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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended ___________________
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from February 1, 1996 to June 30, 1996
Commission file number 1-2275
THE SEAGRAM COMPANY LTD.
(Exact name of registrant as specified in its charter)
Canada None
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1430 Peel Street, Montreal, Quebec, Canada H3A 1S9
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (514) 849-5271
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common shares without New York Stock Exchange Vancouver Stock Exchange
nominal or par value Montreal Stock Exchange London Stock Exchange
Toronto Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has 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 registrant was
required to file such reports), and (2) has 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 registrant's 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. [X]
The aggregate market value of common shares held by non-affiliates of the
registrant as of August 31, 1996 (64% of the outstanding common shares) was
approximately $7.8 billion. At August 31, 1996, there were 370,491,354 common
shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareholders for the transition period ended
June 30, 1996. Parts I, II
Proxy Circular for the Annual Meeting of Shareholders to be
held on October 30, 1996. Parts I, III
Annual Report on Form 10-K of E.I. du Pont de Nemours and
Company for the year ended December 31, 1994. Part IV
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PART I
Items 1 and 2. - Business and Properties
The Seagram Company Ltd., a corporation organized under Canadian
federal law on March 2, 1928, operates two core, global businesses: beverages
and entertainment. The Corporation's beverage businesses are engaged principally
in the production and marketing of distilled spirits, wines, fruit juices,
coolers, beers and mixers. The Corporation's entertainment company, MCA INC.,
produces and distributes motion picture, television and home video products, and
recorded music; operates theme parks and retail stores; and publishes books. For
information as to revenues, operating income and identifiable assets by business
segment see Note 12 of Notes to Consolidated Financial Statements included in
the Corporation's Transition Report to Shareholders for the Transition Period
ended June 30, 1996 (the "Transition Report"). Unless the context otherwise
requires, the term "Corporation", as used herein, refers collectively to The
Seagram Company Ltd. and its subsidiaries and affiliates. Unless otherwise
specified, all dollar amounts stated herein are expressed in U.S. currency.
The Corporation's executive offices are located at 1430 Peel Street,
Montreal, Quebec, Canada H3A 1S9 and its registered office is located at 57 Erb
Street West, Waterloo, Ontario, Canada N2L 6C2.
Effective June 30, 1996, the Corporation changed its fiscal year-end to
June 30 from January 31. Accordingly, this Report has been prepared for the
five-month period ended June 30, 1996 (the "Transition Period"). Financial
results for the Transition Period are not necessarily indicative of results for
a full year.
BEVERAGES
The Corporation's beverage operations are divided into two principal
worldwide business units -- The Seagram Spirits And Wine Group and The Seagram
Beverage Group.
The Seagram Spirits And Wine Group, directly and through affiliates and
joint ventures in 41 countries and territories, produces, markets and
distributes more than 225 brands of distilled spirits and more than 210 brands
of wines, Champagnes, Ports and Sherries, which are sold in over 150 countries
and territories. Some of these products are sold worldwide and others only in
the geographic area where they are produced. In addition to marketing
company-owned brands, the Group also distributes spirits and wines produced by
others.
The Seagram Beverage Group includes Tropicana Products, Inc.
("Tropicana"), a leading producer of high-quality branded fruit juices and juice
beverages, and The Seagram Beverage Company, a producer,
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marketer and distributor of coolers, beers, mixers and other low-alcohol and
non-alcohol adult beverages.
SPIRITS AND WINES
Some of the Corporation's best-known brand names include Crown Royal
and Seagram's V.O. Canadian whiskies; Seagram's 7 Crown blended whiskey; Four
Roses bourbon; Chivas Regal, Royal Salute and Passport Scotch whiskies; The
Glenlivet and Glen Grant single malt Scotch whiskies; Martell Cognacs; Seagram's
Extra Dry Gin; and Captain Morgan and Myers's rums. The Corporation also
distributes Absolut Vodka, which is owned by V&S Vin & Sprit Aktiebolag, in the
United States and in certain major European and other international markets.
The Corporation maintains distilleries and spirits bottling plants in
19 countries in North America, South America, Europe, Asia and Australia which
have aggregate daily distillation capacities of approximately 272,000 U.S. proof
gallons and aggregate daily bottling capacities of approximately 277,000
standard cases.
As required by the nature of its business, the Corporation maintains
large inventories of aging spirits in warehousing facilities located primarily
in Canada, France, the United Kingdom and the United States. At June 30, 1996,
such inventories aggregated approximately 494,000,000 U.S. proof gallons.
The basic raw materials used in the production of the Corporation's
spirits are grains, principally corn and barley, which are purchased from a
large number of suppliers. Fluctuations in the prices of these commodities have
not had a material effect upon operating results. The Corporation acquires
substantially all of its American white oak barrels (used for the storage of
whiskey during the aging period) from one supplier in the United States. The
Corporation purchases plastic bottles from two suppliers and glass bottles and
packaging materials from several suppliers. The Corporation believes that its
relationships with its various suppliers are good.
Among the wines produced by the Corporation are Mumm and Perrier-Jouet
French Champagnes; Sterling Vineyards wines; Mumm Cuvee Napa California
sparkling wine; Sandeman Ports and Sherries; and Matheus Muller and Mumm German
sekt. The Monterey Vineyard California wines and Barton & Guestier (B&G) French
wines are produced for the Corporation.
The Corporation imports fine wines, principally French wines and
Champagnes, into the United States and markets premium California wines,
including Sterling Vineyards wines, The Monterey Vineyard wines and Mumm Cuvee
Napa California sparkling wines.
The Corporation's wines, Champagnes and Cognacs are produced primarily
from grapes grown by others. Grapes are, from time to time, adversely affected
by weather and other forces which occasionally have
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limited production. The Corporation believes that its relationships with its
growers are good.
The Corporation operates wineries and wine bottling plants in
Argentina, Brazil, Canada, France, Germany, Italy, Portugal, Spain and the
United States. At June 30, 1996, the Corporation's bulk wine inventory
aggregated approximately 32,000,000 wine gallons.
FRUIT JUICES AND OTHER
Tropicana, which was acquired by the Corporation in 1988, produces and
markets the leading brand of chilled orange juice in the world.
Tropicana pioneered not-from-concentrate orange juice in the United
States with Tropicana Pure Premium Orange Juice. Today, Tropicana Pure Premium
Orange Juice is offered in seven varieties Original, Home Style, Grovestand,
Ruby Red Orange Juice, Tangerine Orange, Plus with Calcium and extra Vitamin C
and Plus with Vitamins A, C and E. Tropicana also offers a number of other
juices which are not made from concentrate, including Home Style Golden and Ruby
Red Grapefruit Juices, and in Canada, Orchard Stand Apple Juice. In addition,
Tropicana produces the Tropicana Season's Best and Pure Tropics brands of juices
made from concentrate and frozen concentrate juices, and Tropicana Twister as
well as Twister Light, unique blends of fruit juice beverages.
On May 19, 1995, the Corporation acquired the worldwide juice and juice
beverage business of Dole Food Company, Inc. ("Dole"), including juices and
juice beverages sold under the Dole, Juice Bowl, Fruvita and Looza brand names,
but excluding Dole's canned pineapple juice business. This acquisition has
significantly expanded Tropicana's international juice business and
international production capabilities.
Tropicana's products are available throughout the United States and in
a growing number of other countries, including, Argentina, Belgium, Canada,
China, Finland, France, Germany, Hong Kong, Ireland, Italy, The Netherlands,
Japan, South Korea, Sweden, Switzerland, Taiwan and the United Kingdom.
Tropicana operates three production facilities in Florida and one in
each of California, Belgium, France and China. In addition, products are
manufactured for Tropicana by third parties at 14 facilities in the United
States and internationally. Tropicana manufactures most of its corrugated
cardboard cases. Tropicana acquires substantially all of its paperboard
containers from a single supplier and substantially all of its plastic
containers from another single supplier. Tropicana acquires most of its glass
containers through a joint venture of which it is a partner. Distribution
facilities are located in California, Florida, New Jersey, Port Ghent, Belgium
and various other locations.
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Oranges are the largest single raw material purchased by Tropicana and
Tropicana is the largest processor of Florida oranges. Approximately 95% of its
Florida oranges are provided by growers under agreements ranging from one to
twenty years. In addition to oranges, Tropicana purchases fruit juice
concentrate from several suppliers. Tropicana believes its relationships with
its growers and suppliers are good. Prices of citrus fruit and fruit juice
concentrate fluctuate due to various seasonal, climatic and economic factors,
which generally affect Tropicana's competitors as well.
The Seagram Beverage Company markets low-alcohol and non- alcohol adult
beverages. Seagram's Coolers are sold in a wide variety of flavors, while
Seagram's Mixers include Ginger Ale, Club Soda, Seltzer and Tonic Water. The
Seagram Beverage Company is the exclusive U.S. importer of Grolsch lagers which
are owned by Royal Grolsch N.V. It also distributes Devil Mountain ales and
Coyote lagers.
BEVERAGES - MARKETING AND DISTRIBUTION
The Corporation derives a significant portion of its revenues from its
beverage operations outside of the United States and Canada. In recent years,
the Corporation has sought to increase the presence of such beverage operations
through internal expansion, joint ventures and acquisitions. The Corporation's
foreign operations involve risks including governmental regulation, embargoes,
expropriation, export controls, burdensome taxes, government price restraints,
exchange controls and currency fluctuations. See Note 12 of the Notes to
Consolidated Financial Statements for information as to sales and other income,
operating income and total assets by geographic area.
In the United States, spirits, wines, coolers and beers are sold to two
general classes of customers. In 32 states and the District of Columbia, sales
are made to approximately 380 wholesale distributors who also purchase and
market other brands of distilled spirits, wines, coolers and beers. In 18
"control" states (where the government engages in distribution), sales are made
to state and local liquor boards and commissions; in certain of these states,
sales of wines, coolers and beers also are made to approximately 280 wholesale
distributors. In Canada, sales are made exclusively to ten provincial and two
territorial government liquor boards and commissions.
Outside the United States and Canada, the Corporation's spirits and
wines are marketed either through affiliates, joint ventures or independent
distributors. Such affiliates and joint ventures are located in Argentina,
Australia, Austria, Belgium, Brazil, Chile, the People's Republic of China,
Colombia, Costa Rica, the Czech Republic, the Dominican Republic, France,
Germany, Greece, Hungary, Hong Kong, India, Israel, Italy, Jamaica, Japan,
Mexico, The Netherlands, New Zealand, Philippines, Poland, Portugal, Singapore,
Slovakia, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan,
Thailand, Ukraine, the United Kingdom and Venezuela.
Tropicana markets its products primarily through independent brokers or
distributors in the United States and Canada, distributors
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in Finland, Hong Kong, Ireland, Italy, South Korea, Sweden and Taiwan and a
direct sales force in Argentina, Belgium, France, Switzerland, The Netherlands
and the United Kingdom. Tropicana markets its products in Japan through a joint
venture of which it is a party and in China and Germany through a direct sales
force as well as independent distributors. Tropicana is expanding the
distribution of its products in other markets throughout the world. Seagram's
Mixers are marketed through approximately 50 distributors.
During the Transition Period, no independent customer (or group of
related customers) of the Corporation's beverage operations accounted for as
much as 10% of the Corporation's revenues.
BEVERAGES - COMPETITION
The beverage industry is highly competitive. In particular, the spirits
and wine business in Europe has become intensely competitive. The trend toward
retailer concentration continues with both national and pan-European retailers
and buying groups becoming more powerful. All marketers of beverage alcohol
brands have confronted severe pricing pressure across Europe. However, the
Corporation is investing in its key brand franchises to build image and grow
distribution in European markets.
To maintain or improve its market position the Corporation makes
extensive use of magazine, newspaper and outdoor advertising. The Corporation
also utilizes radio and television advertising, although the use of such
advertising in connection with the sale of beverage alcohol is restricted in
certain countries.
BEVERAGES - REGULATION AND TAXES
The beverage alcohol business is subject to strict governmental
regulation covering virtually every aspect of operations, including production,
marketing, pricing, labeling, packaging and advertising. In the United States,
the Corporation must file or publish prices for its beverage alcohol products in
some states as much as three months in advance of their implementation.
In the United States, Canada and many other countries, beverage alcohol
products are subject to substantial excise taxes or custom duties and additional
taxation by governmental subdivisions.
ENTERTAINMENT
The Corporation acquired an 80% interest in MCA Holding I Corp., the
indirect parent of MCA INC., on June 5, 1995. MCA INC. has four major business
units: filmed entertainment, music entertainment, recreation, and publishing and
other. Unless the context otherwise requires, the term "MCA" includes MCA INC.
and its subsidiaries and affiliates.
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FILMED ENTERTAINMENT
MCA's filmed entertainment business produces and distributes films
worldwide in the theatrical, television, home video and pay television markets,
engages in the licensing of merchandising rights and film property publishing
rights and has interests in USA Networks, Cineplex Odeon Corporation, United
Cinemas International Multiplex B.V. ("UCI"), Cinema International Corporation
N.V. ("CIC"), United International Pictures ("UIP") and Cinema International
B.V. ("CIBV").
MCA is currently engaged, through Universal Pictures Production, in the
production of feature length films intended for initial theatrical exhibition
("theatrical films") and, through Universal Television and its interest in
Brillstein Grey Entertainment, in the production of motion picture films
intended for initial exhibition on television ("television films"). MCA TV
develops original programming for local television stations. MCA Television
Entertainment, Inc. develops original programming for pay television, basic
cable and home video. Universal Family Entertainment, Inc., MCA Family
Entertainment, Inc. and Universal Cartoon Studios, Inc. produce animated and
live action children's and family programming for networks, basic cable and
local television stations as well as home video. Universal Pictures Production
and Universal Television are headquartered at Universal City Studios, located at
the Corporation's 418 acre property in Universal City, California.
Production generally includes four steps: acquisition of story rights,
pre-production, principal photography and post-production. The
production/distribution cycle represents the period of time from acquisition of
a property through distribution and varies depending upon such factors as type
of product and release pattern. Production activities for both theatrical films
and television films are centered in the Corporation's Universal City Studios.
Production facilities are also leased to outside parties. Some motion picture
and television films are produced, in whole or in part, at other locations both
in and outside the United States.
MCA produces film product for network primetime television. Programming
consists of various weekly series, additional hours of special programming and
"made for television" feature length films. In the initial telecast season, the
network license provides for a minimum number of episodes, with the network
having the option to order additional episodes for both the current and future
television seasons. Network licenses give the networks the exclusive right to
telecast, as well as select the time a series will be telecast, and the success
of any one series may be influenced by the strength of the programs against
which it competes.
Generally, television films for the networks are produced under
contracts which provide for license fees which cover only a portion of the
anticipated production costs. The recoverability of the balance of the
production costs and the realization of profits, if any, are
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dependent upon the success of foreign syndication licenses, additional network
exhibition in non-primetime hours, subsequent domestic syndication licenses and
other uses.
The arrangements under which MCA's theatrical films and television
films are owned, produced and distributed vary widely. Other parties may
participate in varying degrees in revenues or other contractually defined
amounts. Generally, MCA or its affiliated companies own the films and control
worldwide distribution except where they act as a subdistributor in specified
territories or contract for specifically defined distribution rights.
The rights to use the characters, titles and other material and rights
from television and theatrical films and other sources are licensed to
manufacturers, retailers and others by MCA/Universal Merchandising, Inc.
Distribution. Generally, theatrical films are first distributed in the
theatrical, home video and pay television markets. Subsequently, theatrical
films are made available for worldwide television network exhibition and/or
television syndication. The license agreements with theater operators are on an
individual picture basis, and rentals under these agreements are generally a
percentage of the theater's receipts with, in some instances, a minimum
guaranteed amount.
Certain television films are initially licensed for network exhibition
in the United States and are simultaneously syndicated in foreign countries.
Subsequent to their network telecast, series may be licensed in the United
States for airing on local television stations, airing on basic cable or for
additional network exhibition in non-primetime hours. Certain films are produced
and/or distributed for initial exhibition on local television. In addition,
certain television films are distributed in the home video market. Licensing
agreements are recognized in the period that the films are available for
telecast.
Theatrical product is distributed in the United States and Canada to
motion picture theaters by Universal Pictures Distribution and to pay television
by Universal Pay Television, Inc. Theatrical distribution throughout the rest of
the world is primarily conducted by UIP, which is equally owned by the
Corporation, MGM and Viacom Inc. Pay television distribution for the rest of the
world is conducted by MCA International B.V. Television distribution is handled
by MCA TV domestically and throughout the rest of the world primarily by MCA TV
International. Videocassettes and videodiscs are marketed in the United States
and Canada by MCA Home Video, Inc. and outside the U.S. and Canada by CIBV,
which is 49% owned by each of the Corporation and Viacom Inc.
Certain Other Joint Ventures and Equity Interests. USA Networks, which
is equally owned by MCA and Viacom Inc., owns and operates three
advertiser-supported cable television services: USA
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Network, a general entertainment channel, Sci-Fi Channel and Sci-Fi Europe,
science fiction channels. MCA has a more than 40% equity interest in Cineplex
Odeon Corporation which owns and operates motion picture theaters and related
food service concessions in the United States and Canada. MCA also has a 49%
interest in UCI and CIC, joint ventures with Viacom Inc., which operate motion
picture theaters outside the United States and Canada.
MUSIC ENTERTAINMENT
The Music Entertainment Group encompasses record labels; manufacturing,
sales, and distribution operations; music publishing; and MCA Concerts, a live
event/concert promotion division. MCA's record companies create and market
prerecorded music, principally on compact discs and cassettes. Their music
appears on such labels as MCA Records; Universal Records; MCA Records/Nashville;
Geffen and DGC Records; GRP Recording Company, which includes the Impulse!,
Decca Jazz and Blue Thumb labels; Rising Tide/Nashville; Uptown Records; and
Interscope Records (50 percent ownership). New labels marketed by Geffen Records
include Almo Sounds, Outpost Recordings, and DreamWorks SKG Records. UNI
Distribution Corporation manufactures and distributes recorded music for all of
the labels in the group, affiliated label ventures, and others, and distributes
video product for MCA Home Video, Inc. and others in the United States. MCA
Music Entertainment International Limited has subsidiaries in major markets
outside the United States for the release and marketing of recorded music. In
foreign countries other than Canada and the United Kingdom, the Music
Entertainment Group's record product is manufactured and distributed by third
parties, principally BMG Music. The Corporation also releases soundtrack albums
for motion pictures. MCA Music Publishing licenses music from a catalog of more
than 155,000 copyrights for a wide variety of uses including recorded music,
videocassettes, videodiscs, video games, radio, television and motion pictures.
Concerts and live events are presented at and promoted by the Corporation's
Universal Amphitheatre in Los Angeles, Fiddler's Green in Denver, Blossom Music
Center in Cleveland and the Gorge Amphitheatre in George, Washington and through
joint ventures at the Starplex Amphitheatre in Dallas, the Lakewood Amphitheatre
in Atlanta and the Molson Amphitheatre in Toronto, Canada.
In connection with the Corporation's music entertainment activities,
MCA owns manufacturing facilities in New York and Illinois and an office
building in Los Angeles. The Corporation leases warehouses at six facilities in
the United States and Canada and leases office and/or warehouse space in 27
countries outside of the United States.
RECREATION
MCA owns and operates Universal Studios Hollywood, a theme park
attraction based on the Corporation's filmed entertainment businesses located at
Universal City Studios. MCA has a 50% interest in Universal City Florida
Partners, a joint venture which owns Universal Studios
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Florida, a motion picture and television themed tourist attraction and
production facility on approximately 440 acres owned by the joint venture in
Orlando, Florida. Universal City Development Partners, a partnership in which
MCA has a 50% interest, has begun development of an additional themed tourist
attraction, Universal's Islands of Adventure, and related commercial real estate
on approximately 385 acres of land owned by such partnership which is adjacent
to Universal Studios Florida. In early 1996, the Corporation announced plans for
Universal Studios Japan in Osaka, the Corporation's first theme park venture
outside the United States. It is anticipated that the Corporation will hold a
17% equity interest in Universal Studios Japan. Construction is expected to
begin in 1998, with the opening expected in 2001.
MCA develops and manages commercial buildings with about 1.5 million
rentable square feet of office space in Universal CityWalk and Universal City
which are occupied by the Corporation or leased to outside tenants; owns the
Sheraton Universal Hotel; and has a 50% joint venture interest in the 10
Universal City Plaza office building. Universal CityWalk, which is located on
the Corporation's property in Universal City, is an integrated
retail/entertainment zone which offers shopping, dining, cinemas and
entertainment adjacent to Universal Studios Hollywood.
PUBLISHING AND OTHER
MCA Publishing Group (also known in the book industry as The Putnam
Berkley Group, Inc.) is composed of three divisions: The Berkley Publishing
Group, G.P. Putnam's Sons and The Putnam & Grosset Group. The Berkley
Publishing Group publishes mass market and trade paperback books which are
either reprints of hardcover books or paperback originals. The Berkley
Publishing Group releases books through book imprints: Berkley, Jove, Ace,
Boulevard, Perigee Books, HP Books and Riverhead Books. G.P. Putnam's Sons
publishes adult books, principally through G.P. Putnam's Sons, Grosset & Dunlap,
Inc., Jeremy P. Tarcher, Inc. and Riverhead Books. The Putnam & Grosset Group
releases young adult and children's books through G.P. Putnam's Sons, Philomel
Books, Grosset & Dunlap, Inc., Price Stern Sloan and Paperstar Books.
Generally, each of these operations maintains its own independent editorial
staff. MCA Publishing Group also distributes product for other publishers.
The Putnam Berkley Group does not own printing or binding facilities;
printing and binding are performed by several outside firms with which the Group
has maintained long-standing relationships.
Spencer Gifts, Inc. operates approximately 500 retail gift stores
throughout the United States through two groups of stores: the Spencer and DAPY
gift shops. Spencer and DAPY sell novelties, electronics, accessories, books and
trend driven products.
Universal Interactive Studios, Inc. develops entertainment software and
manages the Corporation's 49% interest (45% on a fully-
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diluted basis) in Interplay Productions, an entertainment software developer.
For the Corporation's book publishing activities, it leases office
space in New York City, Los Angeles and New Jersey and distribution facilities
in New York and Pennsylvania. In connection with the activities of Spencer
Gifts, Inc., the Corporation owns a building in New Jersey and leases
approximately 500 stores in various cities in the United States and a warehouse
in North Carolina.
ENTERTAINMENT - COMPETITION
Filmed Entertainment. The Corporation's filmed entertainment business
competes with all other forms of entertainment. The Corporation competes with
other major film studios and independent producers for creative talent and story
products, essential ingredients of the Corporation's filmed entertainment
business. The profitability of the Corporation's filmed entertainment business
is dependent upon public taste which is volatile, shifts in demand, economic
conditions and technological developments.
Music Entertainment. The music entertainment industry is highly
competitive. The profitability of a company's recorded music business depends on
its ability to attract and develop recording artists, the public acceptance of
such artists and the recordings released in a particular year. The Corporation's
music business competes for creative talent both from new artists and those
artists who have already established themselves through another label. Over
expansion of retail outlets for recorded music over the past several years
resulted in the closing of many such stores which is expected to further
increase competition among recorded music companies. The recorded music business
continues to be adversely affected by counterfeiting and piracy, in particular
through the home taping of recorded music.
Recreation. The Corporation's theme parks compete with other theme
parks in their respective geographic regions and other leisure- time activities.
The profitability of the leisure-time industry is influenced by various factors
which are not directly controllable such as economic conditions, amount of
available leisure time, oil and transportation prices and weather patterns.
Publishing and Other. The book publishing industry is highly
competitive. The Corporation competes with numerous other publishers for book
titles, authors and retail shelf space. The book publishing industry also
competes with other media and entertainment. Spencer Gifts and Dapy stores
compete with numerous retail firms of various sizes throughout the United
States, including department, variety and drug stores.
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INTERESTS IN TIME WARNER AND DUPONT
TIME WARNER
At June 30, 1996, the Corporation owned 56.8 million shares or
approximately 14.5% of the outstanding common stock of Time Warner Inc., a
Delaware corporation ("Time Warner"), which had a market value of approximately
$2.2 billion as of such date. The Corporation's ownership percentage would be
reduced if the merger with Turner Broadcasting System, Inc. ("TBS") previously
announced by Time Warner is consummated. Time Warner has included information
with respect to its business and its proposed merger with TBS in its Annual
Report on Form 10-K for the year ended December 31, 1995 and in its Joint Proxy
Statement/Prospectus for the special meeting of its stockholders to be held on
October 10, 1996.
DUPONT
On April 6, 1995, E.I. du Pont de Nemours and Company, a Delaware
corporation ("DuPont"), redeemed 156 million shares of its common stock owned by
the Corporation in exchange for $8.3 billion in cash and 90-day DuPont notes,
plus warrants (the "DuPont Warrants") to purchase 156 million shares of DuPont
common stock, which had a value of approximately $440 million as of the date of
the transaction. On July 24, 1996, DuPont repurchased the DuPont Warrants from
the Corporation for $500 million in cash. The Corporation has retained 8.2
million shares of DuPont common stock which had a market value of $651 million
as of June 30, 1996. DuPont has included information relating to its business in
its Annual Report on Form 10-K for the year ended December 31, 1995.
EMPLOYEES
As of June 30, 1996, the Corporation had approximately 30,000
employees. The number of employees is subject to seasonal fluctuations.
The Corporation has collective bargaining agreements with a number of
labor unions governing wages and benefits, hours, working conditions and similar
matters and covering approximately 11,500 of its employees in the United States
and certain other countries. Such agreements expire at various times between
1996 and 2000. In general, the Corporation believes its labor relations are
good.
Item 3. - Legal Proceedings
In 1993, the Federal Trade Commission ("FTC") commenced an
investigation of the practices of the major record distributors with respect to
advertising allowances, pricing policies and related matters. MCA received a
voluntary request for information in 1993 and produced a substantial volume of
documents at that time. In September 1994, MCA received a subpoena for the
production of documents, stating that the FTC is investigating whether members
of the prerecorded music
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distributing industry may be engaging or may have engaged in any unfair methods
of competition in violation of Section 5 of the Federal Trade Commission Act and
the Robinson-Patman Act by fixing prices or by limiting, or engaging in
concerted activities to limit, the availability of cooperative advertising or
promotional funds, allowances, services, or facilities to retailers who
distribute used compact discs or advertise prices of compact discs below
specified levels. No allegations of unlawful conduct have been made against MCA
at this time.
On May 30, 1995, a purported class action was filed in the United
States District Court for the Central District of California, entitled Digital
Distribution Inc. d/b/a Compact Disc Warehouse v. CEMA Distribution, Sony Music
Entertainment, Inc., Warner Elektra Atlantic Corporation, UNI Distribution
Corporation, Bertelsmann Music Group, Inc. and Polygram Group Distribution,
Inc., No. 95-3596 JSL. The plaintiffs brought the action on behalf of direct
purchasers of compact discs alleging that defendants, including UNI Distribution
Corporation, violated the federal and/or state antitrust laws and unfair
competition laws by engaging in a conspiracy to fix prices of compact discs, and
seek an injunction and treble damages. The defendants' motion to dismiss the
amended complaint was granted and the action was dismissed, with prejudice, on
January 9, 1996. Plaintiffs filed a notice of appeal on February 12, 1996. On
June 13, 1996, plaintiffs filed their brief in support of the appeal. Defendants
filed their opposition brief on July 26, 1996 and plaintiffs filed a reply brief
on August 26, 1996.
On July 8, 1996, a purported class action was filed in the Circuit
Court of Blount County, Tennessee at Maryville, entitled Robinson and Silvey v.
EMI Music Distribution, Inc., Sony Music Entertainment, Inc., Warner Elektra
Atlantic Corporation, UNI Distribution Corporation, Bertelsmann Music Group,
Inc. and Polygram Group Distribution, Inc., No. L-10462. The action was brought
on behalf of persons who, from June 26, 1992 to the present, purchased recorded
music compact discs indirectly from the defendants in Tennessee, Alabama,
California, Florida, Kansas, Maine, Michigan, Minnesota, Mississippi, New
Mexico, North Dakota, South Dakota, West Virginia, Wisconsin and the District of
Colombia, and alleges that the defendants are engaged in a conspiracy to fix the
prices of compact discs, in violation of the antitrust, unfair trade practices
and consumer protection statutes of each of those jurisdictions. On July 8,
1996, the Circuit Court issued an order conditionally granting class
certification, subject to the defendants' right to move to decertify the class.
On July 25, 1996, UNI Distribution Corporation was served with an
antitrust civil investigation demand from the Office of the Attorney General of
the State of Florida that calls for the production of documents in connection
with an investigation to determine whether there "is, has been or may be" a
"conspiracy to fix the prices" of compact discs or conduct consisting of "unfair
methods of competition" or "unfair trade practices" in the sale and marketing of
compact discs.
<PAGE> 14
14
On April 29, 1996, MCA commenced an action entitled MCA INC. v. Viacom
Inc., Viacom International Inc. and Eighth Century Corporation, C.A. No. 14971,
in the Court of Chancery of the State of Delaware (the "Court of Chancery")
alleging breaches by Viacom Inc. ("Viacom") and affiliated entities of the USA
Networks joint venture agreement between affiliates of Viacom and MCA, by
reason, among others, of Viacom operating certain cable television networks in
violation of the joint venture agreement and in competition with USA Networks.
The action seeks, among other things, to enforce the joint venture agreement's
exclusivity provision in the fields of advertiser-supported basic cable
television and pay-per-view programming services. Shortly thereafter Viacom and
Eighth Century Corporation, an indirect, wholly owned subsidiary of Viacom,
commenced an action in the Court of Chancery entitled Viacom Inc. and Eighth
Century Corporation v. The Seagram Company Ltd., MCA INC. and Universal City
Studios, Inc., C.A. No. 14973, against the Corporation, MCA and Universal City
Studios, Inc. The action alleges, among other things, that MCA sought to force
Viacom to sell its 50 percent interest in USA Networks to MCA at an unfairly low
price. The action seeks compensatory damages in an unspecified amount and a
declaration that Viacom has not violated, or has been released from a claim for
violating, the exclusivity provision of the USA Networks joint venture
agreement. The Court of Chancery has currently scheduled the trial of both
actions to commence on October 15, 1996.
The Corporation and its subsidiaries and affiliates are defendants or
respondents in a number of other actions arising in the ordinary course of
business.
Item 4. - Submission of Matters to a Vote of Security Holders
Not applicable.
<PAGE> 15
15
PART II
Item 5. - Market for Registrant's Common Equity and Related Shareholder Matters
Information as to the number of holders of record of the Corporation's
common shares, the markets on which such common shares are traded, the quarterly
high and low prices for such common shares on Canadian and New York stock
exchanges and the quarterly dividends declared with respect thereto during the
Transition Period and during fiscal years ended January 31, 1996 and 1995 is
incorporated herein by reference to the Management's Discussion and Analysis
section captioned "Return to Shareholders" on page 14 of the Transition Report.
Payment of dividends by the Corporation to shareholders not resident in
Canada is subject under Canadian law to Canadian withholding tax. For
shareholders resident in the United States, 15% of the dividends must be
withheld pursuant to currently existing treaty arrangements between the United
States and Canada. For shareholders resident in other countries, the withholding
rate varies depending upon the existence and terms of applicable treaties
between each such other country and Canada.
Item 6. - Selected Financial Data
Selected financial data for the Transition Period and for each of the
five fiscal years ended January 31, 1996, 1995, 1994, 1993 and 1992 are
incorporated herein by reference to the Financial Summary on pages 34 and 35 of
the Corporation's Transition Report.
Item 7. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Management's discussion and analysis of financial condition and results
of operations is incorporated herein by reference to pages 6 through 14 of the
Corporation's Transition Report.
Item 8. - Financial Statements and Supplementary Data
The Consolidated Financial Statements, together with the report thereon
of Price Waterhouse dated September 5, 1996, and the supplementary quarterly
data are incorporated herein by reference to pages 15 through 33 of the
Corporation's Transition Report.
Item 9. - Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
Not applicable.
<PAGE> 16
16
PART III
Item 10. - Directors and Executive Officers of the Registrant
Information as to the Corporation's directors is incorporated by
reference to pages 5 through 7 of the Proxy Circular for the Meeting of
Shareholders to be held on October 30, 1996 (the "Proxy Circular") under the
caption "Election of Directors -- Nominees for Directors".
Set forth below is certain information with respect to the
Corporation's executive officers.
Title and Other Office Held
Name Age Information Since
---- --- --------------- -----------
Edgar M. Bronfman 67 Chairman of the Board and 1975
Director. For more than
five years prior to June
1994, he was also Chief
Executive Officer.
Charles R. Bronfman 65 Co-Chairman of the Board, 1986
Chairman of the Executive
Committee and Director.
Edgar Bronfman, Jr. 41 President, Chief Executive 1994
Officer and Director. From
June 1989 to June 1994, he
was President, Chief
Operating Officer and
Director.
Robert W. Matschullat 48 Vice Chairman, Chief 1995
Financial Officer and
Director. From January 1,
1992 to July 1, 1995 he was
Managing Director and Head
of Worldwide Investment
Banking for Morgan Stanley
& Co., Inc. and a director
of Morgan Stanley Group
Inc. From February 1986 to
January 1992, he was
Managing Director of Morgan
Stanley & Co., Inc.
Frank J. Biondi, Jr. 51 Director, Chairman and 1996
Chief Executive Officer,
MCA INC. From July 1987
until January 1996, he was
President, Chief Executive
Officer and a director of
Viacom Inc.
<PAGE> 17
17
Title and Other Office Held
Name Age Information Since
---- --- --------------- -----------
John D. Borgia 48 Executive Vice President, 1995
Human Resources. From
March 1991 to April 1995,
he was Senior Vice
President, Human Resources
& Administration, Bristol-
Myers Squibb Pharmaceutical
Group.
Stephen E. Herbits 54 Executive Vice President, 1989
Corporate Policy and
External Affairs.
Steven J. Kalagher 53 Executive Vice President 1995
and President, The Seagram
Spirits And Wine Group (a
division of Joseph E.
Seagram & Sons, Inc.).
From May 1994 to May 1995
he was Reengineering
Leader. From February 1993
to May 1995 he was also
President, Seagram North
America (a division of The
Seagram Spirits And Wine
Group). From March 1991 to
January 1993 he was
Executive Vice President,
Staff Operations of The
Seagram Spirits And Wine
Group.
Ellen R. Marram 49 Executive Vice President 1993
and President, The Seagram
Beverage Group (a division
of Joseph E. Seagram &
Sons, Inc.). From June
1988 to April 1993, she was
President of Nabisco
Biscuit Company, an
operating unit of RJR
Nabisco Holdings Corp.
Edward Falkenberg 55 Vice President and 1993
Controller. From August
1986 to January 1993, he
was Controller.
Jeananne K. Hauswald 52 Vice President and 1993
Treasurer. From May 1990
to January 1993, she was
Vice President, Human
Resources.
<PAGE> 18
18
Title and Other Office Held
Name Age Information Since
---- --- --------------- -----------
Gabor Jellinek 61 Vice President, Production 1987
and Executive Vice
President, Manufacturing,
The Seagram Spirits And
Wine Group (a division of
Joseph E. Seagram & Sons,
Inc.) since February 1991.
Arnold M. Ludwick 58 Vice President. 1982
Daniel R. Paladino 53 Vice President, Legal and 1993
Environmental Affairs.
From August 1986 to
February 1993, he was Vice
President, Legal Affairs.
Michael C.L. Hallows 55 Secretary. 1979
Pursuant to the Corporation's By-Laws, executive officers are chosen
annually by the Board of Directors and hold office until they resign, are
removed or otherwise become disqualified to serve.
Item 11. - Executive Compensation
The information required hereunder is incorporated herein by reference
to pages 11 through 18 of the Proxy Circular under the captions "Summary
Compensation Table" through "Performance Graph".
Item 12. - Security Ownership of Certain Beneficial Owners and Management
Information required hereunder as to the ownership of the Corporation's
common shares by certain beneficial owners and management is incorporated herein
by reference to pages 2 through 4 of the Proxy Circular under the caption "Share
Ownership".
Item 13. - Certain Relationships and Related Transactions
The information required hereunder is incorporated herein by reference
to page 19 of the Proxy Circular under the captions "Human Resources Committee
Interlocks and Insider Participation" and
"Transactions with Directors and Others".
<PAGE> 19
19
PART IV
Item 14. - Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1&2. Financial Statements and Financial Statement Schedules
The financial statements and schedules filed as part of or
incorporated by reference in this Report are listed in the
accompanying Index to Financial Statements.
3. Exhibits
The exhibits filed as part of or incorporated by reference in this
Report are listed in the accompanying Exhibit Index. Exhibits 10(g)
through 10(cc) listed in the accompanying Exhibit Index identify
management contracts or compensatory plans or arrangements.
(b) Current Reports on Form 8-K
1. A Current Report on Form 8-K dated July 24, 1996 was filed (i) to
report under Item 5 the repurchase by DuPont from the Corporation of
the DuPont Warrants, and (ii) to file under Item 7 a press release
announcing, among other things, such repurchase.
<PAGE> 20
20
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 SEAGRAM COMPANY LTD.
------------------------
(Registrant)
Date: September 27, 1996 By /s/ Edgar Bronfman, Jr.
-----------------------
Edgar Bronfman, Jr.
President and Chief Executive
Officer
(Principal Executive Officer)
<PAGE> 21
21
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on September 27, 1996 by the following persons on
behalf of the Registrant and in the capacities indicated.
Principal Executive Officer:
/s/ Edgar Bronfman, Jr. Director, President and Chief
- ----------------------------- Executive Officer
Edgar Bronfman, Jr.
Principal Financial Officer:
/s/ Robert W. Matschullat Director, Vice Chairman and
- ----------------------------- Chief Financial Officer
Robert W. Matschullat
Principal Accounting Officer:
/s/ Edward Falkenberg Vice President and Controller
- -----------------------------
Edward Falkenberg
Directors:
Edgar M. Bronfman* Director, Chairman of the Board
The Hon. Charles R. Bronfman* Director, Co-Chairman of
the Board and Chairman of the
Executive Committee
Samuel Bronfman II* Director
Matthew W. Barrett* Director
Frank J. Biondi, Jr.* Director
David M. Culver* Director
The Hon. William G. Davis* Director
The Hon. Paul Desmarais* Director
David L. Johnston* Director
The Hon. E. Leo Kolber* Director
Marie-Josee Kravis* Director
C. Edward Medland* Director
Lew R. Wasserman* Director
John L. Weinberg* Director
John S. Weinberg* Director
* By signing his name hereto, Robert W. Matschullat signs this document on
behalf of each of the persons indicated above pursuant to powers of attorney
duly executed by such persons and filed with the Securities and Exchange
Commission.
By /s/ Robert W. Matschullat
---------------------------------------
Robert W. Matschullat, Attorney-in-fact
<PAGE> 22
22
THE SEAGRAM COMPANY LTD.
TRANSITION REPORT ON FORM 10-K
FOR THE FIVE MONTH TRANSITION PERIOD ENDED JUNE 30, 1996
INDEX TO FINANCIAL STATEMENTS
1. Consolidated Financial Statements for The Seagram Company Ltd. and
subsidiary companies, together with the report thereon of Price
Waterhouse dated September 5, 1996, incorporated herein by reference
to the Corporation's Annual Report to Shareholders for the
five-month period ended June 30, 1996 (the "Transition Period"):
Consolidated Balance Sheet at June 30, 1996, January 31, 1996
and January 31, 1995;
For the Transition Period, and the twelve months ended January
31, 1996, 1995 and 1994:
Consolidated Statement of Income;
Consolidated Statement of Cash Flows;
Consolidated Statement of Shareholders' Equity;
Summary of Significant Accounting Policies;
Notes to Consolidated Financial Statements;
Auditors' Report;
Quarterly Data (Unaudited).
2. Financial Statement Schedules and Report:
Report of Chartered Accountants on Financial Statement
Schedule;
Schedule for The Seagram Company Ltd. and Subsidiary
Companies:
II. Valuation and Qualifying Accounts.
Schedules not included have been omitted because they are not
applicable or the required information is shown in the Corporation's
Consolidated Financial Statements or Notes
thereto.
3. The Consolidated Financial Statements of E.I. du Pont de Nemours and
Company (approximately 24.1% owned by the Corporation at January 31,
1995 and accounted for during the
<PAGE> 23
23
fiscal year then ended using the equity method), as listed under
Item 14(a)1 of its Annual Report on Form 10-K for the year ended
December 31, 1994, are incorporated herein by reference.
<PAGE> 24
24
SCHEDULE II
THE SEAGRAM COMPANY LTD.
(Incorporated under the Canada Business Corporations Act)
AND SUBSIDIARY COMPANIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(U.S. dollars in millions)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Costs and at End
Description of Period Expenses Deductions of Period
- ----------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Reserves Deducted
from Receivables:
Transition Period Ended
June 30, 1996:
Reserve for Doubtful
Accounts $ 78 $ 25 $ 15 $ 88
Reserve for
Merchandise Returns
and Allowances 205 130 66 269
---- ---- ---- ----
$283 $155 $ 81 $357
==== ==== ==== ====
Fiscal Year Ended
January 31, 1996:
Reserve for Doubtful
Accounts $ 47 $ 38 $ 7 $ 78
Reserve for
Merchandise Returns
and Allowances 6 245 46 205
---- ---- ---- ----
$ 53 $283 $ 53 $283
==== ==== ==== ====
Fiscal Year Ended
January 31, 1995:
Reserve for Doubtful
Accounts $ 35 $ 15 $ 3 $ 47
Reserve for
Allowances 14 6 14 6
---- ---- ---- ----
$ 49 $ 21 $ 17 $ 53
==== ==== ==== ====
</TABLE>
<PAGE> 25
25
REPORT OF CHARTERED ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
The Seagram Company Ltd.
Our audits of the consolidated financial statements referred to in our report
dated September 5, 1996 appearing on page 32 of the Transition Report to
Shareholders of The Seagram Company Ltd. for the transition period ended June
30, 1996 (which report and consolidated financial statements are incorporated by
reference in this Transition Report on Form 10-K) also included an audit of the
Financial Statement Schedule listed in the Index to Financial Statements
appearing on page 22 of this Form 10-K. In our opinion, this Financial Statement
Schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
/s/ Price Waterhouse
PRICE WATERHOUSE
Chartered Accountants
Montreal, Canada
September 27, 1996
<PAGE> 26
26
THE SEAGRAM COMPANY LTD.
TRANSITION REPORT ON FORM 10-K
FOR THE TRANSITION PERIOD ENDED JUNE 30, 1996
EXHIBIT INDEX
Exhibit Number
Per Item 601 of Description of Document and Incorporation
Regulation S-K Reference Where Applicable
- --------------- -----------------------------------------
3 (a) Articles of Amalgamation dated February 1,
1995 between the Corporation and Centenary
Distillers Ltd. (incorporated by reference
to Exhibit 3(a) of the Corporation's Annual
Report on Form 10-K for the fiscal year
ended January 31, 1995), as amended by
Certificate and Articles of Amendment dated
May 31, 1995 (incorporated by reference to
Exhibit 3(a) of the Corporation's Quarterly
Report on Form 10-Q for the fiscal quarter
ended April 30, 1995).
(b) General By-Laws of the Corporation, as amended
(incorporated by reference to Exhibit 3(b) to the
Corporation's Quarterly Report on Form 10-Q for
the fiscal quarter ended April 30, 1996).
4 Long-term debt instruments are omitted pursuant to Item
601(b)(4)(iii) of Regulation S-K. The Corporation agrees
to furnish to the Commission on request a copy of any
instrument defining the rights of holders of long-term
debt of the Corporation and of any subsidiary for which
consolidated or unconsolidated financial statements are
required to be filed.
10 (a) Amended and Restated Stock Purchase
Agreement dated as of June 5, 1995 among the
Corporation, Matsushita Electric Industrial
Co., Inc., Home Holding Inc. and Home
Holding II Inc. (incorporated by reference
to the Exhibit 2(a) to the Corporation's
Current Report on Form 8-K dated June 5,
1995).
(b) Stockholders' Agreement dated as of June 5,
1995 among the Corporation, MEI Holding Inc.
(formerly known as Home Holding Inc.) and
MCA Holding I Corp. (formerly known as Home
Holding II Inc.) (incorporated by reference
to the Exhibit 10(a) to the Corporation's
<PAGE> 27
27
Current Report on Form 8-K dated June 5, 1995).
(c) Credit Agreement (the "Credit Agreement"),
dated as of November 23, 1994, among Joseph
E. Seagram & Sons, Inc., J.E. Seagram Corp.,
Bank of Montreal, Citibank N.A. and Chemical
Bank and the banks named therein
(incorporated by reference to Exhibit 10 (f)
to the Corporation's Annual Report on Form
10-K for the fiscal year ended January 31,
1995).
(d) First Amendment, dated as of June 14, 1996,
to the Credit Agreement among Joseph E.
Seagram & Sons, Inc., J.E. Seagram Corp.,
Bank of Montreal, Citibank N.A. and Chemical
Bank and the banks named therein.
(e) 5-Year Credit Agreement (the "Five Year
Credit Agreement") dated as of December 21,
1994, among The Seagram Company Ltd., Bank
of Montreal and the banks named therein
(incorporated by reference to Exhibit 10 (h)
to the Corporation's Annual Report on Form
10-K for the fiscal year ended January 31,
1995).
(f) First Amendment, dated as of June 14, 1996, to the
5-Year Credit Agreement among The Seagram Company
Ltd., Bank of Montreal and the banks named
therein.
(g) 1983 Stock Appreciation Right and Stock Unit Plan
of the Corporation, as amended (incorporated by
reference to Exhibit 10(e) to the Corporation's
Annual Report on Form 10-K for the fiscal year
ended January 31,
1987).
(h) Written description of Management Incentive
Plan of Joseph E. Seagram & Sons, Inc.
(incorporated by reference to Exhibit 10(g)
to the Corporation's Annual Report on Form
10-K for the fiscal year ended January 31,
1994).
(i) Senior Executive Long-Term Incentive Plan of the
Corporation (incorporated by reference to Exhibit
10(f) to the Corporation's Annual Report on Form
10-K for the fiscal year ended January 31, 1990).
<PAGE> 28
28
(j) Form of Deferred Compensation Agreement, as
amended, between Joseph E. Seagram & Sons,
Inc. and certain of its executives
(incorporated by reference to Exhibit 10(n)
to the Corporation's Annual Report on Form
10-K for the fiscal year ended January 31,
1996).
(k) 1988 Stock Option Plan of the Corporation, as
amended (incorporated by reference to Exhibit
10(f) to the Corporation's Annual Report on Form
10-K for this fiscal year ended January 31, 1992).
(l) 1992 Stock Incentive Plan of the Corporation, as
amended (incorporated by reference to Exhibit
10(g) to the Corporation's Annual Report on Form
10-K for the fiscal year ended January 31, 1993).
(m) 1996 Stock Incentive Plan of the
Corporation.
(n) Senior Executive Basic Life Insurance
Program, as amended, of Joseph E. Seagram &
Sons, Inc. (incorporated by reference to
Exhibit 10(i) to the Corporation's Annual
Report on Form 10-K for the fiscal year
ended January 31, 1993).
(o) Retirement Salary Continuation Plan, as
amended, of Joseph E. Seagram & Sons, Inc.
(incorporated by reference to Exhibit 10(j)
to the Corporation's Annual Report on Form
10-K for the fiscal year ended January 31,
1993).
(p) Benefit Equalization Plan, as amended, of
Joseph E. Seagram & Sons, Inc. (incorporated
by reference to Exhibit 10(k) to the
Corporation's Annual Report on Form 10-K for
the fiscal year ended January 31, 1993).
(q) Senior Executive Group Term Life Insurance
Arrangement, as amended, of Joseph E.
Seagram & Sons, Inc. (incorporated by
reference to Exhibit 10(k) to the
Corporation's Annual Report on Form 10-K for
the fiscal year ended January 31, 1992).
(r) Personal Excess Liability Insurance Policy for
Senior Executives of Joseph E. Seagram & Sons,
Inc. (incorporated by reference to Exhibit 10(m)
to the Corporation's Annual
<PAGE> 29
29
Report on Form 10-K for the fiscal year ended
January 31, 1993).
(s) Flexible Perquisite Program for Seagram Senior
Executives (incorporated by reference to Exhibit
10(s) to the Corporation's Annual Report on Form
10-K for the fiscal year ended January 31, 1994).
(t) Senior Executive Disability Salary
Continuation Arrangement of Joseph E.
Seagram & Sons, Inc. (incorporated by
reference to Exhibit 10 (w) to the
Corporation's Annual Report on Form 10-K for
the fiscal year ended January 31, 1995).
(u) Post Retirement Consulting Plan, as amended, of
Joseph E. Seagram & Sons, Limited (incorporated by
reference to Exhibit 10(r) to the Corporation's
Annual Report on Form 10-K for the fiscal year
ended January 31,
1993).
(v) Canadian Executive Pension Plan of Joseph E.
Seagram & Sons, Limited, as amended
(incorporated by reference to Exhibit 10(s)
to the Corporation's Annual Report on Form
10-K for the fiscal year ended January 31,
1993).
(w) Executive Long-Term Incentive Arrangement among
the Corporation, Joseph E. Seagram & Sons, Limited
and Charles R. Bronfman dated February 4, 1982
(incorporated by reference to Exhibit 10(r) to the
Corporation's Annual Report on Form 10-K for the
fiscal year ended January 31, 1992).
(x) Employment Agreement between Joseph E. Seagram &
Sons, Inc. and Robert W. Matschullat dated July 3,
1995 (incorporated by reference to Exhibit 10(aa)
to the Corporation's Annual Report on Form 10-K
for the fiscal year ended January 31, 1996).
(y) Employment Agreement among MCA INC., the
Corporation and Frank J. Biondi, Jr. dated April
23, 1996 (incorporated by reference to Exhibit
10(bb) to the Corporation's Annual Report on Form
10- K for the fiscal year ended January 31, 1996).
(z) Agreement between Joseph E. Seagram & Sons, Inc.
and Steven J. Kalagher dated December
<PAGE> 30
30
28, 1995 (incorporated by reference to Exhibit
10(cc) to the Corporation's Annual Report on Form
10- K for the fiscal year ended January 31, 1996).
(aa) Employment Agreement between Joseph E. Seagram &
Sons, Inc. and Ellen R. Marram dated April 12,
1993 (incorporated by reference to Exhibit 10(dd)
to the Corporation's Annual Report on Form 10-K
for the fiscal year ended January 31, 1996).
(bb) Employment Agreement between MCA INC. and Lew R.
Wasserman dated December 6, 1988 (incorporated by
reference to Exhibit 10(ee) to the Corporation's
Annual Report on Form 10-K for the fiscal year
ended January 31, 1996).
(cc) Amendment to Employment Agreement between MCA INC.
and Lew R. Wasserman dated November 26, 1990
(incorporated by reference to Exhibit 10(ff) to
the Corporation's Annual Report on Form 10- K for
the fiscal year ended January 31, 1996).
11 Computation of fully diluted earnings per share.
12 (a) Computation of ratio of earnings to fixed
charges - The Seagram Company Ltd.
(b) Computation of ratio of earnings to fixed
charges - Joseph E. Seagram & Sons, Inc.
13 Report to Shareholders for the Transition Period ended
June 30, 1996. Only those sections (or portions thereof)
specifically referred to in this Report as being
incorporated by reference are deemed to be filed
herewith.
21 Subsidiaries.
23 (a) Consent of Price Waterhouse, chartered
accountants.
(b) Consent of Price Waterhouse LLP, independent
accountants.
24 Power of Attorney.
27 Financial Data Schedule.
99 Supplemental Quarterly Financial Information on
New Fiscal Year Basis.
<PAGE> 1
Exhibit 10(d)
FIRST AMENDMENT
FIRST AMENDMENT, dated as of June 14, 1996 (this "Amendment"),
to the 5-Year Credit Agreement, dated as of November 23, 1994 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among Joseph E. Seagram & Sons, Inc. (the "Borrower"), J.E. Seagram Corp. (the
"Guarantor"), the financial institutions from time to time parties thereto (the
"Banks"), Bank of Montreal, Citibank, N.A. and Chemical Bank, as co-arrangers,
Citibank, N.A., as syndication agent, Bank of Montreal, as documentation agent,
and Chemical Bank, as administrative agent (in such capacity, the
"Administrative Agent") for the Banks.
W I T N E S S E T H :
WHEREAS, the Borrower, the Banks and the Administrative Agent
are parties to the Credit Agreement;
WHEREAS, the Borrower has requested that the Banks amend
certain provisions of the Credit Agreement, as more fully described herein;
WHEREAS, the Banks are willing to amend such provisions of the
Credit Agreement only upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises, the parties
hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized
terms which are defined in the Credit Agreement are used herein as therein
defined.
2. Amendment of Section 1.01. Section 1.01 of the Credit
Agreement hereby is amended by:
(a) deleting therefrom in their entireties the definitions of the terms
"Applicable Margin," "Applicable Utilization Fee Rate" and "Facility
Fee";
(b) inserting therein, in proper alphabetical order, the following new
defined terms:
"Applicable Margin" means, for each day during the
Interest Period for each Eurodollar Rate Advance, the rate of
interest per annum (expressed in basis points, i.e., 1/100 of
1%) set forth in Column B below opposite the category in
Column A below which describes the Applicable Public Debt
Rating in effect on such day:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Column A Column B
-------- --------
-----------------------------------------------------------------
<S> <C>
Level 1 12.50
-----------------------------------------------------------------
Level 2 15.00
-----------------------------------------------------------------
</TABLE>
<PAGE> 2
2
<TABLE>
-----------------------------------------------------------------
<S> <C>
Level 3 20.00
-----------------------------------------------------------------
Level 4 25.00
-----------------------------------------------------------------
Level 5 42.50
-----------------------------------------------------------------
</TABLE>
"Applicable Utilization Fee Rate" means, for each
day, the rate of interest per annum (expressed in basis
points, i.e., 1/100 of 1%) set forth in Column B below
opposite the category in Column A below which describes the
Applicable Public Debt Rating in effect on such day:
<TABLE>
<CAPTION>
-------------------------------------------------
Column A Column B
-------- --------
-------------------------------------------------
<S> <C>
Level 1 0.00
-------------------------------------------------
Level 2 0.00
-------------------------------------------------
Level 3 0.00
-------------------------------------------------
Level 4 7.50
-------------------------------------------------
Level 5 7.50
-------------------------------------------------
</TABLE>
"Facility Fee" means, for each day, the rate per
annum (expressed in basis points, i.e., 1/100 of 1%) set forth
in Column B below opposite the category in Column A below
which describes the Applicable Public Debt Rating in effect on
such day:
<TABLE>
<CAPTION>
-------------------------------------------------
Column A Column B
-------- --------
-------------------------------------------------
<S> <C>
Level 1 7.00
-------------------------------------------------
Level 2 7.50
-------------------------------------------------
Level 3 10.00
-------------------------------------------------
Level 4 12.50
-------------------------------------------------
Level 5 20.00
-------------------------------------------------
</TABLE>
3. Amendment of Signature Pages. (a) Each Bank hereby agrees
that the aggregate amount of the Commitments shall be increased to
$2,000,000,000 and hereby agrees to provide a Commitment (as defined in the
Credit Agreement) under the Credit Agreement in an amount up to the amount set
forth opposite the signature of such Bank hereto; provided that any Bank which
agrees to provide a Commitment (i.e., inserts an amount greater than $0) shall
provide a Commitment of not less than $25,000,000.
<PAGE> 3
3
(b) Each Bank hereby agrees that, simultaneously with the
effectiveness of this Amendment, the Administrative Agent and the Borrower shall
(in their sole discretion) reallocate the Commitments of the Banks such that the
aggregate amount of the Commitments under the Credit Agreement shall be
increased to $2,000,000,000. Notwithstanding the provisions of Section 9.06 of
the Credit Agreement (which provisions hereby are waived to the extent necessary
to permit such re-allocation and assignment), such re-allocation shall be deemed
to be an assignment of the relevant portions of the Commitments of the Banks
affected thereby on the Effective Date of this Amendment. Following the
Effective Date hereof, (i) the Administrative Agent shall distribute to each
Bank a schedule reflecting the new allocation of Commitments and (ii) the
Commitment set forth for each Bank on its signature page to the Credit Agreement
shall be deemed to have been amended (without any notice to or consent of the
Borrower, any Bank or any other Person) to reflect the allocation set forth for
such Bank in new schedule (with any Bank which has no allocation after the
Effective Date then ceasing to be a "Bank" under the Credit Agreement).
(c) Notwithstanding anything to the contrary contained herein,
the Commitment of each Bank (after giving effect to such re-allocation) shall
not be greater than the amount set forth opposite its signature hereto and shall
not be less than the lesser of (i) the amount set forth opposite its signature
hereto and (ii) the aggregate amount of such Bank's Commitments under (and as
defined in) the Credit Agreement and the 364-Day Credit Agreement immediately
prior to the effectiveness of such re-allocation.
4. Extension of Termination Date. Notwithstanding anything to
the contrary contained in the Credit Agreement, the Termination Date presently
in effect shall be extended to the date which is the fifth anniversary of the
Effective Date (as hereinafter defined), such that (unless terminated pursuant
to Section 2.05, 2.08(b), 2.11(c), 2.13(h) or 6.01 of the Credit Agreement) the
"Termination Date" for each Bank shall occur the later of the fifth anniversary
of the Effective Date or the date to which the Commitment of such Bank is
extended pursuant to Section 9.09 of the Credit Agreement.
5. Termination of 364-Day Credit Agreement. By its execution
and delivery hereof, the Borrower hereby terminates the Commitments under (and
as defined in) the 364-Day Credit Agreement. Each Bank hereby agrees to waive
the provisions of Section 2.05 of the 364-Day Credit Agreement to the extent and
only to the extent necessary to permit such termination to become effective on
the Effective Date of this Amendment. Notwithstanding anything to the contrary
contained herein or in the 364-Day Credit Agreement, any interest, fees and
other amounts (other than principal) owing on account of the 364-Day Credit
Agreement on such date of termination shall be due and payable on June 30, 1996
(or such later date upon which the 364-Day Credit Agreement shall terminate).
6. Representations and Warranties. Each of the Borrower and
the Guarantor hereby confirms, reaffirms and restates the representations and
warranties made by it which are set forth in Article IV of the Credit Agreement,
provided that each reference to the Credit Agreement therein shall be deemed to
be a reference to the Credit Agreement after giving effect to this Amendment.
Each of the Borrower and the Guarantor represents and warrants that no Default
or Event of Default has occurred and is continuing.
<PAGE> 4
4
7. Effectiveness. This Amendment shall become effective (the
date of such effectiveness being the "Effective Date") upon receipt by the
Administrative Agent of the following:
(i) counterparts hereof, duly executed and delivered by the
Borrower, the Guarantor and each Bank;
(ii) promissory notes in substantially the form of Exhibit A
to the Credit Agreement, (the "A Notes"), referencing the Credit
Agreement, as amended by this Amendment No. 1, drawn to the order of
each of the respective Banks in the aggregate principal amount of each
such Bank's Commitment as re-allocated pursuant to the foregoing
paragraph 3 of this Amendment;
(iii) certified copies of the resolutions of the Board of
Directors of each of the Borrower and the Guarantor approving the
Credit Agreement, as amended by this Amendment No. 1, and (in the case
of the Borrower) the Notes and (in the case of the Borrower and the
Guarantor) all documents evidencing other necessary corporate action
and governmental authorizations and approvals, if any, required in
connection with the execution, delivery and performance of this
Amendment by the Guarantor, and this Amendment and the Notes by the
Borrower;
(iv) a signed copy of a certificate of the Secretary or an
Assistant Secretary or other appropriate officer of each of the
Borrower and the Guarantor certifying the names and true signatures of
the officers of the Borrower and the Guarantor, respectively,
authorized to sign this Amendment and, in the case of the Borrower, the
Notes, and in each case the other documents or certificates to be
delivered pursuant to this Amendment. The Administrative Agent and the
Banks each may conclusively rely on such certificate until it shall
receive a further certificate of the Secretary or an Assistant
Secretary of the Borrower or the Guarantor, as the case may be,
cancelling or amending the prior certificate of the Borrower or the
Guarantor, as the case may be, and submitting the signatures of the
officers named in such further certificate;
(v) A favorable opinion of Simpson Thacher & Bartlett, New
York counsel for the Borrower and the Guarantor, referencing the Credit
Agreement, as amended by this Amendment No. 1, in form and substance
reasonably satisfactory to the Administrative Agent, which opinion the
Borrower and the Guarantor hereby instruct such counsel to prepare and
deliver;
(vi) A favorable opinion of Barnes and Thornburg, special
Indiana counsel for the Borrower, referencing the Credit Agreement, as
amended by this Amendment No. 1, in form and substance reasonably
satisfactory to the Administrative Agent, which opinion the Borrower
and the Guarantor hereby instruct such counsel to prepare and deliver;
and
(vii) A favorable opinion of Shearman & Sterling, special New
York counsel for the Co-Agents and the Administrative Agent,
referencing the Credit Agreement, as
<PAGE> 5
5
amended by this Amendment No. 1, in form and substance reasonably
satisfactory to the Administrative Agent.
Notwithstanding anything to the contrary contained in the Credit Agreement, each
of the Applicable Margin, Applicable Utilization Fee and Facility Fee shall
accrue for each day from and after the Effective Date at the rates set forth
herein.
8. Continuing Effect of Credit Agreement. This Amendment shall
not constitute a waiver or amendment of any other provision of the Credit
Agreement not expressly referred to herein and shall not be construed as a
waiver or consent to any further or future action on the part of the Borrower
that would require a waiver or consent of the Banks or the Administrative Agent.
Except as expressly amended herein, the provisions of the Credit Agreement are
and shall remain in full force and effect. Without limiting the foregoing, the
undersigned, J.E. Seagram Corp., a Delaware corporation, as Guarantor under
Section 8.01 (the "Guaranty") of the Credit Agreement, hereby consents to this
Amendment and hereby confirms and agrees that the Guaranty is, and shall
continue to be, in full force and effect and is hereby ratified and confirmed in
all respects.
9. Counterparts. This Amendment may be executed by the parties
hereto in any number of counterparts, and all of such counterparts taken
together shall be deemed to constitute one and the same instrument.
<PAGE> 6
6
10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered in New York, New York by their
proper and duly authorized officers as of the day and year first above written.
JOSEPH E. SEAGRAM & SONS, INC.
By: /s/ Daniel R. Paladino
-------------------------------------
Name: Daniel R. Paladino
Title: Vice President - Legal and
Environmental Affairs,
General Counsel and Secretary
CHEMICAL BANK, as Administrative Agent
and on behalf of each Bank
By: /s/ Carol A. Ulmer
-------------------------------------
Name: Carol A. Ulmer
Title: Vice President
Name of Bank: CHEMICAL BANK
Maximum Commitment By: /s/ Carol A. Ulmer
Amount: $ 150,000,000 -------------------------------------
Name: Carol A. Ulmer
Title: Vice President
Name of Bank: ABN AMRO BANK
Maximum Commitment By: /s/ Frances O'R. Logan
Amount: $ 60,000,000 -------------------------------------
Name: Frances O'R. Logan
Title: Vice President
By: /s/ Margaret P. Hannahoe
-------------------------------------
Name: Margaret P. Hannahoe
Title: Assistant Vice President
<PAGE> 7
7
Name of Bank: BANK OF AMERICA ILLINOIS
Maximum Commitment By: /s/ Ambrish D. Thanawala
Amount: $ 100,000,000 -------------------------------------
Name: Ambrish D. Thanawala
Title: Authorized Officer
Name of Bank: BANK OF MONTREAL
Maximum Commitment By: /s/ Thruston W. Pettus
Amount: $ 150,000,000 -------------------------------------
Name: Thruston W. Pettus
Title: Director
Name of Bank: BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
Maximum Commitment By: /s/ Michael C. Irwin
Amount: $ 75,000,000 -------------------------------------
Name: Michael C. Irwin
Title: Vice President
Name of Bank: BANQUE NATIONALE DE PARIS
Maximum Commitment By: /s/ Richard L. Sted
Amount: $ 100,000,000 -------------------------------------
Name: Richard L. Sted
Title: Senior Vice President
By: /s/ Sophie Revillard Kaufman
-------------------------------------
Name: Sophie Revillard Kaufman
Title: Vice President
Name of Bank: BANQUE PARIBAS
Maximum Commitment By: /s/ Ann C. Pifer
Amount: $ 100,000,000 -------------------------------------
Name: Ann C. Pifer
Title: Vice President
<PAGE> 8
8
By: /s/ John J. McCormick, III
-------------------------------------
Name: John J. McCormick, III
Title: Vice President
Name of Bank: CIBC, INC.
Maximum Commitment By: /s/ J. Domkowski
Amount: $ 100,000,000 -------------------------------------
Name: J. Domkowski
Title: Authorized Signatory
Name of Bank: CITIBANK
Maximum Commitment By: /s/ Andrew R. Sriubas
Amount: $ 150,000,000 -------------------------------------
Name: Andrew R. Sriubas
Title: Attorney-in-Fact
Name of Bank: CREDIT LYONNAIS NEW YORK
BRANCH
Maximum Commitment By: /s/ Mark Campellone
Amount: $ 60,000,000 -------------------------------------
Name: Mark Campellone
Title: Vice President
Name of Bank: CREDIT SUISSE
Maximum Commitment By: /s/ Robert B. Potter
Amount: $ 75,000,000 -------------------------------------
Name: Robert B. Potter
Title: Member of Senior Management
By: /s/ Lynn Allegaert
-------------------------------------
Name: Lynn Allegaert
Title: Member of Senior Management
<PAGE> 9
9
Name of Bank: DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLAND
BRANCHES
Maximum Commitment By: /s/ Stephen A. Wiedemann
Amount: $ 100,000,000 -------------------------------------
Name: Stephen A. Wiedemann
Title: Vice President
By: /s/ Iain Stewart
-------------------------------------
Name: Iain Stewart
Title: Assistant Vice President
Name of Bank: DRESDNER BANK AG NEW YORK
AND GRAND CAYMAN BRANCHES
Maximum Commitment By: /s/ B. Craig Erickson
Amount: $ 100,000,000 -------------------------------------
Name: B. Craig Erickson
Title: Vice President
By: /s/ Lucas Missong
-------------------------------------
Name: Lucas Missong
Title: Assistant Treasurer
Name of Bank: ISTITUTO BANCARIO SAN
PAOLO DI TORINO SpA
Maximum Commitment By: /s/ Wendell Jones
Amount: $ 50,000,000 -------------------------------------
Name: Wendell Jones
Title: Vice President
By: /s/ Robert Wurster
-------------------------------------
Name: Robert Wurster
Title: First Vice President
<PAGE> 10
10
Name of Bank: LLOYDS BANK PLC
Maximum Commitment By: /s/ A. Micklethwaite
Amount: $ 25,000,000 -------------------------------------
Name: A. Micklethwaite
Title: Executive Officer M-141
By: /s/ Stephen J. Attree
-------------------------------------
Name: Stephen J. Attree
Title: Assistant Vice President
Name of Bank: MELLON BANK, N.A.
Maximum Commitment By: /s/ Caroline R. Walsh
Amount: $ 75,000,000 -------------------------------------
Name: Caroline R. Walsh
Title: Assistant Vice President
Name of Bank: MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
Maximum Commitment By: /s/ Diana H. Imhof
Amount: $ 125,000,000 -------------------------------------
Name: Diana H. Imhof
Title: Vice President
Name of Bank: NATIONAL WESTMINSTER BANK
PLC
Maximum Commitment By: /s/ Anne Marie Torre
Amount: $ 75,000,000 -------------------------------------
Name: Anne Marie Torre
Title: Vice President
Name of Bank: NATIONSBANK, N.A.
Maximum Commitment By: /s/ Eileen C. Higgins
Amount: $ 100,000,000 -------------------------------------
Name: Eileen C. Higgins
Title: Vice President
<PAGE> 11
11
Name of Bank: PNC BANK, N.A.
Maximum Commitment By: /s/ Sarah McClintock
Amount: $ 0 -------------------------------------
Name: Sarah McClintock
Title: Vice President
Name of Bank: ROYAL BANK OF CANADA
Maximum Commitment By: /s/ Tom L. Gleason
Amount: $ 100,000,000 -------------------------------------
Name: Tom L. Gleason
Title: Vice President
Name of Bank: SOCIETE GENERALE
Maximum Commitment By: /s/ Bruce Drossman
Amount: $ 60,000,000 -------------------------------------
Name: Bruce Drossman
Title: Vice President
Name of Bank: SWISS BANK CORPORATION NEW
YORK BRANCH
Maximum Commitment By: /s/ Thomas R. Salzano
Amount: $ 0 -------------------------------------
Name: Thomas R. Salzano
Title: Associate Director, Banking
Finance Support, N.A.
By: /s/ James J. Diaz
-------------------------------------
Name: James J. Diaz
Title: Director Banking Finance
Support, N.A.
Name of Bank: THE BANK OF NEW YORK
Maximum Commitment By: /s/ Eliza S. Adams
Amount: $ 75,000,000 -------------------------------------
Name: Eliza S. Adams
Title: Vice President
<PAGE> 12
12
Name of Bank: THE BANK OF NOVA SCOTIA
Maximum Commitment By: /s/ Terry K. Fryett
Amount: $ 25,000,000 -------------------------------------
Name: Terry K. Fryett
Title: Senior Relationship Manager
Name of Bank: THE FIRST NATIONAL BANK OF
BOSTON
Maximum Commitment By: /s/ William F. Hamilton
Amount: $ 35,000,000 -------------------------------------
Name: William F. Hamilton
Title: Director
Name of Bank: THE FIRST NATIONAL BANK OF
CHICAGO
Maximum Commitment By: /s/ Stephen E. McDonald
Amount: $ 35,000,000 -------------------------------------
Name: Stephen E. McDonald
Title: First Vice President
Name of Bank: THE FUJI BANK, LIMITED
Maximum Commitment By: /s/ Gina M. Kearns
Amount: $ 75,000,000 -------------------------------------
Name: Gina M. Kearns
Title: Vice President
Name of Bank: THE INDUSTRIAL BANK OF
JAPAN TRUST COMPANY JAPAN
Maximum Commitment By: /s/ J. Kenneth Biegen
Amount: $ 75,000,000 -------------------------------------
Name: J. Kenneth Biegen
Title: Senior Vice President
<PAGE> 13
13
Name of Bank: THE ROYAL BANK OF
SCOTLAND PLC
Maximum Commitment By: /s/ D. Dougan
Amount: $ 35,000,000 -------------------------------------
Name: D. Dougan
Title: Vice President
Name of Bank: THE SAKURA BANK, LIMITED
Maximum Commitment By: /s/ Yasuhiro Terada
Amount: $ 75,000,000 -------------------------------------
Name: Yasuhiro Terada
Title: Senior Vice President
Name of Bank: THE SANWA BANK, LIMITED
Maximum Commitment By: /s/ Dominic J. Sorresso
Amount: $ 75,000,000 -------------------------------------
Name: Dominic J. Sorresso
Title: Vice President
Name of Bank: THE SUMITOMO BANK, LIMITED
Maximum Commitment By: /s/ Yoshinori Kawamura
Amount: $ 75,000,000 -------------------------------------
Name: Yoshinori Kawamura
Title: Joint General Manager
Name of Bank: THE TORONTO-DOMINION BANK
Maximum Commitment By: /s/ Jorge A. Garcia
Amount: $ 75,000,000 -------------------------------------
Name: Jorge A. Garcia
Title: Manager - Credit
Administration
<PAGE> 14
14
Name of Bank: WELLS FARGO BANK, N.A.
Maximum Commitment By: /s/ Peter G. Olson
Amount: $ 35,000,000 -------------------------------------
Name: Peter G. Olson
Title: Senior Vice President
ACKNOWLEDGED AND AGREED
as of the date first set forth above :
- -----------------------------------------
J.E. SEAGRAM CORP.
By: /s/ Jeananne K. Hauswald
-----------------------------------------------
Name: Jeananne K. Hauswald
Title: Vice President and Treasurer
<PAGE> 1
Exhibit 10(f)
FIRST AMENDMENT
FIRST AMENDMENT, dated as of June 14, 1996 (this "Amendment"),
to the 5-Year Credit Agreement, dated as of December 21, 1994 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among The Seagram Company Ltd. (the "Borrower"), the financial institutions from
time to time parties thereto (the "Banks") and Bank of Montreal, as
administrative agent (in such capacity, the "Administrative Agent") for the
Banks.
W I T N E S S E T H :
WHEREAS, the Borrower, the Banks and the Administrative Agent
are parties to the Credit Agreement;
WHEREAS, the Borrower has requested that the Banks amend
certain provisions of the Credit Agreement, as more fully described herein;
WHEREAS, the Banks are willing to amend such provisions of the
Credit Agreement only upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises, the parties
hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized
terms which are defined in the Credit Agreement are used herein as therein
defined.
2. Amendment of Section 1.01. Section 1.01 of the Credit
Agreement hereby is amended by:
(a) deleting therefrom in their entireties the definitions of the terms
"Applicable Margin," "Applicable Utilization Fee Rate" and "Facility
Fee";
(b) inserting therein, in proper alphabetical order, the following new
defined terms:
"Applicable Margin" means, for each day during the
Interest Period for each Eurodollar Rate Advance, the rate of
interest per annum (expressed in basis points, i.e., 1/100 of
1%) set forth in Column B below opposite the category in
Column A below which describes the Applicable Public Debt
Rating in effect on such day:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Column A Column B
-------- --------
-----------------------------------------------------------------
<S> <C>
Level 1 12.50
-----------------------------------------------------------------
Level 2 15.00
-----------------------------------------------------------------
Level 3 20.00
-----------------------------------------------------------------
</TABLE>
<PAGE> 2
2
<TABLE>
<S> <C>
-----------------------------------------------------------------
Level 4 25.00
-----------------------------------------------------------------
Level 5 42.50
-----------------------------------------------------------------
</TABLE>
"Applicable Utilization Fee Rate" means, for each
day, the rate of interest per annum (expressed in basis
points, i.e., 1/100 of 1%) set forth in Column B below
opposite the category in Column A below which describes the
Applicable Public Debt Rating in effect on such day:
<TABLE>
<CAPTION>
-------------------------------------------------
Column A Column B
-------------------------------------------------
<S> <C>
Level 1 0.00
-------------------------------------------------
Level 2 0.00
-------------------------------------------------
Level 3 0.00
-------------------------------------------------
Level 4 7.50
-------------------------------------------------
Level 5 7.50
-------------------------------------------------
</TABLE>
"Facility Fee" means, for each day, the rate per
annum (expressed in basis points, i.e., 1/100 of 1%) set forth
in Column B below opposite the category in Column A below
which describes the Applicable Public Debt Rating in effect on
such day:
<TABLE>
<CAPTION>
-------------------------------------------------
Column A Column B
-------------------------------------------------
<S> <C>
Level 1 7.00
-------------------------------------------------
Level 2 7.50
-------------------------------------------------
Level 3 10.00
-------------------------------------------------
Level 4 12.50
-------------------------------------------------
Level 5 20.00
-------------------------------------------------
</TABLE>
3. Amendment of Signature Pages. (a) Each Bank hereby agrees
that the aggregate amount of the Commitments shall be increased to
$1,100,000,000 and hereby agrees to provide a Commitment (as defined in the
Credit Agreement) under the Credit Agreement in an amount up to the amount set
forth opposite the signature of such Bank hereto; provided that any Bank which
agrees to provide a Commitment (i.e., inserts an amount greater than $0) shall
provide a Commitment of not less than $20,000,000.
<PAGE> 3
3
(b) Each Bank hereby agrees that, simultaneously with the
effectiveness of this Amendment, the Administrative Agent and the Borrower shall
(in their sole discretion) reallocate the Commitments of the Banks such that the
aggregate amount of the Commitments under the Credit Agreement shall be
increased to $1,100,000,000. Notwithstanding the provisions of Section 9.06 of
the Credit Agreement (which provisions hereby are waived to the extent necessary
to permit such re-allocation and assignment), such re-allocation shall be deemed
to be an assignment of the relevant portions of the Commitments of the Banks
affected thereby on the Effective Date of this Amendment. Following the
Effective Date hereof, (i) the Administrative Agent shall distribute to each
Bank a schedule reflecting the new allocation of Commitments and (ii) the
Commitment set forth for each Bank on its signature page to the Credit Agreement
shall be deemed to have been amended (without any notice to or consent of the
Borrower, any Bank or any other Person) to reflect the allocation set forth for
such Bank in new schedule (with any Bank which has no allocation after the
Effective Date then ceasing to be a "Bank" under the Credit Agreement).
(c) Notwithstanding anything to the contrary contained herein,
the Commitment of each Bank (after giving effect to such re-allocation) shall
not be greater than the amount set forth opposite its signature hereto and shall
not be less than the lesser of (i) the amount set forth opposite its signature
hereto and (ii) the aggregate amount of such Bank's Commitments under (and as
defined in) the Credit Agreement and the 364-Day Credit Agreement immediately
prior to the effectiveness of such re-allocation.
4. Extension of Termination Date. Notwithstanding anything to
the contrary contained in the Credit Agreement, the Termination Date presently
in effect shall be extended to the date which is the fifth anniversary of the
Effective Date (as hereinafter defined), such that (unless terminated pursuant
to Section 2.05 or 6.01 of the Credit Agreement) the "Termination Date" for each
Bank shall occur the later of the fifth anniversary of the Effective Date or the
date to which the Commitment of such Bank is extended pursuant to Section 9.16
of the Credit Agreement.
5. Termination of 364-Day Credit Agreement. By its execution
and delivery hereof, the Borrower hereby terminates the Commitments under (and
as defined in) the 364-Day Credit Agreement. Each Bank hereby agrees to waive
the provisions of Section 2.05 of the 364-Day Credit Agreement to the extent and
only to the extent necessary to permit such termination to become effective on
the Effective Date of this Amendment. Notwithstanding anything to the contrary
contained herein or in the 364-Day Credit Agreement, any interest, fees and
other amounts (other than principal) owing on account of the 364-Day Credit
Agreement on such date of termination shall be due and payable on June 30, 1996
(or such later date upon which the 364-Day Credit Agreement shall terminate).
6. Representations and Warranties. The Borrower hereby
confirms, reaffirms and restates the representations and warranties made by it
which are set forth in Article IV of the Credit Agreement, provided that each
reference to the Credit Agreement therein shall be deemed to be a reference to
the Credit Agreement after giving effect to this Amendment. The Borrower
represents and warrants that no Default or Event of Default has occurred and is
continuing.
<PAGE> 4
4
7. Effectiveness. This Amendment shall become effective (the
date of such effectiveness being the "Effective Date") upon receipt by the
Administrative Agent of the following:
(i) counterparts hereof, duly executed and delivered by the
Borrower and by each Bank;
(ii) certified copies of the resolutions of the Board of
Directors of the Borrower approving the Credit Agreement, as amended by
this Amendment, the Notes and all documents evidencing other necessary
corporate action and governmental authorizations and approvals, if any,
required in connection with the execution, delivery and performance of
this Amendment and the Notes by the Borrower;
(iii) a signed copy of a certificate of the Secretary or an
Assistant Secretary or other appropriate officer of the Borrower
certifying the names and true signatures of the officers of the
Borrower authorized to sign this Amendment, the Notes and the other
documents or certificates to be delivered pursuant to this Amendment.
The Administrative Agent and the Banks each may conclusively rely on
such certificate until it shall receive a further certificate of the
Secretary or an Assistant Secretary of the Borrower cancelling or
amending the prior certificate of the Borrower and submitting the
signatures of the officers named in such further certificate;
(iv) A favorable opinion of Phillips & Vineberg, Quebec
counsel for the Borrower, referencing the Credit Agreement, as amended
by this Amendment, in form and substance reasonably satisfactory to the
Administrative Agent, which opinion the Borrower hereby instructs such
counsel to prepare and deliver;
(v) A favorable opinion of Stikeman, Elliott, special counsel
for the Administrative Agent and the Banks, referencing the Credit
Agreement, as amended by this Amendment, in form and substance
reasonably satisfactory to the Administrative Agent.
Notwithstanding anything to the contrary contained in the Credit Agreement, each
of the Applicable Margin, Applicable Utilization Fee and Facility Fee shall
accrue for each day from and after the Effective Date at the rates set forth
herein.
8. Continuing Effect of Credit Agreement. This Amendment shall
not constitute a waiver or amendment of any other provision of the Credit
Agreement not expressly referred to herein and shall not be construed as a
waiver or consent to any further or future action on the part of the Borrower
that would require a waiver or consent of the Banks or the Administrative Agent.
Except as expressly amended herein, the provisions of the Credit Agreement are
and shall remain in full force and effect.
9. Counterparts. This Amendment may be executed by the parties
hereto in any number of counterparts, and all of such counterparts taken
together shall be deemed to constitute one and the same instrument.
<PAGE> 5
5
10. GOVERNING LAW; LANGUAGE. (a) THIS AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
PROVINCE OF QUEBEC AND THE FEDERAL LAWS OF CANADA APPLICABLE THEREIN.
(b) The parties confirm their desire that this Amendment,
together with all other documents, including notices, with respect thereto be
written in the English language. Les parties aux presentes confirment leur
volonte expresse que cette convention de meme que tous les documents, y compris
tout avis, s'y rattachant, soient rediges in anglais.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered in New York, New York by their
proper and duly authorized officers as of the day and year first above written.
THE SEAGRAM COMPANY LTD.
By: /s/ Daniel R. Paladino
-------------------------------------
Name: Daniel R. Paladino
Title: Vice President - Legal and
Environmental Affairs
By: /s/ Jeananne K. Hauswald
-------------------------------------
Name: Jeananne K. Hauswald
Title: Vice President and
Treasurer
BANK OF MONTREAL, as Administrative
Agent
By: /s/ Lester Fernandes
-------------------------------------
Name: Lester Fernandes
Title: Managing Director
Name of Bank: BANK OF MONTREAL
Maximum Commitment By: /s/ Lester Fernandes
Amount: $ 150,000,000 -------------------------------------
Name: Lester Fernandes
Title: Managing Director
<PAGE> 6
6
Name of Bank: J.P. MORGAN CANADA
Maximum Commitment By: /s/ A. Shelton
Amount: $ 25,000,000 -------------------------------------
Name: A. Shelton
Title: President
Name of Bank: SOCIETE GENERALE (CANADA)
Maximum Commitment By: /s/ Rene Douville
Amount: $ 20,000,000 -------------------------------------
Name: Rene Douville
Title: Senior Manager, Corporate
Banking
Name of Bank: IBJ (CANADA)
Maximum Commitment By: /s/ T. Irie
Amount: $ 20,000,000 -------------------------------------
Name: T. Irie
Title: Senior Vice President
Name of Bank: CREDIT LYONNAIS (CANADA)
Maximum Commitment By: /s/ Cynthia Hansen
Amount: $ 20,000,000 -------------------------------------
Name: Cynthia Hansen
Title: Manager
By: /s/ Daniel Arponi
-------------------------------------
Name: Daniel Arponi
Title: Vice President
Name of Bank: BANQUE PARIBAS
Maximum Commitment By: /s/ Ann C. Pifer
Amount: $ 25,000,000 -------------------------------------
Name: Ann C. Pifer
Title: Vice President
By: /s/ John J. McCormick, III
-------------------------------------
Name: John J. McCormick, III
Title: Vice President
<PAGE> 7
7
Name of Bank: ABN AMRO BANK N.V. (GRAND
CAYMAN)
Maximum Commitment By: /s/ Charles Marien
Amount: $ 20,000,000 -------------------------------------
Name: Charles Marien
Title: Vice President
By: /s/ R. Dupuis
-------------------------------------
Name: R. Dupuis
Title: Vice President
Name of Bank: THE SUMITOMO BANK OF
CANADA
Maximum Commitment By: /s/ Koichi Sasa
Amount: $ 30,000,000 -------------------------------------
Name: Koichi Sasa
Title: Senior Vice President
By: /s/ Alfred Lee
-------------------------------------
Name: Alfred Lee
Title: Vice President
Name of Bank: SANWA BANK CANADA
Maximum Commitment By: /s/ Shigeki Iwashita
Amount: $ 30,000,000 -------------------------------------
Name: Shigeki Iwashita
Title: Vice President, Corporate
Banking
Name of Bank: SAKURA BANK (CANADA)
Maximum Commitment By: Elwood Langley
Amount: $ 30,000,000 -------------------------------------
Name: Elwood Langley
Title: Vice President
<PAGE> 8
8
Name of Bank: NATIONAL WESTMINSTER BANK
OF CANADA
Maximum Commitment By: /s/ N.L. Stride
Amount: $ 50,000,000 -------------------------------------
Name: N.L. Stride
Title: Vice President
Name of Bank: MELLON BANK CANADA
Maximum Commitment By: /s/ Wendy B.H. Bocti
Amount: $ 50,000,000 -------------------------------------
Name: Wendy B.H. Bocti
Title: Vice President
Name of Bank: FUJI BANK CANADA
Maximum Commitment By: /s/ Francois Bienvenue
Amount: $ 30,000,000 -------------------------------------
Name: Francois Bienvenue
Title: Assistant Vice President
Name of Bank: DEUTSCHE BANK CANADA
Maximum Commitment By: /s/ Quentin Broad
Amount: $ 50,000,000 -------------------------------------
Name: Quentin Broad
Title: Vice President
By: /s/ R. Rod O'Hara
-------------------------------------
Name: R. Rod O'Hara
Title: Assistant Vice President
<PAGE> 9
9
Name of Bank: BANK OF TOKYO-MITSUBISHI
(CANADA)
Maximum Commitment By: /s/ Keiichiro Hida
Amount: $ 50,000,000 -------------------------------------
Name: Keiichiro Hida
Title: Executive Vice President
By: /s/ Amos W. Simpson
-------------------------------------
Name: Amos W. Simpson
Title: Vice President & General
Manager
Name of Bank: BANQUE NATIONALE DE PARIS
(CANADA)
Maximum Commitment By: /s/ Frank L. Shaw
Amount: $ 50,000,000 -------------------------------------
Name: Frank L. Shaw
Title: Vice President, Corporate
Banking
By: /s/ Chantal Debailleul
-------------------------------------
Name: Chantal Debailleul
Title: Vice President, Corporate
Banking
Name of Bank: CITIBANK CANADA
Maximum Commitment By: /s/ David Wingfelder
Amount: $ 75,000,000 -------------------------------------
Name: David Wingfelder
Title: Vice President
Name of Bank: CHEMICAL BANK OF CANADA
Maximum Commitment By: /s/ Owen G. Roberts
Amount: $ 75,000,000 -------------------------------------
Name: Owen G. Roberts
Title: Vice President
<PAGE> 10
10
Name of Bank: BANK OF AMERICA CANADA
Maximum Commitment By: /s/ Gilles De Montigny
Amount: $ 75,000,000 -------------------------------------
Name: Gilles De Montigny
Title: Vice President
Name of Bank: ROYAL BANK OF CANADA
*Maximum Commitment By: /s/ Nick Avgoustakis
Amount: $ 150,000,000 -------------------------------------
Name: Nick Avgoustakis
Title: Senior Manager
Name of Bank: THE TORONTO-DOMINION BANK
Maximum Commitment By: /s/ Jorge A. Garcia
Amount: $ 150,000,000 -------------------------------------
Name: Jorge A. Garcia
Title: Manager-Credit
Administration
Name of Bank: CANADIAN IMPERIAL BANK OF
COMMERCE
Maximum Commitment By: /s/ B.R. Storelli
Amount: $ 150,000,000 -------------------------------------
Name: B.R. Storelli
Title: Director
Name of Bank: BANK OF NOVA SCOTIA
Maximum Commitment By: /s/ David M. Torrey
Amount: $ 100,000,000 -------------------------------------
Name: David M. Torrey
Title: Relationship Manager
<PAGE> 1
EXHIBIT 10(m)
THE SEAGRAM COMPANY LTD.
1996 STOCK INCENTIVE PLAN
ARTICLE I
PURPOSE
The purpose of The Seagram Company Ltd. 1996 Stock Incentive Plan is to
provide selected key employees of The Seagram Company Ltd. and its subsidiaries
an opportunity to benefit from the appreciation in the value of the common
shares of The Seagram Company Ltd., thus providing an increased incentive for
such employees to contribute to the future success and prosperity of The Seagram
Company Ltd., enhancing the value of the common shares for the benefit of the
shareholders and increasing the ability of The Seagram Company Ltd. and its
subsidiaries to attract and retain individuals of exceptional skill.
ARTICLE II
DEFINITIONS
The following capitalized terms used in the Plan have the respective
meanings set forth in this Article:
2.1 Act: The United States Securities Exchange Act of 1934, as amended.
2.2 Affiliate: A person or entity controlling, controlled by, or under
common control with, The Seagram Company Ltd.
2.3 Approval Date: The later of the date of approval of the Plan (a) by
the shareholders of The Seagram Company Ltd. and (b) by the applicable
regulatory authorities and stock exchanges, each as contemplated by
Article XVIII of the Plan.
2.4 Award: An Option, Stock Appreciation Right or other award granted
under the Plan.
2.5 Board: The Board of Directors of The Seagram Company Ltd.
2.6 Code: The United States Internal Revenue Code of 1986, as amended.
2.7 Committee: The Seagram Company Ltd. Human Resources Committee or
such other persons designated by the Board.
2.8 Common Shares: The common shares without nominal or par value of
The Seagram Company Ltd.
2.9 Company: The Seagram Company Ltd., any of its Subsidiaries or any
other Affiliate designated by the Board.
2.10 Disability: Inability to engage in any substantial gainful activity
by reason of a medically determinable physical or mental impairment
which constitutes a permanent and total disability, as defined in
Section 22(e)(3) of the Code. The determination whether a Participant
has suffered a Disability shall be made by the Committee based upon
such evidence as it deems necessary and appropriate.
2.11 Disinterested Persons: Members of the Board who are not full time
employees of the Company and who are eligible to serve as Plan
administrators or to approve Awards under the provisions of Rule 16b-3
promulgated under the Act. The preceding sentence shall have no effect
if any specification of such persons is eliminated from the rules
promulgated under Section 16 of the Act. This Section 2.11 shall apply
only to the Plan and not to any other employee benefit plan of the
Company.
2.12 Employer: The Company that employs the employee or Participant.
2.13 Fair Market Value: The mean between high and low prices of the
Common Shares as reported on the composite tape for securities traded
on the New York Stock Exchange (or, if such exchange is not open on
such date, the immediately preceding date on which such exchange is
open), or, if the Common Shares are not so listed or traded, the mean
between high and low prices of the Common Shares as reported on the
principal United States national securities exchange on which such
shares are listed or admitted to trading (or, if such exchange is not
open on such date, the immediately preceding date on which such
exchange is open), or, if the Common Shares are not so listed or
traded, the mean
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between the closing bid price and the closing asked price as quoted on
the National Association of Securities Dealers Automated Quotation
System, or such other market in which such prices are regularly quoted,
or, if there have been no published bid or asked quotations with
respect to the Common Shares, the Fair Market Value shall be the value
established by the Committee in good faith and, in the case of an ISO,
in accordance with Section 422 of the Code.
2.14 ISO: An incentive stock option within the meaning of Section 422 of
the Code.
2.15 Non-ISO: A stock option that is not an ISO.
2.16 Option: A stock option (whether ISO or Non-ISO) granted under the
Plan.
2.17 Option Price: The purchase price of one Common Share under an
Option.
2.18 Participant: A key employee of the Company who has been selected by
the Committee to receive an Award under the Plan.
2.19 Parent Corporation: A parent corporation, as defined in Section
424(e) of the Code.
2.20 Plan: The Seagram Company Ltd. 1996 Stock Incentive Plan, as from
time to time amended.
2.21 Retirement: Separation from service with the Company on or after
attainment of age 65 or, with the prior written consent of the Company,
retirement at an earlier age.
2.22 Stock Appreciation Right: A stock appreciation right granted under
the Plan.
2.23 Subsidiary: A subsidiary corporation, as defined in Section 424(f)
of the Code.
2.24 Termination Date: With respect to each Award, a date fixed by the
Committee; provided that with respect to an Option, such date shall not
be later than the day preceding the tenth anniversary of its date of
grant.
2.25 Termination For Cause: A Participant's termination of employment
with the Company due to insubordination, willful misconduct, willful
failure to implement corrective actions, misappropriation of any funds
or property of the Company, unreasonable neglect or refusal to perform
duties assigned during employment or the conviction of a felony.
ARTICLE III
ADMINISTRATION
3.1 Except as otherwise provided in the Plan, the Committee (or any
subcommittee thereof) shall administer the Plan and shall have full power to
grant Awards, construe and interpret the Plan, establish and amend rules and
regulations for its administration, and perform all other acts relating to the
Plan, including the delegation of administrative responsibilities, that it
believes reasonable and proper.
3.2 The Committee shall consist of not less than three persons, (a) all of
whom shall be (i) Disinterested Persons or (ii) if applicable, "non-employee
directors" as defined in the rules promulgated under Section 16 of the Act and
(b) at least two of whom shall be "outside directors" as defined in Section
162(m) of the Code and the regulations promulgated thereunder.
3.3 Subject to the provisions of the Plan, the Committee (or any
Subcommittee thereof) or the Board shall, in its discretion, determine which
employees shall be granted Awards and the terms and conditions of Awards.
3.4 Any decision made, or action taken, by the Committee, any Subcommittee
thereof or the Board arising out of or in connection with the interpretation and
administration of the Plan shall be final and conclusive.
ARTICLE IV
LIMITATIONS ON THE AMOUNT OF AWARD GRANTS
4.1 Common Shares Subject to the Plan: The total number of Common Shares
upon which Awards may be based shall be 20,000,000, subject to adjustment in
accordance with Article XIV of the Plan. These Common Shares shall be authorized
but unissued Common Shares. For purposes of this Section, a Stock Appreciation
Right granted pursuant to clause (b) of Section 7.1 shall not be deemed to be an
Award separate from the Option, or portion thereof, to which it relates. For
purposes of this Section, an Option, or portion thereof, exercised through the
exercise of such a Stock Appreciation Right shall be treated, to the extent
settled in Common Shares, as though
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the Option, or portion thereof, had been exercised through the purchase of
Common Shares, with the result that the Common Shares subject to the Option, or
portion thereof, that was so exercised shall not be available for future grants
of Awards.
4.2 Common Shares to be Granted to a Participant: During the period from
the Approval Date through the sixth anniversary of the Approval Date, the total
number of Common Shares available for grants to any one Participant of (a)
Awards under the Plan and (b) awards under any other plan of the Company which
provides for the grant of Common Shares shall not exceed 5% of the then
outstanding Common Shares on the date when the Plan is adopted by the Board.
4.3 Cash-Only Awards: With respect to any fiscal year of the Company, the
aggregate value (as determined by the Committee) of Awards granted which are
exercisable solely for cash, or which upon maturity are payable solely in cash,
shall not exceed the aggregate salaries paid or accrued with respect to such
fiscal year to all Participants who receive grants of any Awards with respect to
such fiscal year; provided, however, that any such Award which may be redeemed
or exercised only upon a fixed date or dates at least six months after grant, or
incident to death, Retirement, Disability or cessation of employment shall not
be included in the foregoing calculation of the aggregate value of Awards
granted with respect to any fiscal year. This Section 4.3 (or any part thereof)
shall be effective only to the extent that it is required under the rules
promulgated under Section 16 of the Act or any other law, rule or regulation
applicable to the Company.
ARTICLE V
ELIGIBILITY
5.1 Awards may be granted to selected key employees of the Company.
ARTICLE VI
TERMS OF OPTIONS
6.1 Option Price: Except as provided in Section 6.3 of the Plan, the
Option Price shall be no less than the Fair Market Value of a Common Share on
the date the Option is granted, but in no event shall the Option Price be less
than that permitted by applicable laws, rules, by-laws or policies of regulatory
authorities or stock exchanges.
6.2 Period of Exercise: The Committee shall determine the dates after
which Options may be exercised in whole or in part; provided, however, that an
Option shall not be exercised prior to the Approval Date nor later than its
Termination Date. The Committee may amend an Option to accelerate the date after
which such Option may be exercised in whole or in part, provided that the
Company has obtained all applicable approvals, if any, of regulatory authorities
and stock exchanges. An Option which has not been exercised on or prior to its
Termination Date shall be cancelled.
6.3 Special Rules Regarding ISOs Granted to Certain
Employees: Notwithstanding any contrary provisions of Sections 6.1 and 6.2 of
the Plan, no ISO shall be granted to any employee who, at the time the Option is
granted, owns (directly or within the meaning of Section 424(d) of the Code)
more than ten percent of the total combined voting power of all classes of stock
of the Employer or of any Subsidiary or Parent Corporation thereof, unless (a)
the Option Price under such Option is at least 110% of the Fair Market Value of
a Common Share on the date the Option is granted and (b) the Termination Date of
such Option is a date not later than the day preceding the fifth anniversary of
the date on which the Option is granted.
6.4 Manner of Exercise and Payment: Subject to Section 6.2 of the Plan, an
Option, or portion thereof, shall be exercised by delivery of a written notice
of exercise to the Company and payment of the full price of the Common Shares
being purchased pursuant to the Option. A Participant or his or her legal
representative may exercise an Option with respect to less than the full number
of Common Shares for which the Option may then be exercised, but a Participant
must exercise the Option in full Common Shares. The price of Common Shares
purchased pursuant to an Option, or portion thereof, may be paid:
a) in United States dollars in cash or by check, bank draft or money
order payable to the order of the Company;
b) through the delivery of Common Shares with an aggregate Fair Market
Value on the date of exercise equal to the Option Price;
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c) with the consent of the Committee, through the withholding of Common
Shares issuable upon exercise with an aggregate Fair Market Value on the
date of exercise equal to the Option Price;
d) through the delivery of irrevocable instructions to a broker to
deliver promptly to the Company an amount equal to the Option Price; or
e) by any combination of the above methods of payment;
provided, however, that the Company shall not be obligated to purchase or accept
the surrender in payment of any such Common Shares if any such action would be
prohibited by the applicable laws governing the Company or the Committee shall
determine that such action is not in the best interests of the Company. The
Committee shall determine acceptable methods for providing notice of exercise,
for tendering Common Shares or for delivering irrevocable instructions to a
broker and may impose such limitations and prohibitions on the use of Common
Shares or irrevocable instructions to a broker to exercise an Option as it deems
appropriate.
6.5 Notification of Sales of Common Shares: Any Participant who disposes
of Common Shares acquired upon the exercise of an ISO either (a) within two
years after the date of the grant of the ISO under which the Common Shares were
acquired or (b) within one year after the transfer of such Common Shares to the
Participant, shall notify the Company of such disposition and of the amount
realized upon such disposition.
ARTICLE VII
TERMS OF STOCK APPRECIATION RIGHTS
7.1 Grants of Stock Appreciation Rights: A Stock Appreciation Right may be
granted (a) independent of an Option or (b) in conjunction with an Option, or
portion thereof. A Stock Appreciation Right granted pursuant to clause (b) of
the preceding sentence may be granted at the time the related Option is granted
or at any time prior to the exercise or cancellation of the related Option.
7.2 Exercise Price: The exercise price per Common Share of a Stock
Appreciation Right shall be an amount determined by the Committee but in no
event shall such amount be less than the greater of (a) the Fair Market Value of
a Common Share on the date the Stock Appreciation Right is granted or, in the
case of a Stock Appreciation Right granted in conjunction with an Option, or
portion thereof, the Option Price of the related Option and (b) an amount
permitted by applicable laws, rules, by-laws or policies of regulatory
authorities or stock exchanges.
7.3 Period of Exercise: The Committee shall determine the dates after
which Stock Appreciation Rights may be exercised in whole or in part; provided,
however, that a Stock Appreciation Right shall not be exercised prior to the
Approval Date nor later than its Termination Date. The Committee may amend a
Stock Appreciation Right to accelerate the date after which it may be exercised
in whole or in part, provided that the Company has obtained all applicable
approvals, if any, of regulatory authorities and stock exchanges. A Stock
Appreciation Right which has not been exercised on or prior to its Termination
Date shall be cancelled. A Stock Appreciation Right granted in conjunction with
an Option, or portion thereof, shall not be exercised unless such Option, or
portion thereof, is otherwise exercisable, and such a Stock Appreciation Right
shall be cancelled to the extent the Option to which it relates has been
exercised, or has expired, been terminated or been cancelled for any reason.
7.4 Exercise of Stock Appreciation Rights: A Stock Appreciation Right,
or portion thereof, shall be exercised in accordance with such procedures as may
be established by the Committee. Upon the exercise of a Stock Appreciation
Right, the Participant or his or her legal representative shall be entitled to
receive from the Company with respect to each Common Share to which such Stock
Appreciation Right relates an amount equal to the excess of (a) the Fair Market
Value of a Common Share on the date of exercise over (b) the exercise price of
the Stock Appreciation Right. Such amount shall be paid in cash and/or Common
Shares at the discretion of the Committee. The number of Common Shares, if any,
issued as a result of the exercise of a Stock Appreciation Right shall be based
on the Fair Market Value of such Common Shares on the date of exercise. Upon the
exercise of a Stock Appreciation Right, or portion thereof, granted in
conjunction with an Option, or portion thereof, the Option, or portion thereof,
to which such Stock Appreciation Right relates shall be deemed in the case of a
cash payment to have been cancelled and in the case of a payment in Common
Shares to have been exercised.
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ARTICLE VIII
OTHER SHARE-BASED AWARDS
8.1 Other Awards of Common Shares and Awards that are valued in whole or
in part by reference to, or are otherwise based on the Fair Market Value of,
Common Shares may be granted under the Plan in the discretion of the Committee.
Such Awards shall be in such form, and dependent on such conditions, as the
Committee shall determine, including, without limitation, the right to receive
one or more Common Shares, or the equivalent cash value of such Common Shares,
upon the completion of a specified period of service, the occurrence of an event
and/or the attainment of performance objectives. Such Awards may be granted
alone or in addition to any other Awards granted under the Plan. Subject to the
provisions of the Plan, the Committee shall determine to whom and when such
Awards will be made, the number of Common Shares to be awarded under (or
otherwise related to) such Awards, whether such Awards shall be settled in cash,
Common Shares or a combination of cash and Common Shares, and all other terms
and conditions of such Awards. Notwithstanding the foregoing, certain Awards
granted under this Section 8.1 of the Plan may be granted in a manner which is
deductible by the Company under Section 162(m) of the Code. Such Awards (the
"Performance-Based Awards") shall be based upon stock price, market share,
sales, earnings per share, return on equity or costs.
ARTICLE IX
DIVIDEND EQUIVALENTS
9.1 At or after the grant of an Award, the Committee, in its discretion,
may provide the Participant with dividend equivalents with respect to such
Award.
ARTICLE X
AWARD AGREEMENTS
10.1 All Awards shall be evidenced by written agreements executed by the
Company and the Participant. Such agreements shall be subject to the applicable
provisions of the Plan, and shall contain such provisions as are required by the
Plan and any other provisions the Committee may prescribe; provided that with
respect to Options, those Options that are intended to be ISOs shall be so
designated and all other Options shall be designated Non-ISOs. Notwithstanding
Section 2.13, an Award agreement may provide that Fair Market Value shall be
determined based on the monetary currency of a Participant's country of
residence. Notwithstanding Section 6.4, an Award agreement may require that
payment of the Option Price shall be made in such currency and may otherwise
restrict the manner of exercise and payment of an Option.
ARTICLE XI
NONTRANSFERABILITY OF AWARDS
11.1 Each Award shall, during the Participant's lifetime, be exercisable
only by the Participant, and neither it nor any right hereunder shall be
transferable otherwise than by will, the laws of descent and distribution or be
subject to attachment, execution or other similar process; provided, however,
that to the extent permitted by applicable law, with respect to any Award, a
Participant may designate a beneficiary pursuant to procedures which may be
established by the Committee. In the event of any attempt by the Participant to
alienate, assign, pledge, hypothecate or otherwise dispose of an Award or of any
right hereunder, except as provided for herein, or in the event of any levy or
any attachment, execution or similar process upon the rights or interest hereby
conferred, the Company may terminate the Award by notice to the Participant and
the Award shall thereupon be cancelled. This Section 11.1 (or any part thereof)
may be altered by the Committee to the extent that it is no longer required
under the rules promulgated under Section 16 of the Act or any other law, rule
or regulation applicable to the Company.
ARTICLE XII
CESSATION OF EMPLOYMENT OF PARTICIPANT
12.1 Cessation of Employment other than by Reason of Retirement,
Disability, Death or Termination For Cause: If a Participant shall cease to be
employed by the Company other than by reason of Retirement, Disability, death or
Termination For Cause, each Award held by the Participant shall be cancelled to
the extent not previously exercised and all rights hereunder shall terminate at
the end of the three-month period commencing on the last day of the month in
which the cessation of employment occurred.
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12.2 Cessation of Employment by Reason of Termination For Cause: If a
Participant shall cease to be employed by the Company by reason of Termination
For Cause, each Award held by the Participant shall be cancelled to the extent
not previously exercised and all rights hereunder shall terminate on the date of
cessation of employment.
12.3 Cessation of Employment by Reason of Retirement or Disability: If a
Participant shall cease to be employed by the Company by reason of Retirement or
Disability, each Award held by the Participant shall be exercisable until the
Termination Date set forth in the Award. Notwithstanding the foregoing, an Award
shall be cancelled if after Retirement, in the sole determination of the
Committee, the Participant (i) engages in activity which is competitive with
that of the Company or its Affiliates or (ii) at any time, divulges to any
person or entity (other than the Company or any of its Affiliates) any of the
trade secrets, methods, processes or other proprietary or confidential
information of the Company or any of its Affiliates.
12.4 Cessation of Employment by Reason of Death: If a Participant shall
die while employed by the Company, or at any time after cessation of employment
by reason of Retirement or Disability, an Award may be exercised at any time or
from time to time prior to the Termination Date set forth in the Award, by the
person or persons to whom the Participant's rights under each Award shall pass
by will or by the applicable laws of descent and distribution. Any person or
persons to whom a Participant's rights under an Award have passed by will or by
the applicable laws of descent and distribution shall be subject to all terms
and conditions of the Plan and the Award applicable to the Participant.
ARTICLE XIII
WITHHOLDING TAXES
13.1 The Company may, in its discretion, require a Participant to pay to
the Company the amount, or make other arrangements (including, without
limitation, the withholding of Common Shares which would otherwise be delivered
as part of or upon exercise of an Award), at the time of exercise or thereafter,
that the Company deems necessary to satisfy its obligation to withhold federal,
provincial, state or local income or other taxes.
ARTICLE XIV
ADJUSTMENTS
14.1 If (a) the Company shall at any time be involved in a transaction to
which Section 424(a) of the Code is applicable, (b) the Company shall declare a
dividend payable in, or shall subdivide or combine, its Common Shares or (c) any
other event shall occur which in the judgment of the Committee necessitates
action by way of adjusting the terms of the outstanding Awards, the Committee
may take any such action as in its judgment shall be necessary to preserve the
Participant's rights substantially proportionate to the rights existing prior to
such event and, to the extent that such action shall include an increase or
decrease in the number of Awards and/or Common Shares subject to outstanding
Awards, the number of Awards and/or Common Shares available under Article IV
above may be increased or decreased, as the case may be, proportionately. The
judgment of the Committee with respect to any matters referred to in this
Article shall be conclusive and binding upon each Participant. The exercise by
the Committee of its authority under this Article is subject to the approval of
the Board as and when required by applicable laws, rules, by-laws or policies of
regulatory authorities or stock exchanges.
ARTICLE XV
AMENDMENT AND TERMINATION OF THE PLAN
15.1 The Board may at any time, or from time to time, suspend or terminate
the Plan in whole or in part or amend it in such respects as the Board may deem
appropriate; provided, however, that no such amendment shall be made without
approval of the shareholders if such approval is required by Rule 16b-3 under
the Act or by any regulatory authorities or stock exchanges.
15.2 No amendment, suspension or termination of the Plan shall, without
the Participant's consent, impair any of the rights or obligations under any
Award theretofore granted to a Participant under the Plan.
15.3 The Committee may amend the Plan, subject to the limitations cited
above, in such manner as it deems necessary to permit the granting of Awards
meeting the requirements of future amendments or issued regulations, if any, to
the Code, the Act or other applicable laws, rules, by-laws or policies of
regulatory authorities or stock exchanges.
15.4 No amendment shall be effective until all applicable approvals, if
any, of regulatory authorities and stock exchanges have been obtained.
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ARTICLE XVI
GOVERNMENT AND OTHER REGULATIONS
16.1 The obligation of the Company to issue, or transfer and deliver,
Common Shares for Awards exercised under the Plan shall be subject to all
applicable laws, regulations, rules, orders and approvals which shall then be in
effect and required by regulatory authorities and any stock exchanges on which
Common Shares are traded.
16.2 Notwithstanding any other provision of the Plan, (a) during any
period in which a Participant is subject to Section 16 of the Act, if the
Participant shall exercise any Award or engage in any other transaction
involving an Award or Common Shares received upon the exercise of an Award, the
Participant shall comply with the rules promulgated under Section 16 of the Act
(and any comparable rules of any other U.S. and non-U.S. regulatory authority),
including, without limitation, rules which restrict the exercise of Awards,
which limit the resale of Common Shares obtained upon exercise of Awards and
which require the reporting of transactions and (b) the Committee may impose any
conditions on an Award necessary to render any transaction involving such Award
exempt under the rules promulgated under Section 16 of the Act.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
17.1 The Plan Does Not Confer Employment or Shareholder Rights: The right
of the Company to terminate at will (whether by dismissal, discharge or
otherwise) the Participant's employment with it at any time is specifically
reserved. Neither the Participant nor any person entitled to exercise the
Participant's rights in the event of the Participant's death shall have any
rights of a shareholder with respect to the Common Shares subject to each Award,
except to the extent that, and until, such Common Shares shall have been issued
upon the exercise or maturity of each Award.
17.2 The Plan Does Not Confer Rights to Assets: Neither the Participant
nor any person entitled to exercise the Participant's rights in the event of the
Participant's death shall have any rights to or interest in any specific asset
of the Company.
17.3 Plan Expenses: Any expenses of administering the Plan shall be borne
by the Company.
17.4 Use of Exercise Proceeds: Cash payments received from Participants
upon the exercise of Options shall be used for the general corporate purposes of
the Company.
17.5 Indemnification: In addition to such other rights of indemnification
as they may have as members of the Board, or the Committee, the members of the
Board and the Committee shall be indemnified by the Company against all costs
and expenses reasonably incurred by them in connection with any action, suit or
proceeding to which they or any of them may be party by reason of any action
taken or failure to act under or in connection with the Plan or any Award
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except a judgment based upon a finding of bad faith;
provided that upon the institution of any such action, suit or proceeding, a
Committee or Board member shall, in writing, give the Company notice thereof and
an opportunity, at its own expense, to handle and defend the same before such
Committee or Board member undertakes to handle and defend it on such member's
own behalf.
17.6 Governing Law: The Plan shall be construed, interpreted and the
rights of the Company and Participants (and all other parties) determined in
accordance with the internal laws of the State of New York, without regard to
the conflict of law principles thereof.
ARTICLE XVIII
SHAREHOLDER APPROVAL AND EFFECTIVE DATES
18.1 The Plan shall become effective when it is adopted by the Board.
However, if (a) the Plan is not approved by the affirmative vote of the holders
of a majority of the Common Shares present, or represented by proxy, and
entitled to vote at the Annual Meeting of Shareholders of The Seagram Company
Ltd. to be held on May 29, 1996, or at any adjournment thereof or (b) the
necessary regulatory and stock exchange approvals are not obtained within one
year after the date the Plan is adopted by the Board, the Plan and all Awards
shall terminate. Awards may not be granted under the Plan after the sixth
anniversary of the Approval Date.
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Exhibit 11
The Seagram Company Ltd.
Exhibit With Respect to Computation of Fully Diluted Earnings Per Share
EFFECT OF CONVERSION OF LIQUID YIELD OPTION NOTES (LYONs) AND EXERCISE OF STOCK
OPTIONS ON FULLY DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
Transition Fiscal Years Ended January 31,
Period Ended ----------------------------------------------
Restatement of Shares: June 30, 1996 1996 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
(1) Shares used in computing earnings per share 373,857,915 373,116,794 372,499,060 373,050,863
(2) Additional shares deemed outstanding:
(a) Upon exercise of stock option plans 2,982,932 4,733,707 2,879,795 2,725,384
(b) Upon conversion of LYONs 691,408 1,175,368 1,273,826 1,293,869
------------ ------------ ------------ ------------
(3) Shares assumed to be outstanding for fully
diluted computation 377,532,255 379,025,869 376,652,681 377,070,116
============ ============ ============ ============
Restatement of Earnings:
(4) Net earnings applicable to common stock $ 85,268 $ 3,405,877 $ 735,863 $ 378,714
(a) LYONs interest expense 924 3,300 2,182 525
(b) LYONs amortization of discount and fees 33 80 80 80
------------ ------------ ------------ ------------
(5) Pro forma earnings applicable to Common Stock $ 86,225 $ 3,409,257 $ 738,125 $ 379,319
============ ============ ============ ============
(6) Pro forma fully diluted earnings per share $ 0.23 $ 8.99 $ 1.96 $ 1.01
(7) Reported per share: $ 0.23 $ 9.13 $ 1.98 $ 1.02
(8) Dilution: 0.00% 1.53% 1.01% 0.98%
</TABLE>
In view of the above percentages, the effect of assumed issuance pursuant to
stock plans, options, and conversion of LYONs was considered not dilutive in
accordance with Footnote 2 to paragraph 14 of APB Opinion #15.
<PAGE> 1
Exhibit 12(a)
The Seagram Company Ltd.
and Subsidiary Companies
Computation of Ratio of Earnings to Fixed Charges
(millions)
<TABLE>
<CAPTION>
Transition
Period
Ended Fiscal Years Ended January 31,
June 30, ---------------------------------------------
Description 1996 1996 1995 1994 1993 1992
- ----------------------------------------- ---------- ----- ----- ---- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Earnings before income taxes (restated
for discontinued operations) $ 65 $ 349 $ 363 $435 $ 450 $ 641
Add (deduct):
Equity in net earnings of less than 50%
owned affiliates (4) (20) -- -- -- --
Dividends from less than 50% owned
affiliates 9 4 -- -- -- --
Fixed charges 183 426 436 378 369 373
Interest capitalized, net of amortization (4) (2) (1) 0 (5) (9)
Minority interest -- -- -- -- 3 6
----- ----- ----- ---- ----- -------
Earnings available for fixed
charges $ 249 $ 757 $ 798 $813 $ 817 $ 1,011
===== ===== ===== ==== ===== =======
Fixed charges:
Interest expense $ 151 $ 378 $ 408 $351 $ 341 $ 345
Proportionate share of 50% owned
companies fixed charges 8 6 -- -- -- --
Portion of rental expense deemed to
represent interest factor 24 42 28 27 28 28
----- ----- ----- ---- ----- -------
Fixed charges $ 183 $ 426 $ 436 $378 $ 369 $ 373
===== ===== ===== ==== ===== =======
Ratio of earnings to fixed
charges 1.36 1.78 1.83 2.15 2.21 2.71
</TABLE>
<PAGE> 1
Exhibit 12(b)
Joseph E. Seagram & Sons, Inc.
and Subsidiary Companies
Computation of Ratio of Earnings to Fixed Charges
(millions)
<TABLE>
<CAPTION>
Transition
Period
Ended Fiscal Years Ended January 31,
June 30, -------------------------------------------
Description 1996 1996 1995 1994 1993 1992
- ----------------------------------------- ---- ---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Earnings before income taxes (restated
for discontinued operations) ($30) $ 83 $ 186 $ 198 $ 169 $ 290
Add (deduct):
Fixed charges 72 169 186 166 157 145
Interest capitalized, net of amortization -- -- (1) -- (1) (1)
Minority interest -- 1 4 (4) (1) --
---- ---- ----- ----- ----- -----
Earnings available for fixed
charges $ 42 $253 $ 375 $ 360 $ 324 $ 434
==== ==== ===== ===== ===== =====
Fixed charges:
Interest expense $ 65 $145 $ 163 $ 146 $ 137 $ 125
Portion of rental expense deemed to
represent interest factor 7 24 23 20 20 20
---- ---- ----- ----- ----- -----
Fixed charges $ 72 $169 $ 186 $ 166 $ 157 $ 145
==== ==== ===== ===== ===== =====
Ratio of earnings to fixed
charges --(a) 1.50 2.02 2.17 2.06 2.99
</TABLE>
(a) Fixed charges exceeded earnings by $30 million for the Transition Period
ended June 30, 1996.
<PAGE> 1
Exhibit 13
SEAGRAM
- --------------------------------------------------------------------------------
REPORT FOR THE TRANSITION PERIOD ENDED JUNE 30, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
The Seagram Company Ltd. operates in two global segments: Beverages and
Entertainment. The beverage businesses are engaged principally in the production
and marketing of distilled spirits, wines, fruit juices, coolers, beers and
mixers throughout more than 150 countries and territories. The entertainment
company, MCA INC., produces and distributes motion picture, television and home
video products, and recorded music; operates theme parks and retail stores; and
publishes books.
[SEAGRAM LOGO]
As reflected in this Report, the Company has changed its fiscal year-end to June
30, in order to better align its planning and budgeting cycles with the business
needs of its core beverage and entertainment segments. This change allows the
operating businesses to focus exclusively on their customers during periods of
peak business activity. This Report discusses our financial results for a
five-month transition period from February 1, 1996 to June 30, 1996.
<PAGE> 3
Directors' Report to Shareholders
[GRAPHIC]
Seagram's results for the February through June 1996 transition
period, which bridged the change in our fiscal year to a June 30 from a
January 31 close, were in line with what we disclosed they would be last March.
Attributed revenues increased eight percent and EBITDA declined eight percent,
both on a pro forma basis. We expected that Company-wide initiatives to
accelerate growth would most likely depress pro forma earnings comparisons
during this five-month period. At the same time, we said that these initiatives
hold great promise for future growth. We continue to believe that this is true.
At the start of our new fiscal year, our businesses are moving in the right
directions. Mindful that much work remains to be done, we are optimistic about
the future of the Company.
Our top initiatives during the transition period were all designed to
make Seagram a more competitive and more profitable entity. Our business plan
anticipated that The Seagram Spirits And Wine Group's EBITDA would decline as
the full benefits of the division's reengineering efforts would not be realized
until our new fiscal year. In fact, the Group's EBITDA was down five percent.
The Seagram Beverage Group accurately predicted good growth during the period,
and EBITDA grew 16 percent. MCA's EBITDA declined 18 percent on a pro forma
basis, reflecting the significant investment in its operations that was
budgeted for this five-month period.
Underlying these results, however, is ample evidence that Seagram's
strategy to create new opportunities for sustained growth in all our businesses
is working. Our strategy demanded that we manage effectively the significant
changes in our core assets, in the senior management at most of our operations,
and in many operating procedures that we detailed in last year's annual report.
As a result, the Company is operationally more flexible and more nimble than it
has ever been. We know that change will continue to affect all of our
operations, although it is unlikely to do so at the same furious pace as it did
this past year. Our strategy also demands that we invest opportunistically in
new businesses that will
[GRAPHIC]
[CAPTION]
UNDERLYING THESE RESULTS IS AMPLE EVIDENCE THAT SEAGRAM'S STRATEGY TO CREATE
NEW OPPORTUNITIES FOR SUSTAINED GROWTH IN ALL OUR BUSINESSES IS WORKING.
<PAGE> 4
strengthen our current operations and offer attractive longer-term growth. Most
of the Company's initiatives during the transition period were in
entertainment, a business we identified last year as one that clearly meets our
growth objectives. Among the highlights:
- The MCA Television Group finalized long-term agreements valued at $2.5
billion in July with Germany's two leading entertainment companies, Kirch Group
and RTL, to license motion pictures and television programming to the German pay
and free television markets. Together, these long-term deals are possibly the
largest ever reached by an American studio in the international marketplace.
They include the launch of two pay channels on Kirch's new digital television
service and television series co-financing with RTL. These agreements form an
important cornerstone of MCA's international television expansion.
- In May, the Television Group also acquired a majority equity interest
in Brillstein-Grey Entertainment, a successful television and motion picture
production company. Combined with MCA's own revitalized network television
development efforts for the 1996-1997 season, this acquisition reestablishes MCA
as one of the leading television programmers in the industry.
- The Universal Recreation Group announced in February that it had
reached an agreement with the city of Osaka to build Universal Studios Japan,
its first theme park outside the U.S. The park is scheduled to open in the
spring of 2001. This agreement provides a blueprint for further international
expansion.
- The Recreation Group also announced an agreement with Loews Corp. to
develop two luxury hotels in Orlando, Florida. These properties are part of
MCA's and The Rank Organisation's major expansion of their Universal City
Florida entertainment complex. As previously announced, these hotels will be
part of a major destination resort encompassing the existing Universal Studios
Florida theme park, as well as a second gated attraction, Universal's Islands of
Adventure and a lively nighttime entertainment complex, CityWalk, both set to
open in 1999.
- As a part of its expanded program of investing in Hollywood-themed
entertainment venues, the Recreation Group also opened two new feature
attractions during the transition period. In Orlando, the Terminator 2: 3-D ride
opened in May, and in Hollywood, Jurassic Park - The Ride debuted in June. To
date, both attractions have raised attendance and per capita spending well above
last year's levels.
- The MCA Music Entertainment Group purchased a 50 percent interest in
Interscope Records in February and formalized two new record labels, Universal
Records and Rising Tide/Nashville, increasing its presence in the recorded
music business. The division also invested significantly in both its domestic
and international operations, opening 21 new offices in four new territories
and signing a number of new international artists. MCA Music's international
offices now cover 95 percent of the foreign record-buying market.
Funding these new investments and evaluating others are vitally
important to us. The Company's strong balance sheet and cash flow provide us
with the flexibility to do so. Approximately one year after the DuPont, MCA and
Dole transactions, net debt of $4.1 billion is 27 percent of total capital
(including minority interest), compared to 48 percent at January 31, 1995,
prior to the transformation in our assets. We have also benefited recently from
several corporate initiatives.
[Graphic showing picture of Edgar M. Bronfman, Chairman, and Charles R.
Bronfman, Co-Chairman]
<PAGE> 5
Seagram sold 156 million equity warrants back to DuPont for $500 million in
July, recognizing proceeds of $479 million after-tax. These warrants were
issued as part of DuPont's redemption of most of our shareholding in that
company. Seagram repurchased approximately 2.1 million of its common shares in
open market transactions in the February through June period at an average
price of $32.82 per share. The Board of Directors has approved an authorization
to repurchase additional shares, which we plan to do opportunistically.
OPERATING HIGHLIGHTS
The Seagram Spirits And Wine Group attributed revenues increased six percent
and EBITDA declined five percent during the February through June period. The
Europe & Africa region recorded a 12 percent attributed revenue gain, its best
performance in some time, while the Americas and Asia Pacific regions
experienced essentially flat revenues. The division's top 15 brands, which
represent over 65 percent of total annualized attributed revenues of $5.2
billion, performed better than the total Group. They are and will continue to
be the primary focus for future growth. EBITDA performance was down, though in
line with expectations; it does not reflect the full effect of operating
efficiencies from reengineering efforts. Not all of these measures, however, are
designed simply to cut costs. The Seagram Spirits And Wine Group has developed
a much-improved customer fulfillment program and a stronger marketing focus on
consumer brand awareness. Fiscal year 1997 results should continue to benefit
from these efforts.
The Seagram Spirits And Wine Group, as part of its planning process for
the 1997 fiscal year, has completed a rigorous review of its 150 brands across
all regions. The division has clearly delineated growth initiatives in each of
the markets in which it competes. For the more mature markets like North America
and Europe, the Group has streamlined its operations and realigned its sales
force in response to changes in distribution. Most importantly, it has
segmented the market to focus on premium brands which are expected to
outperform the overall industry in these markets. In the emerging markets,
Seagram's strong distribution and brand portfolio provide a competitive
advantage.
In June, one of the Group's leading brands, Crown Royal, tested a
television advertisement on a local station in Corpus Christi, Texas, one of
its primary markets. As part of an overall marketing plan to strengthen its
brands, the advertisement appeared on programming which has a predominantly
adult audience. The commercial was consistent with our long-standing principles
of advertising responsibly. For over 60 years, The Seagram Spirits And Wine
Group's public service advertising and educational efforts have stressed
responsible drinking; the Group has contributed significantly to industry trade
groups' support of these programs as well. The Group is strongly committed to
continuing this support. We intend to be just as responsible in our broadcast
product advertising as we have been in every other campaign in every other
medium.
The Seagram Beverage Group reported strong results, based on continued
growth of its worldwide juice businesses and the acquisition of the Dole juice
business, excluding canned pineapple juice, which it completed in May 1995.
Attributed revenues were $839 million, 20 percent ahead of last year, while
EBITDA increased 16 percent. Both North America and International contributed
to the strong performance.
In the U.S., Tropicana Dole Beverages, led by its flagship Pure Premium
brand, maintained its 41 percent
[CAPTION]
THE SEAGRAM SPIRITS AND WINE GROUP DEVELOPED A MUCH-IMPROVED CUSTOMER
FULFILLMENT PROGRAM AND A STRONGER MARKETING FOCUS ON CONSUMER BRAND AWARENESS.
INTERNATIONALLY, TROPICANA DOLE BEVERAGES BOOSTED VOLUME 40 PERCENT, REFLECTING
DOLE'S SIGNIFICANT OVERSEAS PRESENCE.
[GRAPHIC]
<PAGE> 6
share of the chilled orange juice market. The division introduced a
break-through advertising campaign for Pure Premium and significantly increased
spending behind it. The "Perfect" campaign, which will be introduced in other
countries this year, helped drive the Company's share of the not-from-
concentrate orange juice market to 69 percent, up almost two points. The
division also continued its effort to have its brands widely available beyond
the grocery store: Impressive gains were made with both chilled and shelf-stable
products in convenience, club store and food service outlets. The reengineering
efforts initiated in 1994 resulted in savings in both manufacturing and
commercial operations. We expect additional benefits from these initiatives in
the new fiscal year.
Internationally, Tropicana Dole Beverages boosted volume 40 percent,
reflecting Dole's significant overseas presence. In the important French market,
for example, Fruvita, a Dole product, and Tropicana are the number-one and
number-two chilled juice brands, respectively. Results in France and the U.K.
were particularly strong, aided by shifting production from the U.S. to
facilities in France and Belgium. Asian results reflect the company attaining
the number-one position in Tokyo and continuing as the leading chilled juice
market in Taiwan.
At MCA, attributed revenues increased seven percent and
EBITDA declined 18 percent in the transition period on a pro forma basis. Many
of the initiatives described earlier in this report affected period-to-period
comparisons.
Filmed entertainment attributed revenues and EBITDA increased 12 percent
and 98 percent, respectively, from the prior period. The Motion Picture Group
reported significantly stronger international theatrical revenues and worldwide
video revenues, due principally to the division's successful 1995 releases Babe,
Apollo 13 and Casper. MCA Television Group revenues declined during the period
due to less television production and fewer related network license fees from a
year ago. As several of the cancelled programs were being produced at a deficit,
EBITDA increased over 1995. The division's first-run syndication results
improved over last year's, primarily the result of improved ratings for the
action/adventure programs, HERCULES and XENA: WARRIOR PRINCESS.
MCA Television's longer-term outlook, however, is vastly
improved from what it was several months ago. The Group had its most successful
network television development season in many years, placing two new comedies
and two new dramas on the networks' fall schedule. Universal also has
commitments for two additional hour-long dramas as midseason replacements in
early 1997. Combined with its own returning series and with Brillstein-Grey's
current 1.5 hours of network programming, Universal now ranks third of all the
major studios, with 6.5 hours of network programming, compared to sixth last
year. Additionally, the coproduction arrangements and pay channel start-ups from
the previously described German television agreements demonstrate the broad
global appeal of Universal's film and television libraries and their greatly
enhanced international prospects. These initiatives are expected to favorably
impact results more in subsequent years than they will in the fiscal year ending
June 1997.
MCA Music Entertainment Group attributed revenues declined nine percent,
compared to the prior period, and EBITDA was a loss of $24 million,
[GRAPHIC]
[CAPTION]
THE UNIVERSAL RECREATION GROUP REACHED AN AGREEMENT WITH THE CITY OF
OSAKA TO BUILD UNIVERSAL STUDIOS JAPAN, ITS FIRST THEME PARK OUTSIDE THE U.S.
<PAGE> 7
due primarily to extremely difficult comparisons with
the highly successful 1994-1995 release schedule, a
relatively small number of record releases in the 1996
period and the investments in new artists,
international operations and startup record labels. The
foreign share of the world market has been growing
[GRAPHIC SHOWING rapidly. To capitalize on this, MCA Music now has
offices in 25 foreign countries and has been actively
PICTURE OF signing local talent. The domestic U.S. music market
has recently suffered from consolidation and financial
EDGAR BRONFMAN, JR. weakness at the retail level. We view these problems as
cyclical rather than structural and expect the
PRESIDENT AND market to stabilize. The Music Group's investments,
artist signings and restructuring have set the stage
CHIEF EXECUTIVE for revenue and EBITDA growth beginning later in the
1997 fiscal year.
OFFICER]
Universal Recreation Group attributed revenues
increased 11 percent while EBITDA declined 33 percent.
The Group incurred incremental startup and marketing
expenses for the two new feature attractions in Orlando
and Hollywood, both of which opened late in the
transition period. The timing of these start dates
meant that the higher attendance and per capita
spending that these rides have generated will be more
evident in our new fiscal year ending June 30, 1997.
The Company named Frank J. Biondi, Jr. as Chairman and Chief [GRAPHIC]
Executive Officer of MCA, INC. in April. Mr. Biondi, who was
formerly President and Chief Executive Officer of Viacom Inc.,
was also elected to Seagram's Board of Directors.
At this time, we would like to pay special tribute to two directors who
will be retiring from the Board in October. John L. Weinberg joined the Board
in 1975 and has served with distinction on the Audit, Finance and Human
Resources committees. He has also been instrumental in many of the Company's
major transactions. David M. Culver, a director since 1982, has been a member
of the Finance Committee and a key member of the Human Resources Committee and
served as its Chairman since 1995. We thank them for their wise counsel,
support and friendship over the years.
We sense a growing confidence throughout Seagram as we begin our new
fiscal year. This confidence comes from a feeling that our new structure, new
management and new businesses can provide sustained growth. Our beverage and
entertainment franchises are strong, each with excellent growth prospects. Our
overall financial condition is sound and will allow us to pursue additional
opportunities. As we go forward into our next fiscal year, we would like to
express our gratitude once again for the support given us from our consumers
and customers, our shareholders and our employees.
On behalf of the Board,
/s/ Edgar M. Bronfman /s/ Charles R. Bronfman /s/ Edgar Bronfman, Jr.
EDGAR M. BRONFMAN CHARLES R. BRONFMAN EDGAR BRONFMAN, JR.
CHAIRMAN CO-CHAIRMAN PRESIDENT AND
CHIEF EXECUTIVE OFFICER
<PAGE> 8
MANAGEMENT'S
DISCUSSION
AND ANALYSIS
Several major events since April 1995 have substantially changed Seagram and
impacted the comparability of Seagram's financial statements.
CHANGE IN FISCAL YEAR-END: Effective June 30, 1996, the Company changed its
fiscal year-end from January 31 to June 30. The financial results for the period
from February 1, 1996 to June 30, 1996 (the "Transition Period") are included in
this Report. The Company began its first full fiscal year on the new basis on
July 1, 1996. Results for the Transition Period are not necessarily indicative
of operations for a full year.
REDEMPTION OF 156 MILLION SHARES OF DUPONT: On April 6, 1995, E.I. du Pont de
Nemours and Company ("DuPont") redeemed common stock held by the Company in a
transaction valued at $8.8 billion. The Company received cash and 90-day notes
from DuPont plus 156 million DuPont equity warrants valued at $440 million, as
of the transaction date. The after-tax cash proceeds were $7.7 billion. The
Company retains 8.2 million DuPont shares which had a market value of $651
million at June 30, 1996.
ACQUISITION OF DOLE JUICE BEVERAGE BUSINESS: On May 19, 1995, Seagram completed
the acquisition of the global juice and juice beverage business (excluding
canned pineapple juice) of Dole Food Company, Inc. ("Dole") for $276 million.
The Dole operations which Seagram acquired include fruit juices marketed under
the Dole, Juice Bowl, Fruvita and Looza trademarks and manufacturing capability
in the U.S., Europe and China. The Dole brand name is licensed from Dole.
ACQUISITION OF 80 PERCENT OF MCA HOLDING I CORP.: On June 5, 1995, Seagram
completed the purchase of an 80 percent interest in MCA Holding I Corp. ("MCA"),
the parent of MCA INC., from Matsushita Electric Industrial Co., Ltd.
("Matsushita") for $5.7 billion. Matsushita retains a 20 percent interest in
MCA.
SALE OF 156 MILLION DUPONT EQUITY WARRANTS: On July 24, 1996, DuPont repurchased
156 million equity warrants owned by Seagram for $500 million in cash. The
Company had an after-tax gain of $39 million and after-tax net proceeds of $479
million. Because this transaction was completed subsequent to the Transition
Period, it will be recognized in the Company's financial results in the quarter
ending September 30, 1996.
The following presentation discusses the revenues and operating income for the
Company's two business segments--Beverages and Entertainment. The more detailed
discussion of the six lines of business within these two segments--Spirits and
Wine, Fruit Juices and Other, Filmed Entertainment, Music Entertainment,
Recreation, and Publishing and Other - will address attributed revenues and
attributed earnings before interest, taxes, depreciation and amortization
("EBITDA"). These amounts include Seagram's proportionate share of the revenues
and EBITDA, respectively, of its equity companies. The adjustment for equity
companies eliminates the proportionate share of the revenues or EBITDA of equity
companies, and reflects the equity income as reported under U.S. generally
accepted accounting principles.
The Company believes cash flow, as defined by EBITDA, is an appropriate
measure of the Company's operating performance, given the goodwill associated
with the Company's acquisitions. In addition, financial analysts generally
consider EBITDA to be an important measure of comparative operating performance.
However, EBITDA should be considered in addition to, not as a substitute for,
operating income, net income, cash flows and other measures of financial
performance in accordance with generally accepted accounting principles.
The following detailed analysis of operations should be read in conjunction
with the Consolidated Financial Statements of the Company found on pages 15 to
31.
6
<PAGE> 9
RESULTS OF OPERATIONS
TRANSITION PERIOD VS. COMPARABLE PERIOD ENDED JUNE 30, 1995 Revenues were
significantly higher than the comparable period last year reflecting the timing
of the closing of the Dole juice and MCA acquisitions in May and June of last
year, respectively. Reported revenues and attributed revenues in the Transition
Period were $5.0 billion and $5.6 billion, respectively, compared with $2.7
billion and $2.9 billion, respectively, in the prior period. EBITDA increased 32
percent to $518 million in the Transition Period. Beverages EBITDA declined
slightly to $322 million as weaker Spirits and Wine performance more than offset
a $10 million increase in Fruit Juices and Other. Entertainment EBITDA was $196
million compared with $66 million last year, which represented one month of MCA
results. Operating income declined to $179 million in the Transition Period
reflecting a substantial increase in the depreciation and amortization expense
associated with the MCA and Dole juice acquisitions, and higher corporate
expenses. The increase in corporate expenses to $47 million primarily results
from expenses related to our ongoing reengineering initiatives.
Interest, net and other in the Transition Period included $133 million of net
interest expense, partially offset by $19 million of dividend income from Time
Warner Inc. ("Time Warner") and DuPont. In the five months ended June 30, 1995,
net interest expense was $91 million and dividend income was $18 million.
Interest expense last year was net of $76 million of interest income largely
earned from the temporary investment of the full proceeds from the DuPont
redemption from April 1995 until the funding of the MCA acquisition in June
1995.
The income tax provision in the Transition Period included a $67 million
benefit related to a settlement with the U.S. government regarding the
recognition of a capital loss on the Company's 1981 exchange of shares of Conoco
Inc. for common stock of DuPont. Excluding this tax benefit, the effective
income tax rate of 80 percent was significantly higher than the prior year rate
of 34 percent because of the nondeductibility of the goodwill amortization
associated with the MCA and Dole juice acquisitions and lower taxable earnings.
Minority interest expense represents Matsushita's 20 percent interest in the
after-tax income of MCA. In the Transition Period, the minority interest of $5
million was added back to income to reflect the after-tax loss of MCA primarily
due to the depreciation and amortization expense. In the prior period, minority
interest expense of $3 million was deducted from earnings.
Net income was $85 million or $0.23 per share in the Transition Period.
Excluding the benefit associated with the tax settlement of $67 million or $0.18
per share, net income was $18 million or $0.05 per share. In the five months
ended June 30, 1995, earnings before the discontinued DuPont activities were
$117 million or $0.32 per share. Due to the redemption of most of the Company's
DuPont shares on April 6, 1995, the Company discontinued accounting for its
investment in DuPont under the equity method effective February 1, 1995.
Earnings related to the DuPont investment are presented as discontinued
activities in the prior period and include a $3.2 billion after-tax gain on the
redemption of the 156 million shares and $68 million of after-tax dividend
income earned on such shares prior to the redemption transaction. In the five
months ended June 30, 1995, net income was $3.3 billion or $8.99 per share.
EARNINGS SUMMARY
<TABLE>
<CAPTION>
Five Months
U.S. dollars in millions, Ended June 30, Fiscal Years Ended January 31,
except per share amounts 1996 1995 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Attributed Revenues $5,558 $2,909 $10,536 $6,653 $6,212
Reported Revenues 5,013 2,715 9,747 6,399 6,038
EBITDA 518 391 1,089 968 942
Operating Income
Beverages 225 240 456 781 774
Entertainment 1 32 205 - -
Corporate (47) (16) (77) (56) (20)
...... ...... ....... ...... ......
Operating Income 179 256 584 725 754
Interest, net and other 114 73 235 362 319
Provision for income taxes (15) 63 153 169 152
Minority interest (5) 3 22 - -
...... ...... ....... ...... ......
Income Before
Discontinued DuPont
Activities and
Cumulative Effect
of Accounting Change 85 117 174 194 283
Per share $ .23 $ .32 $ .46 $ .52 $ .76
Discontinued DuPont
activities, after tax - 3,232 3,232 617 96
...... ...... ....... ...... ......
Income before
cumulative effect of
accounting change $ 85 $3,349 $ 3,406 $ 811 $ 379
Cumulative effect of
accounting change - - - (75) -
...... ...... ....... ...... ......
Net Income $ 85 $3,349 $ 3,406 $ 736 $ 379
====== ====== ======= ====== ======
Net Income Per Share $ .23 $ 8.99 $ 9.13 $ 1.98 $ 1.02
</TABLE>
7
<PAGE> 10
BEVERAGES
<TABLE>
<CAPTION>
Five Months
Ended June 30, Fiscal Years Ended January 31,
U.S. dollars in millions 1996 1995 1996 1995 1994
Attributed Revenues
<S> <C> <C> <C> <C> <C>
Spirits and Wine $1,947 $1,841 $5,093 $5,061 $4,702
Fruit Juices
and Other 839 702 1,898 1,592 1,510
...... ...... ...... ...... ......
Attributed revenues 2,786 2,543 6,991 6,653 6,212
Adjustment for
equity companies (133) (129) (297) (254) (174)
...... ...... ...... ...... ......
Reported Revenues * $2,653 $2,414 $6,694 $6,399 $6,038
====== ====== ====== ====== ======
EBITDA
Spirits and Wine $ 250 $ 263 $ 763 $ 809 $ 770
Fruit Juices
and Other 72 62 196 159 172
...... ...... ...... ...... ......
EBITDA before
reengineering charge 322 325 959 968 942
Reengineering charge - - (290) - -
...... ...... ...... ...... ......
EBITDA 322 325 669 968 942
Adjustment for
equity companies (5) (3) (8) (7) (5)
Depreciation and
amortization (92) (82) (205) (180) (163)
...... ...... ...... ...... ......
Operating Income $ 225 $ 240 $ 456 $ 781 $ 774
====== ====== ====== ====== ======
</TABLE>
*Reported revenues include excise taxes of $296 million and $317 million in the
five-month periods ended June 30, 1996 and 1995, respectively, and $812
million, $836 million and $811 million for the fiscal years ended January 31,
1996, 1995 and 1994, respectively.
BEVERAGES
In the Transition Period, the Beverages segment contributed $2.7 billion to
reported revenues, which is 10 percent greater than the prior period. The
operating income contribution of $225 million was $15 million below the
operating income in the period ended June 30, 1995.
SPIRITS AND WINE Attributed and reported revenues each grew six percent largely
driven by improvement in Europe. Excluding the unfavorable impact of foreign
exchange, revenues would have risen eight percent. In the Transition Period,
EBITDA declined five percent to $250 million as lower results in North America
more than offset a recovery in Europe. The effect of foreign exchange on EBITDA
was negligible. EBITDA as a percent of attributed revenues declined from 14.3
percent to 12.8 percent as a result of increased marketing spending and
continued investment in developing markets.
Case volumes rose almost four percent in the Transition Period partly
reflecting the improvement in Europe. Most of our key premium brands continued
to grow, including Martell Cognac which increased unit volumes 10 percent,
primarily in Europe, and Chivas Regal Scotch Whisky and Crown Royal Canadian
Whisky, which both had volume growth of three percent. Mumm Sekt, which had
suffered previously from the difficult German market, had five percent higher
volumes during the Transition Period. Absolut Vodka, for which the Company
gained distribution rights in the U.S. and major international markets beginning
in 1994, continues to be an exceptional brand with a double digit increase in
shipments reflecting growth in the U.S. and the expansion of Seagram's
distribution of Absolut Vodka into new markets, such as Canada.
The EBITDA shortfall primarily reflects a decline in North America, which
more than offset a 14 percent improvement in Europe and Africa and a substantial
recovery in several Latin American affiliates. In North America our performance
was impacted by a reduction in distributor inventory levels and the timing of
brand spending. Europe's EBITDA improved versus a very difficult prior period,
particularly in Portugal. Latin America's performance reflected a business
rebound in both Mexico and Argentina, and benefits from our reengineering
initiatives in Brazil. Asia Pacific's results were essentially unchanged as
weaknesses in Taiwan and our duty free operations, caused by the political
unrest between mainland China and Taiwan early in the period, offset growth in
Korea from our scotch portfolio.
Despite the difficult operating results, we continued to invest in our future
by increasing marketing spending five percent and investing in new and
developing markets such as India and greater China. Advertising is focused
behind core strategic brands and in key markets including Germany, Korea and
greater China.
Depreciation and amortization of assets was $44 million in the Transition
Period and in the prior period. Amortization of goodwill was $10 million in both
periods. Spirits and Wine capital expenditures were $106 million in the
Transition Period and total assets were $5,119 million at June 30, 1996.
Fruit Juices and Other This unit continued its strong performance driven by
growth in Tropicana's base business and the contribution of the juice operations
acquired from Dole. The five months ended June 30, 1995 included approximately
one month of Dole juice beverage results. Attributed and reported revenues for
Fruit Juices and Other each climbed 20 percent. Excluding the juice beverage
operations acquired from Dole, Tropicana's attributed revenues grew nine
percent. EBITDA rose 16 percent to $72 million while EBITDA as a percent of
attributed revenues declined from 8.8 percent to 8.6 percent. The decrease in
the EBITDA margin primarily results from the write-off of obsolete inventory in
our low alcohol division. Excluding this inventory adjustment, EBITDA for the
fruit juice group grew 28 percent.
8
<PAGE> 11
Tropicana Dole Beverages' unit volume increased 21 percent driven largely by
an eight percent increase in Pure Premium unit volume in North America and a 40
percent increase in international unit volume. Tropicana Dole Beverages, led by
its flagship Pure Premium brand, maintained a 41 percent share of the U.S.
chilled orange juice market in the Transition Period.
Depreciation and amortization of assets was $26 million in the Transition
Period and $18 million in the prior period. Amortization of goodwill was $12
million and $10 million in the periods ended June 30, 1996 and 1995,
respectively. Capital expenditures for Fruit Juices and Other were $62 million
in the Transition Period and total assets were $2,546 million at June 30, 1996.
ENTERTAINMENT
In the Transition Period, which includes MCA results from January 1, 1996 to
June 30, 1996, MCA contributed $2.4 billion to reported revenues and $1 million
to operating income, after significant amortization and depreciation expense. In
the period ended June 30, 1995, the Company's results included one month of MCA
from the acquisition date of June 5, 1995 until June 30, 1995. During that time
MCA had reported revenues of $301 million and operating income of $32 million.
In order to provide a basis of comparison, the discussion that follows is based
upon MCA results for the six months ended June 30, 1996 compared with the
results for the six months ended June 30, 1995.
FILMED ENTERTAINMENT In the six-month period ended June 30, 1996, attributed
revenues and reported revenues each rose 12 percent and EBITDA almost doubled to
$176 million versus the prior period. EBITDA as a percent of attributed revenues
increased to 10.1 percent from 5.7 percent in the prior period.
The motion picture group was driven by higher worldwide profits from prior
year releases, particularly Babe and Casper. The television group had improved
results mainly because of the cancellation of several series which were in a
deficit position. The EBITDA of our 50 percent-owned joint venture, USA
Networks, was essentially even with the prior period.
MUSIC ENTERTAINMENT Attributed and reported revenues each declined nine percent,
while EBITDA was a loss of $24 million compared to income of $75 million last
year. Lower revenues and EBITDA reflect difficult comparisons with the prior
period. The six months ended June 30, 1995 included significant carry-over
business from the very strong fourth quarter of 1994. Major new releases in 1996
were limited to albums by Wynonna, Vince Gill and George Strait. EBITDA was
affected by a substantial investment program in 1996, which included increased
spending for international expansion and investment in new artists and label
ventures including Universal Records and Rising Tide/Nashville, and the newly
acquired interest in Interscope Records. The Group recorded higher reserves in
the six months ended June 30, 1996 to reflect the current business environment.
ENTERTAINMENT
<TABLE>
<CAPTION>
Five Months Fiscal Year Six Months
Ended Ended Ended 12 Months
June 30, January 31, June 30, Ended December 31,
U.S. dollars in millions 1996 1995 1996 1995 1995 1994
Attributed Revenues
<S> <C> <C> <C> <C> <C> <C>
Filmed Entertainment $1,740 $ 193 $2,124 $1,556 $3,487 $3,313
Music Entertainment 537 85 753 589 1,257 1,293
Recreation 231 48 287 208 447 440
Publishing and Other 264 40 381 240 581 525
...... ..... ...... ...... ...... ......
Attributed revenues 2,772 366 3,545 2,593 5,772 5,571
Adjustment for equity
companies (412) (65) (492) (372) (798) (753)
...... ..... ...... ...... ...... ......
Reported Revenues $2,360 $ 301 $3,053 $2,221 $4,974 $4,818
====== ===== ====== ====== ====== ======
EBITDA
Filmed Entertainment $ 176 $ 37 $ 240 $ 89 $ 292 $ 176
Music Entertainment (24) 11 59 75 123 192
Recreation 37 16 85 55 124 128
Publishing and Other 7 2 36 20 54 37
...... ..... ...... ...... ...... ......
EBITDA $ 196 $ 66 420 $ 239 $ 593 $ 533
Adjustment for equity
companies (47) (11) (56)
Depreciation and
amortization (148) (23) (159)
...... ..... ......
Operating Income $ 1 $ 32 $ 205
====== ===== ======
</TABLE>
Note: The Company's reported financial results for the five-month periods ended
June 30 include six months of MCA in the Transition Period (from January 1, 1996
to June 30, 1996) and one month of MCA in the prior period (from the acquisition
date of June 5, 1995 to June 30, 1995). The Company's results for the fiscal
year ended January 31, 1996 include seven months of MCA (from June 5, 1995 to
December 31, 1995). MCA's results for the six months ended June 30, 1995 and the
12 months ended December 31, 1995 and December 31, 1994 are provided for the
comparative operating discussion.
9
<PAGE> 12
ENTERTAINMENT
<TABLE>
<CAPTION>
FIVE MONTHS Fiscal Year
ENDED Ended 12 Months
JUNE 30, January 31, Ended December 31,
U.S. dollars in millions 1996 1996 1995 1994
Capital Expenditures
<S> <C> <C> <C> <C>
Filmed Entertainment $ 33 $ 40 $ 59 $ 66
Music Entertainment 24 26 33 30
Recreation 66 90 114 98
Publishing and Other 13 19 23 25
.... .... .... ....
$136 $175 $229 $219
==== ==== ==== ====
</TABLE>
Note: The Company's reported financial results for the five-month period ended
June 30 include six months of MCA in the Transition Period (from January 1, 1996
to June 30, 1996). The Company's results for the fiscal year ended January 31,
1996 include seven months of MCA (from June 5, 1995 to December 31, 1995). MCA's
results for the 12 months ended December 31, 1995 and December 31, 1994 are
provided for comparative purposes.
RECREATION Attributed and reported revenues each increased 11 percent during the
six-month period ended June 30, 1996 but EBITDA declined from $55 million to $37
million. EBITDA as a percent of attributed revenues decreased from 26.4 percent
to 16.0 percent. Attendance and per capita spending at both theme parks were
higher in the period ended June 30, 1996 than the prior period. This is due in
part to the successful openings of Terminator 2: 3-D at Universal Studios
Florida, our 50 percent-owned joint venture, in May and Jurassic Park - The Ride
in Universal Studios Hollywood in June. EBITDA was down substantially due to
higher marketing spending and the timing of that spending in advance of the new
attractions (which opened comparatively late in the period) and increased
business development spending related to potential international expansion and
the development of additional CityWalk entertainment complexes.
PUBLISHING AND OTHER Attributed revenues were up 10 percent to $264 million and
reported revenues increased seven percent to $246 million, while EBITDA fell to
$7 million. The EBITDA decline is attributable to higher return reserves at
Interplay Productions (an entertainment software developer), the write-off of
certain development costs at Universal Interactive Studios (an entertainment
software developer) and several nonrecurring favorable items which occurred in
1995 including a gain on the sale of land to the Los Angeles MTA.
Book publishing attributed revenues and EBITDA increased as a result of
higher shipments of two Patricia Cornwell novels: Cause of Death and From
Potter's Field. Spencer Gifts' results remained strong as the division benefited
from a six percent increase in comparable store sales and the impact of new
stores.
YEAR ENDED JANUARY 31, 1996 VS. YEAR ENDED JANUARY 31, 1995 Reported revenues
and attributed revenues were $9.7 billion and $10.5 billion, respectively, up
substantially from $6.4 billion and $6.7 billion, respectively, in the prior
year, largely due to the inclusion of partial year results of MCA and the Dole
juice business. EBITDA, after a reengineering charge of $290 million, was $1.1
billion compared with $968 million in the prior year. Entertainment contributed
$420 million, and Fruit Juices and Other increased 23 percent, while Spirits and
Wine declined six percent. Corporate expenses climbed to $77 million from $56
million largely because the increase in the market value of the Company's shares
in the year ended January 31, 1996 resulted in the recognition of additional
expenses associated with stock-based compensation. Corporate expenses in both
years included expenses related to consulting fees and internal costs
attributable to the Company's ongoing reengineering efforts. Operating income,
after the $290 million charge, declined to $584 million. Excluding this charge,
operating income rose 21 percent to $874 million reflecting the contribution
from Entertainment and higher Fruit Juices and Other, partially offset by weaker
Spirits and Wine results.
Interest, net and other in the year ended January 31, 1996 included $273
million of net interest expense, partially offset by $38 million of dividend
income from Time Warner and DuPont. In the fiscal year ended January 31, 1995
net interest expense of $396 million was partially offset by $34 million of
dividend income. The net interest expense decrease largely reflected the
repayment of debt with a portion of the proceeds from the DuPont redemption and
interest income earned from the temporary investment of the DuPont proceeds from
April 1995 until the funding of the MCA acquisition in June 1995.
The effective income tax rate on continuing operations for the fiscal year
ended January 31, 1996 was 44 percent compared with 29 percent (exclusive of the
1981 transaction) in the prior period. The higher effective tax rate resulted
from the nondeductibility of goodwill amortization and the charge for
reengineering activities, for which a tax benefit was not recognized in some
countries where the charge was incurred. The income tax provision in the year
ended January 31, 1995 included a charge of $65 million attributable to the
disallowance by the U.S. Tax Court of a loss on the Company's exchange of shares
of Conoco Inc. for common stock of DuPont in 1981.
The minority interest expense of $22 million represented the 20 percent
minority interest in the after-tax income of MCA.
In the year ended January 31, 1996, income from discontinued DuPont
activities included a $3.2 billion after-tax gain on the redemption of the 156
million shares and $68 million of after-tax dividend income. In the year ended
January 31, 1995, income from the discontinued DuPont activities included $264
million of after-tax dividend income and $353 million of unremitted earnings
(Seagram's share of DuPont's earnings not received as cash dividends).
10
<PAGE> 13
Earnings before the discontinued DuPont activities were $174 million or $0.46
per share in the year ended January 31, 1996 compared with $194 million or $0.52
per share in the prior year. Net income was $3.4 billion or $9.13 per share,
including the discontinued DuPont activities, compared with $736 million or
$1.98 per share in the prior year, which included a $75 million after-tax charge
for the cumulative effect of the adoption of FAS 112, relating to postemployment
benefits.
BEVERAGES
In the year ended January 31, 1996, the Beverages segment contributed $6.7
billion to reported revenues and $456 million to operating income, after a $290
million charge related to reengineering activities.
SPIRITS AND WINE The Spirits and Wine results were adversely affected by
difficult market conditions in Europe. Spirits and Wine attributed revenues
increased slightly while EBITDA, before the reengineering charge, decreased six
percent. EBITDA as a percent of attributed revenues declined from 16.0 percent
to 15.0 percent.
Case volumes declined three percent in the year ended January 31, 1996
principally from the reduction of trade inventories in Europe. Mumm Sekt,
reflecting weakness in the German market, had an 18 percent decline in
shipments. However, a number of the Company's premium brands showed strong unit
gains, including Chivas Regal Scotch Whisky for which shipments grew three
percent, Martell Cognac which increased volumes four percent on the strength of
operations in Asia Pacific, and Crown Royal Canadian Whisky for which shipments
increased five percent. Absolut Vodka showed 11 percent growth in shipments in
the U.S. and 15 percent growth globally as we continued to expand our
distribution of the brand.
Attributed revenues generated outside of North America accounted for
approximately 69 percent of total attributed revenues. Europe and Africa, which
accounted for 36 percent of total attributed revenues, remained the Company's
largest geographic region. North American attributed revenues were 31 percent of
total attributed Spirits and Wine revenues. Asia Pacific, our fastest growing
region, increased to 23 percent of the total, while Latin America accounted for
10 percent of Spirits and Wine attributed revenues. (This geographic breakdown,
which is used by management to measure the performance of marketing affiliates,
excludes excise taxes, assigns sales to the region in which the purchaser is
located and includes our proportionate share of the revenues of equity company
affiliates. The geographic data contained in Note 12 of the Notes to the
Consolidated Financial Statements include excise taxes as well as the Company's
other operations, and are based upon the location of the legal entity which
invoices the sale.)
The EBITDA decline was attributable to a 20 percent shortfall in Europe and
Africa, partially mitigated by strong performances in Asia Pacific and the
Americas. The weakness in Europe and Africa resulted primarily from the
difficult trading conditions in Germany, Spain and Portugal. Asia Pacific
continued its broad-based profit growth, particularly in greater China and South
Korea. North America's results were driven largely by growth in Crown Royal
Canadian Whisky, Captain Morgan Original Spiced Rum and Absolut Vodka. The
improved contribution from Latin America was mainly the result of significantly
higher profits in Venezuela.
Depreciation and amortization of assets was $99 million in the year ended
January 31, 1996 and $90 million in the prior year. Amortization of goodwill was
$24 million and $22 million in the years ended January 31, 1996 and 1995,
respectively. Spirits and Wine capital expenditures rose to $165 million from
$109 million in the prior year. Total assets were $5,541 million at January 31,
1996 compared with $5,390 million at January 31, 1995.
FRUIT JUICES AND OTHER Attributed revenues for the total unit increased 19
percent to $1.9 billion as Tropicana Dole Beverages had 22 percent higher
revenues, including the partial year results of the juice beverage business
acquired from Dole. Tropicana's attributed revenues rose eight percent,
excluding revenues from the acquired Dole operations. EBITDA, before the
reengineering charge, rose 23 percent to $196 million reflecting strong
performances in the Tropicana base businesses and the acquisition of the Dole
juice beverage business. EBITDA as a percent of attributed revenues rose to 10.3
percent from 10.0 percent in the prior year.
Excluding the operations acquired from Dole, Tropicana's unit volume
increased eight percent driven largely by an 11 percent increase in Pure Premium
in North America and a 71 percent increase in international revenues. The
Tropicana share of the U.S. chilled orange juice market was a record high 42
percent in fiscal 1996.
Depreciation and amortization of assets was $55 million in the year ended
January 31, 1996 and $44 million in the prior year. Amortization of goodwill was
$27 million and $24 million in the years ended January 31, 1996 and 1995,
respectively. Capital expenditures for Fruit Juices and Other were $92 million
11
<PAGE> 14
in the year ended January 31, 1996 and $47 million in the prior year. Total
assets were $2,062 million at January 31, 1996 compared with $1,638 million at
January 31, 1995.
REENGINEERING ACTIVITIES In connection with a program to better position its
beverage operations for strategic growth, the Company recorded a pretax charge
of $290 million in the quarter ended October 31, 1995. The charge related
principally to the Company's global spirits and wine manufacturing, financial,
marketing and distribution systems and included rationalization of facilities in
the U.S. and Europe and other costs related to the redesign of processes
associated with the fulfillment of customer orders and the organizational
structure under which the Spirits and Wine business operates. The components of
the $290 million charge reflected a provision of $100 million for severance
costs, $120 million for asset write-downs/impairments and $70 million for
facility rationalizations, including lease terminations, and other reengineering
programs.
After giving effect to the charge, the Beverages segment reported EBITDA of
$669 million and operating income of $456 million compared with EBITDA of $968
million and operating income of $781 million in the prior year. While the full
magnitude of the cost savings associated with the charge will take several years
to achieve, the benefits will build over time and management expects savings
beginning in the fiscal year which began July 1, 1996. In addition, a
significant portion of the cash outlays associated with the plan should be
completed by June 30, 1997.
ENTERTAINMENT
In the year ended January 31, 1996, MCA contributed $3.1 billion to reported
revenues and $205 million to operating income, which represented MCA's results
since the Company acquired its 80 percent interest in MCA in June 1995. Although
the Company's reported financial results reflected only the partial year of MCA
operations, in order to provide a basis of comparison, the discussion that
follows is based upon MCA results for the 12 months ended December 31, 1995
compared with the prior year.
FILMED ENTERTAINMENT Attributed revenues grew five percent to $3.5 billion, and
EBITDA increased to $292 million from $176 million. EBITDA as a percent of
attributed revenues was 8.4 percent as compared with 5.3 percent in the prior
year.
The motion picture group was driven by the successful worldwide performance
of our summer pictures including Casper, Apollo 13 and Babe. Our share of the
domestic box office increased from 11 percent to almost 13 percent in 1995.
Television operations benefited from higher sales of library product at improved
margins, in addition to reduced losses on fewer new network and first-run
syndication series. EBITDA of our 50 percent-owned joint venture, USA Networks,
increased substantially due to higher advertising revenues, increased subscriber
revenues and lower programming costs.
MUSIC ENTERTAINMENT The Music Entertainment Group faced difficult comparisons
due to an exceptionally strong performance in 1994. Attributed revenues declined
three percent to $1,257 million, while EBITDA fell 36 percent to $123 million.
EBITDA as a percent of attributed revenues decreased from 14.8 percent in 1994
to 9.8 percent in 1995 as a result of increased investment in new label joint
ventures and international expansion, and higher reserves to reflect weaker
retail market conditions.
New releases in 1995 included albums by Live and White Zombie, and the
Dangerous Minds soundtrack, following successful new albums in 1994 by The
Eagles, Counting Crows, Aerosmith and Nirvana.
RECREATION Attributed revenues increased two percent to $447 million in 1995,
while EBITDA decreased slightly to $124 million from $128 million. EBITDA as a
percent of attributed revenues declined from 29.1 percent to 27.7 percent
reflecting higher development spending and a nonrecurring gain realized in 1994.
Our theme parks were solid, despite competitive pressure from new attractions
and aggressive marketing efforts at other theme parks. Universal Studios
Hollywood had a four percent increase in per capita spending and one percent
growth in attendance. Per capita spending at Universal Studios Florida was up
slightly and attendance was essentially unchanged.
PUBLISHING AND OTHER Attributed revenues were up 11 percent to $581 million,
while EBITDA grew to $54 million. Book publishing was higher due to successful
new releases by a number of authors including Tom Clancy, Patricia Cornwell, Amy
Tan and Charles Kuralt. Spencer Gifts had a very strong year, with comparable
store sales up over nine percent. EBITDA also benefited from several favorable
nonoperating income items.
RESULTS OF OPERATIONS
YEAR ENDED JANUARY 31, 1995 VS. YEAR ENDED JANUARY 31, 1994 In the year ended
January 31, 1995, total reported revenues rose six percent as a result of
increases by both Spirits and Wine, and Fruit Juices and Other. EBITDA increased
three
12
<PAGE> 15
percent due to improved Spirits and Wine operations, while operating results
from Fruit Juices and Other declined. Corporate expenses for the fiscal year
ended January 31, 1995 included $35 million of expenses related to the Company's
reengineering efforts. Operating income increased one percent to $760 million
before this charge, but declined to $725 million after the charge.
Interest, net and other in the year ended January 31, 1995 included $396
million of net interest expense, partially offset by $34 million of dividend
income from Time Warner and DuPont. In the year ended January 31, 1994, net
interest expense was $339 million and dividend income was $20 million. The
higher net interest expense reflected a higher average net debt resulting from
financing the Time Warner investment, and an increase in average interest rates.
The effective income tax rate related to continuing business, and excluding
the $65 million charge related to the 1981 DuPont transaction, decreased from 35
percent to 29 percent because a greater proportion of the income was derived
from countries with relatively lower tax rates.
In the year ended January 31, 1995, income from discontinued DuPont
activities included $264 million in after-tax dividend income and $353 million
of unremitted earnings. In the year ended January 31, 1994, after-tax dividend
income was $256 million and unremitted DuPont earnings reflected a loss of $160
million, due to significant nonrecurring charges taken by DuPont.
Net income for the year ended January 31, 1995, was $736 million, or $1.98
per share, up 94 percent from the prior year reflecting improved DuPont results.
Net income included a $75 million after-tax charge for the cumulative effect of
an accounting change relating to postemployment benefits.
BEVERAGES
In the year ended January 31, 1995, reported revenues for the Beverages segment
were $6.4 billion and operating income was $781 million.
SPIRITS AND WINE Attributed revenues increased eight percent including the sales
of Absolut Vodka. EBITDA grew five percent to $809 million. EBITDA represented
16.0 percent of attributed revenues as compared with 16.4 percent in the year
ended January 31, 1994. This decline was partially the result of higher sales
from agency brands in the year ended January 31, 1995, primarily Absolut Vodka,
as well as increased investment in our key brands and strategic markets.
Case volume grew six percent in the year ended January 31, 1995 as a number
of the Company's premium brands showed strong unit gains including Chivas Regal
Scotch Whisky, Martell Cognac and Passport Scotch Whisky.
The Company experienced strong revenue growth in North America and many key
Far Eastern markets. Most Latin American affiliates suffered from difficult
economic conditions. The year-on-year results in Europe were adversely affected
by the loss of profits from agency brands that were terminated in France and
Germany in 1993.
FRUIT JUICES AND OTHER Attributed revenues rose five percent but EBITDA declined
eight percent in the year ended January 31, 1995 as a result of weakness in the
shelf-stable business in the U.S. and continued investment in international
expansion. EBITDA as a percent of attributed revenues fell to 10.0 percent from
11.4 percent.
Tropicana's revenue growth resulted from the continued success of Pure
Premium Grovestand Orange Juice and Pure Premium Grapefruit Juice, which were
introduced in 1993, as well as the introduction of Pure Premium Ruby Red Orange
Juice and the repositioning of the Season's Best line of from-concentrate
juices. The combined Pure Premium and Season's Best share of the U.S. chilled
orange juice market rose three percent to 41 percent in 1994. Unit volume
increased 11 percent, including a 57 percent jump in international unit volumes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position remained strong during the Transition Period.
The cash flow for the five months ended June 30, 1996 was impacted by seasonal
factors which affect our businesses between January and June. In the five months
from February 1 to June 30, 1996, net cash provided by continuing operations was
$903 million, following net cash provided of $1,025 million in the twelve months
ended January 31, 1996. The results for the Transition Period included
significant noncash charges such as amortization of film costs, depreciation and
amortization of assets and amortization of excess of cost over fair value of
assets.
13
<PAGE> 16
In addition, cash was generated by a substantial reduction in accounts
receivable due to the collection of seasonally high receivables which were
outstanding at January 31, 1996. The increases in net cash were partially offset
by higher inventory requirements, largely reflecting a seasonal peak at
Tropicana, and a reduction in accounts payable and accrued liabilities also
related to the seasonality of our businesses.
Net cash used for investing activities was $1.3 billion in the Transition
Period. The major items which required cash included the investment in
Interscope Records of $200 million, the investment in Brillstein-Grey
Entertainment of $81 million and investments in unconsolidated companies
including Cineplex Odeon Corporation and SEGA GameWorks. In addition, film
production costs were $626 million and total capital expenditures were $305
million: Beverages--$168 million, MCA--$136 million and Corporate--$1 million.
In the twelve months ended January 31, 1996, investing activities provided $875
million mainly attributable to the net after-tax cash proceeds of the DuPont
redemption transaction which remained after the financing of the purchase of 80
percent of MCA and the $273 million acquisition of the juice beverage operations
of Dole.
In the Transition Period, the net result of cash provided by ongoing
operations and used for investing activities, the payment of $112 million of
dividends, and the repurchase of $68 million of the Company's common shares was
an increase in net debt of $562 million. This reflects an increase in short-term
borrowings of $916 million, partially offset by the early redemption of $249
million of 9 3/4% Guaranteed Notes which were due in June 2000. In the twelve
months ended January 31, 1996, net debt declined $1.6 billion largely due to the
repayment of debt with the proceeds from the DuPont redemption in excess of the
funds used to finance acquisitions.
The Company's total long- and short-term debt, net of cash and short-term
investments, increased to $4.1 billion at June 30, 1996 from $3.6 billion at
January 31, 1996. The Company's ratio of net debt to total capitalization
(including minority interest) increased from 24 percent to 27 percent, mainly
because of the higher debt outstanding. Subsequent to June 30, 1996, the Company
sold 156 million DuPont equity warrants back to DuPont for $500 million in cash.
The $479 million of after-tax net proceeds have been used largely to repay debt.
In addition, the Company's liquidity is enhanced by the investment in 14.5
percent of Time Warner stock which had a market value of $2.2 billion on June
30, 1996. As previously indicated, we are evaluating our options, including a
possible sale of this investment.
The Company's working capital position is reinforced by available credit
facilities of $3.8 billion. These facilities are used to support the Company's
commercial paper borrowings and are available for general corporate purposes.
The Company continues to utilize U.S. dollar-denominated commercial paper to
fund seasonal working capital requirements in the U.S. and Canada. The Company
also borrows in different currencies from other sources to meet the borrowing
needs of its affiliates. The nature and amount of the Company's long-term and
short-term debt can be expected to vary as a result of future business
requirements, market conditions and other factors.
The Company operates internationally, with manufacturing and sales facilities
in various locations around the world. The Company continually evaluates its
foreign currency exposure (primarily the British pound, French franc, and German
mark), based on current market conditions and the business environment. In order
to mitigate the effect of foreign currency risk, the Company engages in hedging
activities. The magnitude and nature of such hedging activities are explained
further in Note 8 to the financial statements.
The Company believes its internally generated liquidity together with access
to external capital resources will be sufficient to satisfy existing commitments
and plans, and to provide adequate financial flexibility to take advantage of
potential strategic business opportunities should they arise.
QUARTERLY HIGH AND LOW SHARE PRICES
<TABLE>
<CAPTION>
FIVE MONTHS Fiscal Years Ended
ENDED JUNE 30, January 31,
1996 1996 1995
HIGH LOW HIGH LOW High Low
<S> <C> <C> <C> <C> <C> <C>
New York Stock Exchange
First Quarter US$38 3/8 US$31 3/4 US$32 3/8 US$25 5/8 US$31 US$27
Second Quarter 36 3/8 32 1/2 36 3/4 26 3/4 32 28 1/8
Third Quarter 38 1/8 34 1/4 32 5/8 29 1/8
Fourth Quarter 39 1/2 34 1/4 30 3/4 27 1/8
Canadian Stock Exchanges
(Canadian Dollars)
First Quarter C$52 1/2 C$43 1/8 C$45 1/4 C$35 1/2 C$42 1/2 C$37 1/4
Second Quarter 49 3/4 44 2/5 50 36 1/4 43 7/8 38 3/4
Third Quarter 52 46 1/4 44 5/8 39 1/4
Fourth Quarter 53 1/4 46 7/8 43 1/8 37 3/8
</TABLE>
RETURN TO SHAREHOLDERS
The Company had 8,092 registered shareholders at August 15, 1996. The Company's
common shares are traded on the New York, Toronto, Montreal, Vancouver and
London Stock Exchanges. Closing prices at June 30, 1996, on the New York and
Toronto Stock Exchanges were $33.63 and C$45.75, respectively.
In the Transition Period dividends paid were $0.15 per share per quarter. In
the year ended January 31, 1996, the Company also paid dividends of $0.15 per
share in each of the four quarters. In the year ended January 31, 1995, the
Company paid dividends of $0.14 per share in the first two quarters and $0.15
per share in the final two quarters. Dividends paid to shareholders totaled $112
million in the Transition Period and $224 million and $216 million in the years
ended January 31, 1996 and 1995, respectively.
14
<PAGE> 17
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
TRANSITION PERIOD
ENDED JUNE 30, Fiscal Years Ended January 31,
U.S. dollars in millions, except per share amounts 1996 1996 1995 1994
<S> <C> <C> <C> <C>
Revenues $5,013 $9,747 $6,399 $6,038
Cost of revenues 3,186 6,122 3,654 3,451
Selling, general and administrative expenses 1,648 3,041 2,020 1,833
...... ...... ...... ......
Operating Income 179 584 725 754
Interest, net and other 114 235 362 319
...... ...... ...... ......
65 349 363 435
Provision (benefit) for income taxes-- current year 52 153 104 152
- --1981 transaction (67) - 65 -
Minority interest (5) 22 - -
...... ...... ...... ......
Income Before Discontinued DuPont Activities and
Cumulative Effect of Accounting Change 85 174 194 283
...... ...... ...... ......
Discontinued DuPont Activities:
Dividends, after tax - 68 264 256
Unremitted earnings (loss) - - 353 (160)
Gain on redemption of 156 million shares, after tax - 3,164 - -
...... ...... ...... ......
- 3,232 617 96
...... ...... ...... ......
Income Before Cumulative Effect of
Accounting Change 85 3,406 811 379
Cumulative effect of accounting change, after tax - - (75) -
...... ...... ...... ......
Net Income $ 85 $3,406 $ 736 $ 379
====== ====== ====== ======
Earnings Per Share
Income before discontinued DuPont activities
and cumulative effect of accounting change $ .23 $ .46 $ .52 $ .76
Discontinued DuPont activities, after tax - 8.67 1.66 .26
...... ...... ...... ......
Income Before Cumulative Effect of
Accounting Change .23 9.13 2.18 1.02
Cumulative effect of accounting change, after tax - - (.20) -
...... ...... ...... ......
Net Income $ .23 $ 9.13 $ 1.98 $ 1.02
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 18
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, January 31,
U.S. dollars in millions 1996 1996 1995
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and short-term investments at cost $ 279 $ 254 $ 157
Receivables, net 1,770 2,276 1,328
Inventories 3,142 2,914 2,519
Film costs, net of amortization 471 510 -
DuPont warrants 440 - -
Deferred income taxes 402 361 89
Prepaid expenses and other current assets 382 325 172
....... ....... .......
TOTAL CURRENT ASSETS 6,886 6,640 4,265
....... ....... .......
Common stock of DuPont 651 631 3,670
DuPont warrants - 440 -
Common stock of Time Warner 2,228 2,356 2,043
Film costs, net of amortization 783 790 -
Artists' contracts, advances and other entertainment assets 646 712 -
Deferred charges and other assets 770 746 143
Property, plant and equipment, net 2,951 2,806 1,267
Investments in unconsolidated companies 2,162 1,936 57
Excess of cost over fair value of assets acquired 4,551 4,298 1,547
....... ....... .......
$21,628 $21,355 $12,992
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings and indebtedness payable within one year $ 1,850 $ 936 $ 2,475
Accrued royalties and participations 602 642 -
Payables and accrued liabilities 2,086 2,164 1,423
Income and other taxes 149 112 193
....... ....... .......
TOTAL CURRENT LIABILITIES 4,687 3,854 4,091
....... ....... .......
Long-term indebtedness 2,562 2,889 2,841
Accrued royalties and participations 388 404 -
Deferred income taxes 623 696 52
Deferred income taxes--DuPont share redemption 1,540 1,489 -
Other credits 784 851 488
Minority interest 1,839 1,844 11
Shareholders' Equity
Shares without par value 725 709 638
Cumulative currency translation adjustments (246) (268) (359)
Cumulative gain (loss) on equity securities, net of tax 337 407 (85)
Retained earnings 8,389 8,480 5,315
....... ....... .......
TOTAL SHAREHOLDERS' EQUITY 9,205 9,328 5,509
....... ....... .......
$21,628 $21,355 $12,992
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
Approved by the Board
/s/ Edgar M. Bronfman /s/ C.E. Medland
Edgar M. Bronfman C.E. Medland
Director Director
16
<PAGE> 19
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
TRANSITION PERIOD
ENDED JUNE 30, Fiscal Years Ended January 31,
U.S. DOLLARS IN MILLIONS 1996 1996 1995 1994
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Income Before Discontinued DuPont Activities and
Cumulative Effect of Accounting Change $ 85 $ 174 $ 194 $ 283
....... ....... ...... .......
Adjustments to Reconcile Income Before Discontinued
DuPont Activities and Cumulative Effect of
Accounting Change to Net Cash Provided:
Amortization of film costs 524 642 - -
Depreciation and amortization of assets 158 255 138 125
Amortization of excess of cost over fair value of
assets acquired 84 113 46 41
Minority interest (credited) charged to income (5) 22 - -
Sundry 4 20 23 (5)
Changes in assets and liabilities:
Receivables, net 532 (172) (157) (73)
Inventories (212) (137) (23) 24
Prepaid expenses and other current assets (59) (19) (36) (7)
Artists' contracts, advances and other
entertainment assets 35 74 - -
Payables and accrued liabilities (243) 140 363 35
Income and other taxes payable 55 (105) 38 14
Deferred income taxes 15 14 (114) 17
Other credits (70) 4 47 16
....... ....... ...... .......
818 851 325 187
....... ....... ...... .......
Net Cash Provided by Continuing Operations 903 1,025 519 470
....... ....... ...... .......
INVESTING ACTIVITIES
Discontinued DuPont activities:
Dividends, net of taxes paid - 68 264 256
Proceeds from redemption of shares, net of taxes paid - 7,729 - -
Purchase of 80 percent interest in MCA - (5,523) - -
Film production (626) (684) - -
Capital expenditures (305) (433) (172) (163)
Investment in Interscope Records (200) - - -
Investment in Brillstein-Grey Entertainment (81) - - -
Investment in unconsolidated companies (127) - - -
Purchase of Dole juice beverage business - (273) - -
Purchase of Time Warner common stock - - (474) (1,695)
Increase in DuPont investment related to 1981 transaction - - (162) -
Sundry 10 (9) (93) (128)
....... ....... ...... .......
Net Cash (Used for) Provided by Investing Activities (1,329) 875 (637) (1,730)
....... ....... ...... .......
FINANCING ACTIVITIES
Dividends paid (112) (224) (216) (209)
Issuance of shares upon exercise of stock options and
conversion of LYONs 20 72 22 26
Shares purchased and retired (68) (18) (23) (61)
Increase in long-term indebtedness 36 214 3 605
Decrease in long-term indebtedness (341) (251) (252) (104)
Increase (decrease) in short-term borrowings and
indebtedness payable within one year 916 (1,596) 610 1,018
....... ....... ...... .......
Net Cash Provided by (Used for) Financing Activities 451 (1,803) 144 1,275
....... ....... ...... .......
NET INCREASE IN CASH AND SHORT-TERM INVESTMENTS $ 25 $ 97 $ 26 $ 15
======= ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE> 20
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Cumulative Cumulative
Shares Without Par Value Currency Gain (Loss)
Number Translation on Equity Retained
U.S. dollars in millions, except per share amounts (thousands) Amount Adjustments Securities Earnings
<S> <C> <C> <C> <C> <C>
January 31, 1993 373,690 $ 595 $ (369) $ 4,704
Fiscal year ended January 31, 1994
Net income 379
Dividends paid ($.56 per share) (209)
Change in currency translation adjustments (110)
Change in market value of equity
securities, net of $26 tax liability $ 46
Shares issued -- exercise of stock options 1,115 26
-- conversion of LYONs 14 -
Shares purchased and retired (2,330) (4) (57)
....... ..... ...... ..... .......
January 31, 1994 372,489 617 (479) 46 4,817
Fiscal year ended January 31, 1995
Net income before cumulative
effect of accounting change 811
Cumulative effect of accounting change (75)
Dividends paid ($.58 per share) (216)
Change in currency translation adjustments 120
Change in market value of equity
securities, net of $70 tax benefit (131)
Shares issued -- exercise of stock options 827 21
-- conversion of LYONs 31 1
Shares purchased and retired (810) (1) (22)
....... ..... ...... ..... .......
January 31, 1995 372,537 638 (359) (85) 5,315
Fiscal year ended January 31, 1996
Net income 3,406
Dividends paid ($.60 per share) (224)
Change in currency translation adjustments 91
Change in market value of equity
securities, net of $265 tax liability 492
Shares issued -- exercise of stock options 2,056 57
-- conversion of LYONs 550 15
Shares purchased and retired (681) (1) (17)
....... ..... ...... ..... .......
January 31, 1996 374,462 709 (268) 407 8,480
Transition period ended June 30, 1996
Net income 85
Dividends paid ($.30 per share) (112)
Change in currency translation adjustments 22
Change in market value of equity
securities, net of $38 tax benefit (70)
Shares issued -- exercise of stock options 612 18
-- conversion of LYONs 57 2
Shares purchased and retired (2,072) (4) (64)
....... ..... ...... ..... .......
June 30, 1996 373,059 $ 725 $ (246) $ 337 $ 8,389
======= ===== ====== ===== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE> 21
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE SEAGRAM COMPANY LTD. operates in two global business segments: beverages and
entertainment. The beverage businesses are engaged principally in the production
and marketing of distilled spirits, wines, fruit juices, coolers, beers and
mixers. The entertainment company, MCA INC., produces and distributes motion
picture, television and home video products, and recorded music; operates theme
parks and retail stores; and publishes books.
More than 50 percent of the Company's shares are held by U.S. residents and,
therefore, the Company has prepared its consolidated financial statements in
accordance with U.S. generally accepted accounting principles (GAAP) which, in
their application to the Company, conform in all material respects to GAAP in
Canada. Differences between U.S. and Canadian GAAP and the magnitude thereof are
discussed in Note 16. Should a material difference arise in the future,
financial statements will be provided under both U.S. and Canadian GAAP.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of The Seagram Company Ltd. and its subsidiaries. The equity method is
used to account for unconsolidated affiliates owned 20 percent or more. In
conformity with GAAP, management has made estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses. Actual
results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION Except for operations in highly inflationary
economies, affiliates outside the U.S. operating in the beverages segment use
the local currency as the functional currency. For affiliates in countries
considered to have a highly inflationary economy, inventories and property,
plant and equipment are translated at historical exchange rates and translation
effects are included in net income.
Affiliates outside the U.S. operating in the entertainment segment
principally use the U.S. dollar as the functional currency.
INVENTORIES Inventories are stated at cost, which is not in excess of market,
and consist principally of spirits, wines and fruit juices. The cost of spirits,
wines and fruit juices inventories is determined by either the last-in,
first-out (LIFO) method or the identified cost method.
The Company's general practice is to expense, as incurred, costs associated
with the ageing of spirits and wines. In accordance with industry practice,
current assets include spirits and wines which, in the Company's normal business
cycle, are aged for varying periods of years.
The cost of music, publishing, retail and home video inventories is
determined by the first-in, first-out (FIFO) method.
REVENUES AND COSTS
FILM Generally, theatrical films are first distributed in the worldwide
theatrical and home video markets. Subsequently, theatrical films are made
available for worldwide pay television, network exhibition, television
syndication and basic cable television. Generally, television films are first
licensed for network exhibition and foreign syndication or home video, and
subsequently for domestic syndication or cable television. Certain television
films are produced and/or distributed directly for initial exhibition by local
television stations, advertiser-supported cable television, pay television
and/or home video.
Revenues from the theatrical distribution of films are recognized as the
films are exhibited. Revenues from television and pay television licensing
agreements are recognized when the films are available for telecast. Revenues
from the sale of home video product, net of provision for estimated returns and
allowances, are recognized upon availability of product for retail sale.
Generally, the estimated ultimate costs of completed theatrical and
television film productions (including applicable capitalized overhead) are
amortized and participation expenses are accrued for each production in the
proportion of revenue recognized by the Company during the year to the total
estimated future revenue to be received from all sources, under the individual
film forecast method. Estimated ultimate revenues and costs are reviewed
quarterly and revisions to amortization rates or write-downs to net realizable
value may occur.
Film costs, net of amortization, classified as current assets include the
portion of unamortized costs of completed theatrical films allocated to
theatrical, home video and pay television distribution markets; television films
in production which are under contract of sale; and a portion of costs of
completed television films. The allocated portion of released film costs
expected to be realized from secondary markets or other exploitation is reported
as a noncurrent asset. Other costs relating to film production, including the
purchase price of literary properties and related film development costs, and
the film library are classified as noncurrent assets. Abandoned story and
development costs are charged to film
19
<PAGE> 22
production overhead. Film costs are stated at the lower of unamortized cost or
estimated net realizable value as periodically determined on a film-by-film
basis. Approximately $300 million of the cost of the MCA acquisition was
allocated to the film library and is being amortized on a straight-line basis
principally over a 20 year life.
RECORDED MUSIC AND BOOK PUBLISHING Revenues from the sale of recorded music
and books, net of provision for estimated returns and allowances, are recognized
upon shipment. Advances to established recording artists and writers and direct
costs associated with the creation of record masters and books are capitalized
and are charged to expense as the related royalties are earned or when the
amounts are determined to be unrecoverable. The advances are expensed when past
performance or current popularity does not provide a sound basis for estimating
that the advance will be recouped from royalties to be earned. Approximately
$400 million of the cost of the MCA acquisition was allocated to artists'
contracts, music catalogs and copyrights and is being amortized, on an
accelerated basis, over a 14 to 20 year life.
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is carried at
cost. Depreciation is determined for financial reporting purposes using the
straight-line method over estimated useful asset lives, generally at annual
rates of 2-10 percent for buildings, 4-33 percent for machinery and equipment
and 2-20 percent for other assets.
EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED AND OTHER INTANGIBLE ASSETS
The unallocated excess of cost of purchased businesses over the fair value of
assets acquired, the excess of investments in unconsolidated companies over the
underlying equity in tangible net assets acquired and other intangible assets
are being amortized on a straight-line basis principally over 40 years from the
date of acquisition. The Company reviews the carrying value of goodwill for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Measurement of any impairment would
include a comparison of discounted estimated future operating cash flows
anticipated to be generated during the remaining amortization period of the
goodwill to the net carrying value of goodwill.
INCOME TAXES Deferred tax assets and liabilities are recognized based on
differences between the financial statement and tax bases of assets and
liabilities using presently enacted tax rates. Deferred taxes are not provided
for that portion of undistributed earnings of foreign subsidiaries which is
considered to be permanently reinvested.
BENEFIT PLANS Retirement pensions are provided for substantially all of the
Company's employees through either defined benefit or defined contribution plans
sponsored by the Company or unions representing employees. For Company-sponsored
defined benefit plans, pension expense and plan contributions are determined by
independent consulting actuaries; pension benefits under defined benefit plans
generally are based on years of service and compensation levels near the end of
employee service. The funding policy for tax-qualified pension plans is
consistent with statutory funding requirements and regulations. Contributions to
defined contribution plans are funded and expensed currently. Postretirement
health care and life insurance are provided to a majority of nonunion employees
in the U.S.. Postemployment programs, principally severance, are provided for
the majority of nonunion employees. The cost of these programs is accrued based
on actuarial studies. There is no advance funding for postretirement or
postemployment benefits.
STOCK-BASED COMPENSATION Compensation cost attributable to stock option and
similar plans is recognized based on the difference, if any, between the quoted
market price of the stock on the date of grant over the exercise price of the
option. The Company does not issue options at prices below market value at date
of grant.
FINANCIAL INSTRUMENTS The Company occasionally uses foreign exchange
contracts to hedge a portion of its foreign indebtedness. To reduce foreign
currency risk on intercompany payments, the Company hedges through currency
forwards and options. Gains and losses on forward contracts are deferred and
offset against foreign exchange gains and losses on the underlying hedged
transaction.
RECLASSIFICATIONS Certain prior year amounts in the financial statements and
notes have been reclassified to conform with the current period presentation.
20
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 FISCAL YEAR CHANGE
Effective June 30, 1996, the Company changed its fiscal year-end from January 31
to June 30. Accordingly, the consolidated financial statements include the
results of operations for the transition period, which are not necessarily
indicative of operations for a full year.
Results for the comparable prior year period are summarized below.
<TABLE>
<CAPTION>
Five Months
Ended June 30,
millions, except per share amounts (unaudited) 1995
<S> <C>
Revenues $2,715
Operating income 256
Provision for income taxes 63
Income before discontinued DuPont activities 117
Discontinued DuPont activities, after tax 3,232
Net income 3,349
Earnings per share
Income before discontinued DuPont activities $ .32
Discontinued DuPont activities, after tax 8.67
Net income 8.99
</TABLE>
Note 2 DUPONT SHARE REDEMPTION AND REMAINING DUPONT INVESTMENT
On April 6, 1995, E.I. du Pont de Nemours and Company ("DuPont") redeemed 156
million shares of its common stock owned by the Company for $8.336 billion plus
share purchase warrants which the Company valued as of the date of the
transaction at $440 million. The Company received after-tax proceeds of
approximately $7.7 billion from the transaction. The $3.2 billion gain on the
transaction was net of a $2 billion tax provision of which $1.5 billion was
deferred. The Company has retained 8.2 million shares of DuPont common stock,
which were carried at their market value of $651 million at June 30, 1996. The
warrants were sold to DuPont for $500 million in July 1996, and therefore, are
classified as a current asset at June 30, 1996. The gain on the sale of the
warrants was $60 million ($39 million after tax) and will be reflected in the
Company's results in the fiscal quarter ending September 30, 1996. The
underlying historical value of the remaining DuPont shares is $187 million which
represents the historical cost of the retained shares plus unremitted earnings
related to those shares.
At January 31, 1995, the Company owned 164.2 million shares (approximately 24
percent) of the outstanding common stock of DuPont and accounted for its
interest in DuPont using the equity method, whereby its proportionate share of
DuPont's earnings was included in income. Financial information for DuPont for
the two fiscal years ended December 31, 1994 follows.
DuPont Financial Information
<TABLE>
<CAPTION>
Years Ended December 31,
millions 1994 1993
<S> <C> <C>
Sales and other income $40,259 $37,841
Cost of goods sold and all
other expenses 35,877 36,883
Provision for income taxes 1,655 392
....... ......
Income before extraordinary item 2,727 566
Extraordinary charge from early
extinguishment of debt - (11)
....... ......
Net income $ 2,727 $ 555
======= ======
</TABLE>
<TABLE>
<CAPTION>
December 31,
1994
<S> <C>
Current assets $11,108
Noncurrent assets 25,784
.......
$36,892
=======
Current liabilities $ 7,565
Noncurrent liabilities 16,505
Stockholders' equity 12,822
.......
$36,892
=======
</TABLE>
Note 3 ACQUISITION OF 80 PERCENT INTEREST IN MCA HOLDING I CORP.
On June 5, 1995, the Company completed its purchase of an 80 percent interest in
MCA Holding I Corp. ("MCA"), the indirect parent of MCA INC., from Matsushita
Electric Industrial Co., Ltd. ("Matsushita") for $5.7 billion. Matsushita
retains a 20 percent interest in MCA.
21
<PAGE> 24
The acquisition has been accounted for under the purchase method of
accounting. The cost of the acquisition has been allocated on the basis of the
estimated fair market value of the assets acquired and liabilities assumed. This
valuation resulted in $2.6 billion of unallocated excess of cost over fair value
of assets acquired which is being amortized over 40 years.
The unaudited condensed pro forma results of operations data presented below
assume the MCA acquisition and the redemption of 156 million shares of DuPont
common stock occurred at the beginning of each period presented. The unaudited
condensed pro forma results of operations data were prepared based upon the
historical consolidated statements of operations of the Company for the fiscal
years ended January 31, 1996 and 1995, and of MCA for the five months ended May
31, 1995 and the twelve months ended December 31, 1994, adjusted to reflect
purchase accounting. Financial results for MCA for the seven-month period June
1995 through December 1995 were included in the Company's results for the fiscal
year ended January 31, 1996. The unaudited pro forma information is not
necessarily indicative of the combined results of operations of the Company and
MCA that would have resulted if the transactions had occurred on the dates
previously indicated, nor is it necessarily indicative of future operating
results of the Company.
PRO FORMA INCOME STATEMENT DATA
<TABLE>
<CAPTION>
Fiscal Years Ended January 31,
millions, except per share amounts (unaudited) 1996 1995
<S> <C> <C>
Revenues $11,667 $11,217
======= =======
Income before cumulative effect of
accounting change $ 154 $ 346
Cumulative effect of accounting change - (75)
....... .......
Net income $ 154 $ 271
======= =======
Per share data:
Income before cumulative effect of
accounting change $ .41 $ .93
Cumulative effect of accounting change - (.20)
....... .......
Net income $ .41 $ .73
======= =======
</TABLE>
The above pro forma presentation excludes the $3.2 billion after-tax gain on the
redemption of the DuPont shares.
Note 4 ACQUISITION OF THE JUICE BEVERAGE BUSINESS OF THE DOLE FOOD COMPANY, INC.
("DOLE")
On May 19, 1995, the Company acquired the worldwide juice and juice beverage
business of Dole for $276 million. The transaction excluded Dole's canned
pineapple juice business. The reported operating results for the fiscal year
ended January 31, 1996 reflect the results of operations of the acquired
business from the acquisition date. The acquisition has been accounted for under
the purchase method of accounting. The cost of the acquisition has been
allocated on the basis of the estimated fair market value of the assets acquired
and liabilities assumed. This valuation resulted in $134 million of unallocated
excess cost over fair value of assets acquired which is being amortized over 40
years. The impact of this acquisition was not material to the consolidated
results of the Company.
Note 5 INVESTMENT IN TIME WARNER INC. ("TIME WARNER")
At June 30, 1996, the Company owned 56.8 million shares or 14.5 percent of the
outstanding common stock of Time Warner. The Company accounts for the investment
at market value. The total cost of this investment was $2.17 billion.
Note 6 INVESTMENTS IN UNCONSOLIDATED COMPANIES
The Company has a number of investments in unconsolidated companies which are 50
percent or less owned or controlled and are carried in the consolidated balance
sheet on the equity method.
ENTERTAINMENT SEGMENT Significant investments at June 30, 1996 include USA
Networks, owner of three advertiser-supported cable television services, USA
Network, the Sci-Fi Channel, and Sci-Fi Europe (50 percent owned); Cineplex
Odeon Corporation, primarily engaged in theatrical exhibition of motion pictures
in the U.S. and Canada (42 percent equity interest); United International
Pictures, a distributor of theatrical and pay television product outside the
U.S. and Canada (33 percent owned); Cinema International BV, primarily engaged
in marketing of home video product outside the U.S. and Canada (49 percent
owned); Cinema
22
<PAGE> 25
International Corporation and United Cinemas International, both engaged in
theatrical exhibition of motion pictures in territories outside the U.S. and
Canada (49 percent owned); Universal City Florida Partners, which owns Universal
Studios Florida, a motion picture and television themed tourist attraction and
production facility in Orlando, Florida (50 percent owned); Universal City
Development Partners, which has begun development on land adjacent to Universal
Studios Florida of an additional themed tourist attraction and commercial real
estate (50 percent owned).
BEVERAGES SEGMENT Significant investments at June 30, 1996 include Doosan
Seagram Co., Ltd., which is engaged in the production and marketing of whisky
products in South Korea (50 percent owned); Seagram (Thailand) Limited, an
importer and distributor of spirits and wines (49 percent owned); Kirin-Seagram
Limited, engaged in the manufacture, sale and distribution of distilled beverage
alcohol and wines in Japan (50 percent owned); and Kirin-Tropicana Inc., engaged
in the manufacture, sale and distribution, import and export of fruit juice
beverages (50 percent owned).
Summarized financial information, derived from unaudited historical financial
information, is presented below for the Company's investments in unconsolidated
companies.
SUMMARIZED BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
JUNE 30, January 31,
millions 1996 1996
<S> <C> <C>
Current assets $1,290 $1,102
Noncurrent assets 2,317 2,219
...... ......
Total assets $3,607 $3,321
====== ======
Current liabilities $1,049 $ 920
Noncurrent liabilities 1,219 1,254
Equity 1,339 1,147
...... ......
Total liabilities and equity $3,607 $3,321
====== ======
Proportionate share of net assets
of unconsolidated companies $ 612 $ 549
====== ======
</TABLE>
SUMMARIZED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
TRANSITION PERIOD Fiscal Year Ended
ENDED JUNE 30, January 31,
millions 1996 1996
<S> <C> <C>
Revenues $2,168 $2,851
Earnings before interest and taxes 188 214
Net income 129 137
</TABLE>
The Company's operating income includes $57 million and $72 million in equity
in the earnings of unconsolidated companies for the transition period ended June
30, 1996, and the fiscal year ended January 31, 1996, respectively, principally
in the entertainment segment.
Note 7 CREDIT ARRANGEMENTS AND LONG-TERM INDEBTEDNESS
At June 30, 1996, short-term borrowings comprised $315 million of bank
borrowings and $1.4 billion of commercial paper, bearing interest at market
rates. The Company's unused lines of credit totaled $3.8 billion and have
varying terms of up to five years. A portion of these lines of credit support
outstanding commercial paper.
Long-term Indebtedness
<TABLE>
<CAPTION>
June 30, January 31,
millions 1996 1996 1995
<S> <C> <C> <C>
9% Debentures due
December 15, 1998
(C$200 million)* $ 156 $ 156 $ 156
Unsecured term bank loans, due
1996 to 1999, with a weighted
average interest rate of 4.78% 251 267 -
6.5% Debentures due
April 1, 2003 200 200 200
8.35% Debentures
due November 15, 2006 200 200 200
8 3/8% Guaranteed Debentures
due February 15, 2007 200 200 200
7% Guaranteed Debentures
due April 15, 2008 200 200 200
8 7/8% Guaranteed Debentures
due September 15, 2011 223 223 223
9.65% Guaranteed Debentures
due August 15, 2018 249 249 249
9% Guaranteed Debentures
due August 15, 2021 198 198 198
8.35% Debentures
due January 15, 2022 199 199 199
6.875% Debentures
due September 1, 2023 200 200 200
6% Swiss Franc Bonds
due September 30, 2085
(SF 250 million) 200 206 195
7.83% to 93/4% Guaranteed Notes - 249 748
Sundry 217 195 127
...... ...... ......
2,693 2,942 3,095
Indebtedness payable within
one year (131) (53) (254)
...... ...... ......
$2,562 $2,889 $2,841
====== ====== ======
</TABLE>
*All principal and interest payments for these 9% Debentures were converted at
issuance through a series of currency exchange contracts from Canadian dollars
to U.S. dollars with an effective interest rate of 7.7%.
23
<PAGE> 26
Joseph E. Seagram & Sons, Inc. ("JES"), the Company's U.S. spirits and wine
subsidiary, has outstanding $17 million of Liquid Yield Option Notes (LYONs),
which are zero coupon notes with no interest payments due until maturity on
March 5, 2006. Each $1,000 face amount LYON may be converted, at the holder's
option, into 18.44 of the Company's common shares (648,609 shares at June 30,
1996). The Company has guaranteed the LYONs on a subordinated basis.
In addition, the Company has unconditionally guaranteed JES's 83/8 percent
Debentures due February 15, 2007, 7 percent Debentures due April 15, 2008, 8 7/8
percent Debentures due September 15, 2011, 9.65 percent Debentures due August
15, 2018 and 9 percent Debentures due August 15, 2021.
Interest expense on long-term indebtedness was $96 million in the transition
period ended June 30, 1996, and $236 million and $246 million in the fiscal
years ended January 31, 1996 and 1995, respectively. Annual repayments and
redemptions of long-term indebtedness for the five fiscal years subsequent to
June 30, 1996 are: 1997--$131 million; 1998--$15 million; 1999--$308 million;
2000--$35 million; and 2001--$1 million.
Summarized below is the JES financial information:
<TABLE>
<CAPTION>
TRANSITION PERIOD
ENDED JUNE 30, Fiscal Years Ended January 31,
millions 1996 1996 1995 1994
<S> <C> <C> <C> <C>
Revenues $ 1,362 $ 4,031 $ 4,566 $3,787
Cost of revenues 1,062 2,976 3,125 2,405
Income before discon-
tinued DuPont activities
and cumulative effect
of accounting change 57 43 60 100
Discontinued DuPont
activities, after tax - 3,232 617 96
Cumulative effect of
accounting change - - (56) -
...... ....... ...... ......
Net income $ 57 $ 3,275 $ 621 $ 196
====== ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, January 31,
1996 1996 1995
<S> <C> <C> <C>
Current assets $ 1,348 $ 1,412 $ 2,313
Noncurrent assets 11,702 11,442 8,688
...... ....... ......
$13,050 $12,854 $11,001
======= ======= =======
Current liabilities $ 1,028 $720 $ 2,549
Noncurrent liabilities 3,175 3,357 2,478
Shareholder's equity 8,847 8,777 5,974
...... ....... ......
$13,050 $12,854 $11,001
======= ======= =======
</TABLE>
Note 8 FINANCIAL INSTRUMENTS AND EQUITY SECURITIES
The Company selectively uses foreign currency forward and option contracts to
offset the effects of exchange rate changes on cash flow exposures denominated
in foreign currencies. These exposures include intercompany trade accounts,
service fees, intercompany loans and third-party debt. The Company does not use
derivative financial instruments for trading or speculative purposes.
The notional amount of forward exchange contracts and options is the amount
of foreign currency bought or sold at maturity and is not a measure of the
Company's exposure through its use of derivatives.
At June 30, 1996, the Company held foreign currency forward contracts to
purchase and sell foreign currencies, including cross-currency contracts to sell
one foreign currency for another currency, with notional amounts totalling $304
million. The notional amounts of these contracts, which mature at various dates
through December 1998, are summarized below:
<TABLE>
<CAPTION>
millions Buy Sell
<S> <C> <C>
Canadian dollar $177 $ -
German mark - 8
British pound - 14
U.S. dollar 42 3
New Zealand dollar 20 -
French franc - 6
Australian dollar - 7
Italian lira - 20
Other currencies - 7
.... ....
$239 $ 65
==== ====
</TABLE>
The Company minimizes its credit exposure to counterparties by entering into
contracts only with highly rated commercial banks or financial institutions and
by distributing the transactions among the selected institutions. Although the
Company's credit risk is the replacement cost at the then-estimated fair value
of the instrument, management believes that the risk of incurring losses is
remote and that such losses, if any, would not be material. The market risk
related to the foreign exchange agreements should be offset by changes in the
valuation of the underlying items being hedged.
24
<PAGE> 27
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments.
CASH AND SHORT-TERM INVESTMENTS The carrying amount reported in the balance
sheet for cash and short-term investments approximates their fair value.
FOREIGN CURRENCY EXCHANGE CONTRACTS The fair value of forward exchange
contracts is based on quoted market prices from banks.
SHORT- AND LONG-TERM DEBT The carrying amounts of commercial paper and
short-term bank loans approximate their fair value. The fair value of the
Company's long-term debt is estimated based on the quoted market prices for
similar issues.
<TABLE>
<CAPTION>
JUNE 30, 1996
millions CARRYING FAIR
AMOUNT VALUE
<S> <C> <C>
Cash and short-term investments $ 279 $ 279
Foreign currency exchange contracts (15) (15)
Short-term debt 1,850 1,850
Long-term debt 2,562 2,741
</TABLE>
EQUITY SECURITIES
The following is a summary of available-for-sale securities:
<TABLE>
<CAPTION>
JUNE 30, January 31,
millions 1996 1996 1995
<S> <C> <C> <C>
Cost $2,357 $2,357 $2,170
Gross Unrealized Gain 522 630 -
Gross Unrealized Loss - - (127)
Fair Value 2,879 2,987 2,043
</TABLE>
Note 9 COMMON SHARES, EARNINGS PER SHARE AND STOCK OPTIONS
The Company is authorized to issue an unlimited number of common and preferred
shares without nominal or par value. At June 30, 1996, 29,734,847 common shares
were potentially issuable upon the conversion of the LYONs and the exercise of
employee stock options. The dilutive effect on earnings per share from the
assumed issuance of these shares would be less than three percent. Net income
per share was based on the following weighted average number of shares
outstanding during the fiscal period ended June 30, 1996--373,857,915; January
31, 1996--373,116,794; 1995--372,499,060; and 1994--373,050,863.
In the fiscal year ended January 31, 1996, the Company granted 66,500
restricted shares with a weighted average grant-date fair value of $35.69 per
share. These shares have voting and dividend rights; however, sale of the shares
is restricted prior to vesting. Restrictions on 33,250 of the restricted shares
will lapse on each of October 1, 1996 and October 1, 1997.
STOCK OPTION PLANS
Under the Company's employee stock option plans, options may be granted to
purchase the Company's common shares at not less than the fair market value of
the shares on the date of the grant. Currently outstanding options become
exercisable one to five years from the grant date and expire 10 years after the
grant date.
The Company has adopted Financial Accounting Standard No. 123, "Accounting
for Stock-Based Compensation" (FAS 123). In accordance with the provisions of
FAS 123, the Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its plans and does not
recognize compensation expense for its stock-based compensation plans other than
for restricted stock. If the Company had elected to recognize compensation
expense based upon the fair value at the grant date for awards under these plans
consistent with the methodology prescribed by FAS 123, the Company's net income
and earnings per share would be reduced to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
Fiscal Year
TRANSITION PERIOD Ended
ENDED JUNE 30, January 31,
millions, except per share amounts 1996 1996
<S> <C> <C>
Net Income:
As reported $ 85 $ 3,406
Pro forma 73 3,383
Earnings per common share:
As reported $ .23 $ 9.13
Pro forma .19 9.07
</TABLE>
These pro forma amounts may not be representative of future disclosures since
the estimated fair value of stock options is amortized to expense over the
vesting period, and additional options may be granted in future years. The fair
value for these options was estimated at the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions for the transition period ended June 30, 1996 and the fiscal year
ended January 31, 1996, respectively: dividend yields of 1.8 and 1.9 percent;
expected volatility of 22 and 20 percent; risk-free interest rates of 6.0 and
6.6 percent; and expected life of six years for both periods. The weighted
average fair value of options granted during the transition period ended June
30, 1996 and the fiscal year ended
25
<PAGE> 28
January 31, 1996 for which the exercise price equals the market price on the
grant date was $9.13 and $8.86, respectively. The weighted average fair value of
options granted during the transition period ended June 30, 1996 for which the
exercise price exceeded the market price on the grant date was $6.41.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
Transactions involving stock options are summarized as follows:
<TABLE>
<CAPTION>
Weighted Average
Exercise Price
Stock Options of Options
Description Outstanding Outstanding
<S> <C> <C>
Balance, January 31, 1993 12,226,342 $22.70
Granted 5,403,425 27.42
Exercised (1,115,300) 19.69
Cancelled (240,440) 27.51
..........
Balance, January 31, 1994 16,274,027 24.40
Granted 3,677,695 30.56
Exercised (827,040) 23.42
Cancelled (219,880) 28.85
..........
Balance, January 31, 1995 18,904,802 25.59
Granted 6,293,023 31.94
Exercised (2,055,830) 24.37
Cancelled (140,840) 29.96
..........
Balance, January 31, 1996 23,001,155 27.45
GRANTED 6,757,978 35.41
EXERCISED (611,855) 25.97
CANCELLED (61,040) 31.56
..........
BALANCE, JUNE 30, 1996 29,086,238 29.33
==========
</TABLE>
The following table summarizes information concerning currently outstanding and
exercisable stock options:
<TABLE>
<CAPTION>
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
<S> <C> <C> <C> <C> <C>
$10-$20 3,169,492 3.1 yrs. $17.89 3,169,492 $17.89
$20-$30 10,500,060 6.2 26.94 8,980,060 26.85
$30-$40 14,666,686 8.9 32.57 6,664,988 30.42
$40-$50 750,000 9.8 47.70 -
.......... ..........
29,086,238 18,814,540
========== ==========
</TABLE>
Note 10 INCOME TAXES
The following tables summarize the sources of pretax income and the resulting
income tax expense.
GEOGRAPHIC COMPONENTS OF PRETAX INCOME
<TABLE>
<CAPTION>
TRANSITION PERIOD
ENDED JUNE 30, Fiscal Years Ended January 31,
millions 1996 1996 1995 1994
<S> <C> <C> <C> <C>
U.S. $ (133) $ 82 $ (24) $ (22)
Canada (24) 17 15 37
Other jurisdictions 222 250 372 420
....... ....... ....... .......
Income before minority
interest and discontinued
DuPont activities 65 349 363 435
Discontinued DuPont
activities - 5,283 637 114
....... ....... ....... .......
Income before minority
interest $ 65 $ 5,632 $ 1,000 $ 549
======= ======= ======= =======
</TABLE>
COMPONENTS OF INCOME TAX EXPENSE
<TABLE>
<CAPTION>
TRANSITION PERIOD
ENDED JUNE 30, Fiscal Years Ended January 31,
millions 1996 1996 1995 1994
<S> <C> <C> <C> <C>
Income tax expense
(benefit) applicable to:
Continuing operations $ 52 $ 153 $ 104 $ 152
1981 transaction* (67) - 65 -
Discontinued DuPont
activities - 2,051 20 19
...... ...... ...... ......
Total income tax
expense (benefit) $ (15) $2,204 $ 189 $ 171
====== ====== ====== ======
</TABLE>
*The 1981 transaction relates to a loss disallowed by the U.S. Tax Court on the
exchange of common stock of Conoco Inc. for DuPont. In June, 1996, the Company
and the IRS reached a settlement whereby a portion of the original loss was
allowed.
<TABLE>
<S> <C> <C> <C> <C>
Current
Continuing operations
Federal $ (14) $ 26 $ (12) $ (34)
State and local taxes 6 19 - -
1981 transaction (105) - 188 -
Other jurisdictions 83 94 107 169
....... ....... ....... .......
(30) 139 283 135
Discontinued DuPont
activities - 612 20 19
....... ....... ....... .......
(30) 751 303 154
------- ------- ------- -------
Deferred
Continuing operations
Federal (8) 39 4 34
State and local (2) (2) - -
1981 transaction 38 - (123) -
Other jurisdictions (13) (23) 5 (17)
....... ....... ....... .......
15 14 (114) 17
....... ....... ....... .......
Discontinued DuPont
activities - 1,439 - -
....... ....... ....... .......
15 1,453 (114) 17
....... ....... ....... .......
Total income tax
expense (benefit) $ (15) $ 2,204 $ 189 $ 171
======= ======= ======= =======
</TABLE>
26
<PAGE> 29
COMPONENTS OF NET DEFERRED TAX LIABILITY (ASSET)
<TABLE>
<CAPTION>
JUNE 30, January 31,
millions 1996 1996 1995
<S> <C> <C> <C>
Basis and amortization differences $ 471 $ 428 $ 106
DuPont share redemption 1,540 1,489 -
Time Warner and DuPont investments 183 220 6
Unremitted foreign earnings 27 17 -
Other, net 86 80 11
....... ....... .......
Deferred tax liabilities 2,307 2,234 123
....... ....... .......
Employee benefits (102) (101) (92)
Tax credit carryovers (172) (150) -
Valuation, doubtful accounts and
return reserves (323) (269) (8)
Other, net (99) (24) (60)
....... ....... .......
Deferred tax assets (696) (544) (160)
Valuation allowance 150 134 -
....... ....... .......
(546) (410) (160)
....... ....... .......
Net deferred tax liability (asset) $ 1,761 $ 1,824 $ (37)
======= ======= =======
</TABLE>
The Company has U.S. tax credit carryovers of $172 million; $30 million of
which have no expiration date and $142 million of which have expiration dates
through 2005. The $150 million valuation allowance arises from uncertainty as to
the realization of certain U.S. tax credit carryforwards. If realized, these
benefits would be applied to reduce the MCA unallocated excess purchase price.
EFFECTIVE INCOME TAX RATE - CONTINUING OPERATIONS
<TABLE>
<CAPTION>
TRANSITION PERIOD
ENDED JUNE 30, Fiscal Years Ended January 31,
1996 1996 1995 1994
<S> <C> <C> <C> <C>
U.S. statutory rate 35% 35% 35% 35%
1981 transaction (103) - 18 -
State and local taxes 4 3 - -
Dividends received deduction (7) (3) (3) (1)
Goodwill amortization 45 11 4 3
Other 3 (2) (7) (2)
.... .. .. ..
Effective income tax rate --
continuing operations (23)% 44% 47% 35%
==== == == ==
</TABLE>
Various taxation authorities have proposed or levied assessments for
additional income taxes of prior years. Management believes that settlements
will not have a material effect on the results of operations, financial position
or liquidity of the Company.
Note 11 BENEFIT PLANS
PENSION
Pension costs were $27 million for the transition period ended June 30, 1996 and
$45 million, $24 million and $26 million for the fiscal years ended January 31,
1996, 1995 and 1994, respectively.
The Company has defined benefit pension plans which cover certain U.S.
employees. The net cost of the Company's U.S. pension plans was based on an
expected long-term return on plan assets of 10 percent for the transition period
ended June 30, 1996 and 10.75 percent for each of the fiscal years ended January
31, 1996, 1995 and 1994. Discount rates of 7.75 percent, 7.0 percent and 8.75
percent were used in determining the actuarial present value of the projected
benefit obligation at June 30, 1996, January 31, 1996 and January 31, 1995,
respectively. The assumed rates of increase in future compensation levels were
five percent to six percent for the transition period ended June 30, 1996, 4.5
percent to 5.5 percent for the fiscal year ended January 31, 1996, and six
percent to seven percent for the fiscal year ended January 31, 1995. Plans
outside the U.S. used assumptions in determining the actuarial present value of
projected benefit obligations that reflect the economic environments within the
various countries, and therefore are consistent with (but not identical to)
those of the U.S. plans.
The majority of the pension arrangements for the Company's employees of
affiliates outside the U.S., the United Kingdom and Canada are either insured or
government sponsored. In those affiliates outside of the U.S. where defined
benefit plans exist (United Kingdom, Canada and France), the net periodic
pension cost was $3 million for the transition period ended June 30, 1996 and $6
million for each of the fiscal years ended January 31, 1996, 1995 and 1994. At
June 30, 1996, the present value of these plans' projected benefit obligation
was $261 million, $246 million of which was for vested benefits; the fair value
of plan assets was $289 million.
NET COST OF U.S. DEFINED BENEFIT PENSION PLANS
<TABLE>
<CAPTION>
TRANSITION PERIOD
ENDED JUNE 30, Fiscal Years Ended January 31,
millions 1996 1996 1995 1994
<S> <C> <C> <C> <C>
Service cost-- benefits earned
during the period $ 8 $ 17 $ 18 $ 16
Interest cost on Projected
Benefit Obligation 22 52 47 46
Return on plan assets
Actual (gain) loss (55) (204) 11 (90)
Deferred actuarial gain (loss) 26 147 (75) 32
Net amortization 2 4 4 4
..... ..... ..... .....
Net pension cost $ 3 $ 16 $ 5 $ 8
===== ===== ===== =====
</TABLE>
27
<PAGE> 30
STATUS OF U.S. DEFINED BENEFIT PENSION PLANS
<TABLE>
<CAPTION>
JUNE 30, 1996
ASSETS EXCEED ACCUMULATED Assets Exceed
ACCUMULATED BENEFITS Accumulated
millions BENEFITS EXCEED ASSETS Benefits
<S> <C> <C> <C>
Actuarial present value of Vested Benefit Obligation $(501) $ (78) $(532)
----- ----- -----
Accumulated Benefit Obligation $(525) $ (81) $(559)
----- ----- -----
Projected Benefit Obligation $(609) $(105) $(648)
Plan assets at fair value, principally equity securities 757 - 715
..... ..... .....
Plan assets in excess of (less than) Projected Benefit Obligation 148 (105) 67
Deferred net actuarial (gain) loss (95) 38 (20)
Unamortized prior service cost 7 6 6
Unamortized transition obligation (asset) - 3 -
Recognition of minimum liability - (23) -
..... ..... .....
Prepaid (accrued) pension cost $ 60 $ (81) $ 53
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
January 31, 1996 January 31, 1995
Accumulated Assets Exceed Accumulated
Benefits accumulated Benefits
millions Exceed Assets Benefits Exceed Assets
<S> <C> <C> <C>
Actuarial present value of Vested Benefit Obligation $ (82) $(424) $ (60)
----- ----- -----
Accumulated Benefit Obligation $ (84) $(444) $ (63)
----- ----- -----
Projected Benefit Obligation $(110) $(522) $ (89)
Plan assets at fair value, principally equity securities - 547 -
..... ..... .....
Plan assets in excess of (less than) Projected Benefit Obligation (110) 25 (89)
Deferred net actuarial (gain) loss 46 28 34
Unamortized prior service cost 6 2 7
Unamortized transition obligation (asset) 3 (1) 4
Recognition of minimum liability (30) - (19)
..... ..... .....
Prepaid (accrued) pension cost $ (85) $ 54 $ (63)
===== ===== =====
</TABLE>
The Company has defined contribution plans covering certain U.S. employees.
Contributions made to these plans are included in consolidated pension costs of
$27 million for the transition period ended June 30, 1996.
POSTRETIREMENT
The Company provides retiree health care and life insurance benefits covering
certain retirees. Certain U.S. salaried and certain hourly employees are
eligible for benefits upon retirement and completion of a specified number of
years of service.
The components of net periodic postretirement benefit cost are as follows:
<TABLE>
<CAPTION>
TRANSITION PERIOD
ENDED JUNE 30, Fiscal Years Ended January 31,
millions 1996 1996 1995 1994
<S> <C> <C> <C> <C>
Service cost -- benefits earned
during the period $ 2 $ 3 $ 3 $ 5
Interest cost on accumulated
postretirement benefit
obligation 6 14 11 13
Amortization of prior
service cost (2) (4) (4) (1)
.... .... .... ....
Net postretirement
benefit cost $ 6 $ 13 $ 10 $ 17
==== ==== ==== ====
</TABLE>
The accumulated postretirement benefit obligation, included in Other Credits
in the accompanying balance sheet, comprises the following:
<TABLE>
<CAPTION>
JUNE 30, January 31,
millions 1996 1996 1995
<S> <C> <C> <C>
Retirees $ 125 $ 132 $ 85
Fully eligible active plan participants 25 27 25
Other active plan participants 46 50 36
Unrecognized:
Actuarial gain (loss) 3 (11) 16
Prior service cost 37 39 43
..... ..... .....
Accrued postretirement benefit obligation $ 236 $ 237 $ 205
===== ===== =====
</TABLE>
Future benefit costs were estimated assuming medical costs would increase at
an 8.3 percent annual rate, decreasing to a 5.5 percent annual growth
rate-ratably over the next six years, and then remaining at a 5.5 percent growth
rate thereafter. A one-percentage-point increase in this annual trend rate would
have increased the postretirement benefit obligation at June 30, 1996 by $12
million ($8 million after tax), with an increase in pretax expense of $1 million
for the transition period ended June 30, 1996. The weighted average discount
rate used to estimate the accumulated postretirement benefit obligation was 7.75
percent, 7.0 percent and 8.75 percent at June 30, 1996, January 31, 1996 and
January 31, 1995, respectively.
28
<PAGE> 31
POSTEMPLOYMENT
The Company adopted Financial Accounting Standard No. 112, "Employers'
Accounting for Postemployment Benefits" (FAS 112), in the first quarter of the
fiscal year ended January 31, 1995, resulting in a $75 million charge, net of
$40 million of deferred tax benefit. FAS 112 requires that the expected cost of
postemployment benefits be recognized when they are earned rather than when they
are paid. The postemployment obligation has been increased to reflect the
reengineering activities described in Note 13.
Note 12 BUSINESS SEGMENT AND GEOGRAPHIC DATA
BUSINESS SEGMENT DATA
<TABLE>
<CAPTION>
ENTER-
millions BEVERAGES TAINMENT CORPORATE(1) TOTAL
<S> <C> <C> <C> <C>
JUNE 30, 1996
Revenues $2,653 $ 2,360 $ - $ 5,013
Depreciation and
amortization of assets 70 86 2 158
Amortization of goodwill 22 62 - 84
Operating income (expense) 225 1 (47) 179
Identifiable assets 7,665 10,269 3,694 21,628
Capital expenditures 168 136 1 305
January 31, 1996
Revenues $6,694 $ 3,053 $ - $ 9,747
Depreciation and
amortization of assets 154 97 4 255
Amortization of goodwill 51 62 - 113
Operating income (expense) 456(2) 205 (77) 584
Identifiable assets 7,603 9,997 3,755 21,355
Capital expenditures 257 175 1 433
January 31, 1995
Revenues $6,399 $ - $ 6,399
Depreciation and
amortization of assets 134 4 138
Amortization of goodwill 46 - 46
Operating income (expense) 781 (56) 725
Identifiable assets 7,028 5,964 12,992
Capital expenditures 156 16 172
January 31, 1994
Revenues $6,038 $ - $ 6,038
Depreciation and
amortization of assets 122 3 125
Amortization of goodwill 41 - 41
Operating income (expense) 774 (20) 754
Identifiable assets 6,584 5,134 11,718
Capital expenditures 162 1 163
</TABLE>
(1) Includes (i) corporate expenses and assets not identifiable with either
business segment, and (ii) DuPont and Time Warner holdings, which
represented 90%, 91%, 96% and 96% of corporate assets at June 30, 1996 and
January 31, 1996, 1995 and 1994, respectively.
(2) Includes a $290 million charge related to reengineering activities.
GEOGRAPHIC DATA
<TABLE>
<CAPTION>
Sales and Other Income(1)
Unrelated Inter- Operating Total
millions Parties company Income Assets(2)
<S> <C> <C> <C> <C>
JUNE 30, 1996
U.S. $2,735 $ 73 $ (105) $12,773
Europe 1,588 176 239 4,402
Asia Pacific 395 - (8) 429
Latin America 147 13 22 288
Canada 148 61 31 417
...... ...... ...... .......
$5,013 $ 323 $ 179 $18,309
====== ====== ====== =======
January 31, 1996
U.S. $5,185 $ 167 $ 131 $12,171
Europe 3,026 464 276 4,585
Asia Pacific 860 - 30 463
Latin America 415 29 14 324
Canada 261 212 133 385
...... ...... ...... .......
$9,747 $ 872 $ 584 $17,928
====== ====== ====== =======
January 31, 1995
U.S. $2,818 $ 112 $ 160 $ 2,510
Europe 2,254 400 365 3,749
Asia Pacific 750 - 15 395
Latin America 440 30 43 388
Canada 137 207 142 237
...... ...... ...... .......
$6,399 $ 749 $ 725 $ 7,279
====== ====== ====== =======
January 31, 1994
U.S. $2,575 $ 91 $ 108 $ 2,452
Europe 2,188 334 411 3,372
Asia Pacific 618 - 4 322
Latin America 511 25 79 392
Canada 146 220 152 257
...... ...... ...... .......
$6,038 $ 670 $ 754 $ 6,795
====== ====== ====== =======
</TABLE>
(1) Sales are classified based upon the location of the legal entity which
invoices the customer rather than the location of the customer. Sales among
geographic areas include intercompany transactions on a current market price
basis.
(2) Excludes DuPont and Time Warner holdings.
Note 13 REENGINEERING ACTIVITIES
In connection with a program to better position its beverage operations to
achieve its strategic growth objectives, the Company recorded a pretax charge of
$290 million in the fiscal year ended January 31, 1996. The charge related
principally to the Company's global spirits and wine manufacturing, financial,
marketing and distribution systems and included rationalization of facilities in
the U.S. and Europe and other costs related to the redesign of processes
associated with the fulfillment of customer orders and the organizational
structure under which the spirits and wine business operates. The components of
the $290 million charge reflected approximately a $100 million provision for
severance costs, $120 million for asset write-downs/impairments and $70 million
for facility rationalization, including lease terminations, and other
reengineering programs.
29
<PAGE> 32
Note 14 ADDITIONAL FINANCIAL INFORMATION
Income Statement and Cash Flow Data
<TABLE>
<CAPTION>
TRANSITION PERIOD
ENDED JUNE 30, Fiscal Years Ended January 31,
millions 1996 1996 1995 1994
<S> <C> <C> <C> <C>
INTEREST, NET AND OTHER
Interest expense $ 151 $ 378 $408 $351
Interest income (13) (102) (10) (11)
Dividend income (19) (38) (34) (20)
Capitalized interest (5) (3) (2) (1)
..... ...... .... ....
$ 114 $ 235 $362 $319
===== ====== ==== ====
EXCISE TAXES
(included in sales and
cost of sales) $ 296 $ 812 $836 $811
CASH FLOW DATA
Interest paid, net $ 113 $ 262 $361 $346
Income taxes paid (refunded) $ (37) $1,083 $101 $122
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
JUNE 30, January 31,
millions 1996 1996 1995
<S> <C> <C> <C>
RECEIVABLES
Trade $ 1,860 $ 2,370 $ 1,292
Other 267 189 89
....... ....... .......
2,127 2,559 1,381
Allowance for doubtful accounts and
other valuation accounts (357) (283) (53)
....... ....... .......
$ 1,770 $ 2,276 $ 1,328
======= ======= =======
INVENTORIES
Beverages $ 2,789 $ 2,600 $ 2,398
Materials, supplies and other 353 314 121
....... ....... .......
$ 3,142 $ 2,914 $ 2,519
======= ======= =======
LIFO INVENTORIES
Estimated replacement cost $ 680 $ 473 $ 492
Excess of replacement cost over
LIFO carrying value (175) (180) (189)
....... ....... .......
$ 505 $ 293 $ 303
======= ======= =======
FILM COSTS, NET OF AMORTIZATION
THEATRICAL FILM COSTS
Released $ 490 $ 588
In process and unreleased 386 295
....... .......
876 883
....... .......
Television Film Costs
Released 368 391
In process and unreleased 10 26
....... .......
378 417
....... .......
Total Film Costs $ 1,254 $ 1,300
======= =======
</TABLE>
Unamortized costs related to released theatrical and television films
aggregated $858 million at June 30, 1996. Excluding the portion of the purchase
price allocated to the film library which is being amortized over a 20 year
life, the Company currently anticipates that approximately 81 percent of the
unamortized released film costs will be amortized under the individual film
forecast method during the three years ending June 30, 1999.
<TABLE>
<CAPTION>
JUNE 30, January 31,
millions 1996 1996 1995
<S> <C> <C> <C>
PROPERTY, PLANT AND EQUIPMENT
Land $ 544 $ 528 $ 137
Buildings and improvements 1,367 1,297 583
Machinery and equipment 1,531 1,456 1,170
Furniture and fixtures 348 355 137
Construction in progress 294 226 98
....... ....... .......
4,084 3,862 2,125
Accumulated depreciation (1,133) (1,056) (858)
....... ....... .......
$ 2,951 $ 2,806 $ 1,267
======= ======= =======
PAYABLES AND ACCRUED LIABILITIES
Trade $ 576 $ 596 $ 429
Other 1,510 1,568 994
....... ....... .......
$ 2,086 $ 2,164 $ 1,423
======= ======= =======
</TABLE>
30
<PAGE> 33
Note 15 COMMITMENTS AND CONTINGENCIES
The Company has various commitments for the purchase or construction of
property, plant and equipment, materials, supplies and items of investment
related to the ordinary conduct of business.
The Company is involved in various lawsuits, claims and inquiries. Management
believes that the resolution of these matters will not have a material adverse
effect on the results of operations, financial position or liquidity of the
Company.
Note 16 DIFFERENCES BETWEEN U.S. AND CANADIAN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
Differences between U.S. and Canadian GAAP for these financial statements are:
(i) The common stock in DuPont and Time Warner would be carried at cost
under Canadian GAAP, thereby reducing shareholders' equity by $337
million or four percent at June 30, 1996. There is no effect on net
income.
(ii) The deferred tax liability at June 30, 1996 under Canadian GAAP would be
approximately $50 million lower and shareholders' equity $50 million
higher. (A draft accounting standard has been issued in Canada which, if
adopted, will eliminate this difference.)
(iii) Proportionate consolidation of joint ventures under Canadian GAAP would
increase assets and liabilities by approximately $870 million and
increase working capital by approximately $110 million at June 30, 1996.
There is no effect on net income.
(iv) The cumulative effect of the accounting change in the fiscal year ended
January 31, 1995 would be excluded from net income and taken directly to
retained earnings under Canadian GAAP.
(v) Other differences between U.S. and Canadian GAAP are de minimis.
31
<PAGE> 34
MANAGEMENT'S REPORT
The Company's management is responsible for the preparation of the accompanying
financial statements in accordance with generally accepted accounting
principles, including the estimates and judgments required for such preparation.
The Company has a system of internal accounting controls designed to provide
reasonable assurance that assets are safeguarded and financial records
underlying the financial statements properly reflect all transactions. The
system contains self-monitoring mechanisms, including a program of internal
audits, which allow management to be reasonably confident that such controls, as
well as the Company's administrative procedures and internal reporting
requirements, operate effectively. Management believes that its long-standing
emphasis on the highest standards of conduct and business ethics, as set forth
in written policy statements, serves to reinforce the system of internal
accounting controls. There are inherent limitations in the effectiveness of any
system of internal control, including the possibility of human error or the
circumvention or overriding of controls. Accordingly, even an effective internal
control system can provide only reasonable assurance with respect to financial
statement preparation.
The Company's independent auditors, Price Waterhouse, review the system of
internal accounting controls to the extent they consider necessary to evaluate
the system as required by generally accepted auditing standards. Their report
covering their examinations of the financial statements is presented below.
The Audit Committee of the Board of Directors, solely comprising Directors
who are not officers or employees of the Company, meets with the independent
auditors, the internal auditors and management to ensure that each is
discharging its respective responsibilities relating to the financial
statements. The independent auditors and the internal auditors have direct
access to the Audit Committee to discuss, without management present, the
results of their audit work and any matters they believe should be brought to
the Committee's attention.
<TABLE>
<S> <C> <C>
/s/ Edgar Bronfman, Jr. /s/ Robert W. Matschullat /s/ Edward Falkenberg
EDGAR BRONFMAN, JR. ROBERT W. MATSCHULLAT EDWARD FALKENBERG
President and Vice Chairman and Vice President and Controller
Chief Executive Officer Chief Financial Officer
</TABLE>
September 5, 1996
AUDITORS' REPORT
To the Shareholders of The Seagram Company Ltd.
We have audited the consolidated balance sheet of The Seagram Company Ltd. as at
June 30, 1996 and January 31, 1996 and 1995 and the consolidated statements of
income, shareholders' equity and cash flows for the transition period ended June
30, 1996 and for each of the three fiscal years in the period ended January 31,
1996. 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 U.S. of America and Canada. Those standards require that we
plan and perform an 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.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at June 30, 1996
and January 31, 1996 and 1995 and the results of its operations and its cash
flows for the transition period ended June 30, 1996 and for each of the three
fiscal years in the period ended January 31, 1996, in accordance with generally
accepted accounting principles in the U.S. of America which, in their
application to the Company, conform in all material respects with generally
accepted accounting principles in Canada.
The Company changed its accounting for postemployment benefits other than
pensions, under generally accepted accounting principles in the U.S. of America,
during the fiscal year ended January 31, 1995, as described in Note 11.
/s/ Price Waterhouse
PRICE WATERHOUSE
Montreal, Canada
September 5, 1996
32
<PAGE> 35
QUARTERLY DATA
<TABLE>
<CAPTION>
U.S. dollars in millions, FIRST TWO MONTHS TRANSITION PERIOD
except per share amounts (unaudited) QUARTER ENDED JUNE 30, 1996 ENDED JUNE 30, 1996
<S> <C> <C> <C>
Revenues $2,520 $2,493 $5,013
Operating income 140 39 179
Net income $ 23 $ 62 $ 85
Net income per share $ .06 $ .17 $ .23
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth Fiscal Year Ended
Quarter Quarter Quarter* Quarter January 31, 1996
<S> <C> <C> <C> <C> <C>
Revenues $1,282 $1,883 $2,917 $3,665 $9,747
Operating income 150 179 21 234 584
Income (Loss) before discontinued
DuPont activities 59 89 (55) 81 174
Discontinued DuPont activities 3,232 - - - 3,232
...... ...... ...... ...... ......
Net Income (Loss) $3,291 $ 89 $ (55) $ 81 $3,406
====== ====== ====== ====== ======
Income Per Share
Income before discontinued
DuPont activities $ .16 $ .24 $ (.15) $ .21 $ .46
Discontinued DuPont activities 8.67 - - - 8.67
...... ...... ...... ...... ......
Net Income (Loss) $ 8.83 $ .24 $ (.15) $ .21 $ 9.13
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth Fiscal Year Ended
Quarter Quarter Quarter Quarter January 31, 1995
<S> <C> <C> <C> <C> <C>
Revenues $1,211 $1,448 $1,513 $2,227 $6,399
Operating income 162 144 166 253 725
Income before discontinued
DuPont activities 52 44 52 46 194
Discontinued DuPont activities 145 180 147 145 617
...... ...... ...... ...... ......
Income before cumulative effect
of accounting change 197 224 199 191 811
Cumulative effect of accounting change (75) - - - (75)
...... ...... ...... ...... ......
Net Income $ 122 $ 224 $ 199 $ 191 $ 736
====== ====== ====== ====== ======
Income Per Share
Income before discontinued
DuPont activities $ .14 $ .12 $ .14 $ .12 $.52
Discontinued DuPont activities .39 .48 .39 .40 1.66
...... ...... ...... ...... ......
Income before cumulative effect
of accounting change .53 .60 .53 .52 2.18
Cumulative effect of accounting change (.20) - - - (.20)
...... ...... ...... ...... ......
Net Income $ .33 $ .60 $ .53 $ .52 $ 1.98
====== ====== ====== ====== ======
</TABLE>
*Includes a $290 million pretax charge for reengineering activities.
33
<PAGE> 36
FINANCIAL SUMMARY
<TABLE>
<CAPTION>
TRANSITION PERIOD
ENDED JUNE 30,
U.S. dollars in millions, except per share amounts 1996 1996 1995 1994
<S> <C> <C> <C> <C>
INCOME STATEMENT
Revenues $ 5,013 $ 9,747 $ 6,399 $ 6,038
Gain (loss) on divestitures, net - - - -
Operating income 179 584 725 754
Interest, net and other 114 235 362 319
Income before discontinued DuPont activities and
cumulative effect of accounting change 85 174 194 283
Discontinued DuPont activities, after tax - 3,232 617 96
........ ........ ........ ........
Income Before Cumulative Effect of Accounting Change 85 3,406 811 379
Cumulative effect of accounting change, after tax - - (75) -
........ ........ ........ ........
Net Income (Loss) $ 85 $ 3,406 $ 736 $ 379
........ ........ ........ ........
FINANCIAL POSITION
Current assets $ 6,886 $ 6,640 $ 4,265 $ 3,794
Common stock of DuPont 651 631 3,670 3,154
Common stock of Time Warner 2,228 2,356 2,043 1,769
Other noncurrent assets 11,863 11,728 3,014 3,001
Total assets 21,628 21,355 12,992 11,718
Current liabilities 4,687 3,854 4,091 2,996
Long-term indebtedness 2,562 2,889 2,841 3,053
Total liabilities 10,584 10,183 7,472 6,717
Minority interest 1,839 1,844 11 -
Shareholders' equity 9,205 9,328 5,509 5,001
Total liabilities and shareholders' equity 21,628 21,355 12,992 11,718
CASH FLOW DATA
Cash flow from continuing operations 903 1,025 519 470
Capital expenditures (305) (433) (172) (163)
Other investing activities, net (1,024) 1,308 (465) (1,567)
Dividends paid (112) (224) (216) (209)
PER SHARE DATA
Continuing operations $ .23 $ .46 $ .52 $ .76
Discontinued DuPont activities - 8.67 1.66 .26
........ ........ ........ ........
Income Before Cumulative Effect of Accounting Change .23 9.13 2.18 1.02
Cumulative effect of accounting change, after tax - - (.20) -
........ ........ ........ ........
Net Income (Loss) $ .23 $ 9.13 $ 1.98 $ 1.02
........ ........ ........ ........
Dividends paid $ .30 $ .60 $ .58 $ .56
Shareholders' equity 24.67 24.91 14.79 13.43
End-of-year share price
New York Stock Exchange 33.63 36.38 28.75 30.75
Canadian Stock Exchanges C$ 45.75 C$ 49.75 C$ 40.50 C$ 40.63
Average shares outstanding (thousands) 373,858 373,117 372,499 373,051
Shares outstanding at year-end (thousands) 373,059 374,462 372,537 372,489
</TABLE>
34
<PAGE> 37
<TABLE>
<CAPTION>
Fiscal Years Ended January 31,
--------------------------------------------------------------
U.S. dollars in millions, except per share amounts 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
Revenues $ 6,101 $ 6,345 $ 6,127 $ 5,582 $ 5,056
Gain (loss) on divestitures, net - 201 - - -
Operating income 762 961 708 574 425
Interest, net and other
Income before discontinued DuPont activities and 312 320 325 289 229
cumulative effect of accounting change 293 430 241 171 125
Discontinued DuPont activities, after tax 181 297 515 540 464
........ ........ ........ ........ ........
Income Before Cumulative Effect of Accounting Change 474 727 756 711 589
Cumulative effect of accounting change, after tax (1,374) - - - -
........ ........ ........ ........ ........
Net Income (Loss) $ (900) $ 727 $ 756 $ 711 $ 589
........ ........ ........ ........ ........
FINANCIAL POSITION
Current assets $ 3,836 $ 4,327 $ 3,970 $ 3,289 $ 3,182
Common stock of DuPont 3,315 4,566 4,504 4,216 3,879
Common stock of Time Warner - - - - -
Other noncurrent assets 2,953 2,983 3,003 2,708 2,636
Total assets 10,104 11,876 11,477 10,213 9,697
Current liabilities 2,003 1,896 3,130 2,491 1,994
Long-term indebtedness 2,559 3,013 2,038 2,011 2,330
Total liabilities 5,174 5,393 5,525 4,856 4,723
Minority interest - - - - -
Shareholders' equity 4,930 6,483 5,952 5,357 4,974
Total liabilities and shareholders' equity 10,104 11,876 11,477 10,213 9,697
CASH FLOW DATA
Cash flow from continuing operations 310 543 (28) 71 101
Capital expenditures (168) (215) (309) (206) (142)
Other investing activities, net 184 190 168 238 (1,768)
Dividends paid (205) (189) (174) (135) (113)
PER SHARE DATA
Continuing operations $ .78 $ 1.14 $ .64 $ .44 $ .33
Discontinued DuPont activities .48 .78 1.37 1.40 1.20
........ ........ ........ ........ ........
Income Before Cumulative Effect of Accounting Change 1.26 1.92 2.01 1.84 1.53
Cumulative effect of accounting change, after tax (3.64) - - - -
........ ........ ........ ........ ........
Net Income (Loss) $ (2.38) $ 1.92 $ 2.01 $ 1.84 $ 1.53
........ ........ ........ ........ ........
Dividends paid $ .545 $ .50 $ .463 $ .35 $ .294
Shareholders' equity 13.19 17.08 15.87 14.03 12.66
End-of-year share price
New York Stock Exchange 25.13 29.94 22.25 18.72 17.78
Canadian Stock Exchanges C$ 32.00 C$ 35.06 C$ 25.81 C$ 22.22 C$ 21.13
Average shares outstanding (thousands) 375,871 378,839 376,664 385,524 385,460
Shares outstanding at year-end (thousands) 373,690 379,480 374,972 381,820 392,856
</TABLE>
<TABLE>
<CAPTION>
Fiscal Years Ended January 31,
------------------------------
U.S. dollars in millions, except per share amounts 1988 1987
<S> <C> <C>
INCOME STATEMENT
Revenues $ 3,815 $ 3,345
Gain (loss) on divestitures, net - (35)
Operating income 286 193
Interest, net and other
Income before discontinued DuPont activities and 71 81
cumulative effect of accounting change 151 108
Discontinued DuPont activities, after tax 370 315
........ ........
Income Before Cumulative Effect of Accounting Change 521 423
Cumulative effect of accounting change, after tax - -
........ ........
Net Income (Loss) $ 521 $ 423
........ ........
FINANCIAL POSITION
Current assets $ 2,950 $ 2,702
Common stock of DuPont 3,587 3,330
Common stock of Time Warner - -
Other noncurrent assets 1,006 854
Total assets 7,543 6,886
Current liabilities 1,394 1,102
Long-term indebtedness 1,058 912
Total liabilities 3,086 2,931
Minority interest - -
Shareholders' equity 4,457 3,955
Total liabilities and shareholders' equity 7,543 6,886
CASH FLOW DATA
Cash flow from continuing operations (59) 25
Capital expenditures (89) (106)
Other investing activities, net 196 126
Dividends paid (100) (90)
PER SHARE DATA
Continuing operations $ .39 $ .28
Discontinued DuPont activities .97 .83
........ ........
Income Before Cumulative Effect of Accounting Change 1.36 1.11
Cumulative effect of accounting change, after tax - -
........ ........
Net Income (Loss) $ 1.36 $ 1.11
........ ........
Dividends paid $ .263 $ .238
Shareholders' equity 11.76 10.36
End-of-year share price
New York Stock Exchange 13.78 16.78
Canadian Stock Exchanges C$ 17.50 C$ 22.41
Average shares outstanding (thousands) 381,912 380,448
Shares outstanding at year-end (thousands) 379,144 381,980
</TABLE>
35
<PAGE> 38
PORTFOLIO OF BRANDS
[GRAPHIC]
The following is a partial, noninclusive listing.
THE SEAGRAM SPIRITS AND WINE GROUP
AMERICAN WHISKEY
Cougar Bourbon
Four Roses Bourbon
Four Roses Black Label Bourbon
Four Roses Single Barrel Reserve Bourbon
Four Roses Platinum Bourbon
Seagram's 7 Crown
CANADIAN WHISKY
Canadian Hunter
Crown Royal
Crown Royal Special Reserve
Crown Royal Limited Edition
Mount Royal Light
Seagram's V.O.
SCOTCH WHISKY
Black Douglas
Century
Chivas Regal 12-year-old
Glen Grant
Glen Grant 10-year-old
The Glenlivet 12-year-old
The Glenlivet 18-year-old
100 Pipers
Passport
Queen Anne
Royal Salute 21-year-old
St. Leger
Something Special
Windsor Premier 12-year-old
Benriach 10-year-old
Glen Keith Bottled in 1983
Strathisla 12-year-old
Longmorn 15-year-old
LOCAL WHISKY
Black Jack
Blenders Pride
Boston Club
Crescent
Dunbar
Emblem
Master Blend
Natu Nobilis
New Robert Brown
Regency
Secret
Valley 9 Gold
Wilson's
COGNAC
Martell V.S. Fine
Martell Medaillon V.S.O.P.
Martell Noblige
Martell Cordon Bleu
Martell Napoleon Special Reserve
Martell X.O. Supreme
Martell Extra
Martell Gobelet Royal
Classique de J&F Martell
L'Or de J&F Martell
Creation de J&F Martell
BRANDY
Blandice
Capa Negra
Chatelain
Chemineaud
De Valcourt
Imperial
Macieira
Rene Briand
GIN
Boodles
Burnett's
Seagram's Extra Dry
Somers
VODKA
Deluxe
Nikolai
Orloff
Seagram's Premium
RUM
Cacique
Captain Morgan
Centenario
5 Estrellas
Diplomatico
Montilla
Myers's
OVD
Ronrico
TEQUILA
Mariachi
Olmeca
LIQUEUR
Capucello
Godiva
SCHNAPPS
Dr. McGillicuddy's
PRE-MIXED
Four Roses & Cola
Olmeca Tequila Margarita
Passport & Cola
Seagram's Extra Dry Gin & Tonic
Seagram's Gin & Juice
Seagram's 7 Crown & Lemonade
CHAMPAGNE
Mumm Cordon Rouge N.V.
Mumm Cordon Rouge Vintage
Mumm Cordon Rose N.V.
Mumm Cordon Vert
Mumm Grand Cordon
Mumm Rene Lalou
Mumm de Cramant
Perrier-Jouet Grand Brut
Perrier-Jouet Brut Millesime
Perrier-Jouet Blason de France
Perrier-Jouet Blason de France Rose
Perrier-Jouet Belle Epoque
Perrier-Jouet Belle Epoque Rose
Heidsieck Monopole Red Top Monopole Sec
Heidsieck Monopole Dry Monopole Brut
Heidsieck Monopole Diamant Bleu
Heidsieck Monopole Diamant Rose
SPARKLING WINE
Cuvee Mumm
Domaine Mumm
Maschio
Matheus Muller Sekt
Monitor
Mumm Cuvee Napa
Mumm Sekt
Raposeira
SHERRY
Sandeman Dry Seco
Sandeman Medium Dry
Sandeman Rich Cream
Sandeman Don Fino
Sandeman Character
Sandeman Armada
Sandeman Royal Corregidor
Sandeman Soleo
PORT
Sandeman Original Rich Ruby
Sandeman Original Fine Tawny
Sandeman Original Fine White
Sandeman Founders Reserve
Sandeman Imperial Aged Reserve Tawny
Sandeman 20-year-old Tawny
Sandeman Late Bottled Vintage
Sandeman Vintage
Sandeman Quinta do Vau - Single Quinta Vintage
WINE
Almaden
Barton & Guestier
Forestier
Sterling Vineyards
The Monterey Vineyard
COOLERS
Seagram's Spirits
SELECTED AGENCY BRANDS
Absolut Vodka
Bianchi (Argentina)
Citronge (U.S.)
Cointreau (Venezuela)
Jameson (Canada)
Jim Beam (Germany)
Old Bushmills (Canada)
Patron (U.S.)
Patron XO Cafe (U.S.)
San Telmo (Argentina)
Stolichnaya (Greece)
THE SEAGRAM CLASSICS WINE COMPANY
CHAMPAGNE
Mumm
SPARKLING WINE
Mumm Cuvee Napa
36
<PAGE> 39
WINE
Sterling Vineyards
Barton & Guestier
The Monterey Vineyard
Julius Kayser
Tessera
SELECTED AGENCY BRANDS
Castello d'Albola
SEAGRAM CHATEAU & ESTATE WINES COMPANY
CHAMPAGNE
Perrier-Jouet
SHERRY
Sandeman
PORT
Sandeman
SELECTED AGENCY BRANDS
Domaines Barons de Rothschild
Domaine Clarence Dillon
Domaines Cordier
Domaines Jean-Pierre Moueix
Domaines Jean-Eugene Borie
F.E. Trimbach
Dominus Estate
Domaine G. Roumier
Domaine Ramonet
Domaine Bonneau du Martray
[GRAPHIC]
TROPICANA DOLE BEVERAGES NORTH AMERICA
TROPICANA PURE PREMIUM JUICES
Original Orange
Grovestand Orange
Home Style Orange
Ruby Red Orange
Home Style Golden Grapefruit
Ruby Red Grapefruit
Grovestand Ruby Red Grapefruit
Tangerine Orange
Plus Calcium and Extra Vitamin C
Plus Vitamins A, C and E
TROPICANA SEASON'S BEST JUICES
Home Style Orange
Original Orange
Orange Juice Plus Calcium
Orange Juice Plus Vitamins
Apple
Grape
Cranberry Medley
Grapefruit
Orange Pineapple
Ruby Red Grapefruit
Strawberry Orange
Fruit Medley
Citrus Medley
TROPICANA PURE TROPICS JUICES
Orange Kiwi Passion
Orange PeachMango
Orange Pineapple
Orange Strawberry Banana
TROPICANA JUICE BEVERAGES
Citrus Punch
Fruit Punch
Lemonade
Berry Punch
Cranberry Punch
Pineapple Punch
TROPICANA TWISTER JUICE BEVERAGES
Apple Raspberry Blackberry
Apple Berry Pear
Strawberry Orange Peach
Orange Strawberry Banana
Orange Cranberry
Orange Peach
Orange Raspberry
Cranberry Raspberry Strawberry
Pink Grapefruit Cocktail
Orange Strawberry Guava
Ruby Red Cranberry
Light Cranberry Raspberry Strawberry
Light Orange Cranberry
Light Orange Raspberry
Light Orange Strawberry Banana
Light Pink Grapefruit Cocktail
DOLE JUICES
Mountain Cherry
Country Raspberry
Orchard Peach
Pineapple
Pineapple Orange
Pine-Orange Banana
Pine-Orange Guava
Pine-Orange Strawberry
Pine-Passion Banana
Mandarin Tangerine
Tropical Fruit
TROPICANA DOLE BEVERAGES INTERNATIONAL
TROPICANA PURE PREMIUM JUICES
Orange
Grapefruit
Ruby Breakfast
Pink Grapefruit
Orange Peach
Orange Pear
Apple
Sanguinello
TROPICANA PURE JUICES
Orange
Grapefruit
Apple
Pineapple
Red Grape
Ruby Breakfast
Orange Grapefruit
Orange Peach
Orange Banana
FRUVITA JUICES
Orange with Pulp
Orange
Grapefruit
Apple
Red Grape
Lemon
Orange Peach
Orange Pear
Orange Banana
Star Ruby
Sanguinello
DOLE JUICES
Orange with Pulp
Orange
Grapefruit
Apple
Orange Peach
Orange Pear
Orange Banana
KIRIN-TROPICANA JUICES
Orange
Orange Homemade Style
Apple
Grapefruit
Grape
Fruit Blend
Pear
Pure Premium Orange
LOOZA JUICES AND NECTARS
Pineapple
Orange
Grapefruit
Apple Apricot
Apple Cherry
Apricot
Caribbean Blend
Banana
Cranberry
Cherry
Red Grape
Tomato
Tropical
Peach
Mango
Pear
Apple
Apple - unfiltered
Passion Fruit
Blackcurrant
Multivitamin
JUICE BOWL JUICES AND NECTARS
Orange with Pulp
Orange
Apple
Grapefruit with Pulp
Grapefruit
Pineapple
Apricot
Peach
Pear
Tropical
Tomato
Banana
Multivitamin
Red Grape
37
<PAGE> 40
THE SEAGRAM BEVERAGE COMPANY
FROZEN PARADISE
Strawberry Daiquiri
Pina Colada
Peach Daiquiri
COOLERS
Wild Black Cherry
Wild Tropical Fruit
Wild Berries
Wild Kiwi Strawberry
Wild Mango
Wild Watermelon
Peach Daiquiri
Fuzzy Navel
Pineapple Pina Colada
Margarita
Strawberry Daiquiri
Seagram's Golden
MIXER FLAVORS & STYLES
Seagram's Ginger Ale
Seagram's Diet Ginger Ale
Seagram's Raspberry Ginger Ale
Seagram's Diet Raspberry Ginger Ale
Seagram's Tonic Water
Seagram's Diet Tonic Water
Seagram's Club Soda
Seagram's Original Seltzer
Seagram's Black Cherry Seltzer
Seagram's Lemon Lime Seltzer
Seagram's Orange Seltzer
Seagram's Raspberry Seltzer
BEERS
Grolsch (agency brand)
Premium Lager
Amber Lager
Coyote
Amber Lager
Dark Lager
Devil Mountain
Five Malt Ale
Black Honey Ale
Railroad Gold Ale
[GRAPHIC]
FILMED ENTERTAINMENT
UNIVERSAL PICTURES
12 Monkeys
Happy Gilmore
Sgt. Bilko
Twister
Flipper
Dragonheart
The Nutty Professor
MCA/UNIVERSAL TELEVISION
Series:
Hercules: The Legendary Journeys
Xena: Warrior Princess
Murder, She Wrote
Law & Order
Coach
New York Undercover
Sliders
Weird Science
Earthworm Jim
Casper
Wing Commander Academy
News Radio
The Larry Sanders Show
The Jeff Foxworthy Show
The Steve Harvey Show
Made-for-television movies and mini-series:
The Beast
The Rockford Files
MCA/UNIVERSAL HOME VIDEO
Jurassic Park
Babe
Casper
The Land Before Time I, II & III
The Adventures of Timmy the Tooth
Waterworld
12 Monkeys
Earthworm Jim
Tremors 2: Aftershocks
Casino
Sudden Death
[GRAPHIC]
MUSIC
MCA RECORDS
Lyle Lovett (Curb/MCA)
Nonchalant
The Ramones (Radioactive)
Todd Snider (Margaritaville)
Semisonic
MCA RECORDS/NASHVILLE
Jimmy Buffett (Margaritaville)
Vince Gill
Reba McEntire
George Strait
Wynonna (Curb Records)
Trisha Yearwood
Rhett Akins (Decca)
Gary Allan (Decca)
Mark Chesnutt (Decca)
GEFFEN AND DGC RECORDS
Beck
Cowboy Junkies
Garbage (Almo Sounds)
Genius/GZA
Lisa Loeb & Nine Stories
George Michael (DreamWorks Records)
White Zombie
GRP RECORDING COMPANY
Diana Krall
The Rippingtons
Groove Collective
UNIVERSAL RECORDS
Monifah (Uptown Records)
Lina Santiago (Groove Nation Records)
Lost Boyz
Goldfinger (Mojo Records)
Crucial Conflict (Pallas Records)
INTERSCOPE RECORDS
Bush (Trauma Records)
No Doubt (Trauma Records)
The Wallflowers
[GRAPHIC]
RECREATION
UNIVERSAL STUDIOS HOLLYWOOD
Jurassic Park: The Ride
UNIVERSAL STUDIOS FLORIDA
Terminator 2: 3-D
[GRAPHIC]
PUBLISHING
THE PUTNAM BERKLEY GROUP
Tom Clancy: Executive Orders
Patricia Cornwell: Cause of Death
Dick Francis: To The Hilt
W.E.B. Griffin: Blood and Honor
Robin Cook: Chromosome 6
LaVyrle Spencer: That Camden Summer
Lawrence Sanders: McNally's Puzzle
Tomie dePaola: Strega Nona: Her Story
38
<PAGE> 41
Directory
Board of Directors
EDGAR M. BRONFMAN (3)
Chairman of the Board,
The Seagram Company Ltd.
THE HON. CHARLES R. BRONFMAN, P.C., C.C. (3)
Co-Chairman of the Board
and Chairman of the Executive Committee,
The Seagram Company Ltd.
EDGAR BRONFMAN, JR. (3)
President and Chief Executive Officer,
The Seagram Company Ltd.
SAMUEL BRONFMAN II
President, The Seagram Classics Wine Company
(a division of Joseph E. Seagram & Sons, Inc., a subsidiary of the Corporation)
MATTHEW W. BARRETT, O.C. (4)
Chairman and
Chief Executive Officer,
Bank of Montreal
(a financial institution)
FRANK J. BIONDI, JR.
Chairman and Chief
Executive Officer,
MCA INC. (a subsidiary of the Corporation)
DAVID M. CULVER, C.C. (4)
Chairman, CAI Capital Corporation
(an equity investment fund)
THE HON. WILLIAM G. DAVIS, P.C., C.C., Q.C.(1), (2)
Counsel, Tory Tory
DesLauriers & Binnington (attorneys)
THE HON. PAUL DESMARAIS, P.C., C.C.(1), (3)
Chairman of the
Executive Committee,
Power Corporation of Canada (a holding and management company)
DAVID L. JOHNSTON, O.C.(2), (4)
Professor of Law,
McGill University
(an educational institution)
THE HON. E. LEO KOLBER, SENATOR (3), (4)
Member of The Senate of Canada
MARIE-JOSEE KRAVIS, O.C. (2), (4)
Senior Fellow, The Hudson Institute Inc.
(a nonprofit economics research institute)
ROBERT W. MATSCHULLAT (3)
Vice Chairman and
Chief Financial Officer,
The Seagram Company Ltd.
C. EDWARD MEDLAND (1), (3)
President, Beauwood Investments Inc. (a private investment company)
LEW R. WASSERMAN
Chairman Emeritus,
MCA INC. (a subsidiary of the Corporation)
JOHN L. WEINBERG (4)
Senior Chairman,
Goldman, Sachs & Co.
(investment bankers)
JOHN S. WEINBERG (1), (2)
General Partner,
Goldman, Sachs & Co.
(investment bankers)
Honorary Directors
A. JEAN DE GRANDPRE, C.C., Q.C.
ALAIN DE GUNZBURG
JOHN L. LOEB
NEIL F. PHILLIPS, Q.C.
THE HON. IAN D. SINCLAIR, O.C.
SIR IAIN TENNANT, K.T.
Honorary Secretary
ALAN A. SHARP
(1) Member of the Audit Committee
(2) Member of Corporate Governance Committee
(3) Member of the Executive Committee
(4) Member of the Human Resources Committee
Officers
EDGAR M. BRONFMAN
Chairman of the Board
THE HON. CHARLES R. BRONFMAN, P.C., C.C.
Co-Chairman of the Board and Chairman of the Executive Committee
EDGAR BRONFMAN, JR.
President and Chief Executive Officer
ROBERT W. MATSCHULLAT
Vice Chairman and Chief Financial Officer
JOHN D. BORGIA
Executive Vice President, Human Resources
STEPHEN E. HERBITS
Executive Vice President, Corporate Policy and External Affairs
STEVEN J. KALAGHER
Executive Vice President
President, The Seagram Spirits And Wine Group
ELLEN R. MARRAM
Executive Vice President
President, The Seagram Beverage Group
EDWARD FALKENBERG
Vice President and Controller
JEANANNE K. HAUSWALD
Vice President and Treasurer
GABOR JELLINEK
Vice President, Production
ARNOLD M. LUDWICK
Vice President
DANIEL R. PALADINO
Vice President, Legal and
Environmental Affairs
MICHAEL C. L. HALLOWS
Secretary
39
<PAGE> 42
SHAREHOLDER INFORMATION
Annual Meeting of Shareholders
The Annual Meeting of Shareholders will be held on October 30, 1996, at 11:30
a.m. (E.S.T.) at the Marriott Chateau Champlain, 1 Place du Canada, Montreal,
Quebec.
AUDITORS
Price Waterhouse
STOCK SYMBOL
VO
STOCK EXCHANGE LISTINGS
Montreal, Toronto, Vancouver, New York and London
TRANSFER AGENTS AND REGISTRARS
The R-M Trust Company, 2001 University Street, 16th Floor, Montreal, Quebec H3A
2A6
The R-M Trust Company, Lower Level, 393 University Avenue, Toronto, Ontario M5G
2M7
The R-M Trust Company, 600 The Dome Tower, 6th Floor, 333-7th Avenue, S.W.,
Calgary, Alberta T2P 2Z1
The R-M Trust Company, Mall Level, 1177 West Hastings Street, Vancouver, B.C.
V6E 2K3
ChaseMellon Shareholder Services L.L.C., P.O. Box 590, Ridgefield Park,
N.J.07660
SEAGRAM INVESTOR RELATIONS
The Seagram Company Ltd., 1430 Peel Street, Montreal,Quebec H3A 1S9 or
Joseph E. Seagram & Sons, Inc., 375 Park Avenue, New York, N.Y. 10152
Joseph M.Fitzgerald-Vice President, Investor Relations (212) 572-7282
Maureen S. Hannan-Senior Director,Investor Relations (212) 572-1397
Requests for a copy of the Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission in Washington, D.C., and other corporate
information, should be directed to Seagram Investor Relations as listed
above.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be addressed to: Shareholder Services, The Seagram
Company Ltd., 1430 Peel Street, Montreal, Quebec H3A 1S9 or telephoned to (514)
987-5209.
EDITION FRANCAISE DU RAPPORT ANNUEL
On peut se procurer l'edition francaise de ce rapport en ecrivant au: Services
aux actionnaires, La Compagnie Seagram Ltee, 1430, rue Peel, Montreal (Quebec)
H3A 1S9.
DESIGN:
Addison Corporate Annual Reports, NYC
Photographer: Scott Morgan
Arthurs-Jones Lithographing Ltd.
Mississauga, Ontario
(C) The Seagram Company Ltd. 1996
Printed on recycled paper
[Recycled Logo]
40
<PAGE> 43
THE SEAGRAM COMPANY LTD.
1430 Peel Street
Montreal, Quebec
Canada H3A 1S9
<PAGE> 1
EXHIBIT NUMBER 21
PER ITEM 601 OF
REGULATION S-K
THE SEAGRAM COMPANY LTD.
TRANSITION REPORT ON FORM 10-K
SUBSIDIARIES LIST AS OF AUGUST 31, 1996
The following is a list of subsidiaries of the Corporation as of August 31,
1996, prepared in accordance with Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
APPROXIMATE
PERCENTAGE
ORGANIZED DIRECTLY OR
UNDER LAWS OF INDIRECTLY OWNED
-------------------------------------
<S> <C> <C>
THE SEAGRAM COMPANY LTD. Canada --
J. E. Seagram Corp. Delaware 100%
Seagram Enterprises, Inc. Delaware 100%
Seagram Inc. Delaware 100%
Tropicana Products, Inc. Delaware 100%
Tropicana Progress Services, Inc. Florida 100%
B&H Project, Inc. Florida 100%
TPI Urban Renewal Corp. New Jersey 100%
Joseph E. Seagram & Sons, Inc. Indiana 100%
Distillers Products Sales Corporation Massachusetts 100%
Seagram Capital Investments, Inc. Delaware 100%
JES Developments, Inc. Delaware 100%
JES Developments Finance, Inc. Delaware 100%
Barton & Guestier S.A. France 100%
Kirin-Seagram Limited Japan 49.44%
Doosan-Seagram Co., Ltd. South Korea 50%
Seagram Developments, Inc. Delaware 100%
MCA Holding I Corp. Delaware 80%
MCA Holding II Corp. Delaware 100%
MCA Holding III Corp. Delaware 100%
MCA INC. Delaware 100%
Champion Music Corporation New York 100%
Cinema International Corporation N.V. Netherlands 49%
Cineplex Odeon Corporation Canada 41.6%
Duchess Music Corporation California 100%
Geffen Records, Inc. California 100%
Geffen/Outpost Record Ventures, Inc. California 100%
GRP Records, Inc. New York 100%
Interplay Productions California 49%
MCA Artists (England) Limited United Kingdom 100%
MCA Music Entertainment International
Limited United Kingdom 100%
MCA Music Limited United Kingdom 100%
MCA Canada Ltd. Canada 100%
MCA Caravelle Music France SARL France 100%
</TABLE>
<PAGE> 2
THE SEAGRAM COMPANY LTD.
SUBSIDIARIES LIST (CONTINUED)
<TABLE>
<CAPTION>
APPROXIMATE
PERCENTAGE
ORGANIZED DIRECTLY OR
UNDER LAWS OF INDIRECTLY OWNED
-------------------------------------
<S> <C> <C>
MCA Concerts, Inc. California 100%
MCA/Pace Amphitheatres Group,
L.P. (partnership) Delaware 67.5%
MCA Development Venture One California 100%
10 UCP Associates (joint venture) California 50%
MCA Filmed Entertainment Canada Inc. Canada 100%
MCA Foreign Sales Corporation B.V. Netherlands 100%
MCA Home Video, Inc. California 100%
MCA/Universal Home Video, Inc. California 100%
MCA International B.V. Netherlands 100%
Cinema International B.V. Netherlands 49%
MCA Finance B.V. Netherlands 100%
United Cinemas International
Multiplex B.V. Netherlands 49.02%
United International Pictures B.V. Netherlands 33.3%
MCA Japan, Ltd. Japan 100%
MCA Music Australia Pty. Limited Australia 100%
MCA Music Entertainment, Inc. California 100%
MCA Music G.m.b.H. Germany 100%
MCA Music Entertainment G.m.b.H. Germany 100%
MCA Music Italy S.r.l. Italy 100%
MCA Music KK Japan 100%
MCA Records, Inc. California 100%
MCA Music Entertainment
International Limited Hong Kong 100%
MCA Music Entertainment Limited Hong Kong 100%
MCA Music Entertainment Limited Australia 100%
MCA Music Entertainment S.A. Argentina 100%
MCA Music Entertainment, S.A. de C.V. Mexico 100%
MCA Record Ventures, Inc. Delaware 100%
510 Records (joint venture) California 50%
MCA/Interscope Partner, Inc. California 100%
MCA Television Entertainment, Inc. California 100%
MCA Television Limited Delaware 100%
MCA/G-A Record Ventures, Inc. California 100%
Gasoline Alley (joint venture) California 55%
MCA/R Record Ventures, Inc. California 100%
Radioactive Records (joint venture) California 50%
MCA/Universal Child Care Center, Inc. California 100%
MCA/Universal Hotel, Inc. Delaware 100%
MCA/Universal Merchandising, Inc. California 100%
Music Corporation of America, Inc. California 100%
</TABLE>
<PAGE> 3
THE SEAGRAM COMPANY LTD.
SUBSIDIARIES LIST (CONTINUED)
<TABLE>
<CAPTION>
APPROXIMATE
PERCENTAGE
ORGANIZED DIRECTLY OR
UNDER LAWS OF INDIRECTLY OWNED
-------------------------------------
<S> <C> <C>
Sci-Fi Channel Europe, LLC (limited
liability company) Delaware 50%
Spencer Gifts, Inc. Delaware 100%
Terra Properties, Inc. California 100%
The Putnam Berkley Group, Inc. New York 100%
Berkley Publishing Corporation Delaware 100%
Jove Publications, Inc. Delaware 100%
Coward-McCann, Inc. New York 100%
Grosset & Dunlap, Inc. New York 100%
Jeremy P. Tarcher, Inc. California 100%
Price Stern Sloan, Inc. Delaware 100%
UNI Distribution Corp. New York 100%
Universal Cartoon Studios, Inc. California 100%
Universal City Property Management
Company Delaware 100%
Universal City Florida Partners
(partnership) Florida 50%
Universal City Property Management
Company II Delaware 100%
Universal City Development Partners
(partnership) Florida 50%
Universal City Studios, Inc. Delaware 100%
Forbrooke Enterprises, Inc. California 100%
Imagine Films Entertainment, Inc. Delaware 100%
Universal Film Distribution, Inc. California 100%
Universal Film Exchanges, Inc. Delaware 100%
Universal Pay Television, Inc. California 100%
Universal Pay Television
Australia, Inc. California 100%
Universal TV1 Australia, Inc. California 100%
Universal Television, Incorporated California 100%
USA Networks (partnership) New York 50%
Universal Family Entertainment, Inc. California 100%
Universal Interactive Studios, Inc. California 100%
Universal Pay-Per-View Entertainment,
Inc. California 100%
Universal Records, Inc. California 100%
3BG Holdings, Inc. Delaware 100%
Brillstein-Grey Entertainment
(partnership) California 99%
Brillstein-Grey Communications
(partnership) California 50%
Seagram Holdings Limited United Kingdom 100%
Seagram Distillers PLC United Kingdom 100%
Chivas Brothers Limited United Kingdom 100%
The Glenlivet Distillers Limited United Kingdom 100%
</TABLE>
<PAGE> 4
THE SEAGRAM COMPANY LTD.
SUBSIDIARIES LIST (CONTINUED)
<TABLE>
<CAPTION>
APPROXIMATE
PERCENTAGE
ORGANIZED DIRECTLY OR
UNDER LAWS OF INDIRECTLY OWNED
-------------------------------------
<S> <C> <C>
Seagram United Kingdom Limited United Kingdom 100%
The House of Seagram Ltd. United Kingdom 100%
Sandeman & Ca. S.A. Portugal 100%
Cente, S.A. Spain 100%
Gulfstream Insurance (Ireland) Limited Ireland 100%
Gulfstream Reinsurance (Ireland) Limited Ireland 100%
Gulfstream Insurance (Barbados) Limited Barbados 100%
Centenary Investments Inc. Canada 100%
Centenary Holdings Ltd. Bermuda 100%
Seagram C.I. (Taiwan) Co., Ltd. Hong Kong 90%
Centenary S.a.r.L. Luxemborg 100%
Seagram International B.V. Netherlands 100%
Bodegas y Vinedos Crillon S.A.I.C. Argentina 100%
Seagram de Argentina, S.A.I.C. Argentina 100%
G.H. Mumm & Cie France 99%
Champagne Perrier-Jouet S.A. France 98%
Martell S.A. France 99%
Martell & Co. France 99%
Seagram Holding-und Handlesgesellschaft mbh Germany 100%
Seagram Deutschland GmbH Germany 100%
Burgeff & Co. Sektkellereien GmbH Germany 100%
Matheus Muller Sektkellereien GmbH Germany 100%
Lupak S.A. Greece 100%
Seagram India Private Limited India 100%
Seagram Manufacturing Private Limited India 100%
Seagram Italia S.p.A. Italy 100%
Premium Brands Nordic AB Sweden 100%
Seagram Netherlands Antilles N.V. Netherlands Antilles 100%
Tropicana Beverages Greater China Ltd. Hong Kong 100%
Tropicana Beverages Hong Kong Ltd. Hong Kong 100%
Myers Rum Company Limited Bahamas 100%
Seagram Philippines Inc. Philippines 100%
Seagram Australia Holdings Pty. Limited Australia 100%
Seagram Australia Pty. Limited Australia 100%
Seagram Wine Estates Pty. Limited Australia 100%
Australian Bottling Company Pty. Limited Australia 50%
Vintners Pty. Limited Australia 50%
C.A. Seagram de Venezuela Venezuela 100%
Licorerias Unidas, S.A. Venezuela 100%
Grey's Licores, C.A. Venezuela 100%
Captain Morgan Rum Distillers Limited Canada 100%
Captain Morgan (Bermuda) Ltd. Bermuda 100%
Industria de Licores Internacionales, S.A. Dominican Republic 89%
Seagram (China) Ltd. Canada 100%
Tropicana Beverages (Canada) Ltd. Canada 100%
Joseph E. Seagram & Sons, Limited Canada 100%
</TABLE>
<PAGE> 1
Exhibit 23(a)
CONSENT OF CHARTERED ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of The Seagram Company Ltd. Registration Statements on Form
S-3 (Numbers 2-99681, 33-42959, 33- 42877, 33-67772, 333-4134 and 333-4136) and
the Registration Statements on Form S-8 (Numbers 33-27194, 33-2043, 33-49096,
33-60606 and 33-99122) of our report dated September 5, 1996 appearing on Page
32 of the Transition Report to the Shareholders of The Seagram Company Ltd. for
the transition period ended June 30, 1996, which is incorporated by reference in
this Transition Report on Form 10-K. We also consent to the incorporation by
reference of our report on the Financial Statement Schedule, which appears on
Page 24 of this Form 10-K.
/s/ Price Waterhouse
PRICE WATERHOUSE
Chartered Accountants
Montreal, Canada
September 27, 1996
<PAGE> 1
Exhibit 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
E.I. DU PONT DE NEMOURS AND COMPANY
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of The Seagram Company Ltd. Registration Statements on Form
S-3 (Numbers 2-99681, 33-42959, 33- 42877, 33-67772, 333-4134 and 333-4136) and
the Registration Statements of Form S-8 (Numbers 33-27194, 33-2043, 33-49096,
33-60606 and 33-99122) of our report dated February 16, 1995, which appears on
Page 38 of the 1994 Annual Report to Stockholders of E.I. du Pont de Nemours and
Company, which is incorporated by reference in the E.I. du Pont de Nemours and
Company Annual Report on Form 10-K for the year ended December 31, 1994. The
Consolidated Financial Statements of E.I. du Pont de Nemours and Company, as
listed under Item 14(a)1 of its Annual Report on Form 10-K for the year ended
December 31, 1994, are incorporated by reference in The Seagram Company Ltd.
Annual Report on Form 10-K for the transition period ended June 30, 1996.
/s/ Price Waterhouse
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
September 27, 1996
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, THE SEAGRAM COMPANY LTD., a
Canadian corporation (the "Corporation"), and each of the undersigned directors
and officers of the Corporation, hereby constitute and appoint EDGAR M.
BRONFMAN, CHARLES R. BRONFMAN, EDGAR BRONFMAN, JR., ROBERT W. MATSCHULLAT,
MICHAEL C.L. HALLOWS AND DANIEL R. PALADINO and each of them severally, his true
and lawful attorneys and agents, with power to act with or without the others
and with full power of substitution and resubstitution, to do any and all acts
and things and to execute any and all instruments which said attorneys and
agents and each of them may deem necessary or desirable to enable the
Corporation to comply with the U.S. Securities Exchange Act of 1934, as amended,
and any rules, regulations and requirements of the U.S. Securities and Exchange
Commission thereunder in connection with the Corporation's Transition Report on
Form 10-K for the transition period ended June 30, 1996 (the "Transition
Report"), including specifically, but without limiting the generality of the
foregoing, power and authority to sign the name of the Corporation and the name
of the undersigned, individually and in his capacity as a director or officer of
the Corporation, to the Transition Report as filed with the U.S. Securities and
Exchange Commission, to any and all amendments thereto, and to any and all
instruments or documents filed as part thereof or in connection therewith; and
each of the undersigned hereby ratifies and confirms all that said attorneys and
agents and each of them shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF each of the undersigned has subscribed these presents on the
date set opposite his name.
Signature Date
September 5, 1996
/s/ Edgar M. Bronfman
- ------------------------
THE SEAGRAM COMPANY LTD.
by Mr. Edgar M. Bronfman
Chairman of the Board
<PAGE> 2
Signature Date
- --------- ----
September 5, 1996
/s/ Edgar M. Bronfman
- -------------------------
Edgar M. Bronfman
September 5, 1996
/s/ Charles R. Bronfman
- -------------------------
Charles R. Bronfman
September 5, 1996
/s/ Edgar Bronfman, Jr.
- -------------------------
Edgar Bronfman, Jr.
September 5, 1996
/s/ Samuel Bronfman II
- -------------------------
Samuel Bronfman II
September 5, 1996
/s/ Matthew W. Barrett
- -------------------------
Matthew W. Barrett
September 5, 1996
/s/ Frank J. Biondi, Jr.
- -------------------------
Frank J. Biondi, Jr.
September 5, 1996
/s/ David M. Culver
- -------------------------
David M. Culver
September 5, 1996
/s/ William G. Davis
- -------------------------
William G. Davis
<PAGE> 3
Signature Date
- --------- ----
September 5, 1996
/s/ Paul Desmarais
- -------------------------
Paul Desmarais
September 5, 1996
/s/ David L. Johnston
- -------------------------
David L. Johnston
September 5, 1996
/s/ E. Leo Kolber
- -------------------------
E. Leo Kolber
September 5, 1996
/s/ Marie-Josee Kravis
- -------------------------
Marie-Josee Kravis
September 5, 1996
/s/ Robert W. Matschullat
- -------------------------
Robert W. Matschullat
September 5, 1996
/s/ C. Edward Medland
- -------------------------
C. Edward Medland
September 5, 1996
/s/ Lew R. Wasserman
- -------------------------
Lew R. Wasserman
September 5, 1996
/s/ John L. Weinberg
- -------------------------
John L. Weinberg
September 5, 1996
/s/ John S. Weinberg
- -------------------------
John S. Weinberg
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF THE SEAGRAM COMPANY LTD. FOR THE FIVE MONTH TRANSITION PERIOD
ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 279
<SECURITIES> 0
<RECEIVABLES> 1,769
<ALLOWANCES> 0
<INVENTORY> 3,142
<CURRENT-ASSETS> 6,886
<PP&E> 4,085
<DEPRECIATION> 1,133
<TOTAL-ASSETS> 21,628
<CURRENT-LIABILITIES> 4,686
<BONDS> 2,562
0
0
<COMMON> 725
<OTHER-SE> 8,480
<TOTAL-LIABILITY-AND-EQUITY> 21,628
<SALES> 0
<TOTAL-REVENUES> 5,013
<CGS> 3,186
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 133
<INCOME-PRETAX> 65
<INCOME-TAX> (15)
<INCOME-CONTINUING> 85
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 85
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
<PAGE> 1
EXHIBIT 99
Set forth below is certain financial information which has been restated on the
new fiscal year basis. The fiscal quarters ended July 31, 1996, April 30, 1996,
January 31, 1996 and October 31, 1995 of the Company have been restated to
reflect the fiscal quarters ended June 30, 1996, March 31, 1996, December 31,
1995, and September 30, 1995, respectively.
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------
June 30, March 31, December 31, September 30,
1996 1996 1995 1995
-------- --------- ------------ -------------
<S> <C> <C> <C> <C>
REVENUES
Beverages
Spirits and Wines $ 1,179 $ 1,061 $ 1,724 $ 1,235
Fruit Juices and Other 548 496 486 505
------- ------- ------- -------
Total Attributed Beverages 1,727 1,557 2,210 1,740
------- ------- ------- -------
Entertainment
Filmed Entertainment 846 894 1,009 922
Music Entertainment 309 228 329 339
Recreation 131 100 97 142
Publishing and Other 144 120 202 139
------- ------- ------- -------
Total Attributed Entertainment 1,430 1,342 1,637 1,542
------- ------- ------- -------
Total Attributed Revenues 3,157 2,899 3,847 3,282
------- ------- ------- -------
Adjustment for Equity Companies:
Beverages (66) (64) (82) (89)
Entertainment (212) (200) (205) (222)
------- ------- ------- -------
Total Reported Revenues $ 2,879 $ 2,635 $ 3,560 $ 2,971
======= ======= ======= =======
EBITDA
Beverages
Spirits and Wine 160 131 290 169
Fruit Juices and Other 51 43 57 55
Reengineering charge -- -- (290) --
------- ------- ------- -------
Total Beverages 211 174 57 224
------- ------- ------- -------
Entertainment
Filmed Entertainment 67 109 64 139
Music Entertainment (11) (13) 27 21
Recreation 24 13 19 50
Publishing and Other 8 (1) 23 11
------- ------- ------- -------
Total Entertainment 88 108 133 221
------- ------- ------- -------
Total EBITDA $ 299 $ 282 $ 190 $ 445
------- ------- ------- -------
Adjustment for Equity
Companies - Beverages (3) (1) (4) (2)
Adjustment for Equity
Companies - Entertainment (26) (22) (23) (21)
Depreciation and Amortization (138) (120) (127) (120)
Corporate expenses (27) (31) (32) (12)
------- ------- ------- -------
Operating income 105 108 4 290
------- ------- ------- -------
Interest, Net and Other 50 66 70 90
Provision for Income Taxes (42) 28 (44) 133
Minority Interest (5) 1 4 14
------- ------- ------- -------
Net Income $ 102 $ 13 $ (26) $ 53
======= ======= ======= =======
Net Income Per Share $ 0.26 $ 0.04 $ (0.07) $ 0.14
======= ======= ======= =======
</TABLE>
