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. 3
Date of amendment: September 20, 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
June 30, 1995 and 1994 (unaudited) h. Statements of Cash Flows
for 3 months ended June 30, 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 June 30, 1995
c. Income Statement for the 3 Months Ended June 30,1995
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: September 20, 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 June 30, 1995 and 1994 10
3.g. Statements of Income and Retained Earnings
for 3 months ended June 30, 1995 and 1994 11
3.h. Statements of Cash Flows for 3 months ended
June 30, 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 June 30, 1995 14
4 c. Income Statement for the 3 Months Ended June 30,1995 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>
<TABLE>
SOCIETE CIVILE DE DUHART-MILON-ROTHSCHILD
BALANCE SHEETS
(All amounts in thousands of French Francs)
<CAPTION>
December 31
--------------------------------------
1994 1993
------------------ -----------------
<S> <C> <C>
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
================== ================
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
SOCIETE CIVILE DE DUHART-MILON-ROTHSCHILD
STATEMENTS OF INCOME AND RETAINED EARNINGS
(All amounts in thousands of French Francs)
<CAPTION>
Year ended December 31
-------------------------------------------------
1994 1993 1992
--------------- ---------------- --------------
<S> <C> <C> <C>
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
=============== ================ ===============
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
5
<PAGE>
<TABLE>
SOCIETE CIVILE DE DUHART-MILON-ROTHSCHILD
STATEMENTS OF CASH FLOWS
(All amounts in thousands of French Francs)
<CAPTION>
Year ended December 31
--------------------------------------------------
1994 1993 1992
--------------- ---------------- ---------------
<S> <C> <C> <C>
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
=============== ================ ===============
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
6
<PAGE>
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>
NOTE B - RELATED PARTY TRANSACTIONS (Continued)
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, consistant with other third party
transactions.
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. 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, althoght managment
believes the substance of the recorded amounts reflect a reasonable
determination of shared transactions related to the Company.
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
Neuilly-sur-Seine, France
July 13, 1995
9
<PAGE>
<TABLE>
SOCIETE CIVILE DE DUHART-MILON-ROTHSCHILD
BALANCE SHEETS
(All amounts in thousands of French Francs)
<CAPTION>
June 30
-------------------------------------
1995 1994
------------------ ----------------
<S> <C> <C>
ASSETS
Cash FF 73 FF 204
Accounts receivable 2,393 2,038
Inventories:
Bulk and bottled wine 12,970 13,383
Wine production supplies 3,431 3,139
Other current assets 421 623
------------------ ----------------
TOTAL CURRENT ASSETS 19,287 19,388
Property, plant and equipment - net 12,938 13,386
------------------ ----------------
TOTAL ASSETS FF 32,225 FF 32,774
================== ================
LIABILITIES AND SHAREHOLDER'S EQUITY
Bank borrowings FF - FF 374
Accounts payable 1,875 2,387
Customer deposits 45 -
Social charges and taxes, other than income 1,045 1,242
Other current liabilities 73 2
Intercompany accounts:
Interest bearing 15,712 17,428
Non-interest bearing - -
TOTAL CURRENT LIABILITIES 18,750 21,433
Stated value of common equity parts 10 10
Retained earnings 13,465 11,331
------------------ ----------------
TOTAL SHAREHOLDER'S EQUITY 13,475 11,341
------------------ ----------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY FF 32,225 FF 32,774
===================== ===============
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
10
<PAGE>
<TABLE>
SOCIETE CIVILE DE DUHART-MILON-ROTHSCHILD
STATEMENTS OF INCOME AND RETAINED EARNINGS
(All amounts in thousands of French Francs)
<CAPTION>
June 30,
--------------------------------------
1995 1994
--------------------------------------
<S> <C> <C>
Wine sales to unrelated parties FF 6,449 FF 3,979
Intercompany wine sales 6,974 4,817
------------------ -----------------
TOTAL SALES 13,423 8,796
Cost of sales (8,376) (6,195)
------------------ -----------------
GROSS PROFIT 5,047 2,601
Selling, general and administrative expenses (791) (648)
------------------ -----------------
OPERATING INCOME 4,256 1,953
Interest expense:
Bank loans 0 (4)
Intercompany (365) (459)
Other income 119 54
------------------ -----------------
NET EARNINGS 4,010 1,544
Retained earnings, beginning of year 12,854 12,543
Less: Dividends (3,399) (2,756)
------------------ -----------------
RETAINED EARNINGS, END OF YEAR FF 13,465 FF 11,331
================== =================
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
11
<PAGE>
<TABLE>
SOCIETE CIVILE DE DUHART-MILON-ROTHSCHILD
STATEMENTS OF CASH FLOWS
(All amounts in thousands of French Francs)
<CAPTION>
June 30,
--------------------------------------
1995 1994
------------------ -----------------
<S> <C> <C>
SOURCE (USE) OF CASH
Cash flows from operating activities:
Net earnings FF 4,010 FF 1,544
Other (3,349) (2,608)
------------------ -----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 661 (1,064)
NET CASH USED IN INVESTING ACTIVITIES (1,059) (776)
NET CASH USED IN FINANCING ACTIVITIES 365 2,021
------------------ -----------------
NET INCREASE (DECREASE) IN CASH (33) 181
Cash at beginning of year 106 23
------------------ -----------------
CASH AT END OF PERIOD 73 204
Interest paid 365 463
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
12
<PAGE>
<TABLE>
THE CHALONE WINE GROUP, LTD.
BALANCE SHEET
-------------
(in thousands)
<CAPTION>
Pro Forma Pro Forma
June 30, 1995 Adjustments June 30,1995
===========================================================
<S> <C> <C> <C>
Inventories $ 27,030 - $ 27,030
Other current assets 6,367 6,367
------------------- ------------------
TOTAL CURRENT ASSETS 33,397 33,397
DBR investment 12,524 $ (12,524)(1) -
Duhart-Milon investment - 12,524 (1) 12,524
Property, plant and equipment - net 20,284 20,284
Other assets 4,689 (118)(2) 4,571
------------------- ------------------
TOTAL ASSETS $ 70,894 $ 70,776
=================== ==================
Bank lines of credit $ 13,335 (5,000)(3) $ 8,335
Income taxes payable
Other current liabilities 2,944 2,944
------------------- ------------------
TOTAL CURRENT LIABILITIES 16,279 11,279
Long term debt less current maturities 5,512 5,512
Convertible subordinated debentures 20,884 (12,384)(4) 8,500
Other liabilities 4,176 4,176
Common stock 24,509 12,384 (4) 41,775
5,000 (3)
(118)(2)
Shareholder deficit (466) (466)
------------------- ------------------
TOTAL SHAREHOLDERS' EQUITY 24,043 41,309
------------------- ------------------
TOTAL LIABILITIES & EQUITY $ 70,894 $ 70,776
=================== ==================
Shareholders' equity per common share $ 4.84 $ 5.46
=================== ==================
<FN>
--------------------------------------
(1) To eliminate 14,054 shares of DBR held by the Company and set up
Duhart-Milon investment.
(2) To write off unamortized balance of capitalized debenture costs on
converted debentures against common stock.
(3) To issue 416,667 shares of common stock at $6.00/share to each of DBR and
Summus and reduce bank lines of credit using proceeds from issuance of
common stock.
(4) To eliminate debentures held by DBR converted to common stock at
$7.00/share and issue 1,769,143 shares of common stock at $7.00/share for
the DBR debentures converted.
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
13
<PAGE>
<TABLE>
THE CHALONE WINE GROUP, LTD.
----------------------------
INCOME STATEMENT
----------------
(in thousands, except per share data)
<CAPTION>
12 Months Ending Pro Forma
December 31, Pro Forma December 31,
1994 Adjustments 1994
============================================================
<S> <C> <C> <C>
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)(1) 4,605
------------------------------------------------------------
Operating Income 2,870 2,899
Interest, net (2,753) 400 (2) (1,734)
619 (3)
Other, net 192 (63)(4) 128
------------------------------------------------------------
Total Other (2,561) (1,605)
Earnings of equity interest 282 (5) 282
Minority interest (188) (188)
------------------------------------------------------------
Earnings before tax 121 1,388
Income taxes 101 513 (6) 614
============================================================
Net Earnings $ 20 $ 754 $ 774
============================================================
Net Earnings per share $ 0.00 $ 0.10
Average number of shares 4,826 2,602 (7) 7,429
============================================================
<FN>
---------------------------------
(1) To reduce amortization of capitalized DBR debenture costs assumed to have
been written off on January 1, 1994.
(2) To reduce interest expense by assuming that the $5,000,004 proceeds from
issuance of common stock to DBR and Summus are applied against the
Company's bank lines of credit. Interest on such lines of credit is
variable based on the prime rate and the average rate for 1994 is
estimated as 8%.
(3) To reduce interest expense on DBR debentures as if converted at the
beginning of the year.
(4) To reduce dividend income for the year on 14,054 shares of DBR stock.
(5) To record effect of equity in earnings of Duhart-Milon for the year ended
December 31, 1994.
(6) To adjust income tax expense by change in earnings before income tax
using the statutory income tax rate of 40.5% applicable to the Company
during 1994.
(7) To increase average number of shares outstanding for earnings per share
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.
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
14
<PAGE>
<TABLE>
THE CHALONE WINE GROUP, LTD.
----------------------------
INCOME STATEMENT
----------------
(in thousands, except per share data)
<CAPTION>
Six Months Ended Pro Forma Pro Forma
June 30, 1995 Adjustments June 30, 1995
==============================================================
<S> <C> <C> <C>
Wine sales $ 11,834 $ 11,834
Cost of sales 8,092 - 8,092
--------------------------------------------------------------
Gross Profit 3,742 - 3,742
SG&A expenses $ 2,487 $ (14) (1) 2,473
--------------------------------------------------------------
Operating Income 1,255 14 1,269
Interest, net (1,502) 310 (2) (992)
200 (3)
Other, net 92 (58) (4) 34
--------------------------------------------------------------
TOTAL OTHER (1,410) 452 (958)
Earnings of equity interest - 181 (5) 181
Minority interest (172) - (172)
--------------------------------------------------------------
Earnings before tax (327) 647 320
Income taxes (135) 263 (6) 128
--------------------------------------------------------------
Net Earnings $ (192) 384 $ 192
==============================================================
-
Net Earnings per share $ (0.04) - $ 0.03
==============================================================
-
Average shares outstanding 4,962 2,602 (7) 7,564
==============================================================
<FN>
----------------------------
(1) To reduce amortization of capitalized DBR debenture costs assumed to have
been written off on January 1, 1994.
(2) To reduce interest expense on DBR debentures as if converted in the
previous period.
(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 the
Company's bank lines of credit. Interest on such lines of credit is
variable based on the prime rate and the average rate for the first
quarter of 1995 is estimated as 8%.
(4) To reduce dividend income for the year on 14,054 shares of DBR stock
(5) To record effect of equity in earnings of Duhart-Milon for the year ended
December 31, 1994.
(6) To adjust income tax expense by change in earnings before income tax using
the statutory income tax rate of 40.5% applicable to the Company during
1995.
(7) To increase average number of shares outstanding for earnings per share
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.
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
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 assumes that the aforementioned
transactions occurred at June 30, 1995, and the 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
