SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) August 29, 1995
---------------
CANANDAIGUA WINE COMPANY, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-7570 16-0716709
---------------------------- ----------- -----------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
116 Buffalo Street, Canandaigua, New York 14424
- ----------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (716) 394-7900
-------------
- ------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
a. Financial Statements of Product Lines Acquired by Canandaigua
Wine Company, Inc. (the "Company").
The United Distillers Glenmore, Inc. Statement of Assets and
Liabilities Related to the Product Lines Acquired by the Company
through its wholly-owned subsidiary, Barton Incorporated, as of
September 1, 1995 and the related Statements of Identified Income
and Expenses of the Product Lines Acquired for each of the three
years in the period ended December 31, 1994 and the report of
Price Waterhouse LLP, independent auditors, thereon, together
with the notes thereto, are located at pages 6 through 11 of this
Report.
The unaudited Interim Financial Statements of Product Lines
Acquired by the Company through its wholly-owned subsidiary,
Barton Incorporated, for the eight months ended August 31, 1995
and 1994, together with the notes thereto, are located at pages
12 through 14 of this Report.
b. Pro Forma Financial Information.
The pro forma condensed consolidated balance sheet (unaudited) as
of May 31, 1995 and the pro forma condensed consolidated
statement of income (unaudited) for the nine months ended May 31,
1995 and the pro forma condensed consolidated statement of income
(unaudited) for the year ended August 31, 1994, and the notes
thereto, are located at pages 15 through 26 of this Report. See
Index to Exhibits.
UNITED DISTILLERS GLENMORE, INC.
AND AFFILIATES
Statement of Assets and Liabilities and Statement of Identified Income and
Expenses of the Product Lines Acquired as of September 1, 1995 and for the years
ended December 31, 1994, 1993 and 1992
UNITED DISTILLERS GLENMORE, INC. AND AFFILIATES
Table of Contents Page
- ----------------------------------------------------------------------------
Report of Independent Accountants 2
Statement of Assets and Liabilities Related to the Product Lines
Acquired by Canandaigua Wine Company, Inc. 3
Statement of Identified Income and Expenses of the Product Lines
Acquired by Canandaigua Wine Company, Inc. 4
Notes to Financial Statements of the Product Lines Acquired by
Canandaigua Wine Company, Inc. 5
Report of Independent Accountants
----------------------------------
To the Board of Directors of
United Distillers Glenmore, Inc.
We have audited the accompanying Statement of Assets and Liabilities Related to
the Product Lines Acquired by Canandaigua Wine Company, Inc. as of September 1,
1995 and the related Statement of Identified Income and Expenses for each of the
three years in the period ended December 31, 1994. These statements are the
responsibility of United Distillers Glenmore, Inc.'s management. Our
responsibility is to express an opinion on the statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the statements. We
believe that our audits provide a reasonable basis for our opinion.
The accompanying statements have been prepared to present the assets and
liabilities and identified income and expenses of the product lines of United
Distillers Glenmore, Inc. acquired by Canandaigua Wine Company, Inc. on the
basis of preparation described in Note 1, and are not intended to be a
complete presentation of assets and liabilities or operations of United
Distillers Glenmore, Inc.
In our opinion, the statements audited by us present fairly, in all material
respects, the assets and liabilities related to the product lines of United
Distillers Glenmore, Inc. at September 1, 1995 that were acquired by Canandaigua
Wine Company, Inc. and the results of their operations for each of the three
years in the period ended December 31, 1994, on the basis described in the
preceding paragraph and in conformity with generally accepted accounting
principles.
PRICE WATERHOUSE LLP
Stamford, Connecticut
September 25, 1995
UNITED DISTILLERS GLENMORE, INC. AND AFFILIATES
Statement of Assets and Liabilities Related to the Product Lines Acquired by
Canandaigua Wine Company, Inc.
September 1, 1995 (in thousands)
- -----------------------------------------------------------------------
Inventories $ 13,070
Prepaid advertising, merchandising and promotion 376
Property, plant and equipment 23,994
Total assets 37,440
Accrued liabilities 255
$ 37,185
The accompanying notes are an integral part of this statement.
UNITED DISTILLERS GLENMORE, INC. AND AFFILIATES
Statement of Identified Income and Expenses of the Product Lines Acquired by
Canandaigua Wine Company, Inc.
Year ended December 31, 1994, 1993 and 1992 (in thousands)
- -----------------------------------------------------------------------
1994 1993 1992
Net sales, including tax and duty $ 230,785 $ 265,209 $ 259,804
Tax and duty 131,437 153,533 142,099
--------- ------- -------
Net sales 99,348 111,676 117,705
Cost of goods sold 53,124 59,886 66,300
--------- ------ ------
Gross profit 46,224 51,790 51,405
Operating expense/(income):
Grants 9,326 10,951 9,430
Advertising, merchandising and promotions 9,237 9,848 9,347
Brokers' commissions 1,116 1,292 1,752
Royalty income (202) (380) (300)
Allocated expenses (Note 1):
Selling, general and administrative 10,442 15,163 15,094
Interest 1,756 2,118 2,570
Amortization of goodwill 1,374 1,374 1,374
--------- ----- -----
Income before taxes 13,175 11,424 12,138
Provision for income taxes 5,840 5,009 5,111
--------- ------ -----
Net income $ 7,335 $ 6,415 $ 7,027
========= ========= =========
The accompanying notes are an integral part of this statement.
UNITED DISTILLERS GLENMORE, INC. AND AFFILIATES
Notes to Financial Statements of the Product Lines Acquired by
Canandaigua Wine Company, Inc. (in thousands)
- ---------------------------------------------------------------
1. BASIS OF PRESENTATION:
The accompanying statements present the assets and liabilities and the
identified income and expenses of the product lines of United Distillers
Glenmore, Inc. ("UDG"), a wholly owned subsidiary of United Distillers North
America, Inc. ("UDNA"), and its affiliates acquired by Canandaigua Wine Company,
Inc. (the "Product Lines Acquired") pursuant to an asset purchase agreement
dated September 1, 1995. In accordance with this agreement, the cash purchase
price was approximately $141 million.
The assets and liabilities of the Product Lines Acquired as presented in the
accompanying Statement of Assets and Liabilities Related to the Product Lines
Acquired by Canandaigua Wine Company, Inc. as of September 1, 1995 include UDG
and its affiliates' historical book balances of raw materials and bulk
inventory, supplies, work-in-process and finished goods inventory of the Product
Lines Acquired, and certain property, plant and equipment and other assets and
liabilities associated with the Product Lines Acquired. These product lines have
never been operated as a separate business entity and have no legal existence,
but rather have been an integral part of the spirits business of UDG, whose
operations primarily relate to the United States.
These statements include the net sales, including tax and duty, tax and duty,
cost of goods sold, grants, advertising, merchandising and promotions, brokers'
commissions and royalty income, that substantially relate directly to the
Product Lines Acquired. All other expense items are allocated based on estimates
and assumptions as if the Product Lines Acquired had been operated on a
stand-alone basis during the periods presented.
The basis for presenting the allocated expense items is as follows:
(a) Selling, general and administrative expenses are allocated based upon (i)
for UDG overhead (including other operating and nonoperating income/costs),
the proportion of net sales (including tax and duty) of the Product Lines
Acquired to total UDG net sales; and (ii) for UDNA overhead (including
other operating and nonoperating income/costs), the proportion of net sales
(including tax and duty) of the Product Lines Acquired to UDNA and its
affiliated spirits companies' net sales;
(b) Amortization of goodwill is allocated based upon the proportion of UDG
goodwill attributable to the Product Lines Acquired to total UDG goodwill,
using a 40-year amortization period;
(c) Interest expense is allocated by determining the percentage relationship
between the total assets of the Product Lines Acquired and the total assets
of UDNA and its affiliated spirits companies, and applying the percentage
to actual interest expense of UDNA to determine the allocation to the
Product Lines Acquired. Those percentages are 7.1% for 1994, 7.5% for 1993
and 6.5% for 1992.
Management believes the above allocations to be reasonable in the
circumstances; however, there can be no assurances that such allocations
will be indicative of future results of operations or what the results of
operations of the Product Lines Acquired would have been had it been a
separate, stand-alone entity during the periods covered.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) Revenue recognition. Sales revenues are recognized at the date of
shipment to customers.
(b) Inventories. Inventories are stated at the lower of cost or market.
Raw materials and bulk inventories, supplies and certain
work-in-process and finished goods are valued at last-in, first-out
(LIFO) cost. Work-in-process and finished goods inventories not valued
at LIFO are valued at first-in, first-out (FIFO) cost (see Note 3).
The LIFO inventory reserve has been allocated by determining, for each
relevant LIFO pool, the percentage relationship of LIFO inventory for
the Product Lines Acquired to total UDG LIFO inventory, and applying
the percentage to each relevant LIFO inventory reserve.
(c) Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation computed using the straight-line method over their
estimated useful lives within the following ranges:
Buildings and building improvements 20 - 45 years
Manufacturing equipment 4 - 20 years
(d) Taxes. The results of UDG's operations are included in the
consolidated income tax return of its ultimate United States parent
company, Guinness America Holdings, Inc. The provision for income
taxes has been provided assuming the activities of the Product Lines
Acquired were a separate tax paying entity.
United States excise taxes constitute a lien on in-bond inventories.
Since these taxes are not payable until inventories are withdrawn from
bond, excise taxes have not been accrued with respect to such
inventories, in accordance with industry practice.
(e) Advertising, merchandising and promotions
Costs relating to advertising, merchandising and promotions programs
are expensed in the period the related program is run.
3. INVENTORIES:
The composition of inventories at September 1, 1995 was as follows:
Last-in, first-out (LIFO) cost:
Raw materials and bulk inventories $ 2,714
Supplies 2,375
Work-in-process and finished goods 4,785
Less - Allocated LIFO allowance (see Note 2.(b)) (809)
---- ---------
9,065
Lower of first-in, first-out (FIFO) cost or market:
Work-in-process and finished goods 4,005
--------
$ 13,070
--------
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at September 1, 1995 was comprised of the
following:
Land, buildings and building improvements $ 19,693
Manufacturing equipment 28,153
Construction-in-progress 46
------
47,892
Less - Accumulated depreciation and
amortization (23,898)
-------
$ 23,994
Depreciation expense included in cost of goods sold amounted to $1,478 in
1994, $1,522 in 1993 and $1,503 in 1992.
5. ACCRUED LIABILITIES:
Accrued liabilities at September 1, 1995 was comprised of the following:
Accrued property taxes $ 138
Accrued vacation 90
Other liabilities 27
---
$ 255
6. TAXES:
The provision for taxes differs from the amount computed by applying the
statutory U.S. federal income tax rate of 35% for 1994 and 1993 and 34% for
1992 to income before income taxes as follows:
1994 1993 1992
---- ---- ----
Tax at statutory rate $ 4,611 $ 3,998 $ 4,127
State income taxes, net of federal
tax benefit 514 445 480
Goodwill amortization 481 481 467
Other 234 85 37
--- -- --
$ 5,840 $ 5,009 $ 5,111
===== ===== =====
The results of operations of the Product Lines Acquired will be included in
the consolidated federal tax returns of Guinness America Holdings, Inc. and
state income tax returns of affiliated companies.
7. SIGNIFICANT CUSTOMER:
Net sales to one customer as a percentage of total net sales were 11% in
1994, 14% in 1993 and 12% in 1992.
UNITED DISTILLERS GLENMORE, INC.
Statement of Identified Income and Expenses of the Product Lines
Acquired by Canandaigua Wine Company, Inc.
August 31, 1995 and 1994
Eight Months Ended
-------- --------
($ 000's) 8/31/95 8/31/94
-------- --------
(unaudited)
Net sales, including tax and duty 118,142 137,620
Tax and duty 67,345 79,611
-------- --------
Net sales 50,797 58,009
Cost of goods sold 26,547 31,532
-------- --------
Gross profit 24,250 26,477
Operating expense/(income):
Grants 6,066 6,217
Advertising, merchandising and promotions 4,039 6,158
Brokers' commissions 533 744
Royalty income (148) (135)
Allocated selling, general and administrative expense 6,270 6,961
-------- --------
Earnings from operations 7,490 6,532
Other expense:
Allocated interest 908 1,171
Allocated amortization of goodwill 916 916
-------- --------
Earnings before taxes 5,666 4,445
Allocated tax provision 2,681 1,970
-------- --------
Net Income 2,985 2,475
UNITED DISTILLERS GLENMORE, INC. AND AFFILIATES
NOTES TO STATEMENTS OF INCOME AND EXPENSES OF THE PRODUCT LINES ACQUIRED
BY CANANDAIGUA WINE COMPANY, INC. FOR THE EIGHT MONTHS ENDED AUGUST 31,
1995 AND PRIOR YEAR
BASIS OF PRESENTATION
- ---------------------
The accompanying statements present the identified income and expenses of the
product lines of United Distillers Glenmore, Inc. ("UDG"), a wholly owned
subsidiary of United Distillers North America, Inc. ("UDNA"), and its affiliates
acquired by Canandaigua Wine Company, Inc. (the "Product Lines Acquired")
pursuant to an asset purchase agreement dated September 1, 1995. These product
lines have never been operated as a separate business entity and have no legal
existence, but rather have been an integral part of the spirits business of UDG,
whose operations primarily relate to the United States.
These statements include the net sales, including tax and duty, tax and duty,
cost of goods sold, grants, advertising, merchandising and promotions, brokers'
commissions and royalty income, that substantially relate directly to the
Product Lines Acquired. All other expense items are allocated based on estimates
and assumptions as if the Product Lines Acquired had been operated on a
stand-alone basis during the periods presented.
Grants, Advertising, Merchandising and Promotions and Brokers' Commissions for
the eight months to August 31, 1995 represent expenses incurred for the period.
The equivalent amounts for the prior year represent two thirds of the
relevant amounts for the calendar year ended December 31, 1994.
The allocated expense items for the prior year represent two thirds of the
relevant amounts for the calendar year ended December 31, 1994.
The basis for presenting the allocated expense items is as follows:
(a) Selling, general and administrative expenses are allocated based
upon (i) for UDG overhead (including other operating and non operating
income/costs), the proportion of net sales (including tax and duty) of
the Product Lines Acquired to total UDG net sales and (ii) for UDNA
overhead (including other operating and non operating income/costs), the
proportion of net sales (including tax and duty) of the Product Lines
Acquired to UDNA and its affiliated spirits companies' net sales,
including for purposes of this allocation only, the net sales of the
Schieffelin Partner in the Schieffelin & Somerset joint venture;
(b) Amortization of goodwill is allocated based upon the proportion of
UDG goodwill attributable to the Product Lines Acquired to total UDG
goodwill, using a 40-year amortization period;
(c) Interest expense is allocated by determining the percentage
relationship between the total assets of the Product Lines Acquired and
the total assets of UDNA and its affiliated spirits companies, and
applying the percentage to actual interest expense of UDNA and its
affiliated spirits companies to determine the allocation to the Product
Lines Acquired;
(d) Income taxes are allocated to the Product Lines Acquired on the
separate return method.
Management believes the above allocations to be reasonable in the circumstances;
however, there can be no assurances that such allocations will be indicative of
future results of operations or what the results of operations of the Product
Lines Acquired would have been had they been a separate, stand-alone entity
during the period covered.
PRO FORMA CONSOLIDATED FINANCIAL DATA
(UNAUDITED)
The following pro forma financial data of the Company consists of (i) a
pro forma condensed consolidated balance sheet (unaudited) as of May 31, 1995
(the "Pro Forma Balance Sheet"), (ii) a 1994 fiscal year pro forma condensed
consolidated statement of income (unaudited) (the "1994 Pro Forma Statement of
Income") and (iii) a 1995 nine month pro forma condensed consolidated statement
of income (unaudited) (the "1995 Nine Month Pro Forma Statement of Income")
(collectively, the "Pro Forma Statements").
The Pro Forma Balance Sheet reflects the combination of the balance
sheet of the Company as of May 31, 1995 and the statement of assets and
liabilities as of September 1, 1995 related to the product lines acquired by the
Company from United Distillers Glenmore, Inc. (the "United Distillers Glenmore
Product Lines"), as adjusted for the acquisition on September 1, 1995 by the
Company of certain assets and liabilities of United Distillers Glenmore, Inc.,
including those related to the United Distillers Glenmore Product Lines (the
"United Distillers Glenmore Acquisition"). The Pro Forma Balance Sheet is
presented as if the United Distillers Glenmore Acquisition were consummated on
May 31, 1995.
The 1994 Pro Forma Statement of Income reflects the combination of (i)
the income statement of the Company for the year ended August 31, 1994, (ii) the
income statement of Vintners International Company, Inc. ("Vintners") for the
six weeks ended October 15, 1993, (iii) the statement of identified income and
expenses for the product lines acquired by the Company from Heublein Inc. (the
"Almaden/Inglenook Product Lines") for the eleven months ended August 5, 1994
and (iv) the statement of identified income and expenses for the United
Distillers Glenmore Product Lines for the year ended August 31, 1994, as
adjusted for (i) the acquisition by the Company of substantially all of the
assets and liabilities of Vintners as of October 15, 1993 (the "Vintners
Acquisition"), (ii) the acquisition by the Company of certain assets and
liabilities from Heublein Inc. as of August 5, 1994, including those related to
the Almaden/Inglenook Product Lines (the "Almaden/Inglenook Acquisition") and
(iii) the United Distillers Glenmore Acquisition. The 1994 Pro Forma Statement
of Income is presented as if such transactions were consummated on September 1,
1993.
The 1995 Nine Month Pro Forma Statement of Income reflects the
combination of (i) the income statement of the Company and (ii) the statement of
identified income and expenses for the United Distillers Glenmore Product Lines,
both for the nine months ended May 31, 1995, as adjusted for the United
Distillers Glenmore Acquisition. The 1995 Nine Month Pro Forma Statement of
Income is presented as if the United Distillers Glenmore Acquisition were
consummated on September 1, 1994.
The Pro Forma Statements should be read in conjunction with (i) the
separate historical financial statements of the Company, Vintners, the
Almaden/Inglenook Product Lines and the United Distillers Glenmore Product
Lines, (ii) the related notes and (iii) "Management's Discussion and Analysis of
Financial Condition and the Results of Operations" incorporated herein by
reference to the Registrant's Registration Statement on Form S-3 (Registration
No. 33-55997). The Pro Forma Statements are based upon currently available
information and upon certain assumptions that the Company believes are
reasonable under the circumstances. The Pro Forma Statements do not purport to
represent what the Company's financial position or results of operations would
actually have been if the aforementioned transactions in fact had occurred on
such date or at the beginning of the period indicated or to project the
Company's financial position or the results of operations at any future date or
for any future period.
CANANDAIGUA WINE COMPANY, INC. AND UNITED DISTILLERS GLENMORE PRODUCT LINES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
AS OF MAY 31, 1995
(IN THOUSANDS)
PRO FORMA
HISTORICAL ADJUSTMENTS
---------- -----------
UNITED DISTILLERS
COMPANY GLENMORE PRODUCT
AS OF LINES AS OF
MAY 31, SEPTEMBER 1, FOR THE PRO FORMA
1995 1995 ACQUISITION CONSOLIDATED
-------- --------------- ----------- ------------
ASSETS:
Cash and cash equivalents $8,826 $9,904 (c) $18,730
Accounts receivable, net 118,211 3,289 (c) 121,500
Inventories, net 289,226 $13,070 3,000 (a) 305,296
Prepaid expenses and other
current assets 25,645 376 26,021
Property, plant and equipment, net 201,277 23,994 6,155 (a) 231,426
Other assets 166,052 97,354 (a) 264,419
1,013 (b)
Total assets $809,237 $37,440 $120,715 $967,392
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current maturities of long-term
and short-term debt $37,768 $2,000 (c) $39,768
Accounts payable and accrued
liabilities: 41,277 $255 2,300 (b) 43,832
Other current liabilities 85,936 600 (b) 86,536
Long-term debt (excluding current
portion) 232,787 153,000 (c) 385,787
Other long-term liabilities 28,140 28,140
Deferred income taxes 43,826 43,826
Total liabilities 469,734 255 157,900 627,889
Common stock 214 214
Additional Paid-in Capital 217,578 217,578
Retained earnings 129,215 129,215
UDG investment in product lines
acquired 37,185 (37,185)(d) 0
Less: Treasury stock (7,504) (7,504)
Total stockholders' equity 339,503 37,185 (37,185) 339,503
Total liabilities and
stockholders' equity $809,237 $37,440 $120,715 $967,392
CANANDAIGUA WINE COMPANY, INC.
AND UNITED DISTILLERS GLENMORE PRODUCT LINES
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MAY 31, 1995
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(a) Reflects the estimated purchase accounting adjustments for the United
Distillers Glenmore Acquisition based upon a preliminary appraisal of the assets
and liabilities assumed. For purchase accounting, United Distillers Glenmore
Product Lines assets have been recorded at estimated fair market value subject
to adjustment based upon the results of an independent appraisal. The purchase
price and estimated fair market value are based, in part, on the value of net
assets, as defined in the asset purchase agreement, on September 1, 1995. The
estimated amounts recorded for assets and liabilities acquired from United
Distillers Glenmore, Inc. are not expected to differ materially from the final
assigned values. Purchase accounting adjustments were recorded to increase
inventory by $3,000, to increase property, plant and equipment by $6,155, to
record the excess of purchase cost over fair market value of assets acquired of
$65,464, and to record $31,890 reflecting the value of the tradenames. These
adjustments are required to record these assets at their estimated fair market
values. The $600 reflects an assumed liability for an adverse lease commitment.
The estimated purchase price is $144,962 which consists of (i) $37,185
for the net book value of the United Distillers Glenmore Product Lines assets;
(ii) $103,609 for intangible assets and premium over book value of the net
assets acquired; (iii) liabilities assumed of $855; (iv) direct acquisition
costs of $2,300; and (v) financing costs of $1,013. The excess of purchase cost
over fair market value of the assets acquired and liabilities assumed from the
United Distillers Glenmore Product Lines is as follows:
Purchase Cost:
Book value of Product Line assets $ 37,440
Intangible assets and premium over book value 103,609
Less: liabilities assumed (255)
----------
Cash purchase price paid 140,794
Direct acquisition costs 2,300
Financing costs 1,013
Liabilities assumed 855
-----------
Total purchase cost 144,962
Fair market value of United Distillers Glenmore Product
Lines assets including capitalized financing costs 79,498
---------
Excess of purchase cost over fair market value of assets
acquired and liabilities assumed $ 65,464
========
CANANDAIGUA WINE COMPANY, INC.
AND UNITED DISTILLERS GLENMORE PRODUCT LINES
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MAY 31, 1995
(UNAUDITED)--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(b) Reflects the liability for direct acquisition costs of $2,300 and an assumed
liability of $600 for an adverse contract. Capitalized financing costs of $1,013
were funded through Term Loan borrowings.
(c) Reflects the borrowings in connection with the United Distillers Glenmore
Acquisition net of an overpayment of $3,289 at closing, based upon an estimated
net asset closing statement. The sources and application of funds in connection
with the United Distillers Glenmore Acquisition are as follows:
Sources of funds:
Borrowings under the Term Loan $155,000
Accrued liabilities 2,300
Total sources of funds $157,300
Application of funds:
Cash purchase price $140,794
Payment of financing costs 1,013
Excess cash drawn down 9,904
Overpayment to United Distillers Glenmore at closing 3,289
Payment of direct acquisition costs 2,300
Total application of funds $157,300
(d) Reflects the elimination of the United Distillers Glenmore, Inc. investment
in the United Distillers Glenmore Product Lines.
CANANDAIGUA WINE COMPANY, INC., VINTNERS INTERNATIONAL COMPANY,INC.,
ALMADEN/INGLENOOK PRODUCT LINES AND UNITED DISTILLERS GLENMORE PRODUCT LINES
1994 FISCAL YEAR PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
HISTORICAL PRO FORMA ADJUSTMENTS
UNITED DISTILLERS VINTNERS ALMADEN/INGLENOOK
GLENMORE FOR THE PRODUCT LINES FOR
COMPANY PRODUCT LINES SIX WEEKS THE ELEVEN MONTHS FOR THE
YEAR ENDED YEAR ENDED ENDED ENDED FOR THE FOR THE UNITED DISTILLERS
AUGUST 31, AUGUST 31, OCTOBER 15, AUGUST 5, VINTNERS ALMADEN/INGLENOOK GLENMORE PRO FORMA
1994 1994 1993 1994 ACQUISITION ACQUISITION ACQUISITION CONSOLIDATED
Net sales $629,584 $101,916 $17,263 $224,171 $5,341 (j) $978,275
Cost of product sold 447,211 55,163 13,999 178,978 ($718)(a) 2,676 (j) ($243)(s) 692,797
125 (b) (3,101)(k)
(420)(l)
(397)(m)
(476)(n)
----------------------------------------------------------------------------------------------------------
Gross profit 182,373 46,753 3,264 45,193 593 7,059 243 285,478
Selling, general and
administrative
expenses 121,388 33,611 3,789 34,863 (24)(a) 3,376 (j) (359)(s) 197,080
(55)(c) (163)(k) 1,040 (t)
854 (d) (1,528)(l) 169 (u)
9 (e) 429 (o) (525)(v)
(467)(f) 550 (p)
137 (g)
(14)(h)
Nonrecurring
restructuring
expenses 24,005 24,005
-----------------------------------------------------------------------------------------------------------
Operating income 36,980 13,142 (525) 10,330 153 4,395 (82) 64,393
Interest expense, net 18,056 1,877 2,788 4,992 55 (c) 1,916 (q) 5,740 (w) 34,048
(313)(g)
(1,063)(h)
Other 711 (711)(j) 0
Nonrecurring
transaction costs 953 953
-----------------------------------------------------------------------------------------------------------
Income (loss)before
provision
for (benefit from)
federal and state
income taxes 18,924 11,265 (4,266) 4,627 1,474 3,190 (5,822) 29,392
Provision for
(benefit from)
federal and
state income taxes 7,191 5,097 0 2,060 (794)(i) 1,212 (r) (3,028)(x) 11,738
------------------------------------------------------------------------------------------------------------
Net income (loss) $11,733 $6,168 ($4,266) $2,567 $2,268 1,978 ($2,794) $17,654
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Share and Per Share
Data:
Net income per common
share:
Primary $0.74 $1.12
Fully diluted $0.74 $1.10
Weighted average
shares
outstanding:
Primary 15,783,583 15,783,583(y)
Fully diluted 16,401,598 16,401,598(y)
CANANDAIGUA WINE COMPANY, INC.,
VINTNERS INTERNATIONAL COMPANY, INC.,
ALMADEN/INGLENOOK PRODUCT LINES
AND UNITED DISTILLERS GLENMORE PRODUCT LINES
NOTES TO 1994 FISCAL YEAR PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(a) Reflects the adjusted depreciation expense related to the acquired property,
plant and equipment of Vintners on the assumption that the Vintners Acquisition
had taken place on September 1, 1993. These assets have been restated at their
estimated fair market values and depreciated using the Company's depreciation
methods over the remaining useful lives of the assets. The Company utilizes a
convention whereby one-half of the annual depreciation is recorded in the year
of acquisition and one-half in the year of disposition. The decrease in
depreciation expense of $742 as compared to that recorded by Vintners was
allocated, as indicated, to cost of product sold and selling, general and
administrative expenses. Giving effect to a full year's depreciation expense for
the assets acquired in the Vintners Acquisition would reduce pretax income by an
additional $1,784.
(b) Reflects increased lease expense related to the Hammondsport lease on the
assumption that the lease was entered into on September 1, 1993.
(c) Historic Vintners selling, general and administrative expenses and interest
income reflect the reclassification of certain items to conform to the Company's
classification.
(d) Reflects amortization expense of intangible assets of $854 over 40 years
using the straight-line method.
(e) Reflects amortization expense of deferred financing costs of $9 over the
term of the subordinated bank loan used to finance the Vintners Acquisition (the
"Subordinated Bank Loan") (120 months) using the effective interest method.
(f) Reflects the elimination of compensation and benefits attributable to the
net reduction of certain management and sales personnel in connection with the
Vintners Acquisition.
(g) Reflects certain additional revolving loans (the "Revolving Loans"), under a
certain Amendment No. 1 dated as of October 15, 1993 of Amendment and
Restatement of Credit Agreement dated as of June 29, 1993, to repay the
Subordinated Bank Loan. Also, reflects the elimination of interest expense of
$1,803 on the Subordinated Bank Loan, the addition of interest expense of $1,422
on the public offering and sale of the Company's Senior Subordinated Notes on
December 27, 1993 (the "Senior Subordinated Notes") utilizing an interest rate
of 8.75% per annum, the addition of interest expense of $68 on the additional
Revolving Loans utilizing an assumed interest rate of 5% per annum, and
amortization expense of direct financing costs of $137 related to the Senior
Subordinated Notes.
CANANDAIGUA WINE COMPANY, INC.,
VINTNERS INTERNATIONAL COMPANY, INC.,
ALMADEN/INGLENOOK PRODUCT LINES
AND UNITED DISTILLERS GLENMORE PRODUCT LINES
NOTES TO 1994 FISCAL YEAR PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF INCOME--(UNAUDITED)--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(h) Reflects the elimination of Vintners interest expense of $2,846 and
amortization of debt financing costs of $14 and reflects an increase in interest
expense of $1,783 relating to the debt incurred to finance the Vintners
Acquisition. Interest expense was calculated using an assumed interest rate
which started at 9.25% per annum and increased over the 9-month period to 11.25%
per annum for the Subordinated Bank Loan and an assumed interest rate of 5% per
annum for the Revolving Loans.
(i) Reflects the tax benefit assuming that the pro forma income before taxes is
reduced by Vintners historical net loss using a combined federal and state
income tax rate of 38%.
(j) Historic Almaden/Inglenook Product Lines net sales, cost of product sold,
selling, general and administrative expenses and other expense reflect the
reclassification of certain items to conform to the Company's classification.
(k) Reflects the adjusted depreciation expense related to the acquired property,
plant and equipment of Almaden/Inglenook Product Lines on the assumption that
the Almaden/Inglenook Acquisition had taken place on September 1, 1993. These
assets have been restated at their estimated fair market values and depreciated
using the Company's depreciation methods over the remaining useful lives of the
assets. The Company utilizes a convention whereby one-half of the annual
depreciation is recorded in the year of acquisition and one-half in the year of
disposition. The decrease in deprecation expense of $3,264 as compared to that
recorded on a historical basis was allocated, as indicated, to cost of product
sold and selling, general and administrative expenses. Giving effect to a full
year's depreciation expense for the assets acquired in the Almaden/Inglenook
Acquisition would reduce pretax income by an additional $1,328.
(l) Reflects the elimination of compensation and benefits attributable to the
net reduction of certain management and sales personnel in connection with the
Almaden/Inglenook Acquisition.
(m) Reflects the elimination of postretirement benefits expense of $397 as the
liability to existing retirees was not assumed by the Company and no
postretirement benefits will be offered to the new Almaden/Inglenook Product
Lines employees hired by the Company at the date of the Almaden/Inglenook
Acquisition.
(n) Reflects the elimination of $476 of repair and maintenance expense to
conform to the Company's capitalization policy.
CANANDAIGUA WINE COMPANY, INC.,
VINTNERS INTERNATIONAL COMPANY, INC.,
ALMADEN/INGLENOOK PRODUCT LINES
AND UNITED DISTILLERS GLENMORE PRODUCT LINES
NOTES TO 1994 FISCAL YEAR PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF INCOME--(UNAUDITED)--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(o) Reflects the adjusted amortization expense for intangible assets. These
assets have been recorded at their estimated fair market value and amortized
using the Company's amortization methods over their estimated useful lives. The
increase in amortization expense of $429 as compared to that recorded on a
historical basis was allocated to goodwill and trade names.
(p) Reflects amortization expense of deferred financing costs of $550 over the
term of the bank loan (72 months) using the effective interest method.
(q) Reflects the elimination of Almaden/Inglenook Product Lines allocated
interest expense of $4,992 and reflects an increase in interest expense of
$6,908 relating to the debt incurred to finance the Almaden/Inglenook
Acquisition and to reflect the Company's interest cost to finance the annual
grape harvest. Interest expense was calculated using an assumed interest rate of
4.8% per annum on the term loans under a certain Second Amendment and
Restatement of Credit Agreement dated as of August 5, 1994 (the "Term Loans")
and Revolving Loans.
(r) Reflects the additional tax expense calculated using a combined federal and
state income tax rate of 38%.
(s) Reflects the adjusted depreciation expense related to the acquired property,
plant and equipment of United Distillers Glenmore Product Lines on the
assumption that the United Distillers Glenmore Acquisition had taken place on
September 1, 1993. These assets have been restated at their estimated fair
market values and depreciated using the Company's depreciation methods over the
remaining useful lives of the assets. The Company utilizes a convention whereby
one-half of the annual depreciation is recorded in the year of acquisition and
one-half in the year of disposition. The decrease in depreciation expense of
$602 as compared to that recorded on an historical basis was allocated, as
indicated, to cost of product sold and selling, general and administrative
expenses. Giving effect to a full year's depreciation expense for the assets
acquired in the United Distillers Glenmore Acquisition would reduce pretax
income by an additional $884.
(t) Reflects the adjusted amortization expense for intangible assets. These
assets have been recorded at their estimated fair market value and amortized
using the Company's amortization methods over their estimated useful lives. The
increase in amortization expense of $1,040 as compared to that recorded by
United Distillers Glenmore Product Lines was allocated to goodwill and trade
names.
CANANDAIGUA WINE COMPANY, INC.,
VINTNERS INTERNATIONAL COMPANY, INC.,
ALMADEN/INGLENOOK PRODUCT LINES
AND UNITED DISTILLERS GLENMORE PRODUCT LINES
NOTES TO 1994 FISCAL YEAR PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF INCOME--(UNAUDITED)--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(u) Reflects amortization expense of deferred financing costs of $169 over the
term of the Term Loan (72 months).
(v) Reflects the elimination of postretirement benefits expense of $525 as the
liability to existing retirees was not assumed by the Company and no
postretirement benefits will be offered to the new United Distillers Glenmore
Product Lines employees hired by the Company at the date of the United
Distillers Glenmore Acquisition.
(w) Reflects the elimination of United Distillers Glenmore Product Lines
allocated interest expense of $1,877 and reflects an increase in interest
expense of $7,617 relating to the debt incurred to finance the United Distillers
Glenmore Acquisition. Interest expense was calculated using an assumed interest
rate of 5.2% per annum on the Term Loan portion of a certain Third Amended and
Restated Credit Agreement dated as of September 1, 1995 (the "Amended Credit
Agreement").
(x) Reflects the reduction in tax expense calculated using a combined federal
and state income tax rate of 38%.
(y) Reflects the historical weighted average shares outstanding adjusted for the
assumed conversion of the Company's convertible debentures and the assumed
exercise of options to purchase 500,000 shares and 600,000 shares of the
Company's Class A Common Stock in connection with the Vintners Acquisition and
the Almaden/Inglenook Acquisition, respectively. For purposes of calculating
primary net income per share, the effect of the exercise of the Vintners options
determined under the treasury stock method increased the weighted average shares
by 133,790, and the effect of the exercise of the Almaden/Inglenook Product
Lines options determined under the treasury stock method was antidilutive. For
purposes of calculating fully diluted earnings per share, the effect of the
exercise of the Vintners options and the Almaden/Inglenook Product Lines options
determined under the treasury stock method increased the weighted average shares
by 176,605.
CANANDAIGUA WINE COMPANY, INC. AND UNITED DISTILLERS GLENMORE PRODUCT LINES
1995 NINE MONTH PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
PRO FORMA
HISTORICAL ADJUSTMENTS
---------- -----------
UNITED DISTILLERS
COMPANY GLENMORE PRODUCT
NINE MONTHS LINES NINE MONTHS
ENDED ENDED
MAY 31, MAY 31, FOR THE PRO FORMA
1995 1995 ACQUISITION CONSOLIDATED
Net sales $677,255 $72,708 $749,963
Cost of product sold 487,202 38,169 ($228)(a) 525,143
---------------------------------------------------------
Gross profit 190,053 34,539 228 224,820
Selling, general and administrative
expenses 118,759 21,705 (231)(a) 140,909
779 (b)
127 (c)
(230)(d)
Nonrecurring restructuring expenses 1,653 1,653
Operating income 69,641 12,834 (217) 82,258
Interest expense, net (19,304) (1,190) (4,523)(e) (25,017)
---------------------------------------------------------
Income (loss) before provision for
(benefit from) federal and
state income taxes 50,337 11,644 (4,740) 57,241
Provision for (benefit from) federal
and state income taxes 19,380 5,065 (2,407)(f) 22,038
---------------------------------------------------------
Net income $30,957 $6,579 ($2,333) $35,203
---------------------------------------------------------
---------------------------------------------------------
Share and Per Share Data:
Net income per common share:
Primary $1.64 $1.87
Fully diluted $1.63 $1.85
Weighted average shares outstanding:
Primary 18,872,144 18,872,144
Fully diluted 18,979,785 18,979,785
CANANDAIGUA WINE COMPANY, INC. AND
UNITED DISTILLERS GLENMORE PRODUCT LINES
NOTES TO 1995 NINE MONTH PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(a) Reflects the adjusted depreciation expense related to the acquired property,
plant and equipment of United Distillers Glenmore Product Lines on the
assumption that the United Distillers Glenmore Acquisition had taken place on
September 1, 1994. These assets have been restated at their estimated fair
market values and depreciated using the Company's depreciation methods over the
remaining useful lives of the assets. The Company utilizes a convention whereby
one-half of the annual depreciation is recorded in the year of acquisition and
one-half in the year of disposition. The decrease in depreciation expense of
$459, as compared to that recorded on a historical basis, was allocated, as
indicated, to cost of product sold and selling, general and administrative
expenses. Giving effect to a full nine months' depreciation expense for the
assets acquired in the United Distillers Glenmore Acquisition would reduce
pretax income by an additional $663.
(b) Reflects the adjusted amortization expense for intangible assets. These
assets have been recorded at their estimated fair market value and amortized
using the Company's amortization methods over their estimated useful lives. The
increase in amortization expense of $779 as compared to that recorded by United
Distillers Glenmore Product Lines was allocated to goodwill and trade names.
(c) Reflects amortization expense of deferred financing costs of $127 over the
term of the Term Loan (72 months).
(d) Reflects the elimination of postretirement benefits expense of $230 as the
liability to existing retirees was not assumed by the Company and no
postretirement benefits will be offered to the new United Distillers Glenmore
Product Lines employees hired by the Company at the date of the United
Distillers Glenmore Acquisition.
(e) Reflects the elimination of United Distillers Glenmore Product Lines
allocated interest expense of $1,190 and reflects an increase in interest
expense of $5,713 relating to the debt incurred to finance the United Distillers
Glenmore Acquisition. Interest expense was calculated using an assumed interest
rate of 5.2% per annum on the Term Loan portion of the Amended Credit Agreement.
(f) Reflects the reduction in tax expense calculated using a combined federal
and state income tax rate of 38.5%.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
CANANDAIGUA WINE COMPANY, INC.
November 9, 1995 By: /s/ Richard Sands
Richard Sands, President and Chief
Executive Officer
INDEX TO EXHIBITS
(1) Underwriting agreement
Not Applicable.
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession
(a) Asset Purchase Agreement among Barton Incorporated (a
wholly-owned subsidiary of the Registrant), United Distillers
Glenmore, Inc., Schenley Industries Inc., Medley Distilling
Company, United Distillers Manufacturing, Inc., and The Viking
Distillery, Inc., dated August 29, 1995 (including a list briefly
identifying the contents of all omitted schedules and exhibits
thereto) is incorporated herein by reference to Exhibit 2(a) to
the Registrant's Current Report on Form 8-K, dated August 29,
1995, of which this Amendment No. 1 on Form 8-K/A forms a part.
The Registrant will furnish supplementally to the Commission or
any security holder upon request a copy of any omitted schedule
or exhibit.
(b) Third Amended and Restated Credit Agreement between the
Registrant, its principal operating subsidiaries, and certain
banks for which The Chase Manhattan Bank (National Association)
acts as Administrative Agent, dated as of September 1, 1995
(including a list briefly identifying the contents of all omitted
schedules and exhibits thereto) is incorporated herein by
reference to Exhibit 2(b) to the Registrant's Current Report on
Form 8-K, dated August 29, 1995, of which this Amendment No. 1 on
Form 8-K/A forms a part. The Registrant will furnish
supplementally to the Commission or any security holder upon
request a copy of any omitted schedule or exhibit.
(4) Instruments defining the rights of security holders, including
indentures
Not Applicable.
(16) Letter re change in certifying accountant
Not Applicable.
(17) Letter re director resignation
Not Applicable.
(21) Other documents or statements to security holders
Not Applicable.
(23) Consents of experts and counsel
Consent of Price Waterhouse LLP is attached hereto as Exhibit 23 at
page 30 of this Report.
(24) Power of attorney
Not Applicable.
(27) Financial Data Schedule
Not Applicable.
(99) Additional Exhibits
None.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-8 (Nos. 33-26694 and 33-56557) of Canandaigua Wine
Company, Inc. of our report dated September 25, 1995 relating to the
Statement of Assets and Liabilities and Statement of Identified Income
and Expenses of the Product Lines Acquired of United Distillers
Glenmore, Inc. and Affiliates, which appears in the Current Report on
Form 8-K/A (Amendment No. 1) which amends and forms part of Canandaigua
Wine Company, Inc.'s Current Report on Form 8-K dated August 29, 1995.
PRICE WATERHOUSE LLP
Stamford, Connecticut
October 27, 1995