CHALONE WINE GROUP LTD
8-K/A, 1995-08-02
BEVERAGES
Previous: COMMUNITY BANCORP INC /MA/, 10-Q, 1995-08-02
Next: INVESTORS QUALITY TAX EXEMPT TRUST 14TH MULTI SERIES, 497J, 1995-08-02




                        SECURITIES & EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 8-K/A


                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                                AMENDMENT NO. 2


                        Date of amendment: August 2, 1995

                        Commission File Number: 0-13406





                          The CHALONE Wine Group, Ltd.

             (Exact name of Registrant as specified in its charter)





         California                                    94-1696731
 (State or other jurisdiction of
  incorporation or organization)            (I.R.S. Employer Identification No.)

                                621 Airpark Road
                             Napa, California 94558
               (Address of principal executive offices) (Zip Code)

        Registrant's telephone number, including area code: 707-254-4200




<PAGE>
                          The CHALONE Wine Group, Ltd.

The  undersigned  registrant  hereby amends its Current Report on Form 8-K dated
May 9, 1995, by restatement  and  supplementation  of Item 7 thereof,  Financial
Statements and Exhibits, as follows:

Item 7.  Financial Statements and Exhibits

(a)      Financial statements.
         Financial  statements  of  Societe  Civile De  Duhart-Milon-Rothschild,
pertaining to the registrant's  acquisition of a 23.5% interest therein, and pro
forma financial  information for The Chalone Wine Group,  Ltd.,  showing the pro
forma effects of such an acquisition,  are submitted herewith,  as shown in Item
7(c), following.

 (c)     Exhibits.
         1. "Summary of Terms," dated April 26, 1995. *
         2. Press release, dated April 27, 1995. *
         3. Financial statements of Societe Civile De Duhart-Milon-Rothschild:
            a.    Balance Sheets at December 31, 1994 and 1993
            b.    Statements of Income and Retained Earnings for 12 months ended
                  December 31, 1994, 1993 and 1992
            c.    Statements  of Cash  Flows for 12 months  ended  December  31,
                  1994, 1993 and 1992
            d.    Notes to Financial Statements
            e.    Independent Auditors' Report
            f.    Balance Sheets at March 31, 1995 and 1994 (unaudited)
            g.    Statements of Income and Retained  Earnings for 3 months ended
                  March 31, 1995 and 1994 (unaudited)
            h.    Statements of Cash Flows for 3 months ended March 31, 1995 and
                  1994 (unaudited)
         4. Pro Forma Financial Statements for The Chalone Wine Group, Ltd.:
            a.    Income Statement for the 12 Months Ended December 31,1994
            b.    Balance Sheet at March 31, 1995
            c.    Income Statement for the 3 Months Ended March 31,1995
            d.    Note to Pro Forma Financial Statements (Unaudited)

                                   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.

                                             The CHALONE Wine Group, Ltd.

Dated:  July 31, 1995                        By /s/ William L. Hamilton
                                                ---------------------------
                                                William L. Hamilton
                                                Executive Vice President
                                                and Chief Financial Officer

                                      -2-

<PAGE>



                                 EXHIBIT INDEX
                                 -------------

Exhibit                                                            Sequentially
Number    Exhibit Description                                     Numbered Page
- -----     -------------------                                     --------------

1. "Summary of Terms," dated April 26, 1995.                                 *

2. Press release, dated April 27, 1995.                                      *

3. Financial statements of Societe Civile De Duhart-Milon-Rothschild:
   3.a.  Balance Sheets at December 31, 1994 and 1993                        4
   3.b.  Statements of Income and Retained Earnings for 12 months ended
             December 31, 1994, 1993 and 1992                                5
   3.c.  Statements of Cash Flows for 12 months ended
              December 31, 1994, 1993 and 1992                               6
   3.d.  Notes to Financial Statements                                       7
   3.e.  Independent Auditors' Report                                        9
   3.f.  Balance Sheets at March 31, 1995 and 1994                          10
   3.g.  Statements of Income and Retained Earnings for 3 months ended
         March 31, 1995 and 1994                                            11
   3.h.  Statements of Cash Flows for 3 months ended March 31, 1995
         and 1994                                                           12

4. Pro Forma Financial Statements for The Chalone Wine Group, Ltd.:
   4 a.  Income Statement for the 12 Months Ended December 31,1994          13
   4 b.  Balance Sheet at March 31, 1995                                    14
   4 c.  Income Statement for the 3 Months Ended March 31,1995              15
   4 d.  Note to Pro Forma Financial Statements (Unaudited)                 16


*  Exhibits 1 and 2 incorporated by reference to the  same-numbered  Exhibits to
   the registrant's  Current Report on Form 8-K dated May 9, 1995, filed May 10,
   1995.

                                      -3-

<PAGE>


                   SOCIETE CIVILE DE DUHART-MILON-ROTHSCHILD
                                 BALANCE SHEETS
                  (All amounts in thousands of French Francs)


                                                                 December 31
                                                          ----------------------
                                                              1994         1993
                                                          ---------   ----------
ASSETS
Cash .................................................... FF    106   FF      23
Accounts receivable less allowance
   for doubtful accounts of FF 0 - 1994 and FF 85 - 1993        902          599
Inventories:
                  Bulk and bottled ......................    16,378       15,043
                  Wine production supplies ..............     2,410        1,886
Other current assets ....................................       342          258
                                                          ---------   ----------
Total current assets ....................................    20,138       17,809
Property, plant and equipment - net .....................    13,004       13,660
                                                          ---------   ----------
TOTAL ASSETS ............................................ FF 33,142   FF  31,469
                                                          =========   ==========


LIABILITIES AND SHAREHOLDER'S EQUITY
Bank borrowings ......................................... FF     87   FF     257
Accounts payable ........................................     1,602        1,071
Customer deposits........................................     1,570           94
Social charges and taxes, other than income .............     1,542        1,146
Other current liabilities ...............................       217          824
Intercompany accounts:
                  Interest bearing ......................    14,199       15,100
                  Non-interest bearing ..................     1,061          424
                                                          ---------   ----------
Total current liabilities ...............................    20,278       18,916
Stated value of common equity parts .....................        10           10
Retained earnings .......................................    12,854       12,543
                                                          ---------   ----------
Total shareholder's equity ..............................    12,864       12,553
                                                          ---------   ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY   ..........   FF 33,142   FF  31,469
                                                          =========   ==========

        The accompanying notes are an integral part of these statements.

                                      -4-

<PAGE>

                    SOCIETE CIVILE DE DUHART-MILON-ROTHSCHILD

                   STATEMENTS OF INCOME AND RETAINED EARNINGS

                   (All amounts in thousands of French Francs)


                                                   Year ended December 31
                                             ---------------------------------
                                                  1994       1993      1992
                                             ---------   --------    ---------
Wine sales to unrelated parties ............ FF  7,332   FF  2,652   FF 13,473
Intercompany wine sales ....................     7,406       9,379       5,381
                                             ---------   ---------   ---------
         Total Sales .......................    14,738      12,031      18,854
Cost of sales ..............................   (10,003)     (9,144)     (9,874)
                                             ---------   ---------   ---------
         Gross Profit ......................     4,735       2,887       8,980
Selling, general and administrative expenses    (1,267)       (888)     (1,411)
                                             ---------   ---------   ---------
         Operating income ..................     3,468       1,999       7,569
Interest expense: 
         Bank loans ........................        (5)        (41)        (77)
         Intercompany ......................      (988)       (824)       (174)
Other income ...............................       592         375         442
                                             ---------   ---------   ---------
         Net earnings ......................     3,067       1,509       7,760
Retained earnings, beginning of year .......    12,543      16,899      12,229
Less: Dividends ............................    (2,756)     (5,865)     (3,090)
                                             ---------   ---------   ---------
Retained earnings, end of year ............. FF 12,854   FF 12,543   FF 16,899

        The accompanying notes are an integral part of these statements.

                                      -5-

<PAGE>
                    SOCIETE CIVILE DE DUHART-MILON-ROTHSCHILD

                            STATEMENTS OF CASH FLOWS

                  (All amounts in thousands of French Francs)


                                                     Year ended December 31
                                                 -----------------------------
                                                   1994       1993      1992
                                                 --------   --------  --------
Source (use) of cash
Cash flows from operating activities:
         Net earnings .......................... FF 3,067   FF 1,509  FF 7,760
         Non cash transactions included 
                  in earnings:
                  Depreciation .................    2,215      1,970     1,915
                  Other ........................     (292)        82       (12)
         Change in:
                  Accounts receivable ..........     (218)      (284)      151
                  Inventories ..................   (1,859)    (1,933)   (2,618)
                  Other current assets .........      (84)        67      (114)
                  Accounts payable .............      531         27       104
                  Customer deposits ............    1,476       (145)   (3,799)
                  Social charges and taxes, 
                     other than income .....          396       (209)       80
                  Other current liabilities ....     (607)       370       207
                                                 --------   --------  --------
                     Net cash provided by 
                         operating activities ..    4,625      1,454     3,674
                                                 --------   --------  --------
Cash flows from investing activities:
         Capital expenditures ..................   (1,831)    (1,712)   (1,832)
         Proceeds from sale of assets ..........      479        519       423
                                                 --------   --------  --------
                  Net cash used in investing 
                     activities ................   (1,352)    (1,193)   (1,409)
                                                 --------   --------  --------
Cash flows from financing activities:
         Bank borrowings (repayments) ..........     (170)      (401)     (389)
         Change in intercompany accounts .......     (264)     5,974     1,059
         Dividends paid to shareholder .........   (2,756)    (5,865)   (3,090)
                                                 --------   --------  --------
                  Net cash (used in) financing
                     activities ................   (3,190)      (292)   (2,420)
                                                 --------   --------  --------
Net increase (decrease) in cash ................       83        (31)     (155)
         Cash at beginning of year .............       23         54       209
                                                 --------   --------  --------
         Cash at end of year ................... FF   106   FF    23  FF    54
                                                 ========   ========  ========
Other cash flow information:
         Interest paid ......................... FF 1,016   FF   675  FF   282
                                                 ========   ========  ========

        The accompanying notes are an integral part of these statements.

                                      -6-

<PAGE>

                          The CHALONE Wine Group, Ltd.
                         ProForma Financial Statements

                    SOCIETE CIVILE DE DUHART-MILON-ROTHSCHILD

                         NOTES TO FINANCIAL STATEMENTS
                  Years ended December 31, 1994, 1993 and 1992

                  (All amounts in thousands of French Francs)



NOTE A - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION.  Societe Civile de Duhart-Milon-Rothschild  (The Company)
is organised  under the laws of the  Republic of France and was a subsidiary  of
Domaines Barons de Rothschild S.A. (DBR), a company  incorporated under the laws
of the  Republic  of France,  during the periods  included  in the  accompanying
financial  statements.  These  financial  statements  are prepared  using United
States  generally  accepted  accounting  principles.  The  company  operated  on
dependent  basis with other  operations of DBR, and all costs of its operations,
or  sources  of  revenue,  may not be  measured  in the  accompanying  financial
statements. Interest charges are provided on intercompany accounts with DBR.

INVENTORIES.  Inventories  are stated at the lower of cost or  market.  Cost for
bulk and bottled wines is determined on an  accumulated  weighted  average basis
and includes farming and harvesting costs,  winery, and bottling costs.  Farming
and related  costs are  deferred as growing  crops and are  recognized  when the
related  crop  is  harvested.  Wine  production  supplies  are  stated  at  FIFO
(first-in, first-out) cost. All bulk and bottled wine inventories are classified
as current assets in accordance with recognized  industry  practice,  although a
portion of such inventories will be aged for periods longer than one year.

PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are stated at cost.
Depreciation  is  calculated  over  the  estimated  useful  life  of the  asset.
Buildings are depreciated  over 20 to 40 years,  building  improvements  over 10
years,   and  producing  vines  over  25  to  33  years,   primarily  using  the
straight-line  method.  Barrels and other equipment are depreciated over 2 to 10
years, primarily using accelerated methods.

REVENUE  RECOGNITION.  Revenues are recognised  either when the customer accepts
delivery of the wines or when the customer  fully pays for the wines,  whichever
occurs first. In accordance with industry practices,  customers often will leave
their  merchandise  on the winery  premises,  perhaps for many  years,  prior to
accepting  delivery.  In such  circumstances it is the Company's practice not to
charge  storage fees to its  customers.  Partial  payments by customers for wine
purchases  prior to bottling and shipment are recorded as deposits and are shown
as current liabilities.

INCOME TAXES. The Company,  as a Societe Civile under French law, has the status
of a pass-through entity whose profits are taxable to its owner(s). Accordingly,
no income taxes have been provided in the accompanying financial statements.

CONCENTRATION  OF CREDIT RISK. The Company sells the majority of its products to
long-time  customers,  predominantly in France,  many of whom place  substantial
advance deposits on the product.  The Company  maintains  reserves for potential
credit losses and such losses have been within management's expectations.


NOTE B - RELATED PARTY TRANSACTIONS

The Company often sells its wine through a centralized sales staff which is part
of another DBR operating  business.  Such wine may be sold to independent  third
parties  or to  other  operations  of  DBR.  Intercompany  sales  to  other  DBR
operations  were FF 7,406,  FF 9,379,  and FF 5,381, in the years ended December
31, 1994, 1993, and 1992, respectively,  which generated gross profit related to
the  intercompany  sales of  approximately  FF 4,800,  FF  6,100,  and FF 3,500,
respectively.

The Company obtains certain  technical and  administrative  services,  including
certain sales  activities  discussed above,  from other DBR operating  business.
Intercompany expense changes (classified as selling,  general and administrative
expenses)  for such  services  were FF  1,267,  FF 888 and FF 1,411 in the years
ended December 31, 1994, 1993 and 1992 respectively.

                                      -7-

<PAGE>

The Company  purchases  the barrels  used to store and age its wine from another
DBR business.  Such barrels are capitalized and depreciated (as a cost of sales)
over their useful life of three years. Such  depreciation  expense was FF 1,197,
FF 804,  and FF 789,  in the  years  ended  December  31,  1994,  1993 and 1992,
respectively.  Capital  expenditures  for barrels were FF 340, FF 937 and FF 960
during the years ended December 31, 1994, 1993 and 1992, respectively.

The  Company has  interest-bearing  intercompany  borrowings  from DBR which are
classified as current liabilities.  Such intercompany  borrowings were FF 14,199
(at 7%) and FF 15,100 (at 6%) at December 31, 1994 and 1993, respectively.  Such
interest rates are  established by DBR so as not to exceed rates permitted under
French fiscal (tax) requirements.  Intercompany  interest expense was FF 988, FF
824  and  FF  174  in  the  years  ended  December  31,  1994,  1993  and  1992,
respectively.  Additionally, at December 31, 1994 and 1993, a DBR subsidiary had
provided  non-interest-bearing  advances  of FF 1,408 and FF 556,  respectively,
related to future purchases of wine.

As a component  part of a dependent  group of business  within DBR,  the Company
from  time-to-time  shares  its  personnel  and assets  (such as  transportation
equipment or farming machinery) with other DBR operations, and also receives the
use of personnel and assets from other such operations. The costs or benefits of
such  transactions  have not been  measured by the Company.  Accordingly,  these
financial  statements  may not  reflect  the costs and  expenses  which would be
recorded if the Company were operated on a stand-alone basis.


NOTE C - PROPERTY, PLANT AND EQUIPMENT

                                                                December 31
                                                           ---------------------
                                                              1994       1993
                                                           ---------  ----------
Land ...................................................   FF  1,440  FF  1,402
Buildings and buildings improvements ...................       9,006      9,301
Producing and immature vines ...........................       5,578      5,319
Barrels 3,928...........................................       5,048
Other equipment ........................................       6,324      5,225
                                                           ---------  ----------
                                                              26,276     26,295
Less: accumulated depreciation .........................     (13,272)   (12,635)
                                                           ---------  ----------
                                                           FF 13,004  FF 13,660
                                                           =========  ==========

NOTE D - SIGNIFICANT CUSTOMER

In addition to intercompany  sales, the sales to one customer aggregated 14% and
10% of total sales in the years ended December 31, 1994 and 1993, respectively.


NOTE E - SUBSEQUENT EVENTS

After  December  31,  1994,  the  Company's   parent,   DBR,   entered  into  an
understanding with The Chalone Wine Group, Ltd. ("Chalone") whereby Chalone will
contribute certain assets to the Company in exchange for a 23.5% interest in the
Company.
                                      -8-

<PAGE>

INDEPENDENT AUDITORS' REPORT


To the Board of Directors
SOCIETE CIVILE DE
DUHART-MILON-ROTHSCHILD


We  have  audited  the   accompanying   balance  sheets  of  SOCIETE  CIVILE  DE
DUHART-MILON-ROTHSCHILD  (the  Company)  (a  subsidiary  of  Domaines  Barons de
Rothschild S.A.) as of December 31, 1994 and 1993, and the related statements of
income and retained earnings,  and cash flows for each of the three years in the
period ended December 31, 1994 (all expressed in French Francs). 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 generally accepted auditing standards
in the  United  States of  America.  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,  such  financial  statements  present  fairly,  in all material
respects,  the  financial  position of the  Company as of December  31, 1994 and
1993, and the results of its operations and its cash flows for each of the three
years in the period ended  December  31,  1994,  in  conformity  with  generally
accepted accounting principles in the United States of America.

As  discussed  in Notes A and B to the  financial  statements,  the  Company  is
operated on a dependent basis with other  operations of its parent company,  and
accordingly, the Company has significant transactions with related parties.

Deloitte Touche Tohmatsu


/s/   Jean-Paul Picard  
- -------------------------
      Jean-Paul Picard

July 13, 1995

                                      -9-
<PAGE>

                    SOCIETE CIVILE DE DUHART-MILON-ROTHSCHILD

                                 BALANCE SHEETS

                  (All amounts in thousands of French Francs)


                                                                March 31
                                                          ---------------------
                                                             1995        1994
                                                          ---------   ---------
ASSETS
Cash ...................................................  FF     93   FF     38
Accounts receivable ....................................      1,334       1,798
Inventories:
           Bulk and bottled wine .......................     15,602      14,624
           Wine production supplies ....................      2,497       1,676
Other current assets ...................................        281         201
                                                          ---------   ---------
Total current assets ...................................     19,807      18,337
Property, plant and equipment - net ....................     13,331      13,386
                                                          ---------   ---------
           TOTAL ASSETS ................................  FF 33,138   FF 31,723
                                                          =========   =========

LIABILITIES AND SHAREHOLDER'S EQUITY
Bank borrowings ........................................  FF     85   FF    287
Accounts payable .......................................      1,179       1,660
Customer deposits ......................................      1,750         640
Social charges and taxes, other than income ............      1,040         904 
Other current liabilities ..............................      1,152           2 
Intercompany accounts:
           Interest bearing ............................     16,667      17,624
           Non-interest bearing ........................        770         265
                                                          ---------   ---------
Total current liabilities ..............................     22,643      21,382
Stated value of common equity parts ....................         10          10
Retained earnings ......................................     10,485      10,331
                                                          ---------   ---------
           Total shareholder's equity ..................     10,495      10,341
                                                          ---------   ---------
           TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY ..  FF 33,138   FF 31,723
                                                          =========   =========

                                      -10-
<PAGE>

                   SOCIETE CIVILE DE DUHART-MILON-ROTHSCHILD

                   STATEMENTS OF INCOME AND RETAINED EARNINGS

                  (All amounts in thousands of French Francs)


                                                                March 31
                                                          ---------------------
                                                             1995       1994
                                                          ---------  ---------- 
Wine sales to unrelated parties ........................  FF  2,082  FF  1,455
Intercompany wine sales ................................      2,382      2,446
                                                          ---------  --------- 
         Total Sales ...................................      4,464      3,901
Cost of sales ..........................................     (3,110)    (2,863)
                                                          ---------  --------- 
         Gross Profit ..................................      1,354      1,038
Selling, general and administrative expenses ...........       (164)      (296)
                                                          ---------  --------- 
         Operating income ..............................      1,190        742

Interest expense:
         Bank loans ....................................          0         (2)
         Intercompany ..................................       (197)      (228)
         Other income ..................................         37         32
                                                          ---------  --------- 
               Net earnings ............................      1,030        544
Retained earnings, beginning of year ...................     12,854     12,543
Less: Dividends ........................................     (3,399)    (2,756)
                                                          ---------  --------- 
Retained earnings, end of year .........................  FF 10,485  FF 10,331
                                                          =========  =========
                                                     
                                                     
                                      -11-

<PAGE>

                          The CHALONE Wine Group, Ltd.
                         ProForma Financial Statements

                   SOCIETE CIVILE DE DUHART-MILON-ROTHSCHILD

                            STATEMENTS OF CASH FLOWS

                  (All amounts in thousands of French Francs)


                                                                March 31
                                                          ---------------------
                                                             1995        1994
                                                          ---------   ---------
Source (use) of cash
Cash flows from operating activities:
         Net earnings ..................................  FF  1,030   FF    544
Other ..................................................     (2,189)     (2,648)
                                                          ---------   --------- 
Net cash provided by operating activities ..............     (1,159)     (2,104)
Net cash used in investing activities ..................     (1,028)       (276)
Net cash used in financing activities ..................      2,175       2,395
                                                          ---------   --------- 
Net increase (decrease) in cash ........................        (13)         15
Cash at beginning of year ..............................        106          23
                                                          ---------   --------- 
Cash at end of Period ..................................         93          38
Interest paid ..........................................        243         266


                                      -12-

<PAGE>

                          THE CHALONE WINE GROUP, LTD.
                         Pro Forma Financial Statements

                                INCOME STATEMENT
                                ----------------
                     (in thousands, except per share data)


                                     12 Months
                                      Ending                         Pro Forma
                                    December 31,     Pro Forma      December 31,
                                       1994          Adjustments       1994
                                    ------------     -----------    ------------
Wine sales ......................     $21,132                         $21,132
Cost of sales ...................      13,628                          13,628
                                      -------                         -------
  Gross Profit ..................       7,504                           7,504
SG&A expenses ...................       4,633        $ (29) (2)         4,605
                                      -------                         -------
  Operating Income ..............       2,870                           2,870
Interest, net ...................      (2,753)         400  (4)        (1,734)
                                                       619  (1)
Other, net ......................         192          (63) (3)           128
                                      -------                         -------
  Total Other ...................      (2,561)                         (1,605)
Earnings of equity interest .....                      282  (7)           282
Minority interest ...............                                        (188)
                                         (188)
                                      -------                         -------
  Earnings before tax ...........         121                           1,359
Income taxes ....................         101          513  (6)           614
                                      -------                         -------
Net Earnings ....................     $    20        $ 754            $   745
                                      =======                         =======
Net Earnings per share ..........     $  0.00                         $  0.10
                                      =======                         =======
Average # shares ................       4,826        2,602  (5)         7,429
                                      =======                         =======

- ------------------
(1) To  reduce  interest  expense  on  DBR  debentures  as if  converted  at the
    beginning of the year.
(2) To reduce  amortization  of capitalized  DBR debenture costs assumed to have
    been written-off on January 1, 1994.
(3) To reduce dividend income for the year on 14,054 shares of DBR stock.
(4) To reduce  interest  expense by assuming that the  $5,000,004  proceeds from
    issuance  of common  stock to DBR and Summus are applied  against  Chalone's
    bank lines of credit.  Interest on such lines of credit is variable based on
    the Prime rate and the average for 1994 is estimated as 8%.
(5) To increase average number of shares  outstanding for EPS calculation due to
    the  issuance  of  1,769,143  shares  of  common  stock  for DBR  debentures
    converted, and 416,667 shares issued to each of DBR and Summus.
(6) To adjust  income tax expense by change in earnings  before income tax using
    the statutory income tax rate of 40.5% applicable to Chalone during 1994.
(7) To record effect of equity in earnings of Duhart for the year ended December
    31, 1994.

                                      -13-

<PAGE>

                          THE CHALONE WINE GROUP, LTD.
                         Pro Forma Financial Statements

                                 BALANCE SHEET
                                 -------------
                                 (in thousands)


                                                                      Pro Forma
                                          March 31,    Pro Forma      March 31,
                                           1995        Adjustments      1995
                                          ---------    -----------   ---------
Inventories ..........................     $28,740          --        $28,740
Other current assets .................       4,013        $476 (5)      4,489
                                           -------                    -------
     TOTAL CURRENT ASSETS ............      32,753                     32,229
DBR investment .......................      12,524     (12,524)(1)         --
Duhart-Milon investment                         --      12,524 (1)     12,873
                                                           349 (7)
Property, plant and equipment - net         20,299                     20,299
Other assets .........................       4,723        (118)(4)      4,605
                                           -------                    -------
     TOTAL ASSETS ....................     $70,299                    $71,006
                                           =======                    =======

Bank lines of credit .................     $13,708      (5,000)(3)    $ 8,708
Income taxes payable .................                     135 (6)        135
Other current liabilities ............       2,365                      2,365
                                           -------                    -------
     TOTAL CURRENT LIABILITIES .......      16,073                     11,208
Long term debt less current maturities       5,455                      5,455
Convertible subordinated debentures ..      20,884     (12,384)(2)      8,500
Other liabilities ....................       3,956        (258)(5)      3,698
Common stock .........................      24,467      12,384 (2)     41,733
                                                         5,000 (3)
                                                          (118)(4)
Shareholder deficit ..................        (536)        948 (6)        412
     TOTAL SHAREHOLDERS' EQUITY ......      23,931                     42,263
                                           =======                    =======
     TOTAL LIABILITIES & EQUITY ......     $70,299                    $71,006
                                           =======                    =======

- -----------------
(1) To  eliminate  14,055  shares  of DBR  held by  Chalone  and  set up  Duhart
    investment.
(2) To eliminate  debentures held by DBR converted to common stock @ $7.00/share
    and  issue  1,769,143  shares  of  common  stock @  $7.00/share  for the DBR
    debentures converted.
(3) To issue  416,667  shares of common stock @  $6.00/share  to each of DBR and
    Summus and reduce  bank lines of credit  using  proceeds  from  issuance  of
    common stock.
(4) To write-off unamortized balance of capitalized debenture costs on converted
    debentures against common stock.
(5) To record increased cash from lower interest expense net of reduced interest
    expense attributable to converted debentures.
(6) To reflect the effect of (5) and (7) on shareholder deficit, net of taxes.
(7) To record effect of equity in earnings of Duhart for the year ended December
    31, 1994 and the quarter ended March 31, 1995.

                                      -14-
<PAGE>

                          THE CHALONE WINE GROUP, LTD.
                         Pro Forma Financial Statements

                                INCOME STATEMENT
                                ----------------
                     (in thousands, except per share data)

                                                      
                                                                     Pro Forma 
                                      March 31,      Pro Forma       March 31,
                                       1995          Adjustments       1995
                                    ------------     -----------    ------------
Wine sales ......................     $ 4,423                         $ 4,423
Cost of sales ...................       2,926           --              2,926
                                      -------                         -------   
  Gross Profit ..................       1,497           --              1,497
SG&A expenses ...................       1,221        $  (7) (2)        1,214
                                      -------                         -------
  Operating Income ..............         276           --                283
Interest, net ...................        (736)         155  (1)          (481)
                                      -------                         -------
Other, net ......................           9         (100) (3)             9  
                                      -------                         -------
  TOTAL OTHER ...................        (727)          --               (472)

Earnings of equity interest .....          --           67  (6)            67
Minority interest ...............          (5)          --                 (5)
                                      -------                         -------
  Earnings before tax ...........        (456)          --               (127)

Income taxes ....................         193          129  (5)           (64)
                                      -------                         -------
  Net Earnings ..................     $  (263)          --            $   (63)

                                      =======                         =======
Net Earnings per share ..........     $ (0.05)                        $ (0.01)
                                      =======                         =======
Average shares outstanding.......       4,961        2,602  (4)         7,563
                                      =======                         =======

- ------------------
(1) To  reduce  interest  expense  on  DBR  debentures  as if  converted  in the
    previous period.
(2) To reduce  amortization  of capitalized  DBR debenture costs assumed to have
    been written-off on January 1, 1994
(3) To reduce  interest  expense by assuming that the  $5,000,004  proceeds from
    issuance  of common  stock to DBR and Summus are applied  against  Chalone's
    bank lines of credit.  Interest on such lines of credit is variable based on
    the Prime rate and the average for the first quarter of 1995 is estimated as
    8%.
(4) To increase average number of shares  outstanding for EPS calculation due to
    the  issuance  of  1,769,143  shares  of  common  stock  for DBR  debentures
    converted, and 416,667 shares issued to each of DBR and Summus.
(5) To adjust  income tax expense by change in earnings  before income tax using
    the statutory income tax rate of 40.5% applicable to Chalone during 1995.
(6) To record effect of equity in earnings of Duhart for the year ended December
    31, 1994.

                                      -15-


<PAGE>

                          THE CHALONE WINE GROUP, LTD.
                         Pro Forma Financial Statements

               NOTE TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)

The accompanying  unaudited pro forma condensed financial statements present the
financial position of The Chalone Wine Group, Ltd. (Chalone) following:

         a.  The   purchase   of  a  23.5%   interest   in  Societe   Civile  de
         Duhart-Milon-Rothschild  in exchange for all of Chalone's  ownership in
         Les Domaines Barons de Rothschild (Lafite)(DBR), 14,054 shares.

         b. The  conversion  of all of the  convertible  debentures  held by DBR
         ($12,384,000)  at $7.00  per share  into  1,769,143  shares of  Chalone
         common stock.

         c. The sale by  Chalone  for  $2,500,000  of 416,667  new common  stock
         shares to each of DBR and Summus Financial,  Inc. (Summus) at $6.00 per
         share and issuance of one warrant to purchase one share of common stock
         at $8.00 per share for each new common  stock  share  issued to DBR and
         Summus.

The unaudited  pro forma  condensed  balance  sheet and condensed  statements of
income assume that the aforementioned  transactions occurred at January 1, 1994.
The unaudited  pro forma  condensed  financial  statements  are not  necessarily
indicative of the financial condition and/or results of operations had the above
transaction been consummated on such dates and may not necessarily be indicative
of future performance.

                                      -16-



© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission