FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended November 30, 2000
-----------------May 31, 2001
------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------------------- -------------
Commission File Number 0-7570001-08495
Delaware CONSTELLATION BRANDS, INC. 16-0716709
and its subsidiaries:
New York Batavia Wine Cellars, Inc. 16-1222994
New York Canandaigua Wine Company, Inc. 16-1462887
New York Canandaigua Europe Limited 16-1195581
England and Wales Canandaigua Limited 98-0198402
New York Polyphenolics, Inc. 16-1546354
New York Roberts Trading Corp. 16-0865491
Netherlands Canandaigua B.V. 98-0205132
Delaware Franciscan Vineyards, Inc. 94-2602962
California Allberry, Inc. 68-0324763
California Cloud Peak Corporation 68-0324762
California M.J. Lewis Corp. 94-3065450
California Mt. Veeder Corporation 94-2862667
Delaware Barton Incorporated 36-3500366
Delaware Barton Brands, Ltd. 36-3185921
Maryland Barton Beers, Ltd. 36-2855879
Connecticut Barton Brands of California, Inc. 06-1048198
Georgia Barton Brands of Georgia, Inc. 58-1215938
Illinois Barton Canada, Ltd. 36-4283446
New York Barton Distillers Import Corp. 13-1794441
Delaware Barton Financial Corporation 51-0311795
Wisconsin Stevens Point Beverage Co. 39-0638900
Illinois Monarch Import Company 36-3539106
(State or other (Exact name of registrant as (I.R.S. Employer
jurisdiction of specified in its charter) Identification No.)
incorporation or
organization)
300 WILLOWBROOK OFFICE PARK, FAIRPORT, NEW YORK 14450
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(Address of principal executive offices) (Zip Code)
(716) 218-2169
-----------------------------------------------------------------------------------------------------------
(Registrants' telephone number, including area code)
-----------------------------------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding with respect to each of the classes of common
stock of Constellation Brands, Inc., as of December 31, 2000,June 30, 2001, is set forth below
(all of the Registrants, other than Constellation Brands, Inc., are direct or
indirect wholly-owned subsidiaries of Constellation Brands, Inc.):
CLASS NUMBER OF SHARES OUTSTANDING
----- ----------------------------
Class A Common Stock, Par Value $.01 Per Share 15,366,76335,970,244
Class B Common Stock, Par Value $.01 Per Share 3,084,3726,132,795
- 1 -
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
November 30,May 31, February 29,
2000 200028,
2001 2001
------------ ------------
(unaudited)
ASSETS
------
CURRENT ASSETS:
Cash and cash investments $ 1,8713,739 $ 34,308145,672
Accounts receivable, net 386,908 291,108374,398 314,262
Inventories, net 699,885 615,700756,611 670,018
Prepaid expenses and other current assets 70,140 54,88164,584 61,037
------------ ------------
Total current assets 1,158,804 995,9971,199,332 1,190,989
PROPERTY, PLANT AND EQUIPMENT, net 536,300 542,971583,070 548,614
OTHER ASSETS 770,686 809,823957,291 772,566
------------ ------------
Total assets $ 2,465,7902,739,693 $ 2,348,7912,512,169
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 121,00024,903 $ 26,8004,184
Current maturities of long-term debt 37,544 53,98772,996 54,176
Accounts payable 163,195 122,213154,394 114,793
Accrued excise taxes 44,853 30,44643,979 55,954
Other accrued expenses and liabilities 245,538 204,771208,351 198,053
------------ ------------
Total current liabilities 612,130 438,217504,623 427,160
------------ ------------
LONG-TERM DEBT, less current maturities 1,123,929 1,237,1351,294,116 1,307,437
------------ ------------
DEFERRED INCOME TAXES 116,523 116,447131,317 131,974
------------ ------------
OTHER LIABILITIES 30,337 36,15228,690 29,330
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value-
Authorized, 1,000,000 shares;
Issued, none at November 30, 2000,May 31, 2001,
and February 29, 200028, 2001 - -
Class A Common Stock, $.01 par value-
Authorized, 120,000,000 shares;
Issued, 18,459,87537,723,329 shares at
November 30, 2000,May 31, 2001, and 18,206,66237,438,968 shares
at February 29, 2000 185 18228, 2001 377 374
Class B Convertible Common Stock,
$.01 par value-
Authorized, 20,000,000 shares;
Issued, 3,711,0977,384,445 shares at
November 30, 2000,May 31, 2001, and 3,745,5607,402,594 shares
at February 29, 2000 37 3828, 2001 74 74
Additional paid-in capital 254,595 247,949373,530 267,655
Retained earnings 437,421 358,456479,641 455,798
Accumulated other comprehensive income-
Cumulative translation adjustment (27,632) (4,149)loss (30,375) (26,004)
------------ ------------
664,606 602,476823,247 697,897
------------ ------------
Less-Treasury stock-
Class A Common Stock, 3,119,1121,830,600 shares at
November 30, 2000,May 31, 2001, and 3,137,2446,200,600 shares at
February 29, 2000,28, 2001, at cost (79,353) (79,429)(39,967) (79,271)
Class B Convertible Common Stock, 625,7251,251,450
shares at November 30, 2000,May 31, 2001, and
February 29, 2000,28, 2001, at cost (2,207) (2,207)
------------ ------------
(81,560) (81,636)(42,174) (81,478)
------------ ------------
Less-Unearned compensation-restricted
stock awards (175) -(126) (151)
------------ ------------
Total stockholders' equity 582,871 520,840780,947 616,268
------------ ------------
Total liabilities and stockholders' equity $ 2,465,7902,739,693 $ 2,348,7912,512,169
============ ============
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
- 1 -
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the Three Months Ended May 31,
----------------------------------
2001 2000
------------- -------------
(unaudited) (unaudited)
GROSS SALES $ 835,774 $ 774,522
Less - Excise taxes (193,664) (188,942)
------------- -------------
Net sales 642,110 585,580
COST OF PRODUCT SOLD (440,160) (401,707)
------------- -------------
Gross profit 201,950 183,873
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (132,027) (126,409)
------------- -------------
Operating income 69,923 57,464
INTEREST EXPENSE, net (30,185) (27,627)
------------- -------------
Income before income taxes 39,738 29,837
PROVISION FOR INCOME TAXES (15,895) (11,935)
------------- -------------
NET INCOME $ 23,843 $ 17,902
============= =============
SHARE DATA:
Earnings per common share:
Basic $ 0.58 $ 0.49
============= =============
Diluted $ 0.56 $ 0.48
============= =============
Weighted average common shares
outstanding:
Basic 41,254 36,460
Diluted 42,526 37,196
The accompanying notes to consolidated financial statements
are an integral part of these statements.
- 2 -
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the Nine Months Ended November 30, For the Three Months Ended November 30,
-------------------------------------- ---------------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
(unaudited) (unaudited) (unaudited) (unaudited)
GROSS SALES $ 2,436,637 $ 2,383,909 $ 833,447 $ 864,075
Less - Excise taxes (583,990) (579,191) (203,870) (211,106)
--------------- --------------- --------------- ---------------
Net sales 1,852,647 1,804,718 629,577 652,969
COST OF PRODUCT SOLD (1,260,082) (1,249,781) (421,524) (443,282)
--------------- --------------- --------------- ---------------
Gross profit 592,565 554,937 208,053 209,687
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (379,159) (368,130) (122,815) (132,309)
NONRECURRING CHARGES - (5,510) - -
--------------- --------------- --------------- ---------------
Operating income 213,406 181,297 85,238 77,378
INTEREST EXPENSE, net (81,797) (78,219) (26,983) (27,544)
--------------- --------------- --------------- ---------------
Income before income taxes 131,609 103,078 58,255 49,834
PROVISION FOR INCOME TAXES (52,644) (41,231) (23,302) (19,934)
--------------- --------------- --------------- ---------------
NET INCOME $ 78,965 $ 61,847 $ 34,953 $ 29,900
=============== =============== =============== ===============
SHARE DATA:
Earnings per common share:
Basic $ 4.31 $ 3.43 $ 1.90 $ 1.65
=============== =============== =============== ===============
Diluted $ 4.24 $ 3.34 $ 1.87 $ 1.60
=============== =============== =============== ===============
Weighted average common shares
outstanding:
Basic 18,308 18,023 18,394 18,083
Diluted 18,642 18,502 18,734 18,651
The accompanying notes to consolidated financial statements are an integral part of these statements.
- 3 -
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the NineThree Months Ended November 30,
--------------------------------------May 31,
----------------------------------
2001 2000
1999
--------------- --------------------------- ------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 78,96523,843 $ 61,84717,902
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of property, plant and equipment 35,826 33,93814,005 11,797
Amortization of intangible assets 19,285 16,9047,920 6,549
Loss (gain) on sale of assets 1,904 (778)920 767
Amortization of discount on long-term debt 370 316135 116
Stock-based compensation expense 255 77625 -
Deferred tax benefitprovision - (3,860)3,571
Change in operating assets and liabilities,
net of effects from purchases of businesses:
Accounts receivable, net (104,496) (123,109)(39,164) (50,394)
Inventories, net (88,726) (55,602)18,800 8,747
Prepaid expenses and other current assets (15,738) (5,432)(3,387) 2,129
Accounts payable 39,087 44,29221,251 10,603
Accrued excise taxes 15,975 (3,191)(11,706) 11,462
Other accrued expenses and liabilities 39,067 88,9604,919 1,200
Other assets and liabilities, net (5,683) 1,201
--------------- ---------------(2,964) (4,478)
------------ ------------
Total adjustments (62,874) (5,585)
--------------- ---------------10,754 2,069
------------ ------------
Net cash provided by operating activities 16,091 56,262
--------------- ---------------34,597 19,971
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of businesses, net of cash acquired (328,783) -
Purchases of property, plant and equipment (47,806) (46,657)(10,838) (10,265)
Proceeds from sale of assets 1,379 1,276
Purchases of businesses, net of cash acquired - (452,526)
--------------- ---------------368 317
------------ ------------
Net cash used in investing activities (46,427) (497,907)
--------------- ---------------(339,253) (9,948)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from equity offering, net of fees 139,878 -
Net proceeds from (repayments of) notes payable 21,162 (16,800)
Exercise of employee stock options 4,797 1,973
Principal payments of long-term debt (221,557) (1,059,406)(1,974) (133,329)
Payment of issuance costs of long-term debt (1,668) (14,494)(1,014) (1,301)
Proceeds from issuance of long-term debt, net of discount - 119,400
1,486,240
Net proceeds from notes payable 96,922 25,995
Exercise of employee stock options 5,530 2,386
Proceeds from employee stock purchases 761 601
--------------- --------------------------- ------------
Net cash provided by (used in) provided by
financing activities (612) 441,322
--------------- ---------------162,849 (30,057)
------------ ------------
Effect of exchange rate changes on cash and
cash investments (1,489) (2,655)
--------------- ---------------(126) (250)
------------ ------------
NET DECREASE IN CASH AND CASH INVESTMENTS (32,437) (2,978)(141,933) (20,284)
CASH AND CASH INVESTMENTS, beginning of period 145,672 34,308
27,645
--------------- --------------------------- ------------
CASH AND CASH INVESTMENTS, end of period $ 1,8713,739 $ 24,667
=============== ===============14,024
============ ============
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Fair value of assets acquired, including cash acquired $ 15,115368,632 $ 559,541-
Liabilities assumed (10,628) (104,526)
--------------- ---------------(39,347) -
------------ ------------
Cash paid 4,487 455,015
Less - amounts borrowed (4,487)329,285 -
Less - cash acquired (502) -
(2,489)
--------------- --------------------------- ------------
Net cash paid for purchases of businesses $ 328,783 $ -
$ 452,526
=============== =========================== ============
The accompanying notes to consolidated financial statements
are an integral part of these statements.
- 43 -
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2000MAY 31, 2001
1) MANAGEMENT'S REPRESENTATIONS:
The consolidated financial statements included herein have been prepared by
Constellation Brands, Inc. and its subsidiaries (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission
applicable to quarterly reporting on Form 10-Q and reflect, in the opinion of
the Company, all adjustments necessary to present fairly the financial
information for the Company. All such adjustments are of a normal recurring
nature. Certain information and footnote disclosures normally included in
financial statements, prepared in accordance with generally accepted accounting
principles, have been condensed or omitted as permitted by such rules and
regulations. These consolidated financial statements and related notes should be
read in conjunction with the consolidated financial statements and related notes
included in the Company's Annual Report on Form 10-K for the fiscal year ended
February 29, 2000.28, 2001. Results of operations for interim periods are not necessarily
indicative of annual results.
Certain February 29,May 31, 2000, and November 30, 1999, balances have been reclassified to conform to current
year presentation.
2) ACQUISITIONS:
On April 9, 1999, in an asset acquisition,ACCOUNTING CHANGES:
Effective March 1, 2001, the Company acquired several
well-known Canadian whisky brands, including Black Velvet, production facilities
locatedadopted Statement of Financial
Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for Derivative
Instruments and Hedging Activities", as amended, which establishes accounting
and reporting standards for derivative instruments and hedging activities. SFAS
No. 133 requires that the Company recognize all derivatives as either assets or
liabilities on the balance sheet and measure those instruments at fair value.
The adoption of SFAS No. 133 did not have a material impact on the Company's
consolidated financial position, results of operations, or cash flows. The
Company is exposed to market risk associated with changes in Albertaforeign currency
exchange rates. The Company has limited involvement with derivative financial
instruments and Quebec, Canada, case goodsdoes not use them for trading purposes. The Company periodically
enters into derivative transactions solely to manage the volatility and bulk whisky inventories
and other related assetsto
reduce the financial impact relating to this risk.
The Company uses foreign currency exchange hedging agreements to reduce the
risk of foreign currency exchange rate fluctuations resulting primarily from
affiliatescontracts to purchase inventory items that are denominated in various foreign
currencies. As these derivative contracts are designated to hedge the exposure
to variable cash flows of Diageo plc (the "Black Velvet
Assets"). In connection with thea forecasted transaction, the Company also entered into
multi-year agreements with affiliates of Diageo plc to provide packaging and
distilling services for various brands retained bycontracts are classified
as cash flow hedges. As such, the Diageo plc affiliates.
The purchase price was $183.6 million and was financed by the proceeds from the
saleeffective portion of the Senior Subordinated Notes.
The Black Velvet Assets acquisition was accounted for usingchange in the purchase
method; accordingly, the acquired assets were recorded at fair market value at
the date of acquisition. The excess of the purchase price over the estimated
fair market
value of the net assets acquired (goodwill)derivatives is recorded each period in the balance sheet in
accumulated other comprehensive income/loss ("AOCI"), $36.0 million,and is being
amortized onreclassified into
the statement of income, primarily as a straight-line basis over 40 years.component of cost of goods sold, in the
same period during which the hedged transaction affects earnings. The resultscurrency
forward exchange contracts used generally have maturity terms of operationstwelve months
or less. The Company expects the entire balance in AOCI related to cash flow
hedges to be reclassified to the statement of income within the next twelve
months. The Company formally documents all relationships between hedging
instruments and hedged items in accordance with SFAS No. 133 requirements.
The Company has exposure to foreign currency risk, primarily in the United
Kingdom, as a result of having international subsidiaries. The Company uses
local currency borrowings to hedge its earnings and cash flow exposure to
adverse changes in foreign currency exchange rates. Such borrowings are
designated as a hedge of the Black Velvet Assets acquisition have been included in the Consolidated
Statements of Income since the date of acquisition.
On June 4, 1999, the Company purchased all of the outstanding capital stock
of Franciscan Vineyards, Inc. ("Franciscan Estates") and, in related
transactions, purchased vineyards, equipment and other vineyard related assets
located in Northern California (collectively, the "Franciscan Acquisition"). The
purchase price was $212.4 million in cash plus assumed debt, net of cash
acquired, of $30.8 million. The purchase price was financed primarily by
additional term loan borrowings under the senior credit facility. Also, on June
4, 1999, the Company acquired all of the outstanding capital stock of Simi
Winery, Inc. ("Simi") (the "Simi Acquisition"). The cash purchase price was
$57.5 million and was financed by revolving loan borrowings under the senior
credit facility. The purchases were accounted for using the purchase method;
accordingly, the acquired assets were recorded at fair market value at the date
of acquisition. The excess of the purchase price over the estimated fair market
valueforeign currency exposure of the net assets acquired (goodwill) forinvestment in
the Franciscan Acquisition andforeign operation. Accordingly, the Simi Acquisition, $94.5 million and $5.8 million, respectively, is being
amortized on a straight-line basis over 40 years. The Franciscan Estates and
Simi operations are managed together as a separate business segmenteffective portion of the Company ("Franciscan").foreign
currency gain or loss on the hedging debt instrument is reported in AOCI as part
of the foreign currency translation adjustments. For the three months ended
- 4 -
- 5 -
The resultsMay 31, 2001, $5.3 million of operations of Franciscan have beennet gain is included in the Consolidated
Statements of Income since the date of acquisition.foreign currency
translation adjustments within AOCI.
3) ACQUISITIONS:
On October 27, 2000, the Company purchased all of the issued Ordinary
Shares and Preference Shares of Forth Wines Limited ("Forth Wines"). The
purchase price was $4.5 million and was accounted for using the purchase method;
accordingly, the acquired net assets were recorded at fair market value at the
date of acquisition. The excess of the purchase price over the estimated fair market value
of the net assets acquired (goodwill), $2.2 million, is being amortized on a
straight-line basis over 40 years. The results of operations of Forth Wines are
reported in the Matthew Clark segment and have been included in the Consolidated
Statements of Income since the date of acquisition.
On March 5, 2001, in an asset acquisition, the Company acquired several
well-known premium wine brands, including Vendange, Nathanson Creek, Heritage,
and Talus, working capital (primarily inventories), two wineries in California,
and other related assets from Sebastiani Vineyards, Inc. and Tuolomne River
Vintners Group (the "Turner Road Vintners Assets"). The preliminary purchase
price of the Turner Road Vintners Assets, including assumption of indebtedness
of $9.4 million, was $289.7 million. The purchase price is subject to final
closing adjustments which the Company does not expect to be material. The
acquisition was financed by the proceeds from the sale of the February 2001
Senior Notes and revolving loan borrowings under the senior credit facility. The
Turner Road Vintners Assets acquisition was accounted for using the purchase
method; accordingly, the acquired net assets were recorded at fair market value
at the date of acquisition, subject to final appraisal. The excess of the
purchase price over the estimated fair market value of the net assets acquired
(goodwill), $180.6 million, is being amortized on a straight-line basis over 40
years. The results of operations of the Turner Road Vintners Assets are reported
in the Canandaigua Wine segment and have been included in the Consolidated
Statements of Income since the date of acquisition.
On March 26, 2001, in an asset acquisition, the Company acquired certain
wine brands, wineries, working capital (primarily inventories), and other
related assets from Corus Brands, Inc. (the "Corus Assets"). In this
acquisition, the Company acquired several well-known premium wine brands
primarily sold in the northwestern United States, including Covey Run, Columbia,
Ste. Chapelle and Alice White. The preliminary purchase price of the Corus
Assets, including assumption of indebtedness (net of cash acquired) of $3.1
million, was $52.0 million plus an earn-out over six years based on the
performance of the brands. The purchase price is subject to final closing
adjustments which the Company does not expect to be material. In connection with
the transaction, the Company also entered into long-term grape supply agreements
with affiliates of Corus Brands, Inc. covering more than 1,000 acres of
Washington and Idaho vineyards. The acquisition was financed with revolving loan
borrowings under the senior credit facility. The Corus Assets acquisition was
accounted for using the purchase method; accordingly, the acquired net assets
were recorded at fair market value at the date of acquisition, subject to final
appraisal. The excess of the purchase price over the estimated fair market value
of the net assets acquired (goodwill), $11.9 million, is being amortized on a
straight-line basis over 40 years. The results of operations of the Corus Assets
are reported in the Canandaigua Wine segment and have been included in the
Consolidated Statements of Income since the date of acquisition.
The following table sets forth the unaudited historical and unaudited pro forma results of
operations of the Company for the ninethree months ended November
30, 2000May 31, 2001 and 1999, respectively.2000. The unaudited historical and
unaudited pro forma results of operations for the ninethree months ended November 30,May 31,
2001 and 2000, gives effect to the acquisitions of the Turner Road Vintners
Assets and 1999, respectively,Corus Assets as if they occurred on March 1, 2000. The unaudited pro
forma results of operations for the three months ended May 31, 2000, do not give
pro forma effect to the acquisition of Forth Wines as if it occurred on March 1,
1999,2000, as it is not significant. The
unaudited pro forma results of operations for the nine months ended November 30,
1999, gives effect to the acquisitions of the Black Velvet Assets and Franciscan
as if they occurred on March 1, 1999. The unaudited pro forma results of operations
are presented after giving effect to certain adjustments for depreciation,
amortization of goodwill, interest expense on the acquisition financing and
related income tax effects. The unaudited pro
- 5 -
forma results of operations are based upon currently available information and
upon certain assumptions that the Company believes are reasonable under the
circumstances.
The unaudited pro forma results of operations for the nine months ended November
30, 1999, reflect total pretax nonrecurring charges of $12.4 million ($0.40 per
share on a diluted basis) related to transaction costs, primarily for exercise
of stock options, which were incurred by Franciscan Estates prior to the
acquisition. The unaudited pro forma results of operations do not purport to
present what the Company's results of operations would actually have been if the
aforementioned transactions had in fact occurred on such date or at the
beginning of the period indicated, nor do they project the Company's financial
position or results of operations at any future date or for any future period.
For the NineThree Months
Ended November 30,
--------------------------------------May 31,
--------------------------
2001 2000
1999
-------------- ------------------------ ----------
(in thousands, except per share data)
Net sales $ 1,852,647644,074 $ 1,832,082644,505
Income before income taxes $ 131,60938,932 $ 87,91226,593
Net income $ 78,96523,359 $ 52,74715,956
Earnings per common share:
Basic $ 4.310.57 $ 2.93
============== ==============0.44
========== ==========
Diluted $ 4.240.55 $ 2.85
============== ==============0.43
========== ==========
Weighted average common shares outstanding:
Basic 18,308 18,02341,254 36,460
Diluted 18,642 18,502
3)42,526 37,196
4) INVENTORIES:
Inventories are stated at the lower of cost (computed in accordance with
the first-in, first-out method) or market. Elements of cost include materials,
labor and overhead and consist of the following:
November 30,May 31, February 29,
2000 200028,
2001 2001
------------ ------------
(in thousands)
Raw materials and supplies $ 37,25432,260 $ 29,41728,007
In-process inventories 460,145 419,558465,848 450,650
Finished case goods 202,486 166,725258,503 191,361
------------ ------------
$ 699,885756,611 $ 615,700670,018
============ ============
5) OTHER ASSETS:
The major components of other assets are as follows:
May 31, February 28,
2001 2001
------------ ------------
(in thousands)
Goodwill $ 637,890 $ 447,813
Trademarks 245,932 247,139
Distribution rights and agency
license agreements 87,052 87,052
Other 77,434 73,935
------------ ------------
1,048,308 855,939
Less - Accumulated amortization (91,017) (83,373)
------------ ------------
$ 957,291 $ 772,566
============ ============
- 6 -
4) BORROWINGS:
SENIOR NOTES -
In
6) STOCKHOLDERS' EQUITY:
During March 2000,2001, the Company exchanged (pound)75.0 million aggregate
principal amountcompleted a public offering of 8 1/2% Series B Senior Notes due4,370,000
shares of its Class A Common Stock resulting in November 2009 (the
"Sterling Series B Senior Notes") for the Sterling Senior Notes. The terms of
the Sterling Series B Senior Notes are identical in all material respectsnet proceeds to the Sterling Senior Notes.
In May 2000, the Company,
issued (pound)80.0 million (approximately $120.0
million upon issuanceafter deducting underwriting discounts and $114.0 million asexpenses, of November 30, 2000) aggregate
principal amount of 8 1/2% Series C Senior Notes due November 2009 at an
issuance price of (pound)79.6 million (approximately $119.4 million upon
issuance, net of $0.6 million unamortized discount, and $113.5 million as of
November 30, 2000, net of $0.5 million unamortized discount, with an effective
rate of 8.6%) (the "Sterling Series C Senior Notes").$139.9 million. The net
proceeds of the
offering ((pound)78.8 million, or approximately $118.2 million) were used to repay revolving loan borrowings under the senior credit
facility of which a portion was incurred to partially finance the acquisition of
the Company's British pound sterling borrowings under its
senior credit facility. Interest on the Sterling Series C Senior Notes is
payable semiannually on May 15 and November 15 of each year, beginning on
November 15, 2000. The Sterling Series C Senior Notes are redeemable at the
option of the Company, in whole or in part, at any time. The Sterling Series C
Senior Notes are unsecured senior obligations and rank equally in right of
payment to all existing and future unsecured senior indebtedness of the Company.
The Sterling Series C Senior Notes are guaranteed, on a senior basis, by certain
of the Company's significant operating subsidiaries.
In October 2000, the Company exchanged (pound)74.0 million aggregate
principal amount of the Sterling Series B Senior Notes for Sterling Series C
Senior Notes. The terms of the Sterling Series C Senior Notes are identical in
all material respects to the Sterling Series B Senior Notes.
5)Turner Road Vintners Assets.
7) EARNINGS PER COMMON SHARE:
Basic earnings per common share exclude the effect of common stock
equivalents and are computed by dividing income available to common stockholders
by the weighted average number of common shares outstanding during the period
for Class A Common Stock and Class B Convertible Common Stock. Diluted earnings
per common share reflect the potential dilution that could result if securities
or other contracts to issue common stock were exercised or converted into common
stock. Diluted earnings per common share assume the exercise of stock options
using the treasury stock method and assume the conversion of convertible
securities, if any, using the "if converted" method.
The computation of basic and diluted earnings per common share is as
follows:
For the Nine Months For the Three Months
Ended November 30, Ended November 30,
------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
(in thousands, except per share data)
Income applicable to common shares $ 78,965 $ 61,847 $ 34,953 $ 29,900
======== ======== ======== ========
Weighted average common shares
outstanding - basic 18,308 18,023 18,394 18,083
Stock options 334 479 340 568
-------- -------- -------- --------
Weighted average common shares
outstanding - diluted 18,642 18,502 18,734 18,651
======== ======== ======== ========
EARNINGS PER COMMON SHARE - BASIC $ 4.31 $ 3.43 $ 1.90 $ 1.65
======== ======== ======== ========
EARNINGS PER COMMON SHARE - DILUTED $ 4.24 $ 3.34 $ 1.87 $ 1.60
======== ======== ======== ========
For the Three Months
Ended May 31,
------------------------------
2001 2000
------------ ------------
(in thousands, except per share data)
Income applicable to common shares $ 23,843 $ 17,902
============ ============
Weighted average common shares
outstanding - basic 41,254 36,460
Stock options 1,272 736
------------ ------------
Weighted average common shares
outstanding - diluted 42,526 37,196
============ ============
EARNINGS PER COMMON SHARE - BASIC $ 0.58 $ 0.49
============ ============
EARNINGS PER COMMON SHARE - DILUTED $ 0.56 $ 0.48
============ ============
Stock options to purchase 1.71.4 million and 84 thousand3.2 million shares of Class A
Common Stock at a weighted average price per share of $52.31$35.49 and $59.28 were
outstanding during the nine months ended November 30, 2000 and 1999,
respectively, but were not included in the computation of the diluted
- 7 -
earnings per common share because the stock options' exercise price was greater
than the average market price of the Class A Common Stock for the respective
periods. Stock options to purchase 1.7 million and 75 thousand shares of Class A
Common Stock at a weighted average price per share of $52.32 and $59.56$26.03 were
outstanding during the three months ended November 30,May 31, 2001 and 2000, and 1999, respectively,
but were not included in the computation of the diluted earnings per common
share because the stock options' exercise price was greater than the average
market price of the Class A Common Stock for the respective periods.
6) SUMMARIZED8) CONDENSED CONSOLIDATING FINANCIAL INFORMATION - SUBSIDIARY GUARANTORS:INFORMATION:
The following table presents summarized financial information sets forth the condensed consolidating balance
sheets of the Company as of May 31, 2001 and 2000, and the condensed
consolidating statements of income and cash flows for the three months ended May
31, 2001 and 2000, for the Company, the parent company, the combined
subsidiaries of the Company which guarantee the Company's senior notes and
senior subordinated notes (the
"Subsidiary("Subsidiary Guarantors") and the combined
subsidiaries of the Company which are not Subsidiary Guarantors, primarily
Matthew Clark (the "Subsidiary("Subsidiary Nonguarantors"). The Subsidiary Guarantors are wholly
owned and the guarantees are full, unconditional, joint and several obligations
of each of the Subsidiary Guarantors. Separate financial statements for the
Subsidiary Guarantors of the Company are not presented because the Company has
determined that such financial statements would not be material to investors.
The Subsidiary Guarantors comprise all of the direct and indirect subsidiaries
of the Company, other than Matthew Clark, the Company's Canadian subsidiary and
certain other subsidiaries which individually, and in the aggregate, are
inconsequential. The accounting policies of the parent company, the Subsidiary
Guarantors and the Subsidiary Nonguarantors are the same as those described
- 7 -
for the Company in the Summary of Significant Accounting Policies in Note 1 to
the Company's consolidated financial statements included in the Company's Annual
Report on Form 10-K for the fiscal year ended February 28, 2001. There are no
restrictions on the ability of the Subsidiary Guarantors to transfer funds to
the Company in the form of cash dividends, loans or advances.
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
----------------------- ------------ ------------- ------------ ------------
(in thousands)
Condensed Consolidating Balance Sheet
Data:
November 30, 2000
- ------------------------------------------------------
at May 31, 2001
- ---------------
Current assets $ 121,413 $ 707,370 $ 330,021assets:
Cash and cash investments $ - $ 1,158,804
Noncurrent assets3,569 $ 910,185 $ 1,239,188 $ 439,263 $ (1,281,650) $ 1,306,986
Current liabilities $ 273,307 $ 120,613 $ 218,210170 $ - $ 612,130
Noncurrent liabilities3,739
Accounts receivable, net 58,083 80,330 235,985 - 374,398
Inventories, net 31,983 598,781 125,905 (58) 756,611
Prepaid expenses and other
current assets 5,615 37,107 21,862 - 64,584
Intercompany (payable) receivable (66,389) 124,835 (58,446) - -
----------- ------------ ------------- ------------ ------------
Total current assets 29,292 844,622 325,476 (58) 1,199,332
Property, plant and equipment, net 30,038 361,568 191,464 - 583,070
Investments in subsidiaries 2,182,342 531,771 - (2,714,113) -
Other assets 88,868 624,356 244,067 - 957,291
----------- ------------ ------------- ------------ ------------
Total assets $ 1,114,2322,330,540 $ 104,0762,362,317 $ 52,481761,007 $ (2,714,171) $ 2,739,693
=========== ============ ============= ============ ============
Current liabilities:
Notes payable $ 20,000 $ - $ 1,270,789
February 29, 2000
- -----------------
Current assets $ 105,705 $ 611,805 $ 278,4874,903 $ - $ 995,997
Noncurrent assets24,903
Current maturities of long-term debt 67,044 1,379 4,573 - 72,996
Accounts payable and other liabilities 110,508 72,169 180,068 - 362,745
Accrued excise taxes 4,858 22,196 16,925 - 43,979
----------- ------------ ------------- ------------ ------------
Total current liabilities 202,410 95,744 206,469 - 504,623
Long-term debt, less current maturities 1,281,793 11,855 468 - 1,294,116
Deferred income taxes 33,232 69,330 28,755 - 131,317
Other liabilities 467 4,111 24,112 - 28,690
Stockholders' equity:
Class A and class B common stock 451 6,434 64,867 (71,301) 451
Additional paid-in capital 373,530 1,071,627 436,466 (1,508,093) 373,530
Retained earnings 479,699 1,104,281 30,438 (1,134,777) 479,641
Accumulated other comprehensive
income (loss) 1,258 (1,065) (30,568) - (30,375)
Treasury stock and other (42,300) - - - (42,300)
----------- ------------ ------------- ------------ ------------
Total stockholders' equity 812,638 2,181,277 501,203 (2,714,171) 780,947
----------- ------------ ------------- ------------ ------------
Total liabilities and
stockholders' equity $ 846,6932,330,540 $ 1,298,4652,362,317 $ 489,286761,007 $ (1,281,650)(2,714,171) $ 1,352,7942,739,693
=========== ============ ============= ============ ============
Condensed Consolidating Balance Sheet
- -------------------------------------
at February 28, 2001
- --------------------
Current liabilitiesassets:
Cash and cash investments $ 174,816142,104 $ 110,3683,239 $ 153,033329 $ - $ 438,217
Noncurrent liabilities145,672
Accounts receivable, net 80,299 116,784 117,179 - 314,262
Inventories, net 31,845 515,274 122,965 (66) 670,018
Prepaid expenses and other
current assets 6,551 33,565 20,921 - 61,037
Intercompany (payable) receivable (61,783) 54,169 7,614 - -
----------- ------------ ------------- ------------ ------------
Total current assets 199,016 723,031 269,008 (66) 1,190,989
Property, plant and equipment, net 30,554 320,143 197,917 - 548,614
Investments in subsidiaries 1,835,088 525,442 - (2,360,530) -
Other assets 87,764 434,782 250,020 - 772,566
----------- ------------ ------------- ------------ ------------
Total assets $ 1,226,3292,152,422 $ 101,2202,003,398 $ 62,185716,945 $ -(2,360,596) $ 1,389,734
Income Statement Data:
For the Nine Months Ended
- -------------------------
November 30, 2000
- -----------------
Net sales $ 436,925 $ 1,069,711 $ 567,195 $ (221,184) $ 1,852,647
Gross profit $ 102,791 $ 320,376 $ 169,398 $ - $ 592,565
(Loss) income before
income taxes $ (28,494) $ 111,120 $ 48,983 $ - $ 131,609
Net (loss) income $ (17,096) $ 63,196 $ 32,865 $ - $ 78,965
For the Nine Months Ended
- -------------------------
November 30, 1999
- -----------------
Net sales $ 455,401 $ 1,056,200 $ 565,800 $ (272,683) $ 1,804,718
Gross profit $ 121,099 $ 270,451 $ 163,387 $ - $ 554,937
(Loss) income before
income taxes $ (4,421) $ 70,166 $ 37,333 $ - $ 103,078
Net (loss) income $ (2,652) $ 42,099 $ 22,400 $ - $ 61,847
2,512,169
=========== ============ ============= ============ ============
- 8 -
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
----------------------- ------------ ------------- ------------ ------------
(in thousands)
Current liabilities:
Notes payable $ - $ - $ 4,184 $ - $ 4,184
Current maturities of long-term debt 49,218 70 4,888 - 54,176
Accounts payable and other liabilities 111,388 58,448 143,010 - 312,846
Accrued excise taxes 9,411 35,474 11,069 - 55,954
----------- ------------ ------------- ------------ ------------
Total current liabilities 170,017 93,992 163,151 427,160
Long-term debt, less current maturities 1,305,302 758 1,377 - 1,307,437
Deferred income taxes 33,232 71,619 27,123 - 131,974
Other liabilities 437 2,953 25,940 - 29,330
Stockholders' equity:
Class A and class B common stock 448 6,434 64,867 (71,301) 448
Additional paid-in capital 267,655 742,343 436,466 (1,178,809) 267,655
Retained earnings 455,864 1,086,311 24,109 (1,110,486) 455,798
Accumulated other comprehensive
income (loss) 1,096 (1,012) (26,088) - (26,004)
Treasury stock and other (81,629) - - - (81,629)
----------- ------------ ------------- ------------ ------------
Total stockholders' equity 643,434 1,834,076 499,354 (2,360,596) 616,268
----------- ------------ ------------- ------------ ------------
Total liabilities and
stockholders' equity $ 2,152,422 $ 2,003,398 $ 716,945 $ (2,360,596) $ 2,512,169
=========== ============ ============= ============ ============
Condensed Consolidating Statement of Income
Statement Data (continued):
For- -------------------------------------------
for the Three Months Ended May 31, 2001
- --------------------------
November 30, 2000---------------------------------------
Gross sales $ 194,126 $ 452,541 $ 256,425 $ (67,318) $ 835,774
Less - -----------------excise taxes (30,388) (102,215) (61,061) - (193,664)
----------- ------------ ------------- ------------ ------------
Net sales $ 155,957 $ 355,450 $ 195,952 $ (77,782) $ 629,577163,738 350,326 195,364 (67,318) 642,110
Cost of product sold (112,487) (248,875) (146,124) 67,326 (440,160)
----------- ------------ ------------- ------------ ------------
Gross profit $ 31,455 $ 116,319 $ 60,279 $51,251 101,451 49,240 8 201,950
Selling, general and administrative
expenses (41,696) (52,230) (38,101) - $ 208,053
(Loss)(132,027)
----------- ------------ ------------- ------------ ------------
Operating income 9,555 49,221 11,139 8 69,923
Interest expense, net (5,365) (23,539) (1,281) - (30,185)
Equity earnings in subsidiary 17,970 6,329 - (24,299) -
----------- ------------ ------------- ------------ ------------
Income before income taxes $ (10,368) $ 48,442 $ 20,181 $22,160 32,011 9,858 (24,291) 39,738
Benefit from (provision for) income taxes 1,675 (14,041) (3,529) - $ 58,255(15,895)
----------- ------------ ------------- ------------ ------------
Net (loss) income $ (6,221)23,835 $ 27,47117,970 $ 13,7036,329 $ (24,291) $ 23,843
=========== ============ ============= ============ ============
Condensed Consolidating Statement of Income
- $ 34,953
For-------------------------------------------
for the Three Months Ended May 31, 2000
- --------------------------
November 30, 1999---------------------------------------
Gross sales $ 168,387 $ 443,183 $ 241,003 $ (78,051) $ 774,522
Less - -----------------excise taxes (30,974) (102,410) (55,558) - (188,942)
----------- ------------ ------------- ------------ ------------
Net sales $ 174,703 $ 365,987 $ 209,332 $ (97,053) $ 652,969137,413 340,773 185,445 (78,051) 585,580
Cost of product sold (100,738) (245,819) (133,186) 78,036 (401,707)
----------- ------------ ------------- ------------ ------------
Gross profit $ 47,709 $ 101,134 $ 60,844 $36,675 94,954 52,259 (15) 183,873
Selling, general and administrative
expenses (38,393) (50,112) (37,904) - $ 209,687(126,409)
----------- ------------ ------------- ------------ ------------
Operating income (1,718) 44,842 14,355 (15) 57,464
Interest expense, net (6,194) (20,272) (1,161) - (27,627)
Equity earnings in subsidiary 22,664 8,688 - (31,352) -
----------- ------------ ------------- ------------ ------------
Income before income taxes 14,752 33,258 13,194 (31,367) 29,837
Benefit from (provision for) income taxes 3,165 (10,594) (4,506) - (11,935)
----------- ------------ ------------- ------------ ------------
Net income $ 2,72817,917 $ 29,80122,664 $ 17,3058,688 $ (31,367) $ 17,902
=========== ============ ============= ============ ============
- 9 -
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
----------- ------------ ------------- ------------ ------------
(in thousands)
Condensed Consolidating Statement of Cash Flows
- -----------------------------------------------
for the Three Months Ended May 31, 2001
- ---------------------------------------
Net cash provided by operating
activities $ 30,101 $ 1,758 $ 2,738 $ - $ 49,83434,597
Cash flows from investing activities:
Purchases of businesses, net of
cash acquired (329,284) 501 - - (328,783)
Purchases of property, plant and
equipment (985) (6,881) (2,972) - (10,838)
Other - 224 144 - 368
----------- ------------ ------------- ------------ ------------
Net income $ 1,637 $ 17,881 $ 10,382cash used in investing activities (330,269) (6,156) (2,828) - (339,253)
----------- ------------ ------------- ------------ ------------
Cash flows from financing activities:
Proceeds from equity offering, net
of fees 139,878 - - - 139,878
Net proceeds from notes payable 20,000 - 1,162 21,162
Exercise of employee stock options 4,797 - - - 4,797
Principal payments of long-term debt (599) (315) (1,060) - (1,974)
Payment of issuance costs of
long-term debt (1,014) - - - (1,014)
----------- ------------ ------------- ------------ ------------
Net cash provided by (used in)
financing activities 163,062 (315) 102 - 162,849
----------- ------------ ------------- ------------ ------------
Effect of exchange rate changes on
cash and cash investments (4,998) 5,043 (171) - (126)
----------- ------------ ------------- ------------ ------------
Net (decrease) increase in cash
and cash investments (142,104) 330 (159) - (141,933)
Cash and cash investments, beginning
of period 142,104 3,239 329 - 145,672
----------- ------------ ------------- ------------ ------------
Cash and cash investments, end of
period $ - $ 29,9003,569 $ 170 $ - $ 3,739
=========== ============ ============= ============ ============
Condensed Consolidating Statement of Cash Flows
- -----------------------------------------------
for the Three Months Ended May 31, 2000
- ---------------------------------------
Net cash provided by (used in)
operating activities $ 45,866 $ (9,465) $ (16,430) $ - $ 19,971
Cash flows from investing activities:
Purchases of property, plant and
equipment (753) (6,335) (3,177) - (10,265)
Other - 79 238 - 317
----------- ------------ ------------- ------------ ------------
Net cash used in investing activities (753) (6,256) (2,939) - (9,948)
----------- ------------ ------------- ------------ ------------
Cash flows from financing activities:
Principal payments of long-term debt (132,950) (16) (363) - (133,329)
Net repayments of notes payable (16,800) - - - (16,800)
Payment of issuance costs of
long-term debt (1,301) - - - (1,301)
Proceeds from issuance of long-term
debt, net of discount 119,400 - - - 119,400
Exercise of employee stock options 1,973 - - - 1,973
----------- ------------ ------------- ------------ ------------
Net cash used in financing activities (29,678) (16) (363) - (30,057)
----------- ------------ ------------- ------------ ------------
Effect of exchange rate changes on
cash and cash investments (15,416) 16,236 (1,070) - (250)
----------- ------------ ------------- ------------ ------------
- 10 -
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
----------- ------------ ------------- ------------ ------------
(in thousands)
Net increase (decrease) in cash
and cash investments 19 499 (20,802) - (20,284)
Cash and cash investments, beginning
of period - 231 34,077 - 34,308
----------- ------------ ------------- ------------ ------------
Cash and cash investments, end of
period $ 19 $ 730 $ 13,275 $ - $ 14,024
=========== ============ ============= ============ ============
7)9) BUSINESS SEGMENT INFORMATION:
The Company reports its operating results in five segments: Canandaigua
Wine (branded popularly-pricedpopular and premium wine and brandy, and other, primarily grape
juice concentrate); Barton (primarily beer and distilled spirits); Matthew Clark
(branded wine, cider and bottled water, and wholesale wine, cider, distilled
spirits, beer and soft drinks); Franciscan (primarily branded super-premium and
ultra-premium wine) and Corporate Operations and Other (primarily corporate
related items). Segment selection was based upon internal organizational
structure, the way in which these operations are managed and their performance
evaluated by management and the Company's Board of Directors, the availability
of separate financial results, and materiality considerations. The accounting
policies of the segments are the same as those described for the Company in the
summarySummary of significant accounting
policies.Significant Accounting Policies in Note 1 to the Company's
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 2001. The Company evaluates
performance based on operating income of the respective business units.
Segment information is as follows:
For the Nine Months For the Three Months
Ended November 30, Ended November 30,
--------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------For the Three Months
Ended May 31,
-------------------------------
2001 2000
----------- -----------
(in thousands)
Canandaigua Wine:
- -----------------
Net sales:
Branded:
External customers $ 166,081 $ 143,330
Intersegment 1,745 1,236
----------- -----------
Total Branded 167,826 144,566
----------- -----------
Other:
External customers 13,549 15,268
Intersegment 3,689 3,629
----------- -----------
Total Other 17,238 18,897
----------- -----------
Net sales $ 185,064 $ 163,463
Operating income $ 15,395 $ 7,818
Long-lived assets $ 230,260 $ 192,337
Total assets $ 966,466 $ 596,543
Capital expenditures $ 1,489 $ 2,645
Depreciation and amortization $ 8,116 $ 5,868
- 11 - -----------------
Net sales:
Branded:
External customers $ 450,927 $ 472,087 $ 160,221 $ 179,905
Intersegment 5,023 5,274 1,891 2,285
------------ ------------ ------------ ------------
Total Branded 455,950 477,361 162,112 182,190
------------ ------------ ------------ ------------
Other:
External customers 46,632 63,081 18,389 24,502
Intersegment 11,450 460 3,095 423
------------ ------------ ------------ ------------
Total Other 58,082 63,541 21,484 24,925
------------ ------------ ------------ ------------
Net sales $ 514,032 $ 540,902 $ 183,596 $ 207,115
Operating income $ 34,849 $ 34,869 $ 16,453 $ 18,850
Long-lived assets $ 188,595 $ 194,199 $ 188,595 $ 194,199
Total assets $ 681,156 $ 698,209 $ 681,156 $ 698,209
Capital expenditures $ 11,894 $ 17,909 $ 4,229 $ 5,201
Depreciation and amortization $ 17,601 $ 16,681 $ 5,867 $ 5,032
- 9 -
For the Nine Months For the Three Months
Ended November 30, Ended November 30,
--------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(in thousands)
Barton:
- -------
Net sales:
Beer $ 538,585 $ 457,961 $ 163,292 $ 134,155
Spirits 224,203 207,697 79,096 80,548
------------ ------------ ------------ ------------
Net sales $ 762,788 $ 665,658 $ 242,388 $ 214,703
Operating income $ 135,818 $ 114,839 $ 46,370 $ 41,380
Long-lived assets $ 76,885 $ 77,022 $ 76,885 $ 77,022
Total assets $ 717,071 $ 699,954 $ 717,071 $ 699,954
Capital expenditures $ 4,646 $ 4,532 $ 1,660 $ 1,864
Depreciation and amortization $ 11,982 $ 10,573 $ 4,078 $ 4,175
Matthew Clark:
- --------------
Net sales:
Branded:
External customers $ 224,734 $ 248,358 $ 79,248 $ 93,104
Intersegment 604 53 107 53
------------ ------------ ------------ ------------
Total Branded 225,338 248,411 79,355 93,157
Wholesale 293,958 306,802 100,725 112,049
------------ ------------ ------------ ------------
Net sales $ 519,296 $ 555,213 $ 180,080 $ 205,206
Operating income $ 41,027 $ 34,503 $ 18,431 $ 15,193
Long-lived assets $ 139,655 $ 171,537 $ 139,655 $ 171,537
Total assets $ 644,396 $ 728,167 $ 644,396 $ 728,167
Capital expenditures $ 9,639 $ 16,459 $ 3,538 $ 5,344
Depreciation and amortization $ 15,400 $ 17,133 $ 5,363 $ 4,317
Franciscan:
- -----------
Net sales:
External customers $ 70,923 $ 44,610 $ 27,779 $ 27,473
Intersegment 177 - 39 -
------------ ------------ ------------ ------------
Net sales $ 71,100 $ 44,610 $ 27,818 $ 27,473
Operating income $ 18,659 $ 7,562 $ 9,001 $ 5,991
Long-lived assets $ 125,280 $ 101,143 $ 125,280 $ 101,143
Total assets $ 394,197 $ 361,378 $ 394,197 $ 361,378
Capital expenditures $ 21,407 $ 6,448 $ 13,074 $ 2,728
Depreciation and amortization $ 7,328 $ 3,990 $ 2,798 $ 2,181
Corporate Operations and Other:
- -------------------------------
Net sales $ 2,685 $ 4,122 $ 826 $ 1,233
Operating loss $ (16,947) $ (10,476) $ (5,017) $ (4,036)
Long-lived assets $ 5,885 $ 17,496 $ 5,885 $ 17,496
Total assets $ 28,970 $ 45,287 $ 28,970 $ 45,287
Capital expenditures $ 220 $ 1,309 $ 56 $ 761
Depreciation and amortization $ 2,800 $ 2,465 $ 940 $ 994
Intersegment Eliminations:
- --------------------------
Net sales $ (17,254) $ (5,787) $ (5,131) $ (2,761)
Consolidated:
- -------------
Net sales $ 1,852,647 $ 1,804,718 $ 629,577 $ 652,969
Operating income $ 213,406 $ 181,297 $ 85,238 $ 77,378
Long-lived assets $ 536,300 $ 561,397 $ 536,300 $ 561,397
Total assets $ 2,465,790 $ 2,532,995 $ 2,465,790 $ 2,532,995
Capital expenditures $ 47,806 $ 46,657 $ 22,557 $ 15,898
Depreciation and amortization $ 55,111 $ 50,842 $ 19,046 $ 16,699
For the Three Months
Ended May 31,
-------------------------------
2001 2000
----------- -----------
(in thousands)
Barton:
- 10-------
Net sales:
Beer $ 182,985 $ 163,134
Spirits 71,317 72,546
----------- -----------
Net sales $ 254,302 $ 235,680
Operating income $ 44,051 $ 38,835
Long-lived assets $ 78,136 $ 77,956
Total assets $ 734,345 $ 716,633
Capital expenditures $ 2,924 $ 1,336
Depreciation and amortization $ 4,762 $ 3,955
Matthew Clark:
- 8)--------------
Net sales:
Branded:
External customers $ 66,881 $ 69,594
Intersegment 102 21
----------- -----------
Total Branded 66,983 69,615
Wholesale 115,006 99,923
----------- -----------
Net sales $ 181,989 $ 169,538
Operating income $ 8,317 $ 10,374
Long-lived assets $ 140,710 $ 148,103
Total assets $ 622,334 $ 629,030
Capital expenditures $ 2,030 $ 2,409
Depreciation and amortization $ 4,673 $ 5,213
Franciscan:
- -----------
Net sales:
External customers $ 26,291 $ 21,785
Intersegment 102 104
----------- -----------
Net sales $ 26,393 $ 21,889
Operating income $ 7,048 $ 5,416
Long-lived assets $ 129,499 $ 108,694
Total assets $ 396,209 $ 361,036
Capital expenditures $ 3,969 $ 3,780
Depreciation and amortization $ 3,223 $ 2,392
Corporate Operations and Other:
- -------------------------------
Net sales $ - $ -
Operating loss $ (4,888) $ (4,979)
Long-lived assets $ 4,465 $ 3,901
Total assets $ 20,339 $ 23,858
Capital expenditures $ 426 $ 95
Depreciation and amortization $ 1,151 $ 918
Intersegment eliminations:
- --------------------------
Net sales $ (5,638) $ (4,990)
Consolidated:
- -------------
Net sales $ 642,110 $ 585,580
Operating income $ 69,923 $ 57,464
Long-lived assets $ 583,070 $ 530,991
Total assets $ 2,739,693 $ 2,327,100
Capital expenditures $ 10,838 $ 10,265
Depreciation and amortization $ 21,925 $ 18,346
- 12 -
10) COMPREHENSIVE INCOME:
Comprehensive income consists of net income, and foreign currency translation
adjustments and net unrealized losses on derivative instruments for the nine months and three
months ended November 30,
2000May 31, 2001 and 1999.2000. The reconciliation of net income to
comprehensive income is as follows:
For the Nine Months For the Three Months
Ended November 30, Ended November 30,
----------------------- ------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
(in thousands)
Net income $ 78,965 $ 61,847 $ 34,953 $ 29,900
Other comprehensive income:
Cumulative translation adjustment $ (23,483) $ (3,504) $ (4,370) $ (2,770)
---------- ---------- ---------- ----------
Total comprehensive income $ 55,482 $ 58,343 $ 30,583 $ 27,130
========== ==========For the Three Months
Ended May 31,
------------------------
2001 2000
---------- ----------
(in thousands)
Net income $ 23,843 $ 17,902
Other comprehensive income, net of tax:
Foreign currency translation adjustments (4,314) (11,266)
Cash flow hedges:
Net derivative gains, net of tax
effect of $79 172 -
Reclassification adjustments, net of
tax effect of $103 (229) -
---------- ----------
Net cash flow hedges (57) -
---------- ----------
Total comprehensive income $ 19,472 $ 6,636
========== ==========
9)Accumulated other comprehensive loss includes the following components:
For the Three Months Ended May 31, 2001
--------------------------------------------------
Foreign Net Accumulated
Currency Unrealized Other
Translation Losses on Comprehensive
Adjustments Derivatives Loss
------------ ------------- -------------
Beginning balance,
February 28, 2001 $ (26,004) $ - $ (26,004)
Current-period change (4,314) (57) (4,371)
------------ ------------- -------------
Ending balance,
May 31, 2001 $ (30,318) $ (57) $ (30,375)
============ ============= =============
11) ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. SFAS No. 133 requires that every
derivative be recorded as either an asset or liability in the balance sheet and
measured at its fair value. SFAS No. 133 also requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting.
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137 ("SFAS No. 137"), "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
FASB Statement No. 133." SFAS No. 137 delays the effective date of SFAS No. 133
for one year. With the issuance of SFAS No. 137, the Company is required to
adopt SFAS No. 133 on a prospective basis for interim periods and fiscal years
beginning March 1, 2001.
In JuneMay 2000, the Financial Accounting Standards BoardEmerging Issues Task Force ("EITF") issued Statement of
Financial Accounting StandardsEITF Issue No.
13800-14 ("SFASEITF No. 138"00-14"), "Accounting for Certain Derivative InstrumentsSales Incentives," which was
subsequently amended in April 2001. EITF No. 00-14 addresses the recognition,
measurement and Certain Hedging Activities--an amendmentincome statement classification of FASB
Statementcertain sales incentives.
EITF No. 133." SFAS No. 138 amends the accounting00-14 requires that sales incentives, including coupons, rebate offers,
and reporting standardsfree product offers, given concurrently with a single exchange transaction
be recognized when incurred and reported as a reduction of SFAS No. 133 for certain derivative instrumentsrevenue. The Company
currently reports these costs in selling, general and certain hedging
activities.administrative expenses.
The Company is required to adopt SFASEITF No. 138 concurrently00-14 in its financial statements
beginning March 1, 2002. Upon adoption of EITF No. 00-14, financial statements
for prior periods presented for comparative purposes are to be reclassified to
comply with SFASthe requirements of EITF No. 133.00-14. The Company believes the effectimpact
of the adoption of these statementsEITF No. 00-14 on its financial statements will result in a material
reclassification that will decrease previously reported net sales and decrease
previously reported selling, general and administrative expenses, but will have
no effect on operating income or net income. The Company has not yet determined
the amount of the reclassification.
12) SUBSEQUENT EVENT:
On July 2, 2001, the Company acquired all of the outstanding capital stock
of Ravenswood Winery, Inc. ("Ravenswood"). The preliminary purchase price of
Ravenswood, including assumption of indebtedness (net of cash acquired) of $3.2
million, was $151.2 million. The purchase price is subject to final closing
adjustments which the Company does not expect to be materialmaterial. The Ravenswood
acquisition will be accounted for using the purchase method; accordingly, the
acquired net assets will be
- 13 -
recorded at fair market value at the date of acquisition based onupon an appraisal
of the Company's current
risk management strategies.
- 11 -net assets. The acquisition was financed with revolving loan borrowings
under the senior credit facility. The Company will manage Ravenswood through its
Franciscan segment.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------
OF OPERATIONS
-------------
INTRODUCTION
- ------------
The Company is a leader in the production and marketing of beverage alcohol
brands in North America and the United Kingdom, and a leading independent drinks
wholesaler in the United Kingdom. As the second largest supplier of wine, the
second largest importer of beer and the fourth largest supplier of distilled
spirits, the Company is the largest single-source supplier of these products in
the United States. In the United Kingdom, the Company is a leading marketer of
wine and the second largest producer and marketer of cider.
The Company reports its operating results in five segments: Canandaigua
Wine (branded popular and premium wine and brandy, and other, primarily grape
juice concentrate); Barton (primarily beer and distilled spirits); Matthew Clark
(branded wine, cider, and bottled water, and wholesale wine, cider, distilled
spirits, beer and soft drinks); Franciscan (primarily branded super-premium and
ultra-premium wine); and Corporate Operations and Other (primarily corporate
related items).
On April 10, 2001, the Board of Directors of the Company approved a
two-for-one stock split of both the Company's Class A Common Stock and Class B
Common Stock, which was distributed in the form of a stock dividend on May 14,
2001, to stockholders of record on April 30, 2001. Pursuant to the terms of the
stock dividend, each holder of Class A Common Stock received one additional
share of Class A stock for each share of Class A stock held, and each holder of
Class B Common Stock received one additional share of Class B stock for each
share of Class B stock held. All share and per share amounts in this Quarterly
Report on Form 10-Q are adjusted to give effect to the common stock split.
The following discussion and analysis summarizes the significant factors
affecting (i) consolidated results of operations of the Company for the three
months ended November 30, 2000May 31, 2001 ("ThirdFirst Quarter 2001"2002"), compared to the three months
ended November 30, 1999 ("Third Quarter 2000"), and for the nine months
ended November 30,May 31, 2000 ("Nine MonthsFirst Quarter 2001"), compared to the nine months ended
November 30, 1999 ("Nine Months 2000"), and (ii) financial liquidity and
capital resources for Nine Months 2001.First Quarter 2002. This discussion and analysis should be
read in conjunction with the Company's consolidated financial statements and
notes thereto included herein and in the Company's Annual Report on Form 10-K
for the fiscal year ended February 29, 200028, 2001 ("Fiscal 2000"2001").
The Company operates primarily in the beverage alcohol industry in North
America and the United Kingdom. The Company reports its operating results in
five segments: Canandaigua Wine (branded popularly-priced wine and brandy, and
other, primarily grape juice concentrate); Barton (primarily beer and spirits);
Matthew Clark (branded wine, cider and bottled water, and wholesale wine, cider,
spirits, beer and soft drinks); Franciscan (primarily branded super-premium and
ultra-premium wine); and Corporate Operations and Other (primarily corporate
related items).
ACQUISITIONS IN FISCAL 20002002 AND FISCAL 2001
On April 9, 1999,July 2, 2001, the Company acquired all of the outstanding capital stock
of Ravenswood Winery, Inc. ("Ravenswood"), a leading premium wine producer based
in Sonoma, California. Ravenswood produces, markets and sells super-premium and
ultra-premium California wine primarily under the Ravenswood brand name. The
vast majority of the wine Ravenswood produces and sells is red wine, including
the number one super-premium Zinfandel in the United States. The Company will
manage Ravenswood through its Franciscan segment. The Ravenswood acquisition is
in line with the Company's strategy of further penetrating the faster growing,
higher gross profit margin super-premium and ultra-premium wine categories.
On March 26, 2001, in an asset acquisition, the Company acquired several
well-known Canadian whiskycertain
wine brands, including Black Velvet, production facilities
located in Alberta and Quebec, Canada, case goods and bulk whisky inventorieswineries, working capital (primarily inventories), and other
related assets from affiliates of Diageo plc (collectively,Corus Brands, Inc. (the "Corus
- 14 -
Assets"). In this acquisition, the "Black
Velvet Assets").Company acquired several well-known premium
wine brands primarily sold in the northwestern United States, including Covey
Run, Columbia, Ste. Chapelle and Alice White. In connection with the
transaction, the Company also entered into multi-yearlong-term grape supply agreements
with affiliates of Diageo plc to provide packagingCorus Brands, Inc. covering more than 1,000 acres of
Washington and distilling services for various brands retained by the Diageo plc
affiliates.Idaho vineyards. The results of operations fromof the Black VelvetCorus Assets
are reported in the BartonCanandaigua Wine segment and have been included in the
consolidated results of operations of the Company since the date of acquisition.
On June 4, 1999,March 5, 2001, in an asset acquisition, the Company purchased all of the outstandingacquired several
well-known premium wine brands, including Vendange, Nathanson Creek, Heritage,
and Talus, working capital stock
of Franciscan(primarily inventories), two wineries in California,
and other related assets from Sebastiani Vineyards, Inc. ("Franciscan Estates") and in related
transactions, purchased vineyards, equipment and other vineyard related assets
located in Northern California (collectively, the "Franciscan Acquisition"Tuolomne River
Vintners Group (the "Turner Road Vintners Assets").
Also on June 4, 1999, the Company purchased all of the outstanding capital stock
of Simi Winery, Inc. ("Simi"). (The acquisition of the capital stock of Simi is
hereafter referred to as the "Simi Acquisition".) The Simi Acquisition included
the Simi winery, equipment, vineyards, inventory and worldwide ownership of the
Simi brand name. The results of operations fromof
the Franciscan and Simi
Acquisitions (collectively, "Franciscan")Turner Road Vintners Assets are reported together in the FranciscanCanandaigua Wine segment and
have been included in the consolidated results of operations of the Company
since the date of acquisition. On February 29, 2000,
Simi was merged into Franciscan Estates.The acquisition of the Turner Road Vintners
Assets is significant and the Company expects it to have a material impact on
the Company's future results of operations.
On October 27, 2000, the Company purchased all of the issued Ordinary
Shares and Preference Shares of Forth Wines Limited ("Forth Wines"). The results
of operations from theof Forth Wines acquisition are reported in the Matthew Clark segment and have
been included in the consolidated results of operations of the Company since the
date of acquisition.
- 12 -
RESULTS OF OPERATIONS
- ---------------------
THIRDFIRST QUARTER 20012002 COMPARED TO THIRDFIRST QUARTER 20002001
NET SALES
The following table sets forth the net sales (in thousands of dollars) by
operating segment of the Company for ThirdFirst Quarter 20012002 and ThirdFirst Quarter 2000.
Third2001.
First Quarter 20012002 Compared to ThirdFirst Quarter 20002001
-------------------------------------------------
Net Sales
-------------------------------------------------
%Increase/
2002 2001 2000 (Decrease)
---------- ---------- ----------
Canandaigua Wine:
Branded:
External customers $ 160,221166,081 $ 179,905 (10.9)143,330 15.9 %
Intersegment 1,891 2,285 (17.2)1,745 1,236 41.2 %
---------- ----------
Total Branded 162,112 182,190 (11.0)167,826 144,566 16.1 %
---------- ----------
Other:
External customers 18,389 24,502 (24.9)13,549 15,268 (11.3)%
Intersegment 3,095 423 631.73,689 3,629 1.7 %
---------- ----------
Total Other 21,484 24,925 (13.8)17,238 18,897 (8.8)%
---------- ----------
Canandaigua Wine net sales $ 183,596185,064 $ 207,115 (11.4)163,463 13.2 %
---------- ----------
Barton:
Beer $ 163,292182,985 $ 134,155 21.7163,134 12.2 %
Spirits 79,096 80,548 (1.8)71,317 72,546 (1.7)%
---------- ----------
Barton net sales $ 242,388254,302 $ 214,703 12.9235,680 7.9 %
---------- ----------
- 15 -
First Quarter 2002 Compared to First Quarter 2001
-------------------------------------------------
Net Sales
-------------------------------------------------
%Increase/
2002 2001 (Decrease)
---------- ---------- ----------
Matthew Clark:
Branded:
External customers $ 79,24866,881 $ 93,104 (14.9)69,594 (3.9)%
Intersegment 107 53 101.9102 21 385.7 %
---------- ----------
Total Branded 79,355 93,157 (14.8)66,983 69,615 (3.8)%
Wholesale 100,725 112,049 (10.1)115,006 99,923 15.1 %
---------- ----------
Matthew Clark net sales $ 180,080181,989 $ 205,206 (12.2)169,538 7.3 %
---------- ----------
Franciscan:
External customers $ 27,77926,291 $ 27,473 1.121,785 20.7 %
Intersegment 39 - N/A102 104 (1.9)%
---------- ----------
Franciscan net sales $ 27,81826,393 $ 27,473 1.321,889 20.6 %
---------- ----------
Corporate Operations and Other $ 826- $ 1,233 (33.0)%- N/A
---------- ----------
Intersegment eliminations $ (5,131)(5,638) $ (2,761) 85.8(4,990) 13.0 %
---------- ----------
Consolidated Net Sales $ 629,577642,110 $ 652,969 (3.6)585,580 9.7 %
========== ==========
Net sales for ThirdFirst Quarter 2002 increased to $642.1 million from $585.6
million for First Quarter 2001, decreased to $629.6 million from $653.0
million for Third Quarter 2000, a decreasean increase of $23.4$56.5 million, or (3.6)%9.7%.
- 13 -
Canandaigua Wine
----------------
Net sales for Canandaigua Wine for ThirdFirst Quarter 2002 increased to $185.1
million from $163.5 million for First Quarter 2001, decreased to $183.6
million from $207.1 million for Third Quarter 2000, a decreasean increase of $23.5$21.6
million, or (11.4)%13.2%. The declineThis increase resulted primarily from a decrease in table wine sales,
a decrease in sparkling wine sales as Third Quarter 2000 included the impact$36.9 million of sales
associated with Millennium activities,of the newly acquired brands from the Turner Road Vintners Assets and a decreaseCorus
Assets acquisitions ("the Acquisitions"), both completed in March 2001. This
increase was partially offset by declines in (i) other wine brands due to the
timing of seasonal programming for First Quarter 2002 versus First Quarter 2001
and (ii) in the Company's grape juice concentrate and bulk wine sales. These decreases were partially offset by
increases in sales of Arbor Mist and Paul Masson Grande Amber.business.
Barton
------
Net sales for Barton for ThirdFirst Quarter 20012002 increased to $242.4$254.3 million
from $214.7$235.7 million for ThirdFirst Quarter 2000,2001, an increase of $27.7$18.6 million, or
12.9%7.9%. This increase resulted primarily from a 12.2% increase in imported beer
sales, led by volume growth in the Mexican beer portfolio. Spirits sales decreased slightly due to the loss of contract
production sales. Excluding contract production sales, brandedThis increase was
partially offset by a slight decrease in spirits sales
increased 5.8% primarily as a result of price increases on tequila products.lower net
selling prices from the implementation of a net pricing strategy in the third
quarter of Fiscal 2001, which also resulted in lower promotion costs.
Matthew Clark
-------------
Net sales for Matthew Clark for ThirdFirst Quarter 2002 increased to $182.0
million from $169.5 million for First Quarter 2001, decreased to $180.1
million from $205.2 million for Third Quarter 2000, a decreasean increase of $25.1$12.5
million, or (12.2)%7.3%. This decrease resulted primarily fromExcluding an adverse foreign currency impact of $24.7 million. On$14.6 million,
net sales increased $27.1 million, or 16.0%, on a local currency basis. This
local currency basis netincrease resulted primarily from a 24.8% increase in
wholesale sales, were virtually
unchangedwith the majority of this growth coming from organic sales.
Additionally, branded sales increased 4.2% with an increase in branded table wine sales an increase in packaged
cider sales, and wholesale sales from the recent Forth Wines acquisition being
partially offset by decreasesa decrease in draft cider and private label cider sales.
- 16 -
Franciscan
----------
Net sales for Franciscan for ThirdFirst Quarter 20012002 increased to $27.8$26.4 million
from $27.5$21.9 million for ThirdFirst Quarter 2000,2001, an increase of $0.3$4.5 million, or
1.3%20.6%. This increase resulted primarily from selling price increases more than
offsetting a volume decline of 11.3% when compared to the prior year, as Third
Quarter 2000 included the impact of sales associated with Millennium activities.growth, particularly in
Veramonte, Estancia, Franciscan and Simi.
GROSS PROFIT
The Company's gross profit decreasedincreased to $208.1$202.0 million for ThirdFirst Quarter
2002 from $183.9 million for First Quarter 2001, from $209.7 million for Third Quarter 2000, a decreasean increase of $1.6$18.1 million,
or (0.8)%9.8%. The dollar decreaseincrease in gross profit resulted primarily from a decrease
in Canandaigua Wine's net sales and an adverse foreign currency impact. These
decreases were partially offset byof
the newly acquired brands from the Acquisitions, volume growth in the Company's
Mexican beer portfolio selling price increasesand volume growth in the Franciscan fine wine portfolioportfolio.
These increases were partially offset by a decrease in Canandaigua Wine's other
wine sales and cost improvements in Matthew Clark's cider and wholesale businesses.an adverse foreign currency impact. As a percent of net sales,
gross profit increased to 33.0%remained virtually unchanged at 31.5% for ThirdFirst Quarter 2001
from 32.1% in Third2002 versus
31.4% for First Quarter 2000, resulting primarily from selling price
increases in the Franciscan fine wine portfolio and cost improvements in Matthew
Clark's cider and wholesale businesses.
- 14 -2001.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreasedincreased to $122.8$132.0 million
for ThirdFirst Quarter 2002 from $126.4 million for First Quarter 2001, from $132.3 million for Third Quarter 2000, a decreasean increase
of $9.5$5.6 million, or (7.2)%4.4%. The dollar decreaseincrease in selling, general and
administrative expenses resulted primarily from a decrease in advertising and promotion expenses as Third Quarter 2000 included advertising and promotion
expensescosts
associated with Millennium activities.the brands acquired in the Acquisitions. Selling, general and
administrative expenses as a percent of net sales decreased to 19.5%20.6% for ThirdFirst
Quarter 2002 as compared to 21.6% for First Quarter 2001 as compared to 20.3% for Third Quarter 2000. This(i) a decrease in
percent of net sales resulted primarily fromBarton spirits advertising and promotion costs was greater than the decrease in
advertisingBarton spirits net sales and promotion(ii) the percent increase in Matthew Clark
wholesale sales was greater than the percent increase in selling, general and
administrative expenses.
OPERATING INCOME
The following table sets forth the operating income/(loss) (in thousands of
dollars) by operating segment of the Company for ThirdFirst Quarter 20012002 and ThirdFirst
Quarter 2000.
Third2001.
First Quarter 20012002 Compared to ThirdFirst Quarter 20002001
-------------------------------------------------
Operating Income/(Loss)
-------------------------------------------------
%Increase/
2002 2001 2000 (Decrease)
-------- -------- ----------
Canandaigua Wine $ 16,45315,395 $ 18,850 (12.7)7,818 96.9 %
Barton 46,370 41,380 12.144,051 38,835 13.4 %
Matthew Clark 18,431 15,193 21.3 8,317 10,374 (19.8)%
Franciscan 9,001 5,991 50.27,048 5,416 30.1 %
Corporate Operations and Other (5,017) (4,036) 24.3 (4,888) (4,979) (1.8)%
-------- --------
Consolidated Operating Income $ 85,23869,923 $ 77,378 10.257,464 21.7 %
======== ========
As a result of the above factors, consolidated operating income increased
to $85.2$69.9 million for ThirdFirst Quarter 20012002 from $77.4$57.5 million for ThirdFirst Quarter
2000,2001, an increase of $7.9$12.5 million, or 10.2%21.7%.
INTEREST EXPENSE, NET
Net interest expense decreasedincreased to $27.0$30.2 million for ThirdFirst Quarter 2002 from
$27.6 million for First Quarter 2001, from
$27.5 million for Third Quarter 2000, a decreasean increase of $0.6$2.6 million, or (2.0)%9.3%. The
decreaseincrease resulted primarily from a decreasean increase in
- 17 -
average borrowings which wasprimarily due to the financing of the Acquisitions, partially
offset by an increasea slight decrease in the average interest rate.
NET INCOME
As a result of the above factors, net income increased to $35.0$23.8 million for
ThirdFirst Quarter 20012002 from $29.9$17.9 million for ThirdFirst Quarter 2000,2001, an increase of
$5.1$5.9 million, or 16.9%33.2%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for ThirdFirst Quarter 20012002
were $104.3$91.8 million, an increase of $10.2$16.0 million over EBITDA of $94.1$75.8 million
for ThirdFirst Quarter 2000.2001. EBITDA should not be construed as an alternative to
operating income or net cash flow from operating activities and should not be
construed as an indication of operating performance or as a measure of
liquidity.
- 15 -
NINE MONTHS 2001 COMPARED TO NINE MONTHS 2000
NET SALES
The following table sets forth the net sales (in thousands of dollars) by
operating segment of the Company for Nine Months 2001 and Nine Months 2000.
Nine Months 2001 Compared to Nine Months 2000
---------------------------------------------
Net Sales
---------------------------------------------
%Increase/
2001 2000 (Decrease)
------------ ------------ ----------
Canandaigua Wine:
Branded:
External customers $ 450,927 $ 472,087 (4.5)%
Intersegment 5,023 5,274 (4.8)%
------------ ------------
Total Branded 455,950 477,361 (4.5)%
------------ ------------
Other:
External customers 46,632 63,081 (26.1)%
Intersegment 11,450 460 2,389.1 %
------------ ------------
Total Other 58,082 63,541 (8.6)%
------------ ------------
Canandaigua Wine net sales $ 514,032 $ 540,902 (5.0)%
------------ ------------
Barton:
Beer $ 538,585 $ 457,961 17.6 %
Spirits 224,203 207,697 7.9 %
------------ ------------
Barton net sales $ 762,788 $ 665,658 14.6 %
------------ ------------
Matthew Clark:
Branded:
External customers $ 224,734 $ 248,358 (9.5)%
Intersegment 604 53 1,039.6 %
------------ ------------
Total Branded 225,338 248,411 (9.3)%
Wholesale 293,958 306,802 (4.2)%
------------ ------------
Matthew Clark net sales $ 519,296 $ 555,213 (6.5)%
------------ ------------
Franciscan:
External customers $ 70,923 $ 44,610 59.0 %
Intersegment 177 - N/A
------------ ------------
Franciscan net sales $ 71,100 $ 44,610 59.4 %
------------ ------------
Corporate Operations and Other $ 2,685 $ 4,122 (34.9)%
------------ ------------
Intersegment eliminations $ (17,254) $ (5,787) 198.2 %
------------ ------------
Consolidated Net Sales $ 1,852,647 $ 1,804,718 2.7 %
============ ============
Net sales for Nine Months 2001 increased to $1,852.6 million from $1,804.7
million for Nine Months 2000, an increase of $47.9 million, or 2.7%.
Canandaigua Wine
----------------
Net sales for Canandaigua Wine for Nine Months 2001 decreased to $514.0
million from $540.9 million for Nine Months 2000, a decrease of $26.9 million,
or (5.0)%. The decline resulted primarily from a decrease in table wine sales, a
decrease in sparkling wine sales as Third Quarter 2000 included the impact of
sales associated with Millennium activities, and a decrease in grape juice
concentrate sales. These decreases were partially offset by increases in sales
of Paul Masson Grande Amber and Arbor Mist.
- 16 -
Barton
------
Net sales for Barton for Nine Months 2001 increased to $762.8 million from
$665.7 million for Nine Months 2000, an increase of $97.1 million, or 14.6%.
This increase resulted primarily from volume growth and selling price increases
in the Mexican beer portfolio as well as from the inclusion of $11.3 million of
incremental net sales during the first quarter of fiscal 2001 from the Canadian
whisky brands acquired as part of the Black Velvet Assets acquisition, which was
completed in April 1999.
Matthew Clark
-------------
Net sales for Matthew Clark for Nine Months 2001 decreased to $519.3
million from $555.2 million for Nine Months 2000, a decrease of $35.9 million,
or (6.5)%. This decrease resulted primarily from an adverse foreign currency
impact of $41.6 million. On a local currency basis, net sales increased 1.0%
primarily due to an increase in wholesale sales, including sales from the recent
Forth Wines acquisition, an increase in branded table wine sales, and an
increase in packaged cider sales. These increases were virtually offset by
decreases in draft cider and private label cider sales.
Franciscan
----------
Net sales for Franciscan for Nine Months 2001 increased to $71.1 million
from $44.6 million for Nine Months 2000, an increase of $26.5 million, or 59.4%.
As the acquisition of Franciscan was completed in June 1999, this increase
resulted primarily from the inclusion of $21.9 million of net sales from the
first quarter of fiscal 2001 and from selling price increases instituted during
the second quarter of fiscal 2001.
GROSS PROFIT
The Company's gross profit increased to $592.6 million for Nine Months 2001
from $554.9 million for Nine Months 2000, an increase of $37.6 million, or 6.8%.
The dollar increase in gross profit was primarily related to volume growth and
selling price increases in the Company's Mexican beer portfolio and sales from
the acquisitions of Franciscan (completed in June 1999) and the Black Velvet
Assets (completed in April 1999), partially offset by an adverse foreign
currency impact. As a percent of net sales, gross profit increased to 32.0% for
Nine Months 2001 from 30.7% for Nine Months 2000, resulting primarily from sales
of higher-margin spirits and super-premium and ultra-premium wine acquired in
the acquisitions of the Black Velvet Assets and Franciscan, respectively, and
from improved margins resulting from selling price increases in the Company's
imported beer business and the Franciscan fine wine portfolio, as well as cost
improvements in Matthew Clark's cider and wholesale businesses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $379.2 million
for Nine Months 2001 from $368.1 million for Nine Months 2000, an increase of
$11.0 million, or 3.0%. The dollar increase in selling, general and
administrative expenses resulted primarily from the inclusion of the Franciscan
business and expenses related to the brands acquired in the Black Velvet Assets
acquisition for a full nine months in fiscal 2001, and an increase in expenses
in Corporate Operations. Selling, general and administrative expenses as a
percent of net sales remained virtually unchanged at 20.5% for Nine Months 2001
as compared to 20.4% for Nine Months 2000.
- 17 -
NONRECURRING CHARGES
The Company incurred nonrecurring charges of $5.5 million in Nine Months
2000 related to the closure of a cider production facility within the Matthew
Clark operating segment in the United Kingdom ($2.9 million) and to a management
reorganization within the Canandaigua Wine operating segment ($2.6 million). No
such charges were incurred in Nine Months 2001.
OPERATING INCOME
The following table sets forth the operating income/(loss) (in thousands of
dollars) by operating segment of the Company for Nine Months 2001 and Nine
Months 2000.
Nine Months 2001 Compared to Nine Months 2000
---------------------------------------------
Operating Income/(Loss)
---------------------------------------------
%Increase/
2001 2000 (Decrease)
------------ ------------ ----------
Canandaigua Wine $ 34,849 $ 34,869 (0.1)%
Barton 135,818 114,839 18.3 %
Matthew Clark 41,027 34,503 18.9 %
Franciscan 18,659 7,562 146.7 %
Corporate Operations and Other (16,947) (10,476) 61.8 %
------------ ------------
Consolidated Operating Income $ 213,406 $ 181,297 17.7 %
============ ============
As a result of the above factors, consolidated operating income increased
to $213.4 million for Nine Months 2001 from $181.3 million for Nine Months 2000,
an increase of $32.1 million, or 17.7%. Exclusive of the aforementioned $2.6
million in nonrecurring charges, operating income for the Canandaigua Wine
operating segment decreased 6.9% in Nine Months 2001 from $37.4 million in Nine
Months 2000. Operating income for the Matthew Clark operating segment, excluding
the aforementioned nonrecurring charges of $2.9 million, increased 9.6% in Nine
Months 2001 from $37.4 million in Nine Months 2000.
INTEREST EXPENSE, NET
Net interest expense increased to $81.8 million for Nine Months 2001 from
$78.2 million for Nine Months 2000, an increase of $3.6 million, or 4.6%. The
increase resulted primarily from an increase in the average interest rate on
virtually unchanged average borrowings.
NET INCOME
As a result of the above factors, net income increased to $79.0 million for
Nine Months 2001 from $61.8 million for Nine Months 2000, an increase of $17.1
million, or 27.7%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Nine Months 2001
were $268.5 million, an increase of $36.4 million over EBITDA of $232.1 million
for Nine Months 2000. EBITDA should not be construed as an alternative to
operating income or net cash flow from operating activities and should not be
construed as an indication of operating performance or as a measure of
liquidity.
- 18 -
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
- -----------------------------------------
GENERAL
The Company's principal use of cash in its operating activities is for
purchasing and carrying inventories. The Company's primary source of liquidity
has historically been cash flow from operations, except during the annual fall
grape harvests when the Company has relied on short-term borrowings. The annual
grape crush normally begins in August and runs through October. The Company
generally begins purchasing grapes in August with payments for such grapes
beginning to come due in September. The Company's short-term borrowings to
support such purchases generally reach their highest levels in November or
December. Historically, the Company has used cash flow from operating activities
to repay its short-term borrowings. The Company will continue to use its
short-term borrowings to support its working capital requirements. The Company
believes that cash provided by operating activities and its financing
activities, primarily short-term borrowings, will provide adequate resources to
satisfy its working capital, liquidity and anticipated capital expenditure
requirements for both its short-term and long-term capital needs.
NINE MONTHS 2001FIRST QUARTER 2002 CASH FLOWS
OPERATING ACTIVITIES
Net cash provided by operating activities for Nine Months 2001First Quarter 2002 was $16.1$34.6
million, which resulted from $136.6$46.8 million in net income adjusted for noncash
items, less $120.5$12.3 million representing the net change in the Company's operating
assets and liabilities. The net change in operating assets and liabilities
resulted primarily from a seasonal increase in accounts receivable and inventories,a
decrease in accrued excise taxes, partially offset by increasesan increase in accounts
payable accrued
excise taxes, accrued income taxes, accrued advertising and promotion expenses,
and accrued grape purchases.a decrease in inventories.
INVESTING ACTIVITIES AND FINANCING ACTIVITIES
Net cash used in investing activities for Nine Months 2001First Quarter 2002 was $46.4$339.3
million, which resulted primarily from net cash paid of $328.8 million for the
Acquisitions and $10.8 million of capital expenditures of $47.8 million.expenditures.
- 18 -
Net cash used inprovided by financing activities for Nine Months 2001First Quarter 2002 was $0.6$162.8
million resulting primarily from principal payments of long-term debt of $221.6 million,
which included $27.2 million of scheduled and required principal payments and
$75.0 million of principal prepayments. This amount was partially offset by net proceeds of $118.2$139.9 million from the issuance of (pound)80.0 million of 8 1/2%
Sterling Series C Senior Notes used to repay a portion of the Company's British
pound sterling borrowings under its senior credit facilityequity
offering and proceeds from $94.2$21.2 million of net revolving loan borrowings under
the senior credit facility.
DEBT
Total debt outstanding as of November 30, 2000,May 31, 2001, amounted to $1,282.5$1,392.0 million, a decreasean
increase of $35.4$26.2 million from February 29, 2000.28, 2001. The ratio of total debt to
total capitalization decreased to 68.8%64.1% as of November 30, 2000,May 31, 2001, from 71.7%68.9% as of
February 29, 2000.
- 19 -28, 2001.
SENIOR CREDIT FACILITY
As of November 30, 2000,May 31, 2001, under its senior credit facility, the Company had
outstanding term loans of $337.1$336.0 million bearing a weighted average interest
rate of 8.3%8.1%, $121.0$20.0 million of revolving loans bearing a weighted average
interest rate of 7.9%5.6%, undrawn revolving letters of credit of $12.2$11.9 million, and
$166.8$268.1 million in revolving loans available to be drawn.
SENIOR NOTES
As of November 30, 2000,May 31, 2001, the Company had outstanding $200.0 million aggregate
principal amount of 8 5/8% Senior Notes due August 2006 (the "Senior Notes").
The Senior Notes are currently redeemable, in whole or in part, at the option of
the Company.
In March 2000,As of May 31, 2001, the Company exchangedhad outstanding (pound)75.01.0 million ($1.4
million) aggregate principal amount of 8 1/2% Series B Senior Notes due in November
2009 (the "Sterling Series B Senior Notes") for the Sterling Senior Notes. The terms of
the Sterling Series B Senior Notes are identical in all material respects to the
Sterling Senior Notes.. In May 2000,addition, the Company issuedhad
outstanding (pound)80.0154.0 million (approximately $120.0($217.9 million, upon issuance and $114.0net of $0.5 million
as of November 30, 2000)unamortized discount) aggregate principal amount of 8 1/2% Series C Senior Notes
due November 2009 at an
issuance price of (pound)79.6 million (approximately $119.4 million upon
issuance, net of $0.6 million unamortized discount, and $113.5 million as of
November 30, 2000, net of $0.5 million unamortized discount, with an effective
rate of 8.6%) (the "Sterling Series C Senior Notes"). as of May 31, 2001. The net proceeds of the
offering ((pound)78.8 million, or approximately $118.2 million) were used to
repay a portion of the Company's British pound sterling borrowings under its
senior credit facility. Interest on the
Sterling Series CB Senior Notes is
payable semiannually on May 15 and November 15 of each year, beginning on
November 15, 2000. The Sterling Series C Senior Notes are currently
redeemable, at the
option of the Company, in whole or in part, at any time. The Sterling Series C
Senior Notes are unsecured senior obligations and rank equally in right of
payment to all existing and future unsecured senior indebtednessthe option of the Company.
The Sterling Series C Senior Notes are guaranteed, on a senior basis, by certainAlso, as of the Company's significant operating subsidiaries.
In October 2000,May 31, 2001, the Company exchanged (pound)74.0had outstanding $200.0 million
aggregate principal amount of the Sterling Series B8% Senior Notes for Sterling Series Cdue February 2008 (the "February
2001 Senior Notes.Notes"). The terms of the Sterling Series CFebruary 2001 Senior Notes are identicalcurrently redeemable, in
all material respects towhole or in part, at the Sterling Series B Senior Notes.option of the Company.
SENIOR SUBORDINATED NOTES
As of November 30, 2000,May 31, 2001, the Company had outstanding $195.0 million ($193.5
million, net of $1.5 million unamortized discount) aggregate principal amount of
8 3/4% Senior Subordinated Notes due December 2003 (the "Original Notes"). The
Original Notes are currently redeemable, in whole or in part, at the option of
the Company.
Also, as of November 30, 2000,May 31, 2001, the Company had outstanding $200.0 million
aggregate principal amount of 8 1/2% Senior Subordinated Notes due March 2009
(the "Senior Subordinated Notes"). The Senior Subordinated Notes are redeemable
at the option of the Company, in whole or in part, at any time on or after March
1, 2004. The Company may also redeem up to $70.0 million of the Senior
Subordinated Notes using the proceeds of certain equity offerings completed
before March 1, 2002.
- 19 -
- 20 -EQUITY OFFERING
During March 2001, the Company completed a public offering of 4,370,000
shares of its Class A Common Stock resulting in net proceeds to the Company,
after deducting underwriting discounts and expenses, of $139.9 million. The net
proceeds were used to repay revolving loan borrowings under the senior credit
facility of which a portion was incurred to partially finance the acquisition of
the Turner Road Vintners Assets.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. SFAS No. 133 requires that every
derivative be recorded as either an asset or liability in the balance sheet and
measured at its fair value. SFAS No. 133 also requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting.
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137 ("SFAS No. 137"), "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
FASB Statement No. 133." SFAS No. 137 delays the effective date of SFAS No. 133
for one year. With the issuance of SFAS No. 137, the Company is required to
adopt SFAS No. 133 on a prospective basis for interim periods and fiscal years
beginning March 1, 2001.
In JuneMay 2000, the Financial Accounting Standards BoardEmerging Issues Task Force ("EITF") issued Statement of
Financial Accounting StandardsEITF Issue No.
13800-14 ("SFASEITF No. 138"00-14"), "Accounting for Certain Derivative InstrumentsSales Incentives," which was
subsequently amended in April 2001. EITF No. 00-14 addresses the recognition,
measurement and Certain Hedging Activities--an amendmentincome statement classification of FASB
Statementcertain sales incentives.
EITF No. 133." SFAS No. 138 amends the accounting00-14 requires that sales incentives, including coupons, rebate offers,
and reporting standardsfree product offers, given concurrently with a single exchange transaction
be recognized when incurred and reported as a reduction of SFAS No. 133 for certain derivative instrumentsrevenue. The Company
currently reports these costs in selling, general and certain hedging
activities.administrative expenses.
The Company is required to adopt SFASEITF No. 138 concurrently00-14 in its financial statements
beginning March 1, 2002. Upon adoption of EITF No. 00-14, financial statements
for prior periods presented for comparative purposes are to be reclassified to
comply with SFASthe requirements of EITF No. 133.00-14. The Company believes the effectimpact
of the adoption of these statementsEITF No. 00-14 on its financial statements will result in a material
reclassification that will decrease previously reported net sales and decrease
previously reported selling, general and administrative expenses, but will have
no effect on operating income or net income. The Company has not be material based onyet determined
the Company's current
risk management strategies.amount of the reclassification.
EURO CONVERSION ISSUES
Effective January 1, 1999, eleven of the fifteen member countries of the
European Union (the "Participating Countries") established fixed conversion
rates between their existing sovereign currencies and the euro. For three years
after the introduction of the euro, the Participating Countries can perform
financial transactions in either the euro or their original local currencies.
This will result in a fixed exchange rate among the Participating Countries,
whereas the euro (and the Participating Countries' currency in tandem) will
continue to float freely against the U.S. dollar and other currencies of the
non-participating countries. The Company does not believe that the effects of
the conversion will have a material adverse effect on the Company's business and
operations.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These forward-looking statements are
subject to a number of risks and uncertainties, many of which are beyond the
Company's control, that could cause actual results to differ materially from
those set forth in, or implied by, such forward-looking statements. All
statements other than statements of historical facts included in this Quarterly
Report on Form 10-Q, including statements regarding the Company's future
financial position and prospects, are forward-looking statements. All
forward-looking statements speak only as of the date of this Quarterly Report on
Form 10-Q. The Company undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. For risk factors associated with the Company and its
business, which factors could cause actual results to differ materially from
those set forth in, or implied by, the Company's forward-looking statements,
reference should be made to the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 2001.
- 20 -
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ------- ----------------------------------------------------------
Information about market risks for the ninethree months ended November 30, 2000,May 31, 2001,
does not differ materially from that discussed under Item 7A in the Company's
Annual Report on Form 10-K for the fiscal year ended February 29, 2000.
- 21 -28, 2001.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
At a Special Meeting of Stockholders of Constellation Brands, Inc. (f/k/a
Canandaigua Brands, Inc.) held on September 18, 2000 (the "Special Meeting"),
the holders of the Company's Class A Common Stock and the holders of the
Company's Class B Common Stock, voting together as a single class, voted upon
the proposal to amend and restate the Company's Restated Certificate of
Incorporation to change the name of the Company to Constellation Brands, Inc.
Set forth below is the number of votes cast for, against or withheld, as
well as the number of abstentions and broker nonvotes with respect to the
proposal to change the name of the Company:
For: 43,064,153
Against: 165,731
Abstain: 50,272
Broker Nonvotes: 0
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) See Index to Exhibits located on Page 28 of this Report.
(b) The following Reports on Form 8-K were filed with the Securities and
Exchange Commission during the quarter ended November 30, 2000:May 31, 2001:
(i) Form 8-K dated September 18, 2000.March 6, 2001. This Form 8-K reported information
under Item 5 (Other Events).
(ii) Form 8-K dated September 27, 2000.March 14, 2001. This Form 8-K reported information
under Item 5 (Other Events).
(iii)Form 8-K dated April 10, 2001. This Form 8-K reported
information under Item 5 (Other Events).
(iv) Form 8-K dated April 12, 2001. This Form 8-K reported information
under Item 5 (Other Events) and included (i) the Company's
Condensed Consolidated Balance Sheets as of August 31,
2000 (unaudited)February 28, 2001 and February
29, 2000 (audited);2000; (ii) the Company's Condensed Consolidated Statements of
Income for the three months ended August 31, 2000 (unaudited)February 28, 2001 and August 31,
1999 (unaudited);February
29, 2000; and (iii) the Company's Condensed Consolidated
Statements of Income for the sixtwelve months ended August 31, 2000
(unaudited)February 28,
2001 and August 31, 1999 (unaudited).February 29, 2000.
- 21 -
- 22 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONSTELLATION BRANDS, INC.
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Vice President,
Corporate Reporting and Controller
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Executive Vice
President and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
SUBSIDIARIES
BATAVIA WINE CELLARS, INC.
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Controller
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
CANANDAIGUA WINE COMPANY, INC.
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Controller
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
- 2322 -
CANANDAIGUA EUROPE LIMITED
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Controller
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
CANANDAIGUA LIMITED
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Authorized Officer
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Finance Director
(Principal Financial Officer and
Principal Accounting Officer)
POLYPHENOLICS, INC.
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Vice President and
Controller
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
ROBERTS TRADING CORP.
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Controller
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, President
and Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
- 2423 -
CANANDAIGUA B.V.
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Chief Financial
Officer (On behalf of the Registrant
and as Principal Financial Officer
and Principal Accounting Officer)
FRANCISCAN VINEYARDS, INC.
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Vice President and
Controller
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
ALLBERRY, INC.
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Vice President and
Controller
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
CLOUD PEAK CORPORATION
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Vice President and
Controller
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
- 2524 -
M.J. LEWIS CORP.
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Vice President and
Controller
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
MT. VEEDER CORPORATION
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas F. Howe
-------------------------------------------------------------------------
Thomas F. Howe, Vice President and
Controller
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
BARTON INCORPORATED
Dated: JanuaryJuly 16, 2001 By: /s//s/ Alexander L. Berk
-------------------------------------------------------------------------
Alexander L. Berk, President and
Chief Executive Officer
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
BARTON BRANDS, LTD.
Dated: JanuaryJuly 16, 2001 By: /s//s/ Alexander L. Berk
-------------------------------------------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
- 2625 -
BARTON BEERS, LTD.
Dated: JanuaryJuly 16, 2001 By: /s//s/ Alexander L. Berk
-------------------------------------------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
BARTON BRANDS OF CALIFORNIA, INC.
Dated: JanuaryJuly 16, 2001 By: /s//s/ Alexander L. Berk
-------------------------------------------------------------------------
Alexander L. Berk, President
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
BARTON BRANDS OF GEORGIA, INC.
Dated: JanuaryJuly 16, 2001 By: /s//s/ Alexander L. Berk
-------------------------------------------------------------------------
Alexander L. Berk, President
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
BARTON CANADA, LTD.
Dated: JanuaryJuly 16, 2001 By: /s//s/ Alexander L. Berk
-------------------------------------------------------------------------
Alexander L. Berk, President
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
- 2726 -
BARTON DISTILLERS IMPORT CORP.
Dated: JanuaryJuly 16, 2001 By: /s//s/ Alexander L. Berk
-------------------------------------------------------------------------
Alexander L. Berk, President
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
BARTON FINANCIAL CORPORATION
Dated: JanuaryJuly 16, 2001 By: /s//s/ Troy J. Christensen
-------------------------------------------------------------------------
Troy J. Christensen, President and
Secretary
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
STEVENS POINT BEVERAGE CO.
Dated: JanuaryJuly 16, 2001 By: /s//s/ Alexander L. Berk
-------------------------------------------------------------------------
Alexander L. Berk, Executive Vice
President
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
MONARCH IMPORT COMPANY
Dated: JanuaryJuly 16, 2001 By: /s//s/ Alexander L. Berk
-------------------------------------------------------------------------
Alexander L. Berk, President
Dated: JanuaryJuly 16, 2001 By: /s//s/ Thomas S. Summer
-------------------------------------------------------------------------
Thomas S. Summer, Vice President
(Principal Financial Officer and
Principal Accounting Officer)
- 2827 -
INDEX TO EXHIBITS
(2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR
SUCCESSION.
2.1 Asset Purchase Agreement dated as of February 21, 1999 by and among
Diageo Inc., UDV Canada Inc., United Distillers Canada Inc. and the
Company (filed as Exhibit 2 to the Company's Current Report on Form 8-K
dated April 9, 1999 and incorporated herein by reference).
2.2 Stock Purchase Agreement, dated April 21, 1999, between Franciscan
Vineyards, Inc., Agustin Huneeus, Agustin Francisco Huneeus, Jean-Michel
Valette, Heidrun Eckes-Chantre Und Kinder Beteiligungsverwaltung II,
GbR, Peter Eugen Eckes Und Kinder Beteiligungsverwaltung II, GbR, Harald
Eckes-Chantre, Christina Eckes-Chantre, Petra Eckes-Chantre and the
Company (filed as Exhibit 2.1 on the Company's Current Report on Form
8-K dated June 4, 1999 and incorporated herein by reference).
2.3 Stock Purchase Agreement by and between Canandaigua Wine Company, Inc.
(a wholly-owned subsidiary of the Company) and Moet Hennessy, Inc. dated
April 1, 1999 (including a list briefly identifying the contents of all omitted
schedules thereto) (filed as Exhibit 2.3 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended May 31, 1999 and incorporated
herein by reference).
2.4 Purchase Agreement dated as of January 30, 2001, by and among Sebastiani
Vineyards, Inc., Tuolomne River Vintners Group and Canandaigua Wine
Company, Inc. (a wholly-owned subsidiary of the Company) (filed as
Exhibit 2.5 to the Company's Annual Report on Form 10-K for the fiscal
year ended February 28, 2001 and incorporated herein by reference).
2.5 Agreement and Plan of Merger by and among Constellation Brands, Inc.,
VVV Acquisition Corp. and Ravenswood Winery, Inc. dated as of April 10,
2001 (including a list briefly identifying the contents of all omitted
schedules thereto) (filed herewith). The Company will furnish
supplementally to the Commission, upon request, a copy of any omitted
schedule.
(3) ARTICLES OF INCORPORATION AND BY-LAWS.
3.1 Restated Certificate of Incorporation of the Company (filed as Exhibit
3.1 to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended August 31, 2000 and incorporated herein by reference).
3.2 By-Laws of the Company (filed as Exhibit 3.2 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended August 31, 2000 and
incorporated herein by reference).
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES.
4.1 Supplemental IndentureAmendment No. 5,2 to the Credit Agreement, dated as of September 14, 2000, by and amongMay 16, 2001
between the Company, as Issuer, itscertain principal operating subsidiaries, as
Guarantors, and The Chase
Manhattan Bank, of New York, as Trusteeadministrative agent for certain banks (filed
as Exhibit 4.1 to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 2000 and incorporated herein by reference)herewith).
(10) MATERIAL CONTRACTS.
10.1 Supplemental IndentureAmendment No. 5,2 to the Credit Agreement, dated as of September 14, 2000, by and amongMay 16, 2001
between the Company, as Issuer, itscertain principal operating subsidiaries, as
Guarantors, and The Chase
Manhattan Bank, of New York, as Trusteeadministrative agent for certain banks (filed
herewith as Exhibit 4.1 to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 2000 and incorporated herein by reference)4.1).
- 28 -
(11) STATEMENT RE COMPUTATION OF PER SHARE EARNINGS.
Computation of per share earnings (filed herewith).
(15) LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION.
Not applicable.
- 29 -
(18) LETTER RE CHANGE IN ACCOUNTING PRINCIPLES.
Not applicable.
(19) REPORT FURNISHED TO SECURITY HOLDERS.
Not applicable.
(22) PUBLISHED REPORT REGARDING MATTERS SUBMITTED TO A VOTE OF SECURITY
HOLDERS.
Not applicable.
(23) CONSENTS OF EXPERTS AND COUNSEL.
Not applicable.
(24) POWER OF ATTORNEY.
Not applicable.
(99) ADDITIONAL EXHIBITS.
Not applicable.
- 29 -