate Cellars, Vina Santa Carolina,
Dunnewood, Mystic Cliffs, Cook's, J. Roget, Richards Wild Irish Rose and Paul
Masson Grande Amber Brandy. Most of its wine is marketed in the popularly-priced
category of the wine market.
As a related part of its U.S. wine business, Canandaigua Wine is a leading
grape juice concentrate producer in the United States. Grape juice concentrate
competes with other domestically produced and imported fruit-based concentrates.
Canandaigua Wine's other wine-related products and services include bulk wine,
cooking wine, grape juice and Inglenook-St. Regis, a leading de-alcoholized line
of wine in the United States.
BARTON
Barton produces, bottles, imports and markets a diversified line of beer
and distilled spirits. It is the second largest marketer of imported beer in the
United States and distributes six of the top 25 imported beer brands in the
United States: Corona Extra, Modelo Especial, Corona Light, Pacifico, St. Pauli
Girl and Negra Modelo. Corona Extra is the number one imported beer nationwide.
Barton's other imported beer brands include Tsingtao from China, Peroni from
Italy and Double Diamond and Tetley's English Ale from the United Kingdom.
Barton also operates the Stevens Point Brewery, a regional brewer located in
Wisconsin, which produces Point Special, among other brands.
Barton is the fourth largest supplier of distilled spirits in the United
States and exports distilled spirits to approximately 15 countries from the
United States. Barton's principal distilled spirits brands include
Fleischmann's, Mr. Boston, Canadian LTD, Chi-Chi's prepared cocktails, Ten High,
Montezuma, Barton, Monte Alban, Inver House and the recently acquired Black
Velvet brand. Substantially all of Barton's spirits unit volume consists of
products marketed in the price value category. Barton also sells distilled
spirits in bulk and provides contract production and bottling services for third
parties.
MATTHEW CLARK
Matthew Clark is a leading producer and distributor of cider, wine and
bottled water and a leading drinks wholesaler throughout the United Kingdom.
Matthew Clark also exports its branded products to approximately 50 countries
from the United Kingdom. Matthew Clark is the second largest producer and
marketer of cider in the United Kingdom. Matthew Clark distributes its cider
brands in both the on-premise and off-premise markets and these brands compete
in both the mainstream and premium brand categories. Matthew Clark's leading
mainstream cider brands include Blackthorn and Gaymer's Olde English. Blackthorn
is the number two mainstream cider brand and Gaymer's Olde English is the U.K.'s
second largest cider brand in the take-home market. Matthew Clark's leading
premium cider brands are Diamond White and K.
Matthew Clark is the largest supplier of wine to the on-premise trade in
the United Kingdom. Its Stowells of Chelsea brand maintains the leading share in
the branded boxed wine segment. Matthew Clark also maintains a leading market
share position in fortified British wine through its QC and Stone's brand names.
It also produces and markets Strathmore bottled water in the United Kingdom, the
leading bottled sparkling water brand in the country.
Matthew Clark is a leading independent beverage supplier to the on-premise
trade in the United Kingdom and has one of the largest customer bases in the
United Kingdom, with more than 16,000 on-premise accounts. Matthew Clark's
wholesaling business involves the distribution of branded wine, spirits, cider,
beer and soft drinks. While these products are primarily produced by third
parties, they also include Matthew Clark's cider and wine branded products.
FRANCISCAN
The Company's Franciscan segment is comprised of the Franciscan Estates and
Simi portfolios. These operations are managed together as a separate business
segment of the Company, and position the Company as a major player in the
super-premium and ultra-premium wine market. Franciscan also exports its
products to approximately 25 countries from the United States.
Franciscan includes the prestigious Franciscan Oakville Estate (Napa
Valley), Estancia (Monterey and Sonoma), Simi (Sonoma), Mt. Veeder and Quintessa
(Napa Valley), and Veramonte (Casablanca Valley, Chile) wines. The portfolio of
fine wines is supported by the segment's winery and vineyard holdings in
California and Chile. These brands are marketed by a dedicated sales force,
primarily focusing on high-end restaurants and fine wine shops.
CORPORATE OPERATIONS AND OTHER
Corporate Operations and Other includes traditional corporate related items
and the results of an immaterial operation.
MARKETING AND DISTRIBUTION
NORTH AMERICA
The Company's products are distributed and sold throughout North America
through over 1,000 wholesalers, as well as through state and provincial
alcoholic beverage control agencies. Canandaigua Wine, Barton and Franciscan
employ full-time, in-house marketing, sales and customer service organizations
to develop and service their sales to wholesalers and state agencies. The
Company believes that the organization of its sales force into separate segments
positions it to maintain a high degree of focus on each of its principal product
categories.
The Company's marketing strategy places primary emphasis upon promotional
programs directed at its broad national distribution network, and at the
retailers served by that network. The Company has extensive marketing programs
for its brands including promotional programs on both a national basis and
regional basis in accordance with the strength of the brands, point-of-sale
materials, consumer media advertising, event sponsorship, market research, trade
advertising and public relations.
During Fiscal 2000, the Company increased its advertising expenditures to
put more emphasis on consumer advertising for its imported beer brands,
primarily with respect to the Mexican brands. In addition, promotional spending
for the Company's wine brands increased to address competitive factors.
UNITED KINGDOM
The Company's U.K.-produced branded products are marketed and distributed
throughout the United Kingdom by Matthew Clark. The products are packaged at one
of three production facilities. Shipments of cider and wine are then made to
Matthew Clark's national distribution center for branded products. All branded
products are then distributed to either the on-premise or off-premise markets
with some of the sales to on-premise customers made through Matthew Clark's
wholesale business. Matthew Clark's wholesale products are distributed through
12 depots located throughout the United Kingdom. On-premise distribution
channels include hotels, restaurants, pubs, wine bars and clubs. The off-premise
distribution channels include grocers, convenience retail, cash-and-carry
outlets and wholesalers.
Matthew Clark employs a full-time, in-house marketing and sales
organization that targets off-premise customers for Matthew Clark's branded
products. Matthew Clark also employs a full-time, in-house branded products
marketing and sales organization that services specifically the on-premise
market in the United Kingdom. Additionally, Matthew Clark employs a full-time,
in-house marketing and sales organization to service the customers of its
wholesale business.
TRADEMARKS AND DISTRIBUTION AGREEMENTS
The Company's products are sold under a number of trademarks, most of which
are owned by the Company. The Company also produces and sells wine and distilled
spirits products under exclusive license or distribution agreements. Important
agreements include a long-term license agreement with Hiram Walker & Sons, Inc.
(which expires in 2116) for the Ten High, Crystal Palace, Northern Light and
Imperial Spirits brands; and a long-term license agreement with the B.
Manischewitz Company (which expires in 2042) for the Manischewitz brand of
kosher wine. On September 30, 1998, under the provisions of an existing
long-term license agreement, Nabisco Brands Company agreed to transfer to Barton
all of its right, title and interest to the corporate name "Fleischmann
Distilling Company" and worldwide trademark rights to the "Fleischmann" mark for
alcoholic beverages. Pending the completion of the assignment of such interests,
the license will remain in effect. The Company also has other less significant
license and distribution agreements related to the sale of wine and distilled
spirits with terms of various durations.
All of the Company's imported beer products are marketed and sold pursuant
to exclusive distribution agreements with the suppliers of these products. These
agreements have terms that vary and prohibit the Company from importing other
beer from the same country. The Company's agreement to distribute Corona and its
other Mexican beer brands exclusively throughout 25 primarily U.S. western
states expires in December 2006 and, subject to compliance with certain
performance criteria, continued retention of certain Company personnel and other
terms under the agreement, will be automatically renewed for additional terms of
five years. Changes in control of the Company or of its subsidiaries involved in
importing the Mexican beer brands, changes in the position of the Chief
Executive Officer of Barton Beers, Ltd. (including by death or disability) or
the termination of the President of Barton Incorporated, may be a basis for the
supplier, unless it consents to such changes, to terminate the agreement. The
supplier's consent to such changes may not be unreasonably withheld. Prior to
their expiration, these agreements may be terminated if the Company fails to
meet certain performance criteria. The Company believes it is currently in
compliance with its material imported beer distribution agreements. From time to
time, the Company has failed, and may in the future fail, to satisfy certain
performance criteria in its distribution agreements. Although there can be no
assurance that its beer distribution agreements will be renewed, given the
Company's long-term relationships with its suppliers the Company expects that
such agreements will be renewed prior to their expiration and does not believe
that these agreements will be terminated.
The Company owns the trademarks for the leading brands and most of the
other brands that were acquired in the Matthew Clark Acquisition. The Company
has a series of distribution agreements and supply agreements in the United
Kingdom related to the sale of its products with varying terms and durations.
COMPETITION
The beverage alcohol industry is highly competitive. The Company competes
on the basis of quality, price, brand recognition and distribution. The
Company's beverage alcohol products compete with other alcoholic and
nonalcoholic beverages for consumer purchases, as well as shelf space in retail
stores, a presence in restaurants and marketing focus by the Company's
wholesalers. The Company competes with numerous multinational producers and
distributors of beverage alcohol products, some of which have significantly
greater resources than the Company. In the United States, Canandaigua Wine's
principal competitors include E & J Gallo Winery and The Wine Group. Barton's
principal competitors include Heineken USA, Molson Breweries USA, Labatt's USA,
Guinness Import Company, Brown-Forman Beverages, Jim Beam Brands and Heaven Hill
Distilleries, Inc. Franciscan's principal competitors include Robert Mondavi
Corp., Beringer Wine Estates, Kendall-Jackson and Allied Domecq Wines. In the
United Kingdom, Matthew Clark's principal competitors include Halewood Vintners,
H.P. Bulmer, Tavern, Waverley Vintners and Perrier. In connection with its
wholesale business, Matthew Clark distributes the branded wine of third parties
that compete directly against its own wine brands.
PRODUCTION
In the United States, the Company's wine is produced from several varieties
of wine grapes grown principally in California and New York. The grapes are
crushed at the Company's wineries and stored as wine, grape juice or
concentrate. Such grape products may be made into wine for sale under the
Company's brand names, sold to other companies for resale under their own
labels, or shipped to customers in the form of juice, juice concentrate,
unfinished wine, high-proof grape spirits or brandy. Most of the Company's wine
is bottled and sold within 18 months after the grape crush. The Company's
inventories of wine, grape juice and concentrate are usually at their highest
levels in November and December immediately after the crush of each year's grape
harvest, and are substantially reduced prior to the subsequent year's crush.
The bourbon whiskeys, domestic blended whiskeys and light whiskeys marketed
by the Company are primarily produced and aged by the Company at its distillery
in Bardstown, Kentucky, though it may from time to time supplement its
inventories through purchases from other distillers. Following the acquisition
of the Black Velvet Assets, the majority of the Company's Canadian whisky
requirements are produced and aged at its Canadian distilleries in Lethbridge,
Alberta, and Valleyfield, Quebec. At its Albany, Georgia, facility, the Company
produces all of the neutral grain spirits and whiskeys it uses in the production
of vodka, gin and blended whiskey it sells to customers in the state of Georgia.
The Company's requirements of Scotch whisky, tequila, mezcal and the neutral
grain spirits it uses in the production of gin and vodka for sale outside of
Georgia, and other spirits products, are purchased from various suppliers.
The Company operates three facilities in the United Kingdom that produce,
bottle and package cider, wine and water. To produce Stowells of Chelsea, wine
is imported in bulk from various countries such as Chile, Germany, France,
Spain, South Africa and Australia, which is then packaged at the Company's
facility at Bristol and distributed under the Stowells of Chelsea brand name.
The Strathmore brand of bottled water (which is available in still, sparkling,
and flavored varieties) is sourced and bottled in Forfar, Scotland. Cider
production was consolidated at the Company's facility at Shepton Mallet, where
apples of many different varieties are purchased from U.K. growers and crushed.
This juice, along with European-sourced concentrate, is then fermented into
cider.
The Company operates one winery in Chile that crushes, vinifies, cellars
and bottles wine.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The principal components in the production of the Company's branded
beverage alcohol products are packaging materials (primarily glass) and
agricultural products, such as grapes and grain. The Company utilizes glass and
PET bottles and other materials such as caps, corks, capsules, labels and
cardboard cartons in the bottling and packaging of its products. Glass bottle
costs are one of the largest components of the Company's cost of product sold.
The glass bottle industry is highly concentrated with only a small number of
producers. The Company has traditionally obtained, and continues to obtain, its
glass requirements from a limited number of producers. The Company has not
experienced difficulty in satisfying its requirements with respect to any of the
foregoing and considers its sources of supply to be adequate. However, the
inability of any of the Company's glass bottle suppliers to satisfy the
Company's requirements could adversely affect the Company's operations.
Most of the Company's annual grape requirements are satisfied by purchases
from each year's harvest which normally begins in August and runs through
October. The Company believes that it has adequate sources of grape supplies to
meet its sales expectations. However, in the event demand for certain wine
products exceeds expectations, the Company could experience shortages.
The Company purchases grapes from over 800 independent growers, principally
in the San Joaquin Valley, Central Coast and North Coast regions of California
and in New York State. The Company enters into written purchase agreements with
a majority of these growers on a year-to-year basis. The Company currently owns
or leases approximately 7,000 acres of land and vineyards, either fully bearing
or under development, in California, New York and Chile. This acreage supplies
only a small percentage of the Company's total needs. The Company continues to
consider the purchase or lease of additional vineyards, and additional land for
vineyard plantings, to supplement its grape supply.
The distilled spirits manufactured by the Company require various
agricultural products, neutral grain spirits and bulk spirits. The Company
fulfills its requirements through purchases from various sources through
contractual arrangements and through purchases on the open market. The Company
believes that adequate supplies of the aforementioned products are available at
the present time.
The Company manufactures cider, perry and light and fortified British wine
from materials that are purchased either on a contracted basis or on the open
market. In particular, supplies of cider apples are sourced through long term
supply arrangements with owners of apple orchards. There are adequate supplies
of the various raw materials at this particular time.
GOVERNMENT REGULATION
The Company's operations in the United States are subject to extensive
Federal and state regulation. These regulations cover, among other matters,
sales promotion, advertising and public relations, labeling and packaging,
changes in officers or directors, ownership or control, distribution methods and
relationships, and requirements regarding brand registration and the posting of
prices and price changes. All of the Company's operations and facilities are
also subject to Federal, state, foreign and local environmental laws and
regulations and the Company is required to obtain permits and licenses to
operate its facilities.
In the United Kingdom, the Company has secured a Customs and Excise License
to carry on its excise trade. Licenses are required for all premises where wine
is produced. The Company holds a license to act as an excise warehouse operator.
Registrations have been secured for the production of cider and bottled water.
Formal approval of product labeling is not required.
In Canada, the Company's operations are also subject to extensive federal
and provincial regulation. These regulations cover, among other matters,
advertising and public relations, labeling and packaging, environmental matters
and customs and duty requirements. The Company is also required to obtain
licenses and permits to operate its facilities.
The Company believes that it is in compliance in all material respects with
all applicable governmental laws and regulations and that the cost of
administration and compliance with, and liability under, such laws and
regulations does not have, and is not expected to have, a material adverse
impact on the Company's financial condition, results of operations or cash
flows.
EMPLOYEES
The Company had approximately 2,520 full-time employees in the United
States at the end of April 2000, of which approximately 830 were covered by
collective bargaining agreements. Additional workers may be employed by the
Company during the grape crushing season.
The Company had approximately 1,720 full-time employees in the United
Kingdom at the end of April 2000, of which approximately 400 were covered by
collective bargaining agreements. Additional workers may be employed during the
peak season.
The Company had approximately 260 full-time employees in Canada at the end
of April 2000, of which approximately 200 were covered by collective bargaining
agreements.
The Company considers its employee relations generally to be good.
ITEM 2. PROPERTIES
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The Company, maintaining its corporate headquarters in offices leased in
Fairport, New York, consists of four business operating segments. Through these
business segments, the Company currently operates wineries, distilling plants,
bottling plants, a brewery, cider and water producing facilities, most of which
include warehousing and distribution facilities on the premises. The Company
also operates separate distribution centers under the Matthew Clark segment's
wholesaling business. The Company believes that all of its facilities are in
good condition and working order and have adequate capacity to meet its needs
for the foreseeable future.
CANANDAIGUA WINE
Canandaigua Wine maintains its headquarters in owned and leased offices in
Canandaigua, New York. It operates three wineries in New York, located in
Canandaigua, Naples and Batavia, and six wineries in California, located in
Madera, Gonzales, Escalon, Fresno and Ukiah. All of the facilities in which
these wineries operate are owned, except for the winery in Batavia, New York,
which is leased. Canandaigua Wine considers its principal wineries to be the
Mission Bell winery in Madera, California; the Canandaigua winery in
Canandaigua, New York; and the Riverland Vineyards winery in Gonzales,
California. The Mission Bell winery crushes grapes, produces, bottles and
distributes wine and produces grape juice concentrate. The Canandaigua winery
crushes grapes and produces, bottles and distributes wine. The Riverland
Vineyards winery crushes grapes and produces, bottles and distributes wine for
Canandaigua Wine's account and, on a contractual basis, for third parties.
Canandaigua Wine currently owns or leases approximately 4,200 acres of
vineyards, either fully bearing or under development, in California and New
York.
BARTON
Barton maintains its headquarters in leased offices in Chicago, Illinois.
It owns and operates four distilling plants, two in the United States and two in
Canada. The two distilling plants in the United States are located in Bardstown,
Kentucky; and Albany, Georgia; and the two distilling plants in Canada, which
were acquired in connection with the Black Velvet Assets, are located in
Valleyfield, Quebec; and Lethbridge, Alberta. Barton considers its principal
distilling plants to be the facilities located in Bardstown, Kentucky;
Valleyfield, Quebec; and Lethbridge, Alberta. The Bardstown facility distills,
bottles and warehouses distilled spirits products for Barton's account and, on a
contractual basis, for other participants in the industry. The two Canadian
facilities distill, bottle and store Canadian whisky for Barton's own account,
and distill and/or bottle and store Canadian whisky, vodka, rum, gin and
liqueurs for third parties.
In the United States, Barton also operates a brewery and three bottling
plants. The brewery is located in Stevens Point, Wisconsin; and the bottling
plants are located in Atlanta, Georgia; Owensboro, Kentucky; and Carson,
California. All of these facilities are owned by Barton except for the bottling
plant in Carson, California, which is operated and leased through an arrangement
involving an ongoing management contract. Barton considers the bottling plant
located in Owensboro, Kentucky to be one of its principal facilities. The
Owensboro facility bottles and warehouses distilled spirits products for
Barton's account and also performs contract bottling.
MATTHEW CLARK
Matthew Clark maintains its headquarters in owned offices in Bristol,
England. It currently owns and operates two facilities in England that are
located in Bristol and Shepton Mallet and one facility in Scotland, located in
Forfar. Matthew Clark considers all three facilities to be its principal
facilities. The Bristol facility produces, bottles and packages wine; the
Shepton Mallet facility produces, bottles and packages cider; and the Forfar
facility produces, bottles and packages water products. Matthew Clark also owns
another facility in England, located in Taunton, the operations of which have
now been consolidated into its Shepton Mallet facility. Matthew Clark plans to
sell the Taunton property.
Matthew Clark operates the National Distribution Centre, located in
Severnside, England to distribute its products that are produced at the Bristol
and Shepton Mallet facilities. This distribution facility is leased by Matthew
Clark. To support its wholesaling business, Matthew Clark operates 12
distribution centers located throughout the United Kingdom, all of which are
leased. These distribution centers are used to distribute products produced by
third parties, as well as by Matthew Clark. Matthew Clark has been and will
continue consolidating the operations of its wholesaling distribution centers.
FRANCISCAN
Franciscan maintains its headquarters in offices owned in Rutherford,
California. Through this segment the Company owns and operates four wineries in
the United States and, through a majority owned subsidiary, operates one winery
in Chile. All four wineries in the United States are located in the state of
California, in Rutherford, Healdsburg, Monterey and Mt. Veeder, and the winery
in Chile is located in the Casablanca Valley. Franciscan considers its principal
wineries to be those located in Rutherford, California; Healdsburg, California;
Monterey, California; and the Casablanca Valley, Chile. The wineries in
Rutherford, California; Healdsburg, California; and the Casablanca Valley, Chile
crush grapes and vinify, cellar and bottle wine. The winery in Monterey,
California crushes, vinifies and cellars wine.
Franciscan also owns and leases approximately 2,000 plantable acres of
vineyards in California and approximately 800 plantable acres of vineyards in
Chile.
ITEM 3. LEGAL PROCEEDINGS
------- -----------------
The Company and its subsidiaries are subject to litigation from time to
time in the ordinary course of business. Although the amount of any liability
with respect to such litigation cannot be determined, in the opinion of
management such liability will not have a material adverse effect on the
Company's financial condition, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------- ---------------------------------------------------
Not Applicable.
EXECUTIVE OFFICERS OF THE COMPANY
Information with respect to the current executive officers of the Company
is as follows:
NAME AGE OFFICE HELD
---- --- -----------
Richard Sands 49 Chairman of the Board, President and Chief
Executive Officer
Robert Sands 41 Group President
Peter Aikens 61 President and Chief Executive Officer of
Matthew Clark plc
Alexander L. Berk 50 President and Chief Executive Officer of
Barton Incorporated
Agustin Francisco Huneeus 34 President of Franciscan Vineyards, Inc.
Jon Moramarco 43 President and Chief Executive Officer of
Canandaigua Wine Company, Inc.
Thomas J. Mullin 48 Executive Vice President and General Counsel
George H. Murray 53 Executive Vice President and Chief Human
Resources Officer
Thomas S. Summer 46 Executive Vice President and Chief Financial
Officer
Richard Sands, Ph.D., has been employed by the Company in various
capacities since 1979. He was elected Executive Vice President and a director in
1982, became President and Chief Operating Officer in May 1986 and was elected
Chief Executive Officer in October 1993. In September 1999, Mr. Sands was
elected Chairman of the Board. He is the brother of Robert Sands.
Robert Sands was appointed Group President in April 2000 and has served as
a director since January 1990. Mr. Sands also had served as Vice President from
June 1990 through October 1993, as Executive Vice President from October 1993
through April 2000, and as General Counsel from June 1986 through May 2000. He
is the brother of Richard Sands.
Peter Aikens serves as President and Chief Executive Officer of Matthew
Clark plc, a wholly-owned subsidiary of the Company. In this capacity, Mr.
Aikens is in charge of the Company's Matthew Clark segment, and has been since
the Company acquired control of Matthew Clark in December 1998. He has been the
Chief Executive Officer of Matthew Clark plc since May 1990 and has been in the
brewing and drinks industry for most of his career.
Alexander L. Berk serves as President and Chief Executive Officer of Barton
Incorporated, a wholly-owned subsidiary of the Company. In this capacity, Mr.
Berk is in charge of the Company's Barton segment. From 1990 until February
1998, Mr. Berk was President and Chief Operating Officer of Barton and from 1988
to 1990, he was the President and Chief Executive Officer of Schenley
Industries. Mr. Berk has been in the alcoholic beverage industry for most of his
career, serving in various positions.
Agustin Francisco Huneeus serves as President of Franciscan Vineyards,
Inc., a wholly-owned subsidiary of the Company. In this capacity, Mr. Huneeus is
in charge of the Company's Franciscan segment. Since December 1995 and prior to
becoming President on May 15, 2000, he served in various positions with
Franciscan, the last of which was Senior Vice President, Sales and Marketing.
From June 1994 to December 1995, he was an associate in the branded consumer
venture group of Hambrecht & Quist.
Jon Moramarco joined Canandaigua Wine Company, Inc., a wholly-owned
subsidiary of the Company, in November 1999 as its President and Chief Executive
Officer. In this capacity, Mr. Moramarco is in charge of the Company's
Canandaigua Wine segment. Prior to joining Canandaigua Wine Company, Inc., he
served as President and Chief Executive Officer of Allied Domecq Wines, USA
since 1992. Mr. Moramarco has more than 15 years of diverse experience in the
wine industry, including prior service as Chairman of the American Vintners
Association, a national wine trade organization.
Thomas J. Mullin joined the Company as Executive Vice President and General
Counsel on May 30, 2000. Prior to joining the Company, Mr. Mullin served as
President and Chief Executive Officer of TD Waterhouse Bank, NA since February
2000, of CT USA, F.S.B. since September 1998, and of CT USA, Inc. since March
1997. He also served as Executive Vice President, Business Development and
Corporate Strategy of C.T. Financial Services, Inc. from March 1997 through
February 2000. From 1985 through 1997, Mr. Mullin served as Vice Chairman and
Senior Executive Vice President of First Federal Savings and Loan Association of
Rochester, and from 1982 through 1985, he was a partner in the law firm of
Phillips, Lytle, Hitchcock, Blaine & Huber.
George H. Murray joined the Company in April 1997 as Senior Vice President
and Chief Human Resources Officer and in April 2000 was elected Executive Vice
President. From August 1994 to April 1997, Mr. Murray served as Vice President -
Human Resources and Corporate Communications of ACC Corp., an international long
distance reseller. For eight and a half years prior to that, he served in
various senior management positions with First Federal Savings and Loan of
Rochester, New York, including the position of Senior Vice President of Human
Resources and Marketing from 1991 to 1994.
Thomas S. Summer joined the Company in April l997 as Senior Vice President
and Chief Financial Officer and in April 2000 was elected Executive Vice
President. From November 1991 to April 1997, Mr. Summer served as Vice
President, Treasurer of Cardinal Health, Inc., a large national health care
services company, where he was responsible for directing financing strategies
and treasury matters. Prior to that, from November 1987 to November 1991, Mr.
Summer held several positions in corporate finance and international treasury
with PepsiCo, Inc.
Executive officers of the Company hold office until the next Annual Meeting
of the Board of Directors and until their successors are chosen and qualify.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
------- -----------------------------------------------------------------
MATTERS
-------
On October 12, 1999, the Company's Class A Common Stock (the "Class A
Stock") and Class B Common Stock (the "Class B Stock") began trading on the New
York Stock Exchange(R) ("NYSE") under the symbols "CDB" and "CDB.B,"
respectively. Prior to October 12, 1999, the Company's Class A Stock and Class B
Stock traded on the Nasdaq Stock Market(R) ("NASDAQ") under the symbols "CBRNA"
and "CBRNB," respectively. (The Company delisted voluntarily its securities from
NASDAQ in order to list its Class A Stock and Class B Stock on the NYSE.)
The following tables set forth for the periods indicated the high and low
sales prices of the Class A Stock and the Class B Stock. With respect to all
periods for Fiscal 1999 and the first two quarters of Fiscal 2000, the high and
low sales prices of the Class A Stock and the Class B Stock reflect trades on
the NASDAQ. For the 3rd Quarter of Fiscal 2000, the high and low sales prices of
the Class A Stock reflect trades on the NASDAQ and the NYSE, respectively, and
the high and low sales prices of the Class B Stock reflect trades on the NASDAQ.
For the 4th Quarter of Fiscal 2000, the high and low sales prices of the Class A
Stock and Class B Stock reflect trades on the NYSE.
CLASS A STOCK
--------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- ----------- -----------
Fiscal 1999
High $ 59 3/4 $ 52 3/8 $ 52 1/8 $ 61 1/2
Low $ 45 9/16 $ 40 1/4 $ 35 1/4 $ 45 5/8
Fiscal 2000
High $ 55 1/4 $ 60 3/8 $ 61 3/16 $ 54 11/16
Low $ 45 3/8 $ 42 7/8 $ 53 $ 46 3/4
CLASS B STOCK
--------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- ----------- -----------
Fiscal 1999
High $ 59 3/4 $ 51 1/2 $ 52 $ 62 1/4
Low $ 45 1/2 $ 40 3/4 $ 37 1/4 $ 46 7/8
Fiscal 2000
High $ 55 3/4 $ 60 $ 60 3/4 $ 58 1/8
Low $ 47 1/2 $ 44 1/4 $ 56 $ 49
At May 15, 2000, the number of holders of record of Class A Stock and Class
B Stock of the Company were 940 and 273, respectively.
The Company's policy is to retain all of its earnings to finance the
development and expansion of its business, and the Company has not paid any cash
dividends since its initial public offering in 1973. In addition, the Company's
current senior credit facility, the Company's indenture for its $130 million 8
3/4% Senior Subordinated Notes due December 2003, its indenture for its $65
million 8 3/4% Series C Senior Subordinated Notes due December 2003, its
indenture for its $200 million 8 1/2% Senior Subordinated Notes due March 2009,
its indenture for its $200 million 8 5/8% Senior Notes due August 2006, its
indenture for its (pound)75 million 8 1/2% Series B Senior Notes due November
2009 and its (pound)80 million 8 1/2% Series C Senior Notes due November 2009
restrict the payment of cash dividends.
ITEM 6. SELECTED FINANCIAL DATA
------- -----------------------
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE MONTHS FOR THE YEAR
YEAR ENDED FOR THE YEARS ENDED ENDED ENDED
FEBRUARY 29, FEBRUARY 28, FEBRUARY 29, AUGUST 31,
------------ -------------------------------------- -------------- ------------
2000 1999 1998 1997 1996 1995
------------ ----------- ----------- ----------- -------------- ------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Gross sales $ 3,088,699 $ 1,984,801 $ 1,632,357 $ 1,534,452 $ 738,415 $ 1,185,074
Less-excise taxes (748,230) (487,458) (419,569) (399,439) (203,391) (278,530)
------------ ----------- ----------- ----------- -------------- ------------
Net sales 2,340,469 1,497,343 1,212,788 1,135,013 535,024 906,544
Cost of product sold (1,618,009) (1,049,309) (869,038) (812,812) (389,281) (657,883)
------------ ----------- ----------- ----------- -------------- ------------
Gross profit 722,460 448,034 343,750 322,201 145,743 248,661
Selling, general and
administrative expenses (481,909) (299,526) (231,680) (208,991) (112,411) (159,196)
Nonrecurring charges (5,510) (2,616) - - (2,404) (2,238)
------------ ----------- ----------- ----------- -------------- ------------
Operating income 235,041 145,892 112,070 113,210 30,928 87,227
Interest expense, net (106,082) (41,462) (32,189) (34,050) (17,298) (24,601)
------------ ----------- ----------- ----------- -------------- ------------
Income before taxes and
extraordinary item 128,959 104,430 79,881 79,160 13,630 62,626
Provision for income taxes (51,584) (42,521) (32,751) (32,977) (6,221) (24,008)
------------ ----------- ----------- ----------- -------------- ------------
Income before extraordinary item 77,375 61,909 47,130 46,183 7,409 38,618
Extraordinary item, net of income taxes - (11,437) - - - -
------------ ----------- ----------- ----------- -------------- ------------
Net income $ 77,375 $ 50,472 $ 47,130 $ 46,183 $ 7,409 $ 38,618
============ =========== =========== =========== ============== ============
Earnings per common share:
Basic:
Income before extraordinary item $ 4.29 $ 3.38 $ 2.52 $ 2.39 $ 0.38 $ 2.06
Extraordinary item - (0.62) - - - -
------------ ----------- ----------- ----------- -------------- ------------
Earnings per common share - basic $ 4.29 $ 2.76 $ 2.52 $ 2.39 $ 0.38 $ 2.06
============ =========== =========== =========== ============== ============
Diluted:
Income before extraordinary item $ 4.18 $ 3.30 $ 2.47 $ 2.37 $ 0.37 $ 2.03
Extraordinary item - (0.61) - - - -
------------ ----------- ----------- ----------- -------------- ------------
Earnings per common share - diluted $ 4.18 $ 2.69 $ 2.47 $ 2.37 $ 0.37 $ 2.03
============ =========== =========== =========== ============== ============
Total assets $ 2,348,791 $ 1,793,776 $ 1,090,555 $ 1,043,281 $ 1,045,590 $ 770,004
============ =========== =========== =========== ============== ============
Long-term debt $ 1,237,135 $ 831,689 $ 309,218 $ 338,884 $ 327,616 $ 198,859
============ =========== =========== =========== ============== ============
</TABLE>
For the fiscal year ended February 29, 2000, and for the fiscal year ended
February 28, 1999, see Management's Discussion and Analysis of Financial
Condition and Results of Operations under Item 7 of this Annual Report on Form
10-K and Notes to Consolidated Financial Statements as of February 29, 2000,
under Item 8 of this Annual Report on Form 10-K. During January 1996, the Board
of Directors of the Company changed the Company's fiscal year end from August 31
to the last day of February.
ITEM 7. 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 year
ended February 29, 2000 ("Fiscal 2000"), compared to the year ended February 28,
1999 ("Fiscal 1999"), and Fiscal 1999 compared to the year ended February 28,
1998 ("Fiscal 1998"), and (ii) financial liquidity and capital resources for
Fiscal 2000. This discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and notes thereto included herein.
The Company operates primarily in the beverage alcohol industry in North
America and the United Kingdom. The Company reports its operating results in
five segments: Canandaigua Wine (branded popularly-priced wine and brandy, and
other, primarily grape juice concentrate); Barton (primarily beer and spirits);
Matthew Clark (branded wine, cider and bottled water, and wholesale wine, cider,
spirits, beer and soft drinks); Franciscan (primarily branded super-premium and
ultra-premium wine); and Corporate Operations and Other (primarily corporate
related items).
ACQUISITIONS IN FISCAL 2000 AND FISCAL 1999
On June 4, 1999, the Company purchased all of the outstanding capital stock
of Franciscan Vineyards, Inc. ("Franciscan Estates") and, in related
transactions, purchased vineyards, equipment and other vineyard related assets
located in Northern California (collectively, the "Franciscan Acquisition").
Also on June 4, 1999, the Company purchased all of the outstanding capital stock
of Simi Winery, Inc. ("Simi"). (The acquisition of the capital stock of Simi is
hereafter referred to as the "Simi Acquisition".) The Simi Acquisition included
the Simi winery, equipment, vineyards, inventory and worldwide ownership of the
Simi brand name. The results of operations from the Franciscan and Simi
Acquisitions (collectively, "Franciscan") are reported together in the
Franciscan segment and have been included in the consolidated results of
operations of the Company since the date of acquisition. On February 29, 2000,
Simi was merged into Franciscan Estates.
On April 9, 1999, in an asset acquisition, the Company acquired several
well-known Canadian whisky brands, including Black Velvet, production facilities
located in Alberta and Quebec, Canada, case goods and bulk whisky inventories
and other related assets from affiliates of Diageo plc (collectively, the "Black
Velvet Assets"). In connection with the transaction, the Company also entered
into multi-year agreements with affiliates of Diageo plc to provide packaging
and distilling services for various brands retained by the Diageo plc
affiliates. The results of operations from the Black Velvet Assets are reported
in the Barton segment and have been included in the consolidated results of
operations of the Company since the date of acquisition.
On December 1, 1998, the Company acquired control of Matthew Clark plc
("Matthew Clark") and as of February 28, 1999, had acquired all of Matthew
Clark's outstanding shares (the "Matthew Clark Acquisition"). Prior to the
Matthew Clark Acquisition, the Company was principally a producer and supplier
of wine and an importer and producer of beer and distilled spirits in the United
States. The Matthew Clark Acquisition established the Company as a leading
British producer of cider, wine and bottled water and as a leading beverage
alcohol wholesaler in the United Kingdom. The results of operations of Matthew
Clark have been included in the consolidated results of operations of the
Company since the date of acquisition, December 1, 1998.
RESULTS OF OPERATIONS
---------------------
FISCAL 2000 COMPARED TO FISCAL 1999
NET SALES
The following table sets forth the net sales (in thousands of dollars) by
operating segment of the Company for Fiscal 2000 and Fiscal 1999.
Fiscal 2000 Compared to Fiscal 1999
-------------------------------------
Net Sales
-------------------------------------
2000 1999 %Increase
------------ ------------ ---------
Canandaigua Wine:
Branded:
External customers $ 623,796 $ 598,782 4.2%
Intersegment 5,524 - N/A
------------ ------------
Total Branded 629,320 598,782 5.1%
------------ ------------
Other:
External customers 81,442 70,711 15.2%
Intersegment 1,146 - N/A
------------ ------------
Total Other 82,588 70,711 16.8%
------------ ------------
Canandaigua Wine net sales $ 711,908 $ 669,493 6.3%
------------ ------------
Barton:
Beer $ 570,380 $ 478,611 19.2%
Spirits 267,762 185,938 44.0%
------------ ------------
Barton net sales $ 838,142 $ 664,549 26.1%
------------ ------------
Matthew Clark:/
Branded:
External customers $ 313,027 $ 64,879 382.5%
Intersegment 75 - N/A
------------ ------------
Total Branded 313,102 64,879 382.6%
Wholesale 416,644 93,881 343.8%
------------ ------------
Matthew Clark net sales $ 729,746 $ 158,760 359.7%
------------ ------------
Franciscan:
External customers $ 62,046 $ - N/A
Intersegment 73 - N/A
------------ ------------
Franciscan net sales $ 62,119 $ - N/A
------------ ------------
Corporate Operations and Other $ 5,372 $ 4,541 18.3%
------------ ------------
Intersegment eliminations $ (6,818) $ - N/A
------------ ------------
Consolidated Net Sales $ 2,340,469 $ 1,497,343 56.3%
============ ============
Net sales for Fiscal 2000 increased to $2,340.5 million from $1,497.3
million for Fiscal 1999, an increase of $843.1 million, or 56.3%.
Canandaigua Wine
----------------
Net sales for Canandaigua Wine for Fiscal 2000 increased to $711.9 million
from $669.5 million for Fiscal 1999, an increase of $42.4 million, or 6.3%. This
increase resulted primarily from (i) an increase in sales of Arbor Mist, which
was introduced in the second quarter of Fiscal 1999, (ii) an increase in the
Company's bulk wine sales, (iii) an increase in sparkling wine sales as a result
of millennium sales, and (iv) an increase in Almaden box wine sales. These
increases were partially offset by declines in certain other wine brands.
Barton
------
Net sales for Barton for Fiscal 2000 increased to $838.1 million from
$664.5 million for Fiscal 1999, an increase of $173.6 million, or 26.1%. This
increase resulted primarily from volume growth and selling price increases in
the Mexican beer portfolio as well as from $81.3 million of sales of products
and services acquired in the acquisition of the Black Velvet Assets, which was
completed in April 1999.
Matthew Clark
-------------
Net sales for Matthew Clark for Fiscal 2000 increased to $729.7 million
from $158.8 million for Fiscal 1999, an increase of $571.0 million, or 359.7%.
The Company acquired control of Matthew Clark during the fourth quarter of
Fiscal 1999.
Franciscan
----------
Net sales for Franciscan for Fiscal 2000 since the date of acquisition,
June 4, 1999, were $62.1 million.
GROSS PROFIT
The Company's gross profit increased to $722.5 million for Fiscal 2000 from
$448.0 million for Fiscal 1999, an increase of $274.4 million, or 61.3%. The
dollar increase in gross profit was primarily related to sales from the
acquisitions of Matthew Clark, the Black Velvet Assets and Franciscan, all
completed after the third quarter of Fiscal 1999, as well as increased Barton
beer and Canandaigua Wine branded wine sales. As a percent of net sales, gross
profit increased to 30.9% for Fiscal 2000 from 29.9% for Fiscal 1999. The
increase in the gross profit margin resulted primarily from the sales of
higher-margin spirits and super-premium and ultra-premium wine acquired in the
acquisitions of the Black Velvet Assets and Franciscan, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $481.9 million
for Fiscal 2000 from $299.5 million for Fiscal 1999, an increase of $182.4
million, or 60.9%. The dollar increase in selling, general and administrative
expenses resulted primarily from the addition of the Matthew Clark and
Franciscan businesses and expenses related to the brands acquired in the Black
Velvet Assets acquisition. The Company also increased its marketing and
promotional costs to generate additional sales volume, particularly of certain
Canandaigua Wine brands and Barton beer brands. Selling, general and
administrative expenses as a percent of net sales increased to 20.6% for Fiscal
2000 as compared to 20.0% for Fiscal 1999. The increase in percent of net sales
resulted primarily from (i) Canandaigua Wine's investment in brand building and
efforts to increase market share and (ii) the acquisitions of Matthew Clark and
Franciscan, as Matthew Clark's and Franciscan's selling, general and
administrative expenses as a percent of net sales are typically at the high end
of the range of the Company's operating segments' percentages.
NONRECURRING CHARGES
The Company incurred nonrecurring charges of $5.5 million in Fiscal 2000
related to the closure of a cider production facility within the Matthew Clark
operating segment in the United Kingdom and to a management reorganization
within the Canandaigua Wine operating segment. In Fiscal 1999, nonrecurring
charges of $2.6 million were incurred related to the closure of the
aforementioned cider production facility in the United Kingdom.
OPERATING INCOME
The following table sets forth the operating profit/(loss) (in thousands of
dollars) by operating segment of the Company for Fiscal 2000 and Fiscal 1999.
Fiscal 2000 Compared to Fiscal 1999
-------------------------------------
Operating Profit/Loss
-------------------------------------
2000 1999 %Increase
---------- ---------- ---------
Canandaigua Wine $ 46,778 $ 46,283 1.1%
Barton 142,931 102,624 39.3%
Matthew Clark 48,473 8,998 438.7%
Franciscan 12,708 - N/A
Corporate Operations and Other (15,849) (12,013) 31.9%
---------- ----------
Consolidated Operating Profit $ 235,041 $ 145,892 61.1%
========== ==========
As a result of the above factors, operating income increased to $235.0
million for Fiscal 2000 from $145.9 million for Fiscal 1999, an increase of
$89.1 million, or 61.1%. Operating income for the Canandaigua Wine operating
segment was up $0.5 million, or 1.1%, due to the nonrecurring charges of $2.6
million related to the segment's management reorganization, as well as
additional marketing expenses associated with new product introductions.
Exclusive of the nonrecurring charges, operating income increased by 6.6% to
$49.3 million in Fiscal 2000. Operating income for the Matthew Clark operating
segment, excluding nonrecurring charges of $2.9 million, was $51.4 million.
INTEREST EXPENSE, NET
Net interest expense increased to $106.1 million for Fiscal 2000 from $41.5
million for Fiscal 1999, an increase of $64.6 million, or 155.9%. The increase
resulted primarily from additional interest expense associated with the
borrowings related to the acquisitions of Matthew Clark, the Black Velvet Assets
and Franciscan.
NET INCOME
As a result of the above factors, net income increased to $77.4 million for
Fiscal 2000 from $50.5 million for Fiscal 1999, an increase of $26.9 million, or
53.3%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Fiscal 2000 were
$299.8 million, an increase of $115.3 over EBITDA of $184.5 million for Fiscal
1999. 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.
FISCAL 1999 COMPARED TO FISCAL 1998
NET SALES
The following table sets forth the net sales (in thousands of dollars) by
operating segment of the Company for Fiscal 1999 and Fiscal 1998.
Fiscal 1999 Compared to Fiscal 1998
---------------------------------------
Net Sales
---------------------------------------
%Increase/
1999 1998 (Decrease)
----------- ----------- ----------
Canandaigua Wine:
Branded $ 598,782 $ 570,807 4.9 %
Other 70,711 71,988 (1.8)%
----------- -----------
Canandaigua Wine net sales $ 669,493 $ 642,795 4.2 %
----------- -----------
Barton:
Beer $ 478,611 $ 376,607 27.1 %
Spirits 185,938 191,190 (2.7)%
----------- -----------
Barton net sales $ 664,549 $ 567,797 17.0 %
----------- -----------
Matthew Clark:
Branded $ 64,879 $ - N/A
Wholesale 93,881 - N/A
----------- -----------
Matthew Clark net sales $ 158,760 $ - N/A
----------- -----------
Corporate Operations and Other $ 4,541 $ 2,196 106.8 %
----------- -----------
Consolidated Net Sales $ 1,497,343 $ 1,212,788 23.5 %
=========== ===========
Net sales for Fiscal 1999 increased to $1,497.3 million from $1,212.8
million for Fiscal 1998, an increase of $284.6 million, or 23.5%.
Canandaigua Wine
----------------
Net sales for Canandaigua Wine for Fiscal 1999 increased to $669.5 million
from $642.8 million for Fiscal 1998, an increase of $26.7 million, or 4.2%. This
increase resulted primarily from (i) the introduction of two new products, Arbor
Mist and Mystic Cliffs, in Fiscal 1999, (ii) Paul Masson Grande Amber Brandy
growth, and (iii) Almaden boxed wine growth. These increases were partially
offset by declines in other wine brands and in the Company's grape juice
concentrate business.
Barton
------
Net sales for Barton for Fiscal 1999 increased to $664.5 million from
$567.8 million for Fiscal 1998, an increase of $96.8 million, or 17.0%. This
increase resulted primarily from an increase in sales of beer brands led by
Barton's Mexican portfolio. This increase was partially offset by a decrease in
revenues from Barton's spirits contract bottling business.
Matthew Clark
-------------
Net sales for Matthew Clark for Fiscal 1999 since the date of acquisition,
December 1, 1998, were $158.8 million.
GROSS PROFIT
The Company's gross profit increased to $448.0 million for Fiscal 1999 from
$343.8 million for Fiscal 1998, an increase of $104.3 million, or 30.3%. The
dollar increase in gross profit resulted primarily from the sales generated by
the Matthew Clark Acquisition completed in the fourth quarter of Fiscal 1999,
increased beer sales and the combination of higher average selling prices and
lower average costs for branded wine sales. As a percent of net sales, gross
profit increased to 29.9% for Fiscal 1999 from 28.3% for Fiscal 1998. The
increase in the gross profit margin resulted primarily from higher selling
prices and lower costs for Canandaigua Wine's branded wine sales, partially
offset by a sales mix shift towards lower margin products, particularly due to
the growth in Barton's beer sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $299.5 million
for Fiscal 1999 from $231.7 million for Fiscal 1998, an increase of $67.8
million, or 29.3%. The dollar increase in selling, general and administrative
expenses resulted primarily from expenses related to the Matthew Clark
Acquisition, as well as marketing and promotional costs associated with the
Company's increased branded sales volume. The year-over-year comparison also
benefited from a one time charge for separation costs incurred in Fiscal 1998
related to an organizational change within Barton. Selling, general and
administrative expenses as a percent of net sales increased to 20.0% for Fiscal
1999 as compared to 19.1% for Fiscal 1998. The increase in percent of net sales
resulted primarily from (i) Canandaigua Wine's investment in brand building and
efforts to increase market share and (ii) the Matthew Clark Acquisition, as
Matthew Clark's selling, general and administrative expenses as a percent of net
sales is typically higher than for the Company's other operating segments.
NONRECURRING CHARGES
The Company incurred nonrecurring charges of $2.6 million in Fiscal 1999
related to the closure of a cider production facility in the United Kingdom. No
such charges were incurred in Fiscal 1998.
OPERATING INCOME
The following table sets forth the operating profit/(loss) (in thousands of
dollars) by operating segment of the Company for Fiscal 1999 and Fiscal 1998.
Fiscal 1999 Compared to Fiscal 1998
---------------------------------------
Operating Profit/(Loss)
---------------------------------------
%Increase/
1999 1998 (Decrease)
----------- ----------- ----------
Canandaigua Wine $ 46,283 $ 45,440 1.9 %
Barton 102,624 77,010 33.3 %
Matthew Clark 8,998 - N/A
Corporate Operations and Other (12,013) (10,380) (15.7)%
----------- -----------
Consolidated Operating Profit $ 145,892 $ 112,070 30.2 %
=========== ===========
As a result of the above factors, operating income increased to $145.9
million for Fiscal 1999 from $112.1 million for Fiscal 1998, an increase of
$33.8 million, or 30.2%.
INTEREST EXPENSE, NET
Net interest expense increased to $41.5 million for Fiscal 1999 from $32.2
million for Fiscal 1998, an increase of $9.3 million, or 28.8%. The increase
resulted primarily from additional interest expense associated with the
borrowings related to the Matthew Clark Acquisition.
EXTRAORDINARY ITEM, NET OF INCOME TAXES
The Company incurred an extraordinary charge of $11.4 million after taxes
in Fiscal 1999. This charge resulted from fees related to the replacement of the
Company's senior credit facility, including extinguishment of the Term Loan. No
extraordinary charges were incurred in Fiscal 1998.
NET INCOME
As a result of the above factors, net income increased to $50.5 million for
Fiscal 1999 from $47.1 million for Fiscal 1998, an increase of $3.3 million, or
7.1%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Fiscal 1999 were
$184.5 million, an increase of $39.3 million over EBITDA of $145.2 million for
Fiscal 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.
FISCAL 2000 CASH FLOWS
OPERATING ACTIVITIES
Net cash provided by operating activities for Fiscal 2000 was $148.1
million, which resulted from $139.9 million in net income adjusted for noncash
items, plus $8.2 million representing the net change in the Company's operating
assets and liabilities. The net change in operating assets and liabilities
resulted primarily from increases in accrued income taxes, accrued interest
expense and accrued salaries and commissions, partially offset by decreases in
accounts payable and accrued excise taxes.
INVESTING ACTIVITIES AND FINANCING ACTIVITIES
Net cash used in investing activities for Fiscal 2000 was $495.7 million,
which resulted primarily from net cash paid of $452.9 million for the
acquisitions of the Black Velvet Assets and Franciscan and $57.7 million of
capital expenditures, including $8.9 million for vineyards.
Net cash provided by financing activities for Fiscal 2000 was $355.6
million, which resulted primarily from proceeds of $1,486.2 million from
issuance of long-term debt, including $400.0 million incurred in connection with
the acquisitions of the Black Velvet Assets and Franciscan and $900.0 million
incurred to repay amounts outstanding under the senior credit facility. This
amount was partially offset by principal payments of $1,060.2 million of
long-term debt and repayment of $60.4 million of net revolving loan borrowings.
As of February 29, 2000, under the 2000 Credit Agreement (as defined
below), the Company had outstanding term loans of $570.1 million bearing a
weighted average interest rate of 7.95%, $26.8 million of revolving loans
bearing a weighted average interest rate of 7.43%, undrawn revolving letters of
credit of $10.7 million, and $262.5 million in revolving loans available to be
drawn.
Total debt outstanding as of February 29, 2000, amounted to $1,317.9
million, an increase of $392.5 million from February 28, 1999. The ratio of
total debt to total capitalization increased to 71.7% as of February 29, 2000,
from 68.0% as of February 28, 1999.
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, in management's discretion and 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 senior credit facility. The repurchased shares will become treasury
shares. As of May 26, 2000, 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.
SENIOR CREDIT FACILITY
During June 1999, the Company financed the purchase price for the
Franciscan Acquisition primarily through additional term loan borrowings under
the senior credit facility. The Company financed the purchase price for the Simi
Acquisition with revolving loan borrowings under the senior credit facility.
During August 1999, as discussed below, a portion of the Company's
borrowings under its senior credit facility were repaid with the net proceeds of
its Senior Notes (as defined below) offering.
On October 6, 1999, the Company, certain of its principal operating
subsidiaries, and a syndicate of banks (the "Syndicate Banks"), for which The
Chase Manhattan Bank acts as administrative agent, entered into a new senior
credit facility (the "2000 Credit Agreement"). The 2000 Credit Agreement
includes both U.S. dollar and British pound sterling commitments of the
Syndicate Banks of up to, in the aggregate, the equivalent of $1.0 billion
(subject to increase as therein provided to $1.2 billion). Proceeds of the 2000
Credit Agreement were used to repay all outstanding principal and accrued
interest on all loans under the Company's prior senior credit facility, and are
available to fund permitted acquisitions and ongoing working capital needs of
the Company and its subsidiaries.
The 2000 Credit Agreement provides for a $380.0 million Tranche I Term Loan
facility due in December 2004, a $320.0 million Tranche II Term Loan facility
available for borrowing in British pound sterling due in December 2004, and a
$300.0 million Revolving Credit facility (including letters of credit up to a
maximum of $20.0 million) which expires in December 2004. The Tranche I Term
Loan facility ($380.0 million) and the Tranche II Term Loan facility
((pound)193.4 million, or approximately $320.0 million) were fully drawn at
closing. The Tranche I Term Loan facility requires quarterly repayments,
starting at $12.0 million in March 2000 and increasing thereafter annually with
final payments of $23.0 million in each quarter in 2004. On November 17, 1999,
proceeds from the Sterling Senior Notes (as defined below) were used to repay a
portion of the $320.0 million Tranche II Term Loan facility ((pound)73.0
million, or approximately $118.3 million). After this repayment, the required
quarterly repayments of the Tranche II Term Loan facility were revised to
(pound)0.6 million ($1.0 million) for each quarter in 2000, (pound)1.2 million
($1.9 million) for each quarter in 2001 and 2002, (pound)1.5 million ($2.4
million) for each quarter in 2003, and (pound)25.6 million ($40.4 million) for
each quarter in 2004 (the foregoing U.S. dollar equivalents are as of February
29, 2000). On May 15, 2000, the Company issued (pound)80.0 million aggregate
principal amount of 8 1/2% Series C Senior Notes. The proceeds of the offering
were used to repay a portion of the Tranche II Term Loan. See Senior Notes
below. There are certain mandatory term loan prepayments, including those based
on sale of assets and issuance of debt and equity, in each case subject to
baskets, exceptions and thresholds which are generally more favorable to the
Company than those contained in its prior senior credit facility.
The rate of interest payable, at the Company's option, is a function of the
London interbank offering rate ("LIBOR") plus a margin, federal funds rate plus
a margin, or the prime rate plus a margin. The margin is adjustable based upon
the Company's Debt Ratio (as defined in the 2000 Credit Agreement) and, with
respect to LIBOR borrowings, ranges between 0.75% and 1.25% for Revolving Credit
loans and 1.00% and 1.75% for Term Loans. As of February 29, 2000, the margin
was 1.25% for Revolving Credit loans and 1.75% for Term Loans. In addition to
interest, the Company pays a facility fee on the Revolving Credit commitments at
0.50% per annum as of February 29, 2000. This fee is based upon the Company's
quarterly Debt Ratio and can range from 0.25% to 0.50%.
Certain of the Company's principal operating subsidiaries have guaranteed
the Company's obligations under the 2000 Credit Agreement. The 2000 Credit
Agreement is secured by (i) first priority pledges of 100% of the capital stock
of Canandaigua Limited and all of the Company's domestic operating subsidiaries
and (ii) first priority pledges of 65% of the capital stock of Matthew Clark and
certain other foreign subsidiaries.
The Company and its subsidiaries are subject to customary lending covenants
including those restricting additional liens, incurring additional indebtedness,
the sale of assets, the payment of dividends, transactions with affiliates and
the making of certain investments, in each case subject to baskets, exceptions
and thresholds which are generally more favorable to the Company than those
contained in its prior senior credit facility. The primary financial covenants
require the maintenance of a debt coverage ratio, a senior debt coverage ratio,
a fixed charges ratio and an interest coverage ratio. Among the most restrictive
covenants contained in the 2000 Credit Agreement is the senior debt coverage
ratio.
SENIOR NOTES
On August 4, 1999, the Company issued $200.0 million aggregate principal
amount of 8 5/8% Senior Notes due August 2006 (the "Senior Notes"). The net
proceeds of the offering (approximately $196.0 million) were used to repay a
portion of the Company's borrowings under its senior credit facility. Interest
on the Senior Notes is payable semiannually on February 1 and August 1 of each
year, beginning February 1, 2000. The Senior Notes are redeemable at the option
of the Company, in whole or in part, at any time. The Senior Notes are unsecured
senior obligations and rank equally in right of payment to all existing and
future unsecured senior indebtedness of the Company. The Senior Notes are
guaranteed, on a senior basis, by certain of the Company's significant operating
subsidiaries.
On November 17, 1999, the Company issued (pound)75.0 million (approximately
$121.7 million upon issuance and $118.4 million as of February 29, 2000)
aggregate principal amount of 8 1/2% Senior Notes due November 2009 (the
"Sterling Senior Notes"). The net proceeds of the offering ((pound)73.0 million,
or approximately $118.3 million) were used to repay a portion of the Company's
British pound sterling borrowings under its senior credit facility. Interest on
the Sterling Senior Notes is payable semiannually on May 15 and November 15 of
each year, beginning on May 15, 2000. The Sterling Senior Notes are redeemable
at the option of the Company, in whole or in part, at any time. The Sterling
Senior Notes are unsecured senior obligations and rank equally in right of
payment to all existing and future unsecured senior indebtedness of the Company.
The Sterling Senior Notes are guaranteed, on a senior basis, by certain of the
Company's significant operating subsidiaries. In March 2000, the Company
exchanged (pound)75.0 million aggregate principal amount of 8 1/2% Series B
Senior Notes due in November 2009 (the "Sterling Series B Senior Notes") for the
Sterling Senior Notes. The terms of the Sterling Series B Senior Notes are
identical in all material respects to the Sterling Senior Notes.
On May 15, 2000, the Company issued (pound)80.0 million (approximately
$120.4 million) aggregate principal amount of 8 1/2% Series C Senior Notes due
November 2009 at an issuance price of (pound)79.6 million (approximately $119.8
million, net of $0.6 million unamortized discount, with an effective rate of
8.6%) (the "Sterling Series C Senior Notes"). The net proceeds of the offering
((pound)78.8 million, or approximately $118.6 million) were used to repay a
portion of the Company's British pound sterling borrowings under its senior
credit facility. After this repayment, the required quarterly repayments of the
Tranche II Term Loan facility were revised to (pound)0.2 million ($0.3 million)
for the remaining three quarters in 2000, (pound)0.4 million ($0.6 million) for
each quarter in 2001 and 2002, (pound)0.5 million ($0.8 million) for each
quarter in 2003, and (pound)8.5 million ($12.8 million) for each quarter in
2004. (The foregoing U.S. dollar equivalents are as of May 15, 2000.) Interest
on the Sterling Series C Senior Notes is payable semiannually on May 15 and
November 15 of each year, beginning on November 15, 2000. The Sterling Series C
Senior Notes are redeemable at the option of the Company, in whole or in part,
at any time. The Sterling Series C Senior Notes are unsecured senior obligations
and rank equally in right of payment to all existing and future unsecured senior
indebtedness of the Company. The Sterling Series C Senior Notes are guaranteed,
on a senior basis, by certain of the Company's significant operating
subsidiaries.
SENIOR SUBORDINATED NOTES
As of February 29, 2000, the Company had outstanding $195.0 million
aggregate principal amount of 8 3/4% Senior Subordinated Notes due December
2003, being the $130.0 million aggregate principal amount of 8 3/4% Senior
Subordinated Notes due December 2003 issued in December 1993 (the "Original
Notes") and the $65.0 million aggregate principal amount of 8 3/4% Series C
Senior Subordinated Notes due December 2003 issued in February 1997 (the "Series
C Notes"). The Original Notes and the Series C Notes are currently redeemable,
in whole or in part, at the option of the Company. A brief description of the
Original Notes and the Series C Notes is contained in Note 6 to the Company's
consolidated financial statements located in Item 8 of this Annual Report on
Form 10-K.
On March 4, 1999, the Company issued $200.0 million aggregate principal
amount of 8 1/2% Senior Subordinated Notes due March 2009 (the "Senior
Subordinated Notes"). The net proceeds of the offering (approximately $195.0
million) were used to fund the acquisition of the Black Velvet Assets and to pay
the fees and expenses related thereto with the remainder of the net proceeds
used for general corporate purposes. Interest on the Senior Subordinated Notes
is payable semiannually on March 1 and September 1 of each year, beginning
September 1, 1999. The Senior Subordinated Notes are redeemable at the option of
the Company, in whole or in part, at any time on or after March 1, 2004. The
Company may also redeem up to $70.0 million of the Senior Subordinated Notes
using the proceeds of certain equity offerings completed before March 1, 2002.
The Senior Subordinated Notes are unsecured and subordinated to the prior
payment in full of all senior indebtedness of the Company, which includes the
senior credit facility. The Senior Subordinated Notes are guaranteed, on a
senior subordinated basis, by certain of the Company's significant operating
subsidiaries.
CAPITAL EXPENDITURES
During Fiscal 2000, the Company incurred $57.7 million for capital
expenditures, including $8.9 million related to vineyards. The Company plans to
spend approximately $65.0 million for capital expenditures, exclusive of
vineyards, in fiscal 2001. In addition, the Company continues to consider the
purchase, lease and development of vineyards and may incur additional
expenditures for vineyards if opportunities become available. See "Business -
Sources and Availability of Raw Materials" under Item 1 of this Annual Report on
Form 10-K. Management reviews the capital expenditure program periodically and
modifies it as required to meet current business needs.
COMMITMENTS
The Company has agreements with suppliers to purchase various spirits of
which certain agreements are denominated in British pound sterling and Canadian
dollars. The maximum future obligation under these agreements, based upon
exchange rates at February 29, 2000, aggregate approximately $28.4 million for
contracts expiring through December 2005.
At February 29, 2000, the Company had open currency forward contracts to
purchase various foreign currencies of $6.8 million which mature within twelve
months. The Company's use of such contracts is limited to the management of
currency rate risks related to purchases denominated in a foreign currency. The
Company's strategy is to enter only into currency exchange contracts that are
matched to specific purchases and not to enter into any speculative contracts.
EFFECTS OF INFLATION AND CHANGING PRICES
The Company's results of operations and financial condition have not been
significantly affected by inflation and changing prices. The Company has been
able, subject to normal competitive conditions, to pass along rising costs
through increased selling prices.
ACCOUNTING PRONOUNCEMENTS
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 and
measured at its fair value. SFAS No. 133 also 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.
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137 ("SFAS No. 137"), "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
FASB Statement No. 133." SFAS No. 137 delays the effective date of SFAS No. 133
for one year. With the issuance of SFAS No. 137, the Company is required to
adopt SFAS No. 133 on a prospective basis for interim periods and fiscal years
beginning March 1, 2001. The Company believes the effect of the adoption on its
financial statements will not be material based on the Company's current risk
management strategies.
YEAR 2000 ISSUE
Prior to January 1, 2000, the Company put into place detailed programs to
address Year 2000 readiness in its internal systems and with its key customers
and suppliers. These programs included contingency plans to protect the
Company's business and operations from Year 2000 related interruptions. The
costs incurred related to its Year 2000 activities and its readiness programs
were not material to the Company.
The Company did not experience any interruptions in its business or
operations when the date changed from 1999 to 2000. Based upon operations since
January 1, 2000, the Company does not expect any significant impact on its
on-going business as a result of the Year 2000 issue.
EURO CONVERSION ISSUES
Effective January 1, 1999, eleven of the fifteen member countries of the
European Union (the "Participating Countries") established fixed conversion
rates between their existing sovereign currencies and the euro. For three years
after the introduction of the euro, the Participating Countries can perform
financial transactions in either the euro or their original local currencies.
This will result in a fixed exchange rate among the Participating Countries,
whereas the euro (and the Participating Countries' currency in tandem) will
continue to float freely against the U.S. dollar and other currencies of the
non-participating countries. The Company does not believe that the effects of
the conversion will have a material adverse effect on the Company's business and
operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------- ----------------------------------------------------------
The Company is exposed to market risk associated with changes in interest
rates and foreign currency exchange rates. To manage the volatility relating to
these risks, the Company periodically enters into derivative transactions
including foreign currency exchange contracts and interest rate swap agreements.
The Company has limited involvement with derivative financial instruments and
does not use them for trading purposes. The Company uses derivative instruments
solely to reduce the financial impact of these risks.
The fair value of long-term debt is subject to interest rate risk.
Generally, the fair value of long-term debt will increase as interest rates fall
and decrease as interest rates rise. The estimated fair value of the Company's
total long-term debt, including current maturities, was approximately $1,255.4
million at February 29, 2000. A hypothetical 1% increase from prevailing
interest rates at February 29, 2000, would result in a decrease in fair value of
long-term debt by approximately $33.3 million.
Also, a hypothetical 1% increase from prevailing interest rates at February
29, 2000, would result in an approximate increase in cash required for interest
on variable interest rate debt during the next five fiscal years as follows:
2001 $ 5.4 million
2002 $ 4.8 million
2003 $ 4.0 million
2004 $ 3.0 million
2005 $ 1.3 million
The Company periodically enters into interest rate swap agreements to
reduce its exposure to interest rate changes relative to its long-term debt. At
February 29, 2000, the Company had no interest rate swap agreements outstanding.
The Company has exposure to foreign currency risk as a result of having
international subsidiaries in the United Kingdom and Canada. For the Company's
operations in the United Kingdom, the Company uses local currency borrowings to
hedge its earnings and cash flow exposure to adverse changes in foreign currency
exchange rates. At February 29, 2000, management believes that a hypothetical
10% adverse change in foreign currency exchange rates would not result in a
material adverse impact on either earnings or cash flow. The Company also has
exposure to foreign currency risk as a result of contracts to purchase inventory
items that are denominated in various foreign currencies. In order to reduce the
risk of foreign currency exchange rate fluctuations resulting from these
contracts, the Company periodically enters into foreign exchange hedging
agreements. At February 29, 2000, the potential loss on outstanding foreign
exchange hedging agreements from a hypothetical 10% adverse change in foreign
currency exchange rates would not be material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
------- -------------------------------------------
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
-----------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
AND
---
SUPPLEMENTARY SCHEDULES
-----------------------
FEBRUARY 29, 2000
-----------------
Page
----
The following information is presented in this Annual Report on Form 10-K:
Report of Independent Public Accountants................................ 29
Consolidated Balance Sheets - February 29, 2000, and February 28, 1999.. 30
Consolidated Statements of Income for the years ended February 29, 2000,
February 28, 1999, and February 28, 1998............................. 31
Consolidated Statements of Changes in Stockholders' Equity for the years
ended February 29, 2000, February 28, 1999, and February 28, 1998.... 32
Consolidated Statements of Cash Flows for the years ended
February 29, 2000, February 28, 1999, and February 28, 1998.......... 33
Notes to Consolidated Financial Statements.............................. 34
Selected Quarterly Financial Information (unaudited).................... 53
Schedules I through V are not submitted because they are not applicable or not
required under the rules of Regulation S-X.
Individual financial statements of the Registrant have been omitted because the
Registrant is primarily an operating company and no subsidiary included in the
consolidated financial statements has minority equity interest and/or noncurrent
indebtedness, not guaranteed by the Registrant, in excess of 5% of total
consolidated assets.
[LOGO]
ARTHUR ANDERSEN
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Canandaigua Brands, Inc.:
We have audited the accompanying consolidated balance sheets of Canandaigua
Brands, Inc. (a Delaware corporation) and subsidiaries as of February 29, 2000
and February 28, 1999, and the related consolidated statements of income,
changes in stockholders' equity and cash flows for each of the three years in
the period ended February 29, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Canandaigua Brands, Inc. and
subsidiaries as of February 29, 2000 and February 28, 1999, and the results of
their operations and their cash flows for each of the three years in the period
ended February 29, 2000 in conformity with accounting principles generally
accepted in the United States.
/s/ Arthur Andersen LLP
Rochester, New York
May 15, 2000
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
February 29, February 28,
2000 1999
------------ ------------
ASSETS
------
CURRENT ASSETS:
Cash and cash investments $ 34,308 $ 27,645
Accounts receivable, net 291,108 260,433
Inventories, net 615,700 508,571
Prepaid expenses and other current assets 54,881 59,090
------------ ------------
Total current assets 995,997 855,739
PROPERTY, PLANT AND EQUIPMENT, net 542,971 428,803
OTHER ASSETS 809,823 509,234
------------ ------------
Total assets $ 2,348,791 $ 1,793,776
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 26,800 $ 87,728
Current maturities of long-term debt 53,987 6,005
Accounts payable 122,213 122,746
Accrued excise taxes 30,446 49,342
Other accrued expenses and liabilities 204,771 149,451
------------ ------------
Total current liabilities 438,217 415,272
------------ ------------
LONG-TERM DEBT, less current maturities 1,237,135 831,689
------------ ------------
DEFERRED INCOME TAXES 116,447 88,179
------------ ------------
OTHER LIABILITIES 36,152 23,364
------------ ------------
COMMITMENTS AND CONTINGENCIES (See Note 12)
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value-
Authorized, 1,000,000 shares;
Issued, none at February 29, 2000, and
February 28, 1999 - -
Class A Common Stock, $.01 par value-
Authorized, 120,000,000 shares;
Issued, 18,206,662 shares at
February 29, 2000, and 17,915,359 shares
at February 28, 1999 182 179
Class B Convertible Common Stock,
$.01 par value-
Authorized, 20,000,000 shares;
Issued, 3,745,560 shares at
February 29, 2000, and 3,849,173 shares
at February 28, 1999 38 39
Additional paid-in capital 247,949 239,912
Retained earnings 358,456 281,081
Accumulated other comprehensive income-
Cumulative translation adjustment (4,149) (4,173)
------------ ------------
602,476 517,038
------------ ------------
Less-Treasury stock-
Class A Common Stock, 3,137,244 at
February 29, 2000, and 3,168,306 shares
at February 28, 1999, at cost (79,429) (79,559)
Class B Convertible Common Stock, 625,725
shares at February 29, 2000, and
February 28, 1999, at cost (2,207) (2,207)
------------ ------------
(81,636) (81,766)
------------ ------------
Total stockholders' equity 520,840 435,272
------------ ------------
Total liabilities and stockholders' equity $ 2,348,791 $ 1,793,776
============ ============
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
<TABLE>
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
<CAPTION>
For the Year
Ended February 29, For the Years Ended February 28,
------------------ --------------------------------
2000 1999 1998
------------------ -------------- --------------
<S> <C> <C> <C>
GROSS SALES $ 3,088,699 $ 1,984,801 $ 1,632,357
Less - Excise taxes (748,230) (487,458) (419,569)
------------------ -------------- --------------
Net sales 2,340,469 1,497,343 1,212,788
COST OF PRODUCT SOLD (1,618,009) (1,049,309) (869,038)
------------------ -------------- --------------
Gross profit 722,460 448,034 343,750
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (481,909) (299,526) (231,680)
NONRECURRING CHARGES (5,510) (2,616) -
------------------ -------------- --------------
Operating income 235,041 145,892 112,070
INTEREST EXPENSE, net (106,082) (41,462) (32,189)
------------------ -------------- --------------
Income before taxes and extraordinary item 128,959 104,430 79,881
PROVISION FOR INCOME TAXES (51,584) (42,521) (32,751)
------------------ -------------- --------------
Income before extraordinary item 77,375 61,909 47,130
EXTRAORDINARY ITEM, NET OF INCOME TAXES - (11,437) -
------------------ -------------- --------------
NET INCOME $ 77,375 $ 50,472 $ 47,130
================== ============== ==============
SHARE DATA:
Earnings per common share:
Basic:
Income before extraordinary item $ 4.29 $ 3.38 $ 2.52
Extraordinary item - (0.62) -
------------------ -------------- --------------
Earnings per common share - basic $ 4.29 $ 2.76 $ 2.52
================== ============== ==============
Diluted:
Income before extraordinary item $ 4.18 $ 3.30 $ 2.47
Extraordinary item - (0.61) -
------------------ -------------- --------------
Earnings per common share - diluted $ 4.18 $ 2.69 $ 2.47
================== ============== ==============
Weighted average common shares outstanding:
Basic 18,054 18,293 18,672
Diluted 18,499 18,754 19,105
<FN>
The accompanying notes to consolidated financial statements are an integral part of these statements.
</FN>
</TABLE>
<TABLE>
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except per share data)
<CAPTION>
Accumulated
Common Stock Additional Other
----------------- Paid-in Retained Comprehensive Treasury Restricted
Class A Class B Capital Earnings Income Stock Stock Total
------- ------- ---------- ---------- ------------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, February 28, 1997 $ 174 $ 40 $ 222,336 $ 183,479 $ - $(28,092) $ - $ 377,937
Net income and comprehensive
income for fiscal 1998 - - - 47,130 - - - 47,130
Exercise of 117,452 Class A
stock options 2 - 1,799 - - - - 1,801
Employee stock purchases of
78,248 treasury shares - - 1,016 - - 240 - 1,256
Repurchase of 362,100 Class A
Common shares - - - - - (9,233) - (9,233)
Acceleration of 142,437 Class A
stock options - - 3,625 - - - - 3,625
Issuance of 25,000 restricted
Class A Common shares - - 1,144 - - - (1,144) -
Amortization of unearned restricted
stock compensation - - - - - - 267 267
Accelerated amortization of unearned
restricted stock compensation - - 200 - - - 877 1,077
Tax benefit on Class A stock
options exercised - - 1,382 - - - - 1,382
Tax benefit on disposition of
employee stock purchases - - 185 - - - - 185
------- ------- ---------- ---------- ------------ -------- ---------- ---------
BALANCE, February 28, 1998 176 40 231,687 230,609 - (37,085) - 425,427
Comprehensive income:
Net income for fiscal 1999 - - - 50,472 - - - 50,472
Cumulative translation adjustment - - - - (4,173) - - (4,173)
--------
Comprehensive income 46,299
Conversion of 107,010 Class B
Convertible Common shares to
Class A Common shares 1 (1) - - - - - -
Exercise of 203,565 Class A
stock options 2 - 4,085 - - - - 4,087
Employee stock purchases of
49,850 treasury shares - - 1,643 - - 197 - 1,840
Repurchase of 1,018,836 Class A
Common shares - - - - - (44,878) - (44,878)
Acceleration of 1,250 Class A
stock options - - 43 - - - - 43
Tax benefit on Class A stock
options exercised - - 2,320 - - - - 2,320
Tax benefit on disposition of
employee stock purchases - - 134 - - - - 134
------- ------- ---------- ---------- ------------ -------- ---------- ---------
BALANCE, February 28, 1999 179 39 239,912 281,081 (4,173) (81,766) - 435,272
Comprehensive income:
Net income for fiscal 2000 - - - 77,375 - - - 77,375
Cumulative translation adjustment - - - - 24 - - 24
---------
Comprehensive income 77,399
Conversion of 103,613 Class B
Convertible Common shares to
Class A Common shares 1 (1) - - - - - -
Exercise of 187,690 Class A
stock options 2 - 3,361 - - - - 3,363
Employee stock purchases of 31,062
treasury shares - - 1,298 - - 130 - 1,428
Acceleration of 94,725 Class A
stock options - - 835 - - - - 835
Tax benefit on Class A stock
options exercised - - 2,634 - - - - 2,634
Tax benefit on disposition of
employee stock purchases - - 43 - - - - 43
Other - - (134) - - - - (134)
------- ------- ---------- ---------- ------------ -------- ---------- ---------
BALANCE, February 29, 2000 $ 182 $ 38 $ 247,949 $ 358,456 $ (4,149) $(81,636) $ - $ 520,840
======= ======= ========== ========== ============ ======== ========== =========
<FN>
The accompanying notes to consolidated financial statements are an integral part of these statements.
</FN>
</TABLE>
<TABLE>
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
For the Year
Ended February 29, For the Years Ended February 28,
------------------ --------------------------------
2000 1999 1998
------------------ -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 77,375 $ 50,472 $ 47,130
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of property, plant and equipment 40,892 27,282 23,847
Extraordinary item, net of income taxes - 11,437 -
Amortization of intangible assets 23,831 11,308 9,314
Stock-based compensation expense 856 144 1,747
Amortization of discount on long-term debt 427 388 352
(Gain) loss on sale of assets (2,003) 1,193 (3,001)
Deferred tax (benefit) provision (1,500) 10,053 4,275
Change in operating assets and liabilities,
net of effects from purchases of businesses:
Accounts receivable, net (10,812) 44,081 749
Inventories, net 1,926 1,190 (60,659)
Prepaid expenses and other current assets 4,663 (14,115) (4,354)
Accounts payable (17,070) (17,560) (3,288)
Accrued excise taxes (18,719) 17,124 440
Other accrued expenses and liabilities 44,184 (31,807) 14,655
Other assets and liabilities, net 4,005 (3,945) (2,452)
------------------ -------------- --------------
Total adjustments 70,680 56,773 (18,375)
------------------ -------------- --------------
Net cash provided by operating activities 148,055 107,245 28,755
------------------ -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of businesses, net of cash acquired (452,910) (332,216) -
Purchases of property, plant and equipment (57,747) (49,857) (31,203)
Proceeds from sale of assets 14,977 431 12,552
Purchase of joint venture minority interest - (716) -
------------------ -------------- --------------
Net cash used in investing activities (495,680) (382,358) (18,651)
------------------ -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 1,486,240 635,090 140,000
Exercise of employee stock options 3,358 4,083 1,776
Proceeds from employee stock purchases 1,428 1,840 1,256
Principal payments of long-term debt (1,060,229) (264,101) (186,367)
Net (repayment of) proceeds from notes payable (60,352) (13,907) 34,900
Payment of issuance costs of long-term debt (14,888) (17,109) (1,214)
Purchases of treasury stock - (44,878) (9,233)
------------------ -------------- --------------
Net cash provided by (used in) financing activities 355,557 301,018 (18,882)
------------------ -------------- --------------
Effect of exchange rate changes on cash and cash investments (1,269) 508 -
------------------ -------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH INVESTMENTS 6,663 26,413 (8,778)
CASH AND CASH INVESTMENTS, beginning of year 27,645 1,232 10,010
------------------ -------------- --------------
CASH AND CASH INVESTMENTS, end of year $ 34,308 $ 27,645 $ 1,232
================== ============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 95,004 $ 35,869 $ 33,394
================== ============== ==============
Income taxes $ 35,478 $ 40,714 $ 32,164
================== ============== ==============
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Fair value of assets acquired, including cash acquired $ 562,204 $ 740,880 $ -
Liabilities assumed (106,805) (382,759) -
------------------ -------------- --------------
Cash paid 455,399 358,121 -
Less - cash acquired (2,489) (25,905) -
------------------ -------------- --------------
Net cash paid for purchases of businesses $ 452,910 $ 332,216 $ -
================== ============== ==============
<FN>
The accompanying notes to consolidated financial statements are an integral part of these statements.
</FN>
</TABLE>
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS -
Canandaigua Brands, Inc. and its subsidiaries (the "Company") operate primarily
in the beverage alcohol industry. The Company is a leading producer and marketer
of branded beverage alcohol products in North America and the United Kingdom. It
maintains a portfolio of over 185 premier branded products in North America and
the United Kingdom. The Company's products are distributed by more than 1,000
wholesalers in North America. In the United Kingdom, the Company distributes its
own brands of cider, wine and bottled water and is a leading independent
beverage supplier to the on-premise trade, distributing its own branded products
and those of other companies to more than 16,000 on-premise establishments in
the U.K.
PRINCIPLES OF CONSOLIDATION -
The consolidated financial statements of the Company include the accounts of
Canandaigua Brands, Inc. and all of its subsidiaries. All intercompany accounts
and transactions have been eliminated.
MANAGEMENT'S USE OF ESTIMATES AND JUDGMENT -
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.
FOREIGN CURRENCY TRANSLATION -
The "functional currency" for translating the accounts of the Company's
operations outside the U.S. is the local currency. The translation from the
applicable foreign currencies to U.S. dollars is performed for balance sheet
accounts using current exchange rates in effect at the balance sheet date and
for revenue and expense accounts using a weighted average exchange rate during
the period. The resulting translation adjustments are recorded as a component of
accumulated other comprehensive income. Gains or losses resulting from foreign
currency transactions are included in selling, general and administrative
expenses.
CASH INVESTMENTS -
Cash investments consist of highly liquid investments with an original maturity
when purchased of three months or less and are stated at cost, which
approximates market value. The amounts at February 29, 2000, and February 28,
1999, are not significant.
FAIR VALUE OF FINANCIAL INSTRUMENTS -
To meet the reporting requirements of Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments," the
Company calculates the fair value of financial instruments using quoted market
prices whenever available. When quoted market prices are not available, the
Company uses standard pricing models for various types of financial instruments
(such as forwards, options, swaps, etc.) which take into account the present
value of estimated future cash flows. The methods and assumptions used to
estimate the fair value of financial instruments are summarized as follows:
ACCOUNTS RECEIVABLE: The carrying amount approximates fair value due to the
short maturity of these instruments, the creditworthiness of the customers and
the large number of customers constituting the accounts receivable balance.
NOTES PAYABLE: These instruments are variable interest rate bearing notes
for which the carrying value approximates the fair value.
LONG-TERM DEBT: The carrying value of the debt facilities with short-term
variable interest rates approximates the fair value. The fair value of the fixed
rate debt was estimated by discounting cash flows using interest rates currently
available for debt with similar terms and maturities.
FOREIGN EXCHANGE HEDGING AGREEMENTS: The fair value of currency forward
contracts is estimated based on quoted market prices.
LETTERS OF CREDIT: At February 29, 2000, and February 28, 1999, the Company
had letters of credit outstanding totaling $10.8 million and $4.0 million,
respectively, which guarantee payment for certain obligations. The Company
recognizes expense on these obligations as incurred and no material losses are
anticipated.
The carrying amount and estimated fair value of the Company's financial
instruments are summarized as follows:
<TABLE>
<CAPTION>
February 29, 2000 February 28, 1999
----------------------------------------- --------------------------------------
Notional Carrying Fair Notional Carrying Fair
Amount Amount Value Amount Amount Value
---------- ----------- ----------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Liabilities:
------------
Notes payable $ - $ 26,800 $ 26,800 $ - $ 87,728 $ 87,728
Long-term debt, including
current portion $ - $ 1,291,122 $ 1,255,424 $ - $ 837,694 $ 844,568
Derivative Instruments:
-----------------------
Foreign exchange hedging
agreements:
Currency forward contracts $ 6,895 $ - $ (125) $ 12,444 $ - $ (1,732)
</TABLE>
INTEREST RATE FUTURES AND CURRENCY FORWARD CONTRACTS -
From time to time, the Company enters into interest rate futures and a variety
of currency forward contracts in the management of interest rate risk and
foreign currency transaction exposure. The Company has limited involvement with
derivative instruments and does not use them for trading purposes. The Company
uses derivatives solely to reduce the financial impact of the related risks.
Unrealized gains and losses on interest rate futures are deferred and recognized
as a component of interest expense over the borrowing period. Unrealized gains
and losses on currency forward contracts are deferred and recognized as a
component of the related transactions in the accompanying financial statements.
Discounts or premiums on currency forward contracts are recognized over the life
of the contract. Cash flows from derivative instruments are classified in the
same category as the item being hedged. The Company's open currency forward
contracts at February 29, 2000, hedge purchase commitments denominated in
foreign currencies and mature within twelve months.
INVENTORIES -
Inventories are stated at the lower of cost (computed in accordance with the
first-in, first-out method) or market. Elements of cost include materials, labor
and overhead and consist of the following:
February 29, 2000 February 28, 1999
----------------- -----------------
(in thousands)
Raw materials and supplies $ 29,417 $ 32,388
In-process inventories 419,558 344,175
Finished case goods 166,725 132,008
----------------- -----------------
$ 615,700 $ 508,571
================= =================
A substantial portion of barreled whiskey and brandy will not be sold within one
year because of the duration of the aging process. All barreled whiskey and
brandy are classified as in-process inventories and are included in current
assets, in accordance with industry practice. Bulk wine inventories are also
included as in-process inventories within current assets, in accordance with the
general practices of the wine industry, although a portion of such inventories
may be aged for periods greater than one year. Warehousing, insurance, ad
valorem taxes and other carrying charges applicable to barreled whiskey and
brandy held for aging are included in inventory costs.
PROPERTY, PLANT AND EQUIPMENT -
Property, plant and equipment is stated at cost. Major additions and betterments
are charged to property accounts, while maintenance and repairs are charged to
operations as incurred. The cost of properties sold or otherwise disposed of and
the related accumulated depreciation are eliminated from the accounts at the
time of disposal and resulting gains and losses are included as a component of
operating income.
DEPRECIATION -
Depreciation is computed primarily using the straight-line method over the
following estimated useful lives:
Depreciable Life in Years
-------------------------
Buildings and improvements 10 to 33 1/3
Machinery and equipment 3 to 15
Motor vehicles 3 to 7
Amortization of assets capitalized under capital leases is included with
depreciation expense. Amortization is calculated using the straight-line method
over the shorter of the estimated useful life of the asset or the lease term.
OTHER ASSETS -
Other assets, which consist of goodwill, distribution rights, trademarks, agency
license agreements, deferred financing costs, prepaid pension benefits, cash
surrender value of officers' life insurance and other amounts, are stated at
cost, net of accumulated amortization. Amortization is calculated on a
straight-line or effective interest basis over the following estimated useful
lives:
Useful Life in Years
--------------------
Goodwill 40
Distribution rights 40
Trademarks 40
Agency license agreements 16 to 40
Deferred financing costs 5 to 10
At February 29, 2000, the weighted average remaining useful life of these assets
is 36.4 years. At February 29, 2000, there were no officers' life insurance
policies with face values. The face value of the officers' life insurance
policies totaled $2.9 million at February 28, 1999.
LONG-LIVED ASSETS AND INTANGIBLES -
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," the Company reviews its long-lived assets and certain
identifiable intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable on an undiscounted cash flow basis. The statement also requires that
long-lived assets and certain identifiable intangibles to be disposed of be
reported at the lower of carrying amount or fair value less cost to sell. The
Company did not record any asset impairment in fiscal 2000.
ADVERTISING AND PROMOTION COSTS -
The Company generally expenses advertising and promotion costs as incurred,
shown or distributed. Prepaid advertising costs at February 29, 2000, and
February 28, 1999, were not material. Advertising and promotion expense for the
years ended February 29, 2000, February 28, 1999, and February 28, 1998, were
$279.6 million, $173.1 million, and $111.7 million, respectively.
INCOME TAXES -
The Company uses the liability method of accounting for income taxes. The
liability method accounts for deferred income taxes by applying statutory rates
in effect at the balance sheet date to the difference between the financial
reporting and tax basis of assets and liabilities.
ENVIRONMENTAL -
Environmental expenditures that relate to current operations are expensed as
appropriate. Expenditures that relate to an existing condition caused by past
operations, and which do not contribute to current or future revenue generation,
are expensed. Liabilities are recorded when environmental assessments and/or
remedial efforts are probable, and the cost can be reasonably estimated.
Generally, the timing of these accruals coincides with the completion of a
feasibility study or the Company's commitment to a formal plan of action.
Liabilities for environmental costs were not material at February 29, 2000, and
February 28, 1999.
COMPREHENSIVE INCOME -
During fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). This
statement establishes rules for the reporting of comprehensive income and its
components. Comprehensive income consists of net income and foreign currency
translation adjustments and is presented in the Consolidated Statements of
Changes in Stockholders' Equity. The adoption of SFAS No. 130 had no impact on
total stockholders' equity.
EARNINGS PER COMMON SHARE -
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.
OTHER -
Certain fiscal 1999 balances have been reclassified to conform to current year
presentation.
2. ACQUISITIONS:
MATTHEW CLARK ACQUISITION -
On December 1, 1998, the Company acquired control of Matthew Clark plc ("Matthew
Clark") and as of February 28, 1999, had acquired all of Matthew Clark's
outstanding shares (the "Matthew Clark Acquisition"). The total purchase price,
including assumption of indebtedness, for the acquisition of Matthew Clark
shares was $484.8 million, net of cash acquired. Matthew Clark, founded in 1810,
is a leading U.K.-based producer and distributor of its own brands of cider,
wine and bottled water and a leading independent drinks wholesaler in the U.K.
The purchase price for the Matthew Clark shares was funded with proceeds from
loans under the Company's prior senior credit facility. The Matthew Clark
Acquisition was accounted for using the purchase method; accordingly, the
Matthew Clark assets were recorded at fair market value, based upon a final
appraisal, at the date of acquisition, December 1, 1998. The excess of the
purchase price over the estimated fair market value of the net assets acquired
(goodwill), (pound) 108.5 million ($179.5 million as of December 1, 1998), is
being amortized on a straight-line basis over 40 years. The results of
operations of the Matthew Clark Acquisition have been included in the
Consolidated Statements of Income since the date of acquisition.
BLACK VELVET ASSETS ACQUISITION -
On April 9, 1999, in an asset acquisition, the Company acquired several
well-known Canadian whisky brands, including Black Velvet, production facilities
located in Alberta and Quebec, Canada, case goods and bulk whisky inventories
and other related assets from affiliates of Diageo plc (the "Black Velvet
Assets"). In connection with the transaction, the Company also entered into
multi-year agreements with affiliates of Diageo plc to provide packaging and
distilling services for various brands retained by the Diageo plc affiliates.
The purchase price was $185.5 million and was financed by the proceeds from the
sale of the Senior Subordinated Notes (as defined in Note 6).
The Black Velvet Assets acquisition was accounted for using the purchase method;
accordingly, the acquired assets were recorded at fair market value at the date
of acquisition. The excess of the purchase price over the estimated fair market
value of the net assets acquired (goodwill), $35.5 million, is being amortized
on a straight-line basis over 40 years. The results of operations of the Black
Velvet Assets acquisition have been included in the Consolidated Statements of
Income since the date of acquisition.
FRANCISCAN AND SIMI ACQUISITIONS -
On June 4, 1999, the Company purchased all of the outstanding capital stock of
Franciscan Vineyards, Inc. ("Franciscan Estates") and, in related transactions,
purchased vineyards, equipment and other vineyard related assets located in
Northern California (collectively, the "Franciscan Acquisition"). The purchase
price was $212.4 million in cash plus assumed debt, net of cash acquired, of
$30.8 million. The purchase price was financed primarily by additional term loan
borrowings under the senior credit facility. Also, on June 4, 1999, the Company
acquired all of the outstanding capital stock of Simi Winery, Inc. ("Simi") (the
"Simi Acquisition"). The cash purchase price was $57.5 million and was financed
by revolving loan borrowings under the senior credit facility. The purchases
were accounted for using the purchase method; accordingly, the acquired assets
were recorded at fair market value at the date of acquisition. The excess of the
purchase price over the estimated fair market value of the net assets acquired
(goodwill) for the Franciscan Acquisition and the Simi Acquisition, $96.5
million and $8.3 million, respectively, is being amortized on a straight-line
basis over 40 years. The Franciscan Estates and Simi operations are managed
together as a separate business segment of the Company ("Franciscan"). The
results of operations of Franciscan have been included in the Consolidated
Statements of Income since the date of acquisition.
The following table sets forth unaudited pro forma results of operations of the
Company for the fiscal years ended February 29, 2000, and February 28, 1999. The
unaudited pro forma results of operations give effect to the acquisitions of
Matthew Clark, the Black Velvet Assets and Franciscan as if they occurred on
March 1, 1998. The unaudited pro forma results of operations are presented after
giving effect to certain adjustments for depreciation, amortization of goodwill,
interest expense on the acquisition financing and related income tax effects.
During fiscal 2000 and fiscal 1999, the Company incurred and paid $2.9 million
and $2.6 million, respectively, in nonrecurring charges related to the closing
of a Matthew Clark cider production facility. The charges were part of a
production facility consolidation program that was begun prior to the Matthew
Clark Acquisition. The unaudited pro forma results of operations for fiscal 1999
(shown in the table below) reflect total nonrecurring charges of $21.5 million
($0.69 per share on a diluted basis) related to this facility consolidation
program, of which $18.9 million was incurred prior to the acquisition. The
unaudited pro forma results of operations for fiscal 2000 (shown in the table
below), reflect total nonrecurring charges of $12.4 million ($0.40 per share on
a diluted basis) related to transaction costs, primarily for exercise of stock
options, which were incurred by Franciscan Estates prior to the acquisition.
The unaudited pro forma results of operations are based upon currently available
information and upon certain assumptions that the Company believes are
reasonable under the circumstances. The unaudited pro forma results of
operations do not purport to present what the Company's 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 results of operations at any future date or
for any future period.
February 29, February 28,
2000 1999
----------- -----------
(in thousands, except per share data)
Net sales $ 2,367,833 $ 2,154,992
Income before extraordinary item $ 68,277 $ 45,793
Extraordinary item, net of income taxes $ - $ (11,437)
Net income $ 68,277 $ 34,356
Earnings per common share:
Basic:
Income before extraordinary item $ 3.78 $ 2.50
Extraordinary item - (0.62)
----------- -----------
Earnings per common share - basic $ 3.78 $ 1.88
=========== ===========
Diluted:
Income before extraordinary item $ 3.69 $ 2.44
Extraordinary item - (0.61)
---------- -----------
Earnings per common share - diluted $ 3.69 $ 1.83
========== ===========
Weighted average common shares outstanding:
Basic 18,054 18,293
Diluted 18,499 18,754
3. PROPERTY, PLANT AND EQUIPMENT:
The major components of property, plant and equipment are as follows:
February 29, 2000 February 28, 1999
----------------- -----------------
(in thousands)
Land $ 62,871 $ 25,434
Vineyards 37,756 266
Buildings and improvements 131,588 104,152
Machinery and equipment 440,008 380,069
Motor vehicles 7,241 20,191
Construction in progress 27,874 35,468
----------------- -----------------
707,338 565,580
Less - Accumulated depreciation (164,367) (136,777)
----------------- -----------------
$ 542,971 $ 428,803
================= =================
4. OTHER ASSETS:
The major components of other assets are as follows:
February 29, February 28,
2000 1999
----------- -----------
(in thousands)
Goodwill $ 463,577 $ 311,908
Trademarks 253,148 102,183
Distribution rights and agency
license agreements 87,052 76,894
Other 64,504 53,779
----------- -----------
868,281 544,764
Less - Accumulated amortization (58,458) (35,530)
----------- -----------
$ 809,823 $ 509,234
=========== ===========
5. OTHER ACCRUED EXPENSES AND LIABILITIES:
The major components of other accrued expenses and liabilities are as follows:
February 29, February 28,
2000 1999
----------- -----------
(in thousands)
Accrued advertising and promotions $ 37,083 $ 38,604
Accrued interest 24,757 11,384
Accrued income taxes payable 24,093 9,347
Accrued salaries and commissions 23,850 15,584
Other 94,988 74,532
----------- -----------
$ 204,771 $ 149,451
=========== ===========
6. BORROWINGS :
Borrowings consist of the following:
<TABLE>
<CAPTION>
February 28,
February 29, 2000 1999
----------------------------------------- -----------
Current Long-term Total Total
(in thousands) ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Notes Payable:
--------------
Senior Credit Facility:
Revolving Credit Loans $ 26,800 $ - $ 26,800 $ 83,075
Other - - - 4,653
----------- ----------- ----------- -----------
$ 26,800 $ - $ 26,800 $ 87,728
=========== =========== =========== ===========
Long-term Debt:
---------------
Senior Credit Facility - Term Loans $ 51,801 $ 518,249 $ 570,050 $ 625,630
Senior Notes - 318,433 318,433 -
Senior Subordinated Notes - 392,947 392,947 192,520
Other Long-term Debt 2,186 7,506 9,692 19,544
----------- ----------- ----------- -----------
$ 53,987 $ 1,237,135 $ 1,291,122 $ 837,694
=========== =========== =========== ===========
</TABLE>
SENIOR CREDIT FACILITY -
On October 6, 1999, the Company, certain of its principal operating subsidiaries
and a syndicate of banks (the "Syndicate Banks"), for which The Chase Manhattan
Bank acts as administrative agent, entered into a new senior credit facility
(the "2000 Credit Agreement"). The 2000 Credit Agreement includes both U.S.
dollar and British pound sterling commitments of the Syndicate Banks of up to,
in the aggregate, the equivalent of $1.0 billion (subject to increase as therein
provided to $1.2 billion). Proceeds of the 2000 Credit Agreement were used to
repay all outstanding principal and accrued interest on all loans under the
Company's prior senior credit facility, and are available to fund permitted
acquisitions and ongoing working capital needs of the Company and its
subsidiaries.
The 2000 Credit Agreement provides for a $380.0 million Tranche I Term Loan
facility due in December 2004, a $320.0 million Tranche II Term Loan facility
available for borrowing in British pound sterling due in December 2004, and a
$300.0 million Revolving Credit facility (including letters of credit up to a
maximum of $20.0 million) which expires in December 2004. The Tranche I Term
Loan facility ($380.0 million) and the Tranche II Term Loan facility
((pound)193.4 million, or approximately $320.0 million) were fully drawn at
closing. The Tranche I Term Loan facility requires quarterly repayments,
starting at $12.0 million in March 2000 and increasing thereafter annually with
final payments of $23.0 million in each quarter in 2004. On November 17, 1999,
proceeds from the Sterling Senior Notes (as defined below) were used to repay a
portion of the $320.0 million Tranche II Term Loan facility ((pound)73.0
million, or approximately $118.3 million). After this repayment, the required
quarterly repayments of the Tranche II Term Loan facility were revised to
(pound)0.6 million ($1.0 million) for each quarter in 2000, (pound)1.2 million
($1.9 million) for each quarter in 2001 and 2002, (pound)1.5 million ($2.4
million) for each quarter in 2003, and (pound)25.6 million ($40.4 million) for
each quarter in 2004 (the foregoing U.S. dollar equivalents are as of February
29, 2000). On May 15, 2000, the Company issued (pound)80.0 million aggregate
principal amount of 8 1/2% Series C Senior Notes. The proceeds of the offering
were used to repay a portion of the Tranche II Term Loan (see Note 19 -
Subsequent Event). There are certain mandatory term loan prepayments, including
those based on sale of assets and issuance of debt and equity, in each case
subject to baskets, exceptions and thresholds which are generally more favorable
to the Company than those contained in its prior senior credit facility.
The rate of interest payable, at the Company's option, is a function of the
London interbank offering rate ("LIBOR") plus a margin, federal funds rate plus
a margin, or the prime rate plus a margin. The margin is adjustable based upon
the Company's Debt Ratio (as defined in the 2000 Credit Agreement) and, with
respect to LIBOR borrowings, ranges between 0.75% and 1.25% for Revolving Credit
loans and 1.00% and 1.75% for Term Loans. As of February 29, 2000, the margin
was 1.25% for Revolving Credit loans and 1.75% for Term Loans. In addition to
interest, the Company pays a facility fee on the Revolving Credit commitments at
0.50% per annum as of February 29, 2000. This fee is based upon the Company's
quarterly Debt Ratio and can range from 0.25% to 0.50%.
Certain of the Company's principal operating subsidiaries have guaranteed the
Company's obligations under the 2000 Credit Agreement. The 2000 Credit Agreement
is secured by (i) first priority pledges of 100% of the capital stock of
Canandaigua Limited and all of the Company's domestic operating subsidiaries and
(ii) first priority pledges of 65% of the capital stock of Matthew Clark and
certain other foreign subsidiaries.
The Company and its subsidiaries are subject to customary lending covenants
including those restricting additional liens, incurring additional indebtedness,
the sale of assets, the payment of dividends, transactions with affiliates and
the making of certain investments, in each case subject to baskets, exceptions
and thresholds which are generally more favorable to the Company than those
contained in its prior senior credit facility. The primary financial covenants
require the maintenance of a debt coverage ratio, a senior debt coverage ratio,
a fixed charges ratio and an interest coverage ratio. Among the most restrictive
covenants contained in the 2000 Credit Agreement is the senior debt coverage
ratio.
As of February 29, 2000, under the 2000 Credit Agreement, the Company had
outstanding term loans of $570.1 million bearing a weighted average interest
rate of 7.95% and $26.8 million of revolving loans bearing a weighted average
interest rate of 7.43%. The Company had average outstanding Revolving Credit
Loans of approximately $73.0 million, $75.5 million, and $59.9 million for the
years ended February 29, 2000, February 28, 1999, and February 28, 1998,
respectively. Amounts available to be drawn down under the Revolving Credit
Loans were $262.5 million and $212.9 million at February 29, 2000, and February
28, 1999, respectively. The average interest rate on the Revolving Credit Loans
was 7.31%, 6.23%, and 6.57% for fiscal 2000, fiscal 1999, and fiscal 1998,
respectively.
SENIOR NOTES -
On August 4, 1999, the Company issued $200.0 million aggregate principal amount
of 8 5/8% Senior Notes due August 2006 ("Senior Notes"). The net proceeds of the
offering (approximately $196.0 million) were used to repay a portion of the
Company's borrowings under its senior credit facility. Interest on the Senior
Notes is payable semiannually on February 1 and August 1 of each year, beginning
February 1, 2000. The Senior Notes are redeemable at the option of the Company,
in whole or in part, at any time. The Senior Notes are unsecured senior
obligations and rank equally in right of payment to all existing and future
unsecured senior indebtedness of the Company. The Senior Notes are guaranteed,
on a senior basis, by certain of the Company's significant operating
subsidiaries.
On November 17, 1999, the Company issued (pound)75.0 million (approximately
$121.7 million upon issuance and $118.4 million as of February 29, 2000)
aggregate principal amount of 8 1/2% Senior Notes due November 2009 ("Sterling
Senior Notes"). The net proceeds of the offering ((pound)73.0 million, or
approximately $118.3 million) were used to repay a portion of the Company's
British pound sterling borrowings under its senior credit facility. Interest on
the Sterling Senior Notes is payable semiannually on May 15 and November 15 of
each year, beginning on May 15, 2000. The Sterling Senior Notes are redeemable
at the option of the Company, in whole or in part, at any time. The Sterling
Senior Notes are unsecured senior obligations and rank equally in right of
payment to all existing and future unsecured senior indebtedness of the Company.
The Sterling Senior Notes are guaranteed, on a senior basis, by certain of the
Company's significant operating subsidiaries. In March 2000, the Company
exchanged (pound)75.0 million aggregate principal amount of 8 1/2% Series B
Senior Notes due in November 2009 (the "Sterling Series B Senior Notes") for the
Sterling Senior Notes. The terms of the Sterling Series B Senior Notes are
identical in all material respects to the Sterling Senior Notes.
SENIOR SUBORDINATED NOTES -
On March 4, 1999, the Company issued $200.0 million aggregate principal amount
of 8 1/2% Senior Subordinated Notes due March 2009 ("Senior Subordinated
Notes"). The net proceeds of the offering (approximately $195.0 million) were
used to fund the acquisition of the Black Velvet Assets and to pay the fees and
expenses related thereto with the remainder of the net proceeds used for general
corporate purposes. Interest on the Senior Subordinated Notes is payable
semiannually on March 1 and September 1 of each year, beginning September 1,
1999. The Senior Subordinated Notes are redeemable at the option of the Company,
in whole or in part, at any time on or after March 1, 2004. The Company may also
redeem up to $70.0 million of the Senior Subordinated Notes using the proceeds
of certain equity offerings completed before March 1, 2002. The Senior
Subordinated Notes are unsecured and subordinated to the prior payment in full
of all senior indebtedness of the Company, which includes the senior credit
facility. The Senior Subordinated Notes are guaranteed, on a senior subordinated
basis, by certain of the Company's significant operating subsidiaries.
On December 27, 1993, the Company issued $130.0 million aggregate principal
amount of 8 3/4% Senior Subordinated Notes due in December 2003 (the "Original
Notes"). Interest on the Original Notes is payable semiannually on June 15 and
December 15 of each year. The Original Notes are unsecured and subordinated to
the prior payment in full of all senior indebtedness of the Company, which
includes the senior credit facility. The Original Notes are guaranteed, on a
senior subordinated basis, by all of the Company's significant operating
subsidiaries (other than Matthew Clark and its subsidiaries).
On October 29, 1996, the Company issued $65.0 million aggregate principal amount
of 8 3/4% Series B Senior Subordinated Notes ($62.9 million, net of $2.1 million
unamortized discount, with an effective rate of 9.76% as of February 29, 2000)
due in December 2003 (the "Series B Notes"). In February 1997, the Company
exchanged $65.0 million aggregate principal amount of 8 3/4% Series C Senior
Subordinated Notes due in December 2003 (the "Series C Notes") for the Series B
Notes. The terms of the Series C Notes are substantially identical in all
material respects to the Original Notes.
TRUST INDENTURES -
The Company's various Trust Indentures relating to the senior notes and senior
subordinated notes contain certain covenants, including, but not limited to: (i)
limitation on indebtedness; (ii) limitation on restricted payments; (iii)
limitation on transactions with affiliates; (iv) limitation on senior
subordinated indebtedness; (v) limitation on liens; (vi) limitation on sale of
assets; (vii) limitation on issuance of guarantees of and pledges for
indebtedness; (viii) restriction on transfer of assets; (ix) limitation on
subsidiary capital stock; (x) limitation on the creation of any restriction on
the ability of the Company's subsidiaries to make distributions and other
payments; and (xi) restrictions on mergers, consolidations and the transfer of
all or substantially all of the assets of the Company to another person. The
limitation on indebtedness covenant is governed by a rolling four quarter fixed
charge ratio requiring a specified minimum.
DEBT PAYMENTS -
Principal payments required under long-term debt obligations (excluding
unamortized discount) during the next five fiscal years and thereafter are as
follows:
(in thousands)
2001 $ 53,987
2002 83,575
2003 88,469
2004 294,753
2005 253,705
Thereafter 518,686
-----------
$ 1,293,175
===========
7. INCOME TAXES:
The provision for (benefit from) income taxes consists of the following:
For the Years Ended
February 28,
-------------------
For the Year Ended February 29, 2000 1999 1998
----------------------------------------- -------- --------
State and
Federal Local Foreign Total Total Total
-------- -------- -------- -------- -------- --------
(in thousands)
Current $ 38,588 $ 6,091 $ 8,405 $ 53,084 $ 32,468 $ 28,476
Deferred (10,804) 2,874 6,430 (1,500) 10,053 4,275
-------- -------- -------- -------- -------- --------
$ 27,784 $ 8,965 $ 14,835 $ 51,584 $ 42,521 $ 32,751
======== ======== ======== ======== ======== ========
The foreign provision for income taxes is based on foreign pretax earnings.
Earnings of foreign subsidiaries would be subject to U.S. income taxation on
repatriation to the U.S. The Company's consolidated financial statements fully
provide for any related tax liability on amounts that may be repatriated.
A reconciliation of the total tax provision to the amount computed by applying
the statutory U.S. Federal income tax rate to income before provision for income
taxes is as follows:
<TABLE>
<CAPTION>
For the Year Ended
February 29, For the Years Ended February 28,
-------------------- --------------------------------------------
2000 1999 1998
-------------------- -------------------- --------------------
% of % of % of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
-------- -------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Income tax provision at statutory rate $ 45,136 35.0 $ 36,551 35.0 $ 27,958 35.0
State and local income taxes, net of
Federal income tax benefit 3,077 2.4 6,977 6.7 4,793 6.0
Earnings of subsidiaries taxed at
other than U.S. statutory rate 1,294 1.0 227 0.2 - -
Miscellaneous items, net 2,077 1.6 (1,234) (1.2) - -
-------- -------- -------- -------- -------- --------
$ 51,584 40.0 $ 42,521 40.7 $ 32,751 41.0
======== ======== ======== ======== ======== ========
</TABLE>
Deferred tax assets and liabilities reflect the future income tax effects of
temporary differences between the consolidated financial statement carrying
amounts of existing assets and liabilities and their respective tax bases and
are measured using enacted tax rates that apply to taxable income.
Significant components of deferred tax liabilities (assets) consist of the
following:
February 29, February 28,
2000 1999
----------- -----------
(in thousands)
Depreciation and amortization $ 127,436 $ 89,447
Effect of change in accounting method 11,200 16,546
Inventory reserves 4,542 6,975
Restructuring (6,824) (3,244)
Insurance accruals (3,868) (3,112)
Other accruals (11,136) (8,653)
----------- -----------
$ 121,350 $ 97,959
=========== ===========
At February 29, 2000, the Company has U.S. Federal net operating loss
carryforwards of $1.8 million to offset future taxable income that, if not
otherwise utilized, will expire during fiscal 2011.
8. PROFIT SHARING AND RETIREMENT SAVINGS PLANS:
The Company's retirement and profit sharing plan, the Canandaigua Brands, Inc.
401(k) and Profit Sharing Plan (the "Plan"), covers substantially all employees,
excluding those employees covered by collective bargaining agreements and
Matthew Clark employees. 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 12% 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. Company contributions were $7.3
million, $6.8 million, and $5.9 million for the years ended February 29, 2000,
February 28, 1999, and February 28, 1998, respectively.
On December 31, 1999, the Company's subsidiary, Matthew Clark, and the Trustees
of the Matthew Clark Group Pension Plan and the Matthew Clark Executive Pension
Plan (the "Plans") entered into an agreement to merge the Plans into the Matthew
Clark Group Pension Plan effective December 31, 1999. The Matthew Clark Group
Pension Plan is a defined benefit plan with assets held by a Trustee who
administers funds separately from the Company's finances. As part of the
acquisition of the Black Velvet Assets, the Company's subsidiary, Barton,
acquired pension plans, which cover certain Canadian employees.
The following table summarizes the funded status of the Company's defined
benefit pension plans and the related amounts that are primarily included in
other assets in the Consolidated Balance Sheets.
<TABLE>
<CAPTION>
February 28,
February 29, 2000 1999
--------------------------------------------- -----------
Matthew Clark Barton Total Total
------------- ------------ ----------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at March 1 $ 163,680 $ - $ 163,680 $ -
Acquisition - 15,348 15,348 165,997
Service cost 4,299 336 4,635 1,335
Interest cost 10,494 711 11,205 2,671
Plan participants' contribution 1,507 - 1,507 481
Actuarial loss/(gain) 12,350 (2,222) 10,128 -
Benefits paid (4,939) (405) (5,344) (1,517)
Foreign currency exchange rate changes (2,875) 513 (2,362) (5,287)
------------- ------------ ----------- -----------
Benefit obligation at last day of February $ 184,516 $ 14,281 $ 198,797 $ 163,680
============= ============ =========== ===========
Change in plan assets:
Fair value of plan assets at March 1 $ 194,606 $ - $ 194,606 $ -
Acquisition - 12,318 12,318 194,001
Actual return on plan assets 20,903 948 21,851 7,935
Plan participants' contributions 1,507 - 1,507 481
Employer contribution - 670 670 -
Benefits paid (4,939) (431) (5,370) (1,517)
Foreign currency exchange rate changes (3,198) 445 (2,753) (6,294)
------------- ------------ ----------- -----------
Fair value of plan assets at last day of February $ 208,879 $ 13,950 $ 222,829 $ 194,606
============= ============ =========== ===========
Funded status of the plan as of last day of February:
Funded status $ 24,362 $ (330) $ 24,032 $ 30,927
Unrecognized actuarial gain/(loss) 2,945 (2,369) 576 (3,950)
------------- ------------ ----------- -----------
Prepaid (accrued) benefit cost $ 27,307 $ (2,699) $ 24,608 $ 26,977
============= ============ =========== ===========
Assumptions as of last day of February:
Rate of return on plan assets 8.00% 8.50% 8.00%
Discount rate 6.00% 7.25% 6.50%
Increase in compensation levels 4.00% - 4.50%
Components of net periodic benefit cost for the
twelve months ended the last day of February:
Service cost $ 4,299 $ 336 $ 4,635 $ 1,335
Interest cost 10,494 711 11,205 2,671
Expected return on plan assets (15,533) (807) (16,340) (3,848)
------------- ------------ ----------- -----------
Net periodic benefit (income) cost $ (740) $ 240 $ (500) $ 158
============= ============ =========== ===========
</TABLE>
9. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS:
In connection with the acquisition of the Black Velvet Assets, the Company's
subsidiary, Barton, currently sponsors multiple non-pension postretirement and
postemployment benefit plans for certain of its Canadian employees.
The status of the plans is as follows:
(in thousands)
Change in benefit obligation:
Benefit obligation at April 9, 1999 $ 698
Service cost 14
Interest cost 32
Benefits paid (10)
Actuarial gain (110)
Foreign currency exchange rate changes 23
-----------
Benefit obligation at February 29, 2000 $ 647
===========
Funded status as of February 29, 2000:
Funded status $ (647)
Unrecognized net gain (111)
-----------
Accrued benefit liability $ (758)
===========
Assumptions as of February 29, 2000:
Discount rate 7.25%
Increase in compensation levels 4.00%
Components of net periodic benefit cost for the
period ended February 29, 2000:
Service cost $ 14
Interest cost 32
-----------
Net periodic benefit cost $ 46
===========
At February 29, 2000, a 9.2% annual rate of increase in the per capita cost of
covered health benefits was assumed for the first year. The rate was assumed to
decrease gradually to 4.3% over seven years and to remain at this level
thereafter. Assumed healthcare trend rates could have a significant effect on
the amount reported for health care plans. A 1% change in assumed health care
cost trend rate would have the following effects:
1% 1%
Increase Decrease
(in thousands) -------- --------
Effect on total service and interest cost components $ 6 $ (5)
Effect on postretirement benefit obligation $ 72 $ (73)
10. STOCKHOLDERS' EQUITY:
COMMON STOCK -
The Company has two classes of common stock: Class A Common Stock and Class B
Convertible Common Stock. Class B Convertible Common Stock shares are
convertible into shares of Class A Common Stock on a one-to-one basis at any
time at the option of the holder. Holders of Class B Convertible Common Stock
are entitled to ten votes per share. Holders of Class A Common Stock are
entitled to only one vote per share but are entitled to a cash dividend premium.
If the Company pays a cash dividend on Class B Convertible Common Stock, each
share of Class A Common Stock will receive an amount at least ten percent
greater than the amount of the cash dividend per share paid on Class B
Convertible Common Stock. In addition, the Board of Directors may declare and
pay a dividend on Class A Common Stock without paying any dividend on Class B
Convertible Common Stock.
At February 29, 2000, there were 15,069,418 shares of Class A Common Stock and
3,119,835 shares of Class B Convertible Common Stock outstanding, net of
treasury stock.
STOCK REPURCHASE AUTHORIZATION -
In January 1996, the Company's Board of Directors authorized the repurchase of
up to $30.0 million of its Class A Common Stock and Class B Convertible Common
Stock. The Company was permitted to finance such purchases, which became
treasury shares, through cash generated from operations or through the senior
credit facility. Throughout the year ended February 28, 1997, the Company
repurchased 787,450 shares of Class A Common Stock totaling $20.8 million. The
Company completed its repurchase program during fiscal 1998, repurchasing
362,100 shares of Class A Common Stock for $9.2 million.
In 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 Convertible Common
Stock. The Company may finance such purchases, which will become treasury
shares, through cash generated from operations or through the senior credit
facility. During fiscal 1999, the Company repurchased 1,018,836 shares of Class
A Common Stock for $44.9 million. No repurchases were made during fiscal 2000.
LONG-TERM STOCK INCENTIVE PLAN -
Under the Company's Long-Term Stock Incentive Plan, nonqualified stock options,
stock appreciation rights, restricted stock and other stock-based awards may be
granted to employees, officers and directors of the Company. At the Company's
Annual Meeting of Stockholders held on July 20, 1999, stockholders approved the
amendment to the Company's Long-Term Stock Incentive Plan to increase the
aggregate number of shares of the Class A Common Stock available for awards
under the plan from 4,000,000 shares to 7,000,000 shares. The exercise price,
vesting period and term of nonqualified stock options granted are established by
the committee administering the plan (the "Committee"). Grants of stock
appreciation rights, restricted stock and other stock-based awards may contain
such vesting, terms, conditions and other requirements as the Committee may
establish. During fiscal 2000 and fiscal 1999, no stock appreciation rights or
restricted stock were granted. At February 29, 2000, there were 3,557,568 shares
available for future grant.
A summary of nonqualified stock option activity is as follows:
Weighted Weighted
Average Average
Shares Under Exercise Options Exercise
Option Price Exercisable Price
------------ -------- ----------- --------
Balance, February 28, 1997 1,432,975 $ 18.85 51,425 $ 10.67
Options granted 569,400 $ 38.72
Options exercised (117,452) $ 15.33
Options forfeited/canceled (38,108) $ 17.66
------------
Balance, February 28, 1998 1,846,815 $ 25.23 360,630 $ 25.46
Options granted 728,200 $ 50.57
Options exercised (203,565) $ 20.08
Options forfeited/canceled (116,695) $ 37.13
------------
Balance, February 28, 1999 2,254,755 $ 33.26 492,285 $ 24.55
Options granted 819,800 $ 50.42
Options exercised (187,690) $ 17.92
Options forfeited/canceled (148,615) $ 44.95
------------
Balance, February 29, 2000 2,738,250 $ 38.81 737,455 $ 27.04
============
The following table summarizes information about stock options outstanding at
February 29, 2000:
Options Outstanding Options Exercisable
------------------------------------ ----------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
--------------- ----------- ----------- -------- ----------- --------
$ 4.44 - $11.50 12,150 2.3 years $ 11.50 12,150 $ 11.50
$17.00 - $25.63 633,420 5.4 years $ 17.28 365,280 $ 17.42
$26.75 - $31.25 335,180 6.5 years $ 28.45 145,300 $ 27.50
$35.38 - $50.00 940,600 8.5 years $ 45.41 185,325 $ 42.76
$51.00 - $59.56 816,900 8.9 years $ 52.57 29,400 $ 51.74
----------- -----------
2,738,250 7.6 years $ 38.81 737,455 $ 27.04
=========== ===========
The weighted average fair value of options granted during fiscal 2000, fiscal
1999, and fiscal 1998 was $26.28, $26.21, and $20.81, respectively. The fair
value of options is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions: risk-free
interest rate of 5.7% for fiscal 2000, 5.3% for fiscal 1999, and 6.4% for fiscal
1998; volatility of 40.0% for fiscal 2000, 40.6% for fiscal 1999, and 41.3% for
fiscal 1998; expected option life of 7.0 years for fiscal 2000 and fiscal 1999,
and 6.9 years for fiscal 1998. The dividend yield was 0% for fiscal 2000, fiscal
1999, and fiscal 1998. Forfeitures are recognized as they occur.
INCENTIVE STOCK OPTION PLAN -
Under the Company's Incentive Stock Option Plan, incentive stock options may be
granted to employees, including officers, of the Company. Grants, in the
aggregate, may not exceed 1,000,000 shares of the Company's Class A Common
Stock. The exercise price of any incentive stock option may not be less than the
fair market value of the Company's Class A Common Stock on the date of grant.
The vesting period and term of incentive stock options granted are established
by the Committee. The maximum term of incentive stock options is ten years.
During fiscal 2000 and fiscal 1999, no incentive stock options were granted.
EMPLOYEE STOCK PURCHASE PLAN - The Company has a stock purchase plan under which
1,125,000 shares of Class A Common Stock can be issued. Under the terms of the
plan, eligible employees may purchase shares of the Company's Class A Common
Stock through payroll deductions. The purchase price is the lower of 85% of the
fair market value of the stock on the first or last day of the purchase period.
During fiscal 2000, fiscal 1999, and fiscal 1998, employees purchased 31,062
shares, 49,850 shares, and 78,248 shares, respectively.
The weighted average fair value of purchase rights granted during fiscal 2000,
fiscal 1999, and fiscal 1998 was $12.18, $12.35, and $11.90, respectively. The
fair value of purchase rights is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions: risk-free interest rate of 5.4% for fiscal 2000, 4.7% for fiscal
1999, and 5.3% for fiscal 1998; volatility of 33.6% for fiscal 2000, 33.5% for
fiscal 1999, and 35.1% for fiscal 1998; expected purchase right life of 0.5
years for fiscal 2000, fiscal 1999, and fiscal 1998. The dividend yield was 0%
for fiscal 2000, fiscal 1999, and fiscal 1998.
PRO FORMA DISCLOSURE -
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for its
plans. The Company adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("SFAS No. 123"). Accordingly, no incremental compensation
expense has been recognized for its stock-based compensation plans. Had the
Company recognized the compensation cost based upon the fair value at the date
of grant for awards under its plans consistent with the methodology prescribed
by SFAS No. 123, net income and earnings per common share would have been
reduced to the pro forma amounts as follows:
<TABLE>
<CAPTION>
For the Year Ended
February 29, For the Years Ended February 28,
-------------------- --------------------------------------------
2000 1999 1998
-------------------- -------------------- --------------------
As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma
-------- -------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net income $ 77,375 $ 71,474 $ 50,472 $ 46,942 $ 47,130 $ 43,230
======== ======== ======== ======== ======== ========
Earnings per common share:
Basic $ 4.29 $ 3.96 $ 2.76 $ 2.57 $ 2.52 $ 2.32
Diluted $ 4.18 $ 3.86 $ 2.69 $ 2.50 $ 2.47 $ 2.26
</TABLE>
The pro forma effect on net income may not be representative of that to be
expected in future years.
<PAGE>
11. EARNINGS PER COMMON SHARE:
The following table presents earnings per common share as follows:
For the Year
Ended For the Years Ended
February 29, February 28,
------------ -------------------
2000 1999 1998
----------- -------- --------
(in thousands, except per share data)
Income before extraordinary item $ 77,375 $ 61,909 $ 47,130
Extraordinary item, net of income taxes - (11,437) -
----------- -------- --------
Income applicable to common shares $ 77,375 $ 50,472 $ 47,130
=========== ======== ========
Weighted average common shares
outstanding - basic 18,054 18,293 18,672
Stock options 445 461 433
----------- -------- --------
Weighted average common shares
outstanding - diluted 18,499 18,754 19,105
=========== ======== ========
Earnings per common share:
Basic:
Income before extraordinary item $ 4.29 $ 3.38 $ 2.52
Extraordinary item - (0.62) -
----------- -------- ---------
Earnings per common share - basic $ 4.29 $ 2.76 $ 2.52
=========== ======== ========
Diluted:
Income before extraordinary item $ 4.18 $ 3.30 $ 2.47
Extraordinary item - (0.61) -
----------- -------- ---------
Earnings per common share - diluted $ 4.18 $ 2.69 $ 2.47
=========== ======== ========
12. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES -
Future payments under noncancelable operating leases having initial or remaining
terms of one year or more are as follows during the next five fiscal years and
thereafter:
(in thousands)
2001 $ 16,312
2002 14,867
2003 13,827
2004 12,936
2005 12,067
Thereafter 96,301
---------
$ 166,310
=========
Rental expense was $17.4 million, $8.2 million, and $5.6 million for fiscal
2000, fiscal 1999, and fiscal 1998, respectively.
PURCHASE COMMITMENTS AND CONTINGENCIES -
The Company has agreements with suppliers to purchase various spirits of which
certain agreements are denominated in British pound sterling and Canadian
dollars. The maximum future obligation under these agreements, based upon
exchange rates at February 29, 2000, aggregate $28.4 million for contracts
expiring through December 2005.
All of the Company's imported beer products are marketed and sold pursuant to
exclusive distribution agreements from the suppliers of these products. The
Company's agreement to distribute Corona Extra and its other Mexican beer brands
exclusively throughout 25 primarily western U.S. states expires in December
2006, with automatic five year renewals thereafter, subject to compliance with
certain performance criteria and other terms under the agreement. The remaining
agreements expire through December 2007. Prior to their expiration, these
agreements may be terminated if the Company fails to meet certain performance
criteria. At February 29, 2000, the Company believes it is in compliance with
all of its material distribution agreements and, given the Company's long-term
relationships with its suppliers, the Company does not believe that these
agreements will be terminated.
In connection with previous acquisitions, the Company assumed purchase contracts
with certain growers and suppliers. In addition, the Company has entered into
other purchase contracts with various growers and suppliers in the normal course
of business. Under the grape purchase contracts, the Company is committed to
purchase all grape production yielded from a specified number of acres for a
period of time ranging up to eighteen years. The actual tonnage and price of
grapes that must be purchased by the Company will vary each year depending on
certain factors, including weather, time of harvest, overall market conditions
and the agricultural practices and location of the growers and suppliers under
contract. The Company purchased $126.8 million of grapes under these contracts
during fiscal 2000. Based on current production yields and published grape
prices, the Company estimates that the aggregate purchases under these contracts
over the remaining term of the contracts will be approximately $800.5 million.
The Company's aggregate obligations under bulk wine purchase contracts will be
approximately $8.3 million over the remaining term of the contracts which expire
through fiscal 2001.
EMPLOYMENT CONTRACTS -
The Company has employment contracts with certain of its executive officers and
certain other management personnel with remaining terms of one year. These
agreements provide for minimum salaries, as adjusted for annual increases, and
may include incentive bonuses based upon attainment of specified management
goals. In addition, these agreements provide for severance payments in the event
of specified termination of employment. The aggregate commitment for future
compensation and severance, excluding incentive bonuses, was $4.2 million as of
February 29, 2000, of which $2.0 million is accrued in other liabilities as of
February 29, 2000.
EMPLOYEES COVERED BY COLLECTIVE BARGAINING AGREEMENTS -
Approximately 31% of the Company's full-time employees are covered by collective
bargaining agreements at February 29, 2000. Agreements expiring within one year
cover approximately 18% of the Company's full-time employees.
LEGAL MATTERS -
The Company is subject to litigation from time to time in the ordinary course of
business. Although the amount of any liability with respect to such litigation
cannot be determined, in the opinion of management such liability will not have
a material adverse effect on the Company's financial condition, results of
operations or cash flows.
13. SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK:
Gross sales to the five largest customers of the Company represented 17.1%,
25.2%, and 26.4% of the Company's gross sales for the fiscal years ended
February 29, 2000, February 28, 1999, and February 28, 1998, respectively. Gross
sales to the Company's largest customer, Southern Wine and Spirits, represented
8.0%, 10.9%, and 12.1% of the Company's gross sales for the fiscal years ended
February 29, 2000, February 28, 1999, and February 28, 1998, respectively.
Accounts receivable from the Company's largest customer represented 8.6%, 8.5%,
and 14.1% of the Company's total accounts receivable as of February 29, 2000,
February 28, 1999, and February 28, 1998, respectively. Gross sales to the
Company's five largest customers are expected to continue to represent a
significant portion of the Company's revenues. The Company's arrangements with
certain of its customers may, generally, be terminated by either party with
prior notice. The Company performs ongoing credit evaluations of its customers'
financial position, and management of the Company is of the opinion that any
risk of significant loss is reduced due to the diversity of customers and
geographic sales area.
14. SUMMARIZED FINANCIAL INFORMATION - SUBSIDIARY GUARANTORS:
The following table presents summarized financial information for the Company,
the parent company, the combined subsidiaries of the Company which guarantee the
Company's senior notes and senior subordinated notes ("Subsidiary Guarantors")
and the combined subsidiaries of the Company which are not Subsidiary
Guarantors, primarily Matthew Clark ("Subsidiary Nonguarantors"). The Subsidiary
Guarantors are wholly owned and the guarantees are full, unconditional, joint
and several obligations of each of the Subsidiary Guarantors. 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 Matthew Clark, the Company's
Canadian subsidiary, and certain other 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, loans or advances.
<TABLE>
<CAPTION>
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
----------- ------------ ------------- ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
February 29, 2000
-----------------
Current assets $ 105,884 $ 611,646 $ 278,467 $ - $ 995,997
Noncurrent assets $ 913,026 $ 1,695,790 $ 25,628 $ (1,281,650) $ 1,352,794
Current liabilities $ 150,507 $ 84,860 $ 202,850 $ - $ 438,217
Noncurrent liabilities $ 1,230,139 $ 97,410 $ 62,185 $ - $ 1,389,734
February 28, 1999
-----------------
Current assets $ 114,243 $ 532,028 $ 209,468 $ - $ 855,739
Noncurrent assets $ 646,133 $ 396,125 $ 421,867 $ (526,088) $ 938,037
Current liabilities $ 157,648 $ 126,803 $ 130,821 $ - $ 415,272
Noncurrent liabilities $ 815,421 $ 73,178 $ 54,633 $ - $ 943,232
INCOME STATEMENT DATA:
For the year ended February 29, 2000
------------------------------------
Net sales $ 620,631 $ 1,305,032 $ 761,762 $ (346,956) $ 2,340,469
Gross profit $ 174,231 $ 332,641 $ 215,588 $ - $ 722,460
(Loss) income before income taxes $ (192) $ 92,433 $ 36,718 $ - $ 128,959
Net (loss) income $ (115) $ 55,460 $ 22,030 $ - $ 77,375
For the year ended February 28, 1999
------------------------------------
Net sales $ 615,270 $ 1,080,466 $ 158,761 $ (357,154) $ 1,497,343
Gross profit $ 168,575 $ 237,437 $ 42,022 $ - $ 448,034
Income before income taxes
and extraordinary item $ 4,849 $ 96,935 $ 2,646 $ - $ 104,430
Net income $ 2,861 $ 45,781 $ 1,830 $ - $ 50,472
For the year ended February 28, 1998
------------------------------------
Net sales $ 562,760 $ 985,757 $ 2,197 $ (337,926) $ 1,212,788
Gross profit $ 151,092 $ 191,658 $ 1,000 $ - $ 343,750
Income (loss) before income taxes $ 21,024 $ 59,285 $ (428) $ - $ 79,881
Net income (loss) $ 12,404 $ 35,154 $ (428) $ - $ 47,130
</TABLE>
15. ACCOUNTING PRONOUNCEMENTS:
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 and
measured at its fair value. SFAS No. 133 also 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.
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137 ("SFAS No. 137"), "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
FASB Statement No. 133." SFAS No. 137 delays the effective date of SFAS No. 133
for one year. With the issuance of SFAS No. 137, the Company is required to
adopt SFAS No. 133 on a prospective basis for interim periods and fiscal years
beginning March 1, 2001. The Company believes the effect of the adoption on its
financial statements will not be material based on the Company's current risk
management strategies.
16. BUSINESS SEGMENT INFORMATION:
The Company reports its operating results in five segments: Canandaigua Wine
(branded popularly-priced wine and brandy, and other, primarily grape juice
concentrate); Barton (primarily beer and spirits); Matthew Clark (branded wine,
cider and bottled water, and wholesale wine, cider, spirits, beer and soft
drinks); Franciscan (primarily branded super-premium and ultra-premium wine) and
Corporate Operations and Other (primarily corporate related items). Segment
selection was based upon internal organizational structure, the way in which
these operations are managed and their performance evaluated by management and
the Company's Board of Directors, the availability of separate financial
results, and materiality considerations. The accounting policies of the segments
are the same as those described in the summary of significant accounting
policies. The Company evaluates performance based on operating profits of the
respective business units.
Segment information is as follows:
<TABLE>
<CAPTION>
For the Year Ended
February 29, For the Years Ended February 28,
------------------ --------------------------------
2000 1999 1998
------------------ ------------- -------------
(in thousands)
<S> <C> <C> <C>
CANANDAIGUA WINE:
-----------------
Net sales:
Branded:
External customers $ 623,796 $ 598,782 $ 570,807
Intersegment 5,524 - -
------------------ ------------- -------------
Total Branded 629,320 598,782 570,807
------------------ ------------- -------------
Other:
External customers 81,442 70,711 71,988
Intersegment 1,146 - -
------------------ ------------- -------------
Total Other 82,588 70,711 71,988
------------------ ------------- -------------
Net sales $ 711,908 $ 669,493 $ 642,795
Operating profit $ 46,778 $ 46,283 $ 45,440
Long-lived assets $ 192,828 $ 191,762 $ 185,317
Total assets $ 639,687 $ 650,578 $ 632,636
Capital expenditures $ 20,213 $ 25,275 $ 25,666
Depreciation and amortization $ 20,828 $ 20,838 $ 21,189
BARTON:
-------
Net sales:
Beer $ 570,380 $ 478,611 $ 376,607
Spirits 267,762 185,938 191,190
------------------ ------------- -------------
Net sales $ 838,142 $ 664,549 $ 567,797
Operating profit $ 142,931 $ 102,624 $ 77,010
Long-lived assets $ 78,876 $ 50,221 $ 51,574
Total assets $ 684,228 $ 478,580 $ 439,317
Capital expenditures $ 7,218 $ 3,269 $ 5,021
Depreciation and amortization $ 14,452 $ 10,765 $ 10,455
<PAGE>
<CAPTION>
For the Year Ended
February 29, For the Years Ended February 28,
------------------ --------------------------------
2000 1999 1998
------------------ ------------ -------------
(in thousands)
<S> <C> <C> <C>
MATTHEW CLARK:
--------------
Net sales:
Branded:
External customers $ 313,027 $ 64,879 $ -
Intersegment 75 - -
------------------ ------------ -------------
Total Branded 313,102 64,879 -
Wholesale 416,644 93,881 -
------------------ ------------ -------------
Net sales $ 729,746 $ 158,760 $ -
Operating profit $ 48,473 $ 8,998 $ -
Long-lived assets $ 158,119 $ 169,693 $ -
Total assets $ 636,807 $ 631,313 $ -
Capital expenditures $ 17,949 $ 10,444 $ -
Depreciation and amortization $ 20,238 $ 4,836 $ -
FRANCISCAN:
-----------
Net sales:
External customers $ 62,046 $ - $ -
Intersegment 73 - -
------------------ ------------ -------------
Net sales $ 62,119 $ - $ -
Operating profit $ 12,708 $ - $ -
Long-lived assets $ 106,956 $ - $ -
Total assets $ 357,999 $ - $ -
Capital expenditures $ 10,741 $ - $ -
Depreciation and amortization $ 6,028 $ - $ -
CORPORATE OPERATIONS AND OTHER:
-------------------------------
Net sales $ 5,372 $ 4,541 $ 2,196
Operating loss $ (15,849) $ (12,013) $ (10,380)
Long-lived assets $ 6,192 $ 17,127 $ 7,144
Total assets $ 30,070 $ 33,305 $ 18,602
Capital expenditures $ 1,626 $ 10,869 $ 516
Depreciation and amortization $ 3,177 $ 2,151 $ 1,517
INTERSEGMENT ELIMINATIONS:
--------------------------
Net sales $ (6,818) $ - $ -
CONSOLIDATED:
-------------
Net sales $ 2,340,469 $ 1,497,343 $ 1,212,788
Operating profit $ 235,041 $ 145,892 $ 112,070
Long-lived assets $ 542,971 $ 428,803 $ 244,035
Total assets $ 2,348,791 $ 1,793,776 $ 1,090,555
Capital expenditures $ 57,747 $ 49,857 $ 31,203
Depreciation and amortization $ 64,723 $ 38,590 $ 33,161
</TABLE>
The Company's areas of operations are principally in the United States.
Operations outside the United States consist of Matthew Clark's operations,
which are primarily in the United Kingdom. No other single foreign country or
geographic area is significant to the consolidated operations.
<PAGE>
17. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
A summary of selected quarterly financial information is as follows:
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------
May 31, August 31, November 30, February 29,
Fiscal 2000 1999 1999 1999 2000 Full Year
------------------------------------------ ---------- ---------- ------------ ------------ -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales $ 530,169 $ 621,580 $ 661,520 $ 527,200 $ 2,340,469
Gross profit $ 156,123 $ 189,128 $ 209,687 $ 167,522 $ 722,460
Net income $ 10,846 $ 21,101 $ 29,900 $ 15,528 $ 77,375
Earnings per common share: (1)
Basic $ 0.60 $ 1.17 $ 1.65 $ 0.86 $ 4.29
Diluted $ 0.59 $ 1.14 $ 1.60 $ 0.84 $ 4.18
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------
May 31, August 31, November 30, February 28,
Fiscal 1999 1998 1998 1998 1999 Full Year
------------------------------------------ ---------- ---------- ------------ ------------ -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales $ 312,928 $ 349,386 $ 375,586 $ 459,443 $ 1,497,343
Gross profit $ 92,061 $ 103,236 $ 115,695 $ 137,042 $ 448,034
Income before extraordinary item $ 13,099 $ 16,731 $ 20,161 $ 11,918 $ 61,909
Extraordinary item, net of income taxes (2) $ - $ - $ - $ (11,437) $ (11,437)
Net income $ 13,099 $ 16,731 $ 20,161 $ 481 $ 50,472
Earnings per common share: (1)
Basic:
Income before extraordinary item $ 0.70 $ 0.90 $ 1.13 $ 0.67 $ 3.38
Extraordinary item - - - (0.64) (0.62)
---------- ---------- ------------ ------------ -----------
Earnings per common share - basic $ 0.70 $ 0.90 $ 1.13 $ 0.03 $ 2.76
========== ========== ============ ============ ===========
Diluted:
Income before extraordinary item $ 0.68 $ 0.88 $ 1.10 $ 0.65 $ 3.30
Extraordinary item - - - (0.62) (0.61)
----------- ---------- ------------ ------------ -----------
Earnings per common share - diluted $ 0.68 $ 0.88 $ 1.10 $ 0.03 $ 2.69
=========== ========== ============ ============ ===========
<FN>
(1) The sum of the quarterly earnings per common share in fiscal 2000 and
fiscal 1999 may not equal the total computed for the respective years as
the earnings per common share are computed independently for each of the
quarters presented and for the full year.
(2) Represents fees related to the replacement of the prior senior credit
facility, including extinguishment of the term loan.
</FN>
</TABLE>
18. NONRECURRING CHARGES:
During fiscal 2000, the Company incurred nonrecurring charges of $5.5 million
related to the closure of a cider production facility within the Matthew Clark
operating segment in the U.K. ($2.9 million) and to a management reorganization
within the Canandaigua Wine operating segment ($2.6 million). During fiscal
1999, the Company incurred nonrecurring charges of $2.6 million also related to
the closure of the aforementioned Matthew Clark cider production facility.
19. SUBSEQUENT EVENT:
On May 15, 2000, the Company issued (pound)80.0 million (approximately $120.4
million) aggregate principal amount of 8 1/2% Series C Senior Notes due November
2009 at an issuance price of (pound)79.6 million (approximately $119.8 million,
net of $0.6 million unamortized discount, with an effective rate of 8.6%)
("Sterling Series C Senior Notes"). The net proceeds of the offering
((pound)78.8 million, or approximately $118.6 million) were used to repay a
portion of the Company's British pound sterling borrowings under its senior
credit facility. After this repayment, the required quarterly repayments of the
Tranche II Term Loan facility were revised to (pound)0.2 million ($0.3 million)
for the remaining three quarters in 2000, (pound)0.4 million ($0.6 million) for
each quarter in 2001 and 2002, (pound)0.5 million ($0.8 million) for each
quarter in 2003, and (pound)8.5 million ($12.8 million) for each quarter in
2004. (The foregoing U.S. dollar equivalents are as of May 15, 2000.) Interest
on the Sterling Series C Senior Notes is payable semiannually on May 15 and
November 15 of each year, beginning on November 15, 2000. The Sterling Series C
Senior Notes are redeemable at the option of the Company, in whole or in part,
at any time. The Sterling Series C Senior Notes are unsecured senior obligations
and rank equally in right of payment to all existing and future unsecured senior
indebtedness of the Company. The Sterling Series C Senior Notes are guaranteed,
on a senior basis, by certain of the Company's significant operating
subsidiaries.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
------- -----------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-------- --------------------------------------------------
The information required by this Item (except for the information regarding
executive officers required by Item 401 of Regulation S-K which is included in
Part I hereof in accordance with General Instruction G(3)) is incorporated
herein by reference to the Company's proxy statement to be issued in connection
with the Annual Meeting of Stockholders of the Company to be held on July 18,
2000, under those sections of the proxy statement titled "Election of Directors"
and "Section 16(a) Beneficial Ownership Reporting Compliance", which proxy
statement will be filed within 120 days after the end of the Company's fiscal
year.
ITEM 11. EXECUTIVE COMPENSATION
-------- ----------------------
The information required by this Item is incorporated herein by reference
to the Company's proxy statement to be issued in connection with the Annual
Meeting of Stockholders of the Company to be held on July 18, 2000, under that
section of the proxy statement titled "Executive Compensation" and that caption
titled "Director Compensation" under "Election of Directors", which proxy
statement will be filed within 120 days after the end of the Company's fiscal
year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-------- --------------------------------------------------------------
The information required by this Item is incorporated herein by reference
to the Company's proxy statement to be issued in connection with the Annual
Meeting of Stockholders of the Company to be held on July 18, 2000, under those
sections of the proxy statement titled "Beneficial Ownership" and "Stock
Ownership of Management", which proxy statement will be filed within 120 days
after the end of the Company's fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------- ----------------------------------------------
The information required by this Item is incorporated herein by reference
to the Company's proxy statement to be issued in connection with the Annual
Meeting of Stockholders of the Company to be held on July 18, 2000, under that
section of the proxy statement titled "Executive Compensation", which proxy
statement will be filed within 120 days after the end of the Company's fiscal
year.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
-------- ----------------------------------------------------------------
(a) 1. Financial Statements
The following consolidated financial statements of the Company are
submitted herewith:
Report of Independent Public Accountants
Consolidated Balance Sheets - February 29, 2000, and February 28,
1999
Consolidated Statements of Income for the years ended February
29, 2000, February 28, 1999, and February 28, 1998
Consolidated Statements of Changes in Stockholders' Equity for
the years ended February 29, 2000, February 28, 1999, and
February 28, 1998
Consolidated Statements of Cash Flows for the years ended
February 29, 2000, February 28, 1999, and February 28, 1998
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
The following consolidated financial information is submitted
herewith:
Selected Quarterly Financial Information (unaudited)
All other schedules are not submitted because they are not applicable or not
required under Regulation S-X or because the required information is included in
the financial statements or notes thereto.
Individual financial statements of the Registrant have been omitted because the
Registrant is primarily an operating company and no subsidiary included in the
consolidated financial statements has minority equity interests and/or
noncurrent indebtedness, not guaranteed by the Registrant, in excess of 5% of
total consolidated assets.
3. Exhibits required to be filed by Item 601 of Regulation S-K
For the exhibits that are filed herewith or incorporated herein by
reference, see the Index to Exhibits located on Page 81 of this
Report.
(b) Reports on Form 8-K
The following Report on Form 8-K was filed by the Company with the
Securities and Exchange Commission during the fourth quarter of the fiscal
year ended February 29, 2000:
Form 8-K dated January 4, 2000. This Form 8-K reported information under
Item 5 (Other Events) and included (i) the Company's Condensed Consolidated
Balance Sheets as of November 30, 1999 (unaudited) and February 28, 1999
(audited); (ii) the Company's Condensed Consolidated Statements of Income
for the three months ended November 30, 1999 (unaudited) and November 30,
1998 (unaudited); and (iii) the Company's Condensed Consolidated Statements
of Income for the nine months ended November 30, 1999 (unaudited) and
November 30, 1998 (unaudited).
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 CANANDAIGUA BRANDS, INC.
By: /s/ Richard Sands
---------------------------------
Richard Sands, Chairman of the
Board, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Richard Sands /s/ Thomas S. Summer
---------------------------------- ----------------------------------
Richard Sands, Chairman of the Thomas S. Summer, Executive Vice
Board, President, and Chief President and Chief Financial
Executive Officer (Principal Officer (Principal Financial
Executive Officer) Officer and Principal Accounting
Dated: May 30, 2000 Officer)
Dated: May 30, 2000
/s/ Robert Sands /s/ George Bresler
---------------------------------- ----------------------------------
Robert Sands, Director George Bresler, Director
Dated: May 30, 2000 Dated: May 30, 2000
/s/ James A. Locke /s/ Thomas C. McDermott
---------------------------------- ----------------------------------
James A. Locke, III, Director Thomas C. McDermott, Director
Dated: May 30, 2000 Dated: May 30, 2000
/s/ Paul L. Smith
----------------------------------
Paul L. Smith, Director
Dated: May 30, 2000
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 BATAVIA WINE CELLARS, INC.
By: /s/ Ned Cooper
----------------------------------
Ned Cooper, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Ned Cooper
----------------------------------
Ned Cooper, President
(Principal Executive Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Richard Sands
----------------------------------
Richard Sands, Director
Dated: May 30, 2000 /s/ Robert Sands
----------------------------------
Robert Sands, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 CANANDAIGUA WINE COMPANY, INC.
By: /s/ Jon Moramarco
----------------------------------
Jon Moramarco, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Jon Moramarco
----------------------------------
Jon Moramarco, President and Chief
Executive Officer (Principal
Executive Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Richard Sands
----------------------------------
Richard Sands, Director
Dated: May 30, 2000 /s/ Robert Sands
----------------------------------
Robert Sands, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 CANANDAIGUA EUROPE LIMITED
By: /s/ Douglas Kahle
----------------------------------
Douglas Kahle, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Douglas Kahle
----------------------------------
Douglas Kahle, President
(Principal Executive Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Richard Sands
----------------------------------
Richard Sands, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 CANANDAIGUA LIMITED
By: /s/ Robert Sands
---------------------------------
Robert Sands, Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Robert Sands
---------------------------------
Robert Sands, Chief Executive
Officer and Director (Principal
Executive Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Finance
Director (Principal Financial
Officer and Principal Accounting
Officer)
Dated: May 30, 2000 /s/ Peter Aikens
---------------------------------
Peter Aikens, Director
Dated: May 30, 2000 /s/ Anne Colquhoun
---------------------------------
Anne Colquhoun, Director
Dated: May 30, 2000 /s/ Hugh Etheridge
---------------------------------
Hugh Etheridge, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 POLYPHENOLICS, INC.
By: /s/ Howard Jacobson
---------------------------------
Howard Jacobson, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Howard Jacobson
---------------------------------
Howard Jacobson, President and
Director (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President,
Treasurer and Director (Principal
Financial Officer and Principal
Accounting Officer)
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 ROBERTS TRADING CORP.
By: /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, President and
Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, President and
Treasurer (Principal Executive
Officer, Principal Financial
Officer and Principal Accounting
Officer)
Dated: May 30, 2000 /s/ Richard Sands
---------------------------------
Richard Sands, Director
Dated: May 30, 2000 /s/ Robert Sands
---------------------------------
Robert Sands, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 CANANDAIGUA B.V.
By: /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Authorized
Representative
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ G.A.L.R. Diepenhorst
---------------------------------
G.A.L.R. Diepenhorst, Managing
Director (Principal Executive
Officer)
Dated: May 30, 2000 /s/ E.F. Switters
---------------------------------
E.F. Switters, Managing Director
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Authorized
Representative in the United
States
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 FRANCISCAN VINEYARDS, INC.
By: /s/ Agustin Francisco Huneeus
---------------------------------
Agustin Francisco Huneeus,
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Agustin Francisco Huneeus
---------------------------------
Agustin Francisco Huneeus,
President (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 30, 2000 /s/ Richard Sands
---------------------------------
Richard Sands, Director
Dated: May 30, 2000 /s/ Robert Sands
---------------------------------
Robert Sands, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 ALLBERRY, INC.
By: /s/ Agustin Francisco Huneeus
---------------------------------
Agustin Francisco Huneeus,
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Agustin Francisco Huneeus
---------------------------------
Agustin Francisco Huneeus,
President (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 30, 2000 /s/ Richard Sands
---------------------------------
Richard Sands, Director
Dated: May 30, 2000 /s/ Robert Sands
---------------------------------
Robert Sands, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 CLOUD PEAK CORPORATION
By: /s/ Agustin Francisco Huneeus
---------------------------------
Agustin Francisco Huneeus,
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Agustin Francisco Huneeus
---------------------------------
Agustin Francisco Huneeus,
President (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 30, 2000 /s/ Richard Sands
---------------------------------
Richard Sands, Director
Dated: May 30, 2000 /s/ Robert Sands
---------------------------------
Robert Sands, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 M.J. LEWIS CORP.
By: /s/ Agustin Francisco Huneeus
---------------------------------
Agustin Francisco Huneeus,
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 s/ Agustin Francisco Huneeus
--------------------------------
Agustin Francisco Huneeus,
President (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 30, 2000 /s/ Richard Sands
---------------------------------
Richard Sands, Director
Dated: May 30, 2000 /s/ Robert Sands
---------------------------------
Robert Sands, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 MT. VEEDER CORPORATION
By: /s/ Agustin Francisco Huneeus
---------------------------------
Agustin Francisco Huneeus,
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Agustin Francisco Huneeus
---------------------------------
Agustin Francisco Huneeus,
President (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal
Financial Officer and Principal
Accounting Officer)
Dated: May 30, 2000 /s/ Richard Sands
---------------------------------
Richard Sands, Director
Dated: May 30, 2000 /s/ Robert Sands
---------------------------------
Robert Sands, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 BARTON INCORPORATED
By: /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, President,
Chief Executive Officer and
Director (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Troy Christensen
---------------------------------
Troy Christensen, Director
Dated: May 30, 2000 /s/ Edward L. Golden
---------------------------------
Edward L. Golden, Director
Dated: May 30, 2000 /s/ William F. Hackett
---------------------------------
William F. Hackett, Director
Dated: May 30, 2000 /s/ Elizabeth Kutyla
---------------------------------
Elizabeth Kutyla, Director
Dated: May 30, 2000 /s/ Richard Sands
---------------------------------
Richard Sands, Director
Dated: May 30, 2000 /s/ Robert Sands
---------------------------------
Robert Sands, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 BARTON BRANDS, LTD.
By: /s/ Edward L. Golden
---------------------------------
Edward L. Golden, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Edward L. Golden
---------------------------------
Edward L. Golden, President and
Director (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, Director
Dated: May 30, 2000 /s/ Troy J. Christensen
---------------------------------
Troy J. Christensen, Director
Dated: May 30, 2000 /s/ Elizabeth Kutyla
---------------------------------
Elizabeth Kutyla, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 BARTON BEERS, LTD.
By: /s/ Richard Sands
---------------------------------
Richard Sands, Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Richard Sands
---------------------------------
Richard Sands, Chief Executive
Officer and Director (Principal
Executive Officer)
Dated: May 30, 2000 /s/ Thomas S.Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, Director
Dated: May 30, 2000 /s/ Troy J. Christensen
---------------------------------
Troy J. Christensen, Director
Dated: May 30, 2000 /s/ William F. Hackett
---------------------------------
William F. Hackett, Director
Dated: May 30, 2000 /s/ Elizabeth Kutyla
---------------------------------
Elizabeth Kutyla, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 BARTON BRANDS OF CALIFORNIA, INC.
By: /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, President and
Director (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Troy J. Christensen
---------------------------------
Troy J. Christensen, Director
Dated: May 30, 2000 /s/ Edward L. Golden
---------------------------------
Edward L. Golden, Director
Dated: May 30, 2000 /s/ Elizabeth Kutyla
---------------------------------
Elizabeth Kutyla, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 BARTON BRANDS OF GEORGIA, INC.
By: /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, President and
Director (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Troy J. Christensen
---------------------------------
Troy J. Christensen, Director
Dated: May 30, 2000 /s/ Edward L. Golden
---------------------------------
Edward L. Golden, Director
Dated: May 30, 2000 /s/ Elizabeth Kutyla
---------------------------------
Elizabeth Kutyla, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 BARTON CANADA, LTD.
By: /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, President and
Director (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Troy J. Christensen
---------------------------------
Troy J. Christensen, Director
Dated: May 30, 2000 /s/ Edward L. Golden
---------------------------------
Edward L. Golden, Director
Dated: May 30, 2000 /s/ Elizabeth Kutyla
---------------------------------
Elizabeth Kutyla, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 BARTON DISTILLERS IMPORT CORP.
By: /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, President and
Director (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Troy J. Christensen
---------------------------------
Troy J. Christensen, Director
Dated: May 30, 2000 /s/ Edward L. Golden
---------------------------------
Edward L. Golden, Director
Dated: May 30, 2000 /s/ Elizabeth Kutyla
---------------------------------
Elizabeth Kutyla, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 BARTON FINANCIAL CORPORATION
By: /s/ Troy J. Christensen
---------------------------------
Troy J. Christensen, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ Troy J. Christensen
---------------------------------
Troy J. Christensen, President,
Secretary and Director (Principal
Executive Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Charles T. Schlau
---------------------------------
Charles T. Schlau, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 STEVENS POINT BEVERAGE CO.
By: /s/ James P. Ryan
---------------------------------
James P. Ryan, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ James P. Ryan
---------------------------------
James P. Ryan, President, Chief
Executive Officer and Director
(Principal Executive Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, Director
Dated: May 30, 2000 /s/ Troy J. Christensen
---------------------------------
Troy J. Christensen, Director
Dated: May 30, 2000 /s/ William F. Hackett
---------------------------------
William F. Hackett, Director
Dated: May 30, 2000 /s/ Elizabeth Kutyla
---------------------------------
Elizabeth Kutyla, Director
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2000 MONARCH IMPORT COMPANY
By: /s/ James P. Ryan
---------------------------------
James P. Ryan, Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 30, 2000 /s/ James P. Ryan
---------------------------------
James P. Ryan, Chief Executive
Officer (Principal Executive
Officer)
Dated: May 30, 2000 /s/ Thomas S. Summer
---------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 30, 2000 /s/ Alexander L. Berk
---------------------------------
Alexander L. Berk, Director
Dated: May 30, 2000 /s/ Troy J. Christensen
---------------------------------
Troy J. Christensen, Director
Dated: May 30, 2000 /s/ William F. Hackett
---------------------------------
William F. Hackett, Director
Dated: May 30, 2000 /s/ Elizabeth Kutyla
---------------------------------
Elizabeth Kutyla, Director
<PAGE>
INDEX TO EXHIBITS
Exhibit No.
-----------
2.1 Asset Purchase Agreement among Barton Incorporated (a
wholly-owned subsidiary of the Company), United Distillers
Glenmore, Inc., Schenley Industries, Inc., Medley Distilling
Company, United Distillers Manufacturing, Inc., and The Viking
Distillery, Inc., dated August 29, 1995 (filed as Exhibit 2(a)
to the Company's Current Report on Form 8-K, dated August 29,
1995 and incorporated herein by reference).
2.2 Recommended Cash Offer, by Schroders on behalf of Canandaigua
Limited, a wholly-owned subsidiary of the Company, to acquire
Matthew Clark plc (filed as Exhibit 2.1 to the Company's Current
Report on Form 8-K dated December 1, 1998 and incorporated
herein by reference).
2.3 Asset Purchase Agreement dated as of February 21, 1999 by and
among Diageo Inc., UDV Canada Inc., United Distillers Canada
Inc. and the Company (filed as Exhibit 2 to the Company's
Current Report on Form 8-K dated April 9, 1999 and incorporated
herein by reference).
2.4 Stock Purchase Agreement, dated April 21, 1999, between
Franciscan Vineyards, Inc., Agustin Huneeus, Agustin Francisco
Huneeus, Jean-Michel Valette, Heidrun Eckes-Chantre Und Kinder
Beteiligungsverwaltung II, GbR, Peter Eugen Eckes Und Kinder
Beteiligungsverwaltung II, GbR, Harald Eckes-Chantre, Christina
Eckes-Chantre, Petra Eckes-Chantre and Canandaigua Brands, Inc.
(filed as Exhibit 2.1 to the Company's Current Report on Form
8-K dated June 4, 1999 and incorporated herein by reference).
2.5 Stock Purchase Agreement by and between Canandaigua Wine
Company, Inc. (a wholly-owned subsidiary of the Company) and
Moet Hennessy, Inc. dated April 1, 1999 (filed as exhibit 2.3 to
the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended May 31, 1999 and incorporated herein by
reference).
3.1 Restated Certificate of Incorporation of the Company (filed as
Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended August 31, 1998 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, 1998 and incorporated herein by
reference).
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. (a subsidiary of the Company
now known as Canandaigua Wine Company, 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 Fourth Supplemental Indenture, dated as of October 2, 1998,
among the Company, Polyphenolics, Inc. and The Chase Manhattan
Bank (filed as Exhibit 4.5 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended November 30, 1998 and
incorporated herein by reference).
4.6 Fifth Supplemental Indenture, dated as of December 11, 1998,
among the Company, Canandaigua B.V., Canandaigua Limited and The
Chase Manhattan Bank (filed as Exhibit 4.6 to the Company's
Annual Report on Form 10-K for the fiscal year ended February
28, 1999 and incorporated herein by reference).
4.7 Sixth Supplemental Indenture, dated as of July 28, 1999, among
the Company, Barton Canada, Ltd., Simi Winery, Inc., Franciscan
Vineyards, Inc., Allberry, Inc., M.J. Lewis Corp., Cloud Peak
Corporation, Mt. Veeder Corporation, SCV-EPI Vineyards, Inc.,
and The Chase Manhattan Bank, as Trustee (filed as Exhibit 4.7
to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended August 31, 1999 and incorporated herein by
reference).
4.8 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).
4.9 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).
4.10 Second Supplemental Indenture, dated as of October 2, 1998,
among the Company, Polyphenolics, Inc. and Harris Trust and
Savings Bank (filed as Exhibit 4.8 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended November 30,
1998 and incorporated herein by reference).
4.11 Third Supplemental Indenture, dated as of December 11, 1998,
among the Company, Canandaigua B.V., Canandaigua Limited and
Harris Trust and Savings Bank (filed as Exhibit 4.10 to the
Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1999 and incorporated herein by reference).
4.12 Fourth Supplemental Indenture, dated as of July 28, 1999, among
the Company, Barton Canada, Ltd., Simi Winery, Inc., Franciscan
Vineyards, Inc., Allberry, Inc., M.J. Lewis Corp., Cloud Peak
Corporation, Mt. Veeder Corporation, SCV-EPI Vineyards, Inc.,
and Harris Trust and Savings Bank, as Trustee (filed as Exhibit
4.12 to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended August 31, 1999 and incorporated herein by
reference).
4.13 Indenture with respect to 8 1/2% Senior Subordinated Notes due
2009, dated as of February 25, 1999, among the Company, as
issuer, its principal operating subsidiaries, as Guarantors, and
Harris Trust and Savings Bank, as Trustee (filed as Exhibit 99.1
to the Company's Current Report on Form 8-K dated February 25,
1999 and incorporated herein by reference).
4.14 Supplemental Indenture No. 1, dated as of February 25, 1999, by
and among the Company, as Issuer, its principal operating
subsidiaries, as Guarantors, and Harris Trust and Savings Bank,
as Trustee (filed as Exhibit 99.2 to the Company's Current
Report on Form 8-K dated February 25, 1999 and incorporated
herein by reference).
4.15 Supplemental Indenture No. 2, dated as of August 4, 1999, by and
among the Company, as Issuer, its principal operating
subsidiaries, as Guarantors, and Harris Trust and Savings Bank,
as Trustee (filed as Exhibit 4.1 to the Company's Current Report
on Form 8-K dated July 28, 1999 and incorporated herein by
reference).
4.16 Supplemental Indenture No. 3, dated as of August 6, 1999, by and
among the Company, Canandaigua B.V., Barton Canada, Ltd., Simi
Winery, Inc., Franciscan Vineyards, Inc., Allberry, Inc., M.J.
Lewis Corp., Cloud Peak Corporation, Mt. Veeder Corporation,
SCV-EPI Vineyards, Inc., and Harris Trust and Savings Bank, as
Trustee (filed as Exhibit 4.20 to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended August 31, 1999 and
incorporated herein by reference).
4.17 Supplemental Indenture No. 4, dated as of May 15, 2000 by and
among the Company, as Issuer, its principal operating
subsidiaries, as Guarantors, and Harris Trust and Savings Bank,
as Trustee (filed herewith).
4.18 Credit Agreement, dated as of October 6, 1999, between the
Company, certain principal subsidiaries, and certain banks for
which The Chase Manhattan Bank acts as Administrative Agent, The
Bank of Nova Scotia acts as Syndication Agent, and Credit Suisse
First Boston and Citicorp USA, Inc. acts as Co-Documentation
Agents (filed as Exhibit 4.1 to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended November 30, 1999 and
incorporated herein by reference).
4.19 Indenture with respect to 8 1/2% Senior Notes due 2009, dated as
of November 17, 1999, among the Company, as Issuer, certain
principal subsidiaries, as Guarantors, and Harris Trust and
Savings Bank, as Trustee (filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-4 (Registration No.
333-9436902) and incorporated herein by reference).
10.1 Barton Incorporated Management Incentive Plan (filed as Exhibit
10.6 to the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1993 and incorporated herein by
reference).
10.2 Marvin Sands Split Dollar Insurance Agreement (filed as Exhibit
10.9 to the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1993 and incorporated herein by
reference).
10.3 Employment Agreement between Barton Incorporated and Alexander
L. Berk dated as of September 1, 1990 as amended by Amendment
No. 1 to Employment Agreement between Barton Incorporated and
Alexander L. Berk dated November 11, 1996 (filed as Exhibit 10.7
to the Company's Annual Report on Form 10-K for the fiscal year
ended February 28, 1998 and incorporated herein by reference).
10.4 Amendment No. 2 to Employment Agreement between Barton
Incorporated and Alexander L. Berk dated October 20, 1998 (filed
as Exhibit 10.5 to the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1999 and incorporated herein
by reference).
10.5 Long-Term Stock Incentive Plan, which amends and restates the
Canandaigua Wine Company, Inc. Stock Option and Stock
Appreciation Right Plan (filed as Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended May
31, 1997 and incorporated herein by reference).
10.6 Amendment Number One to the Company's Long-Term Stock Incentive
Plan (filed as Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended August 31, 1997 and
incorporated herein by reference).
10.7 Amendment Number Two to the Company's Long-Term Stock Incentive
Plan (filed as Exhibit 10 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended August 31, 1999 and
incorporated herein by reference).
10.8 Incentive Stock Option Plan of the Company (filed as Exhibit
10.2 to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended August 31, 1997 and incorporated herein by
reference).
10.9 Amendment Number One to the Incentive Stock Option Plan of the
Company (filed as Exhibit 10.3 to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended August 31, 1997 and
incorporated herein by reference).
10.10 Annual Management Incentive Plan of the Company (filed as
Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended August 31, 1997 and incorporated herein
by reference).
10.11 Amendment Number One to the Annual Management Incentive Plan of
the Company (filed as Exhibit 10.14 to the Company's Annual
Report on Form 10-K for the fiscal year ended February 28, 1998
and incorporated herein by reference).
10.12 Lease, effective December 25, 1997, by and among Matthew Clark
Brands Limited and Pontsarn Investments Limited (filed as
Exhibit 10.13 to the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1999 and incorporated herein
by reference).
10.13 Supplemental Executive Retirement Plan of the Company (filed as
Exhibit 10.14 to the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1999 and incorporated herein
by reference).
10.14 First Amendment to the Supplemental Executive Retirement Plan of
the Company (filed as Exhibit 10 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended May 31, 1999
and incorporated herein by reference).
10.15 Credit Agreement, dated as of October 6, 1999, between the
Company, certain principal subsidiaries, and certain banks for
which The Chase Manhattan Bank acts as Administrative Agent, The
Bank of Nova Scotia acts as Syndication Agent, and Credit Suisse
First Boston and Citicorp USA, Inc. acts as Co-Documentation
Agents (filed as Exhibit 4.1 to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended November 30, 1999 and
incorporated herein by reference).
10.16 Letter Agreement between the Company and Thomas S. Summer, dated
March 10, 1997, addressing compensation (filed herewith).
10.17 Service Agreement, as amended, between Matthew Clark plc and
Peter Aikens, dated September 27, 1991 (filed herewith).
11.1 Statement re Computation of Per Share Earnings (filed herewith).
21.1 Subsidiaries of Company (filed herewith).
23.1 Consent of Arthur Andersen LLP (filed herewith).
27.1 Financial Data Schedule for the fiscal year ended February 29,
2000 (filed herewith).
99.1 1989 Employee Stock Purchase Plan of the Company, as amended by
Amendment Number 1 through Amendment Number 5 (filed as Exhibit
99.1 to the Company's Annual Report on Form 10-K for the fiscal
year ended February 28, 1998 and incorporated herein by
reference).
99.2 Amendment Number 6 to the 1989 Employee Stock Purchase Plan of
the Company (filed as Exhibit 99.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended February 28, 1999
and incorporated herein by reference).
