UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
OR
COMMISSION FILE NO. 0-7570
DELAWARE CANANDAIGUA 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 ----
NEW YORK POLYPHENOLICS, INC. 16-1546354
NEW YORK ROBERTS TRADING CORP. 16-0865491
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
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
GEORGIA THE VIKING DISTILLERY, INC. 58-2183528
(State or other (Exact name of registrant as (I.R.S.
jurisdiction of specified in its charter) Employer
incorporation or Identifiection
organization) No.)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrants' knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the common stock held by non-affiliates of Canandaigua Brands, Inc., as of May 14, 1999, was $841,819,702.
The number of shares outstanding with respect to each of the classes of common stock of Canandaigua Brands, Inc., as of May 14, 1999, is set forth below (all of the Registrants, other than Canandaigua Brands, Inc., are direct or indirect wholly-owned subsidiaries of Canandaigua Brands, Inc.):
CLASS NUMBER OF SHARES OUTSTANDING
----- ----------------------------
Class A Common Stock, Par Value $.01 Per Share 17,640,877
Class B Common Stock, Par Value $.01 Per Share 3,189,599
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DOCUMENTS INCORPORATED BY REFERENCE
The proxy statement of Canandaigua Brands, Inc. to be issued for the annual meeting of stockholders to be held July 20, 1999, is incorporated by reference in Part III.
PART I
Unless the context otherwise requires, the term "Company" refers to Canandaigua Brands, Inc. and its subsidiaries, and all references to "net sales" refer to gross revenue less excise taxes and returns and allowances to conform with the Company's method of classification. All references to "Fiscal 1999", "Fiscal 1998" and "Fiscal 1997" shall refer to the Company's fiscal year ended the last day of February of the indicated year.
Industry data disclosed in this Annual Report on Form 10-K has been obtained from Adam's Media Handbook Advance, NACM, AC Nielsen, The U.S. Wine Market: Impact Databank Review and Forecast and the Zenith Guide. The Company has not independently verified this data. References to positions within industries are based on unit volume.
The Company is a leading producer and marketer of branded beverage alcohol products in the United States and the United Kingdom. According to available industry data, the Company ranks as the second largest supplier of wine, the second largest importer of beer and the fourth largest supplier of distilled spirits in the United States. The Matthew Clark Acquisition (as defined below) established the Company as a leading British producer of cider, wine and bottled water and as a leading beverage alcohol wholesaler in the United Kingdom.
The Company is a Delaware corporation organized in 1972 as the successor to a business founded in 1945 by Marvin Sands, Chairman of the Board of the Company. The Company has aggressively pursued growth in recent years through acquisitions, brand development, new product offerings and new distribution agreements. The Matthew Clark Acquisition and the Black Velvet Acquisition (as defined below) continued a series of strategic acquisitions made by the Company since 1991 by which it has diversified its offerings and as a result, increased its market share, net sales and cash flow. The Company has also achieved internal growth by developing new products and repositioning existing brands to focus on the fastest growing sectors of the beverage alcohol industry.
The Company markets and sells over 170 national and regional branded products to more than 1,000 wholesale distributors in the United States. The Company also distributes its own branded products and those of other companies to more than 16,000 customers in the United Kingdom. The Company operates 20 production facilities in the United States, Canada and the United Kingdom and purchases products for resale from other producers.
RECENT ACQUISITIONS
MATTHEW CLARK ACQUISITION
On December 1, 1998, the Company acquired control of Matthew Clark plc ("Matthew Clark") and has since acquired all of Matthew Clark's outstanding shares (the "Matthew Clark Acquisition"). Matthew Clark grew substantially in the 1990s through a series of strategic acquisitions, including Grants of St. James's in 1993, the Gaymer Group in 1994 and Taunton Cider Co. in 1995. These acquisitions served to solidify Matthew Clark's position within its key markets and contributed to an increase in net sales to approximately $671 million for Matthew Clark's fiscal year ended April 30, 1998. Matthew Clark has developed a number of leading market positions, including positions as a leading independent beverage supplier to the on-premise trade, the number one producer of branded boxed wine,
the number one branded producer of fortified British wine, the number one branded bottler of sparkling water and the number two producer of cider.
The Matthew Clark Acquisition strengthens the Company's position in the beverage alcohol industry by providing the Company with a presence in the United Kingdom and a platform for growth in the European market. The acquisition of Matthew Clark also offers potential benefits including distribution opportunities to market California-produced wine and U.S.-produced spirits in the United Kingdom, as well as the potential to market Matthew Clark products in the U.S.
ACQUISITION OF BLACK VELVET CANADIAN WHISKY BRAND AND RELATED ASSETS
On April 9, 1999, in an asset acquisition, the Company acquired several well-known Canadian whisky brands, including Black Velvet, the third best selling Canadian whisky and the 16th best selling spirits brand in the United States, production facilities located in Alberta and Quebec, Canada, case goods and bulk whisky inventories and other related assets from affiliates of Diageo plc (collectively, the "Black Velvet Acquisition"). Other principal brands acquired in the transaction were Golden Wedding, OFC, MacNaughton, McMaster's and Triple Crown. In connection with the transaction, the Company also entered into multi-year agreements with Diageo to provide packaging and distilling services for various brands retained by Diageo.
The addition of the Canadian whisky brands from this transaction strengthens the Company's position in the North American distilled spirits category, and enhances the Company's portfolio of brands and category participation. The acquired operations are being integrated with the Company's existing spirits business.
RECENT DEVELOPMENTS-PENDING ACQUISITIONS OF SIMI WINERY AND FRANCISCAN ESTATES
SIMI WINERY
On April 1, 1999, the Company entered into a definitive agreement with Moet Hennessy, Inc. to purchase 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 includes the Simi winery (located in Healdsburg, California), equipment, vineyards, inventory and worldwide ownership of the Simi brand name. Founded in 1876, Simi is one of the oldest and best known wineries in California, combining a strong super-premium and ultra-premium brand with a flexible and well-equipped facility and high quality vineyards in the key Sonoma appellation.
FRANCISCAN ESTATES
On April 21, 1999, the Company entered into (i) a definitive purchase agreement with Franciscan Vineyards, Inc. ("Franciscan") and its shareholders to, among other matters, purchase all of the outstanding capital stock of Franciscan and (ii) definitive purchase agreements with certain parties related to Franciscan to acquire certain vineyards and related vineyard assets (collectively, the "Franciscan Acquisition"). Pursuant to the Franciscan Acquisition, the Company will: (i) acquire the Franciscan Oakville Estate, Estancia and Mt. Veeder brands; (ii) acquire wineries located in Rutherford, Monterey and Mt. Veeder, California; (iii) acquire vineyards in the Napa Valley, Alexander Valley, Monterey and Paso Robles appellations and additionally, will enter into long-term grape contracts with certain parties related to Franciscan to purchase additional grapes grown in the Napa and Alexander Valley appellations; (iv) acquire distribution rights to the Quintessa and Veramonte brands; and (v)
acquire equity interests in entities that own the Veramonte brand, the Veramonte winery (which is located in the Casablanca Valley, Chile) and vineyards also located in the Casablanca Valley. Franciscan's net sales for its fiscal year ended December 31, 1998, were approximately $50 million on volume of approximately 600,000 cases.
Franciscan is one of the foremost super-premium and ultra-premium wine companies in California. While the super-premium and ultra-premium wine categories represented only 9% of the total wine market by volume in 1997, they accounted for more than 25% of sales dollars. More importantly, super-premium and ultra-premium wine sales grew at an annual rate of 10% between 1995 and 1997, and by more than 18% in 1998. Given its fiscal 1998 volume of approximately 600,000 cases sold, Franciscan has recorded a three-year compound annual growth rate of more than 17%.
When completed, the Simi and Franciscan Acquisitions will establish the Company as a leading producer and marketer of super-premium and ultra-premium wine. The Simi and Franciscan operations complement each other and offer synergies in the areas of sales and distribution, grape usage and capacity utilization. Together, Simi and Franciscan represent the sixth largest presence in the super-premium and ultra-premium wine categories. The Company intends to operate Simi and Franciscan, and their properties, together as a separate business segment. The Company's strategy is to further penetrate the super-premium and ultra-premium wine categories, which have higher gross profit margins than popularly-priced wine.
The agreements for the Simi and Franciscan Acquisitions are subject to certain customary conditions prior to closing, which the Company expects will be satisfied. The Company cannot guarantee, however, that those transactions will be completed upon the agreed upon terms, or at all.
PRIOR ACQUISITIONS
The Company made a series of significant acquisitions between 1991 and 1995, commencing with the acquisition of the Cook's, Cribari, Dunnewood and other wine brands and related wine production facilities in 1991. In 1993, the Company diversified into the imported beer and distilled spirits categories by acquiring Barton Incorporated, through which the Company acquired distribution rights with respect to Corona Extra and other Modelo brands, St. Pauli Girl and other imported beer brands, and the Barton, Ten High, Montezuma and other distilled spirits brands. Also in 1993, the Company acquired the Paul Masson, Taylor California Cellars and other wine brands and related production facilities. In 1994, the Company acquired the Almaden, Inglenook and other wine brands, a grape juice concentrate business and related facilities. In 1995, the Company acquired the Mr. Boston, Canadian LTD, Skol, Old Thompson, Kentucky Tavern, Glenmore and di Amore distilled spirits brands; the rights to the Fleischmann's and Chi-Chi's distilled spirits brands under long-term license agreements; the U.S. rights to the Inver House, Schenley and El Toro distilled spirits brands; and related production facilities and assets.
Through these acquisitions, the Company has become more competitive by diversifying its portfolio; developing strong market positions in the growing beverage alcohol product categories of varietal table wine and imported beer; strengthening its relationships with wholesalers; expanding its distribution and enhancing its production capabilities; and acquiring additional management, operational, marketing, and research and development expertise.
BUSINESS SEGMENTS
The Company operates primarily in the beverage alcohol industry in the United States and the United Kingdom. The Company reports its operating results in four segments: Canandaigua Wine (branded 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); and Corporate Operations and Other (primarily corporate related items).
Information regarding net sales, operating income and total assets of each of the Company's business segments and information regarding geographic areas is set forth in Note 15 to the Company's consolidated financial statements located in Item 8 of this Annual Report on Form 10-K.
CANANDAIGUA WINE
Canandaigua Wine produces, bottles, imports and markets wine and brandy in the United States. It is the second largest supplier of wine in the United States and exports wine to approximately 65 countries from the United States. Canandaigua Wine sells table wine, dessert wine, sparkling wine and brandy. Its leading brands include Inglenook, Almaden, Paul Masson, Arbor Mist, Manischewitz, Taylor, Marcus James, Estate Cellars, Vina Santa Carolina, Dunnewood, Mystic Cliffs, Cook's, J. Roget, Richards Wild Irish Rose and Paul Masson Grande Amber Brandy. Most of its wine is marketed in the popularly-priced category of the wine market.
As a related part of its U.S. wine business, Canandaigua Wine is a leading grape juice concentrate producer in the United States. Grape juice concentrate competes with other domestically produced and imported fruit-based concentrates. Canandaigua Wine's other wine-related products and services include bulk wine, cooking wine, grape juice and Inglenook-St. Regis, a leading de-alcoholized line of wine in the United States.
BARTON
Barton produces, bottles, imports and markets a diversified line of beer and distilled spirits. It is the second largest marketer of imported beer in the United States and distributes five of the top 25 imported beer brands in the United States: Corona Extra, Modelo Especial, Corona Light, Pacifico and St. Pauli Girl. Corona Extra is the number one imported beer nationwide. Barton's other imported beer brands include Negra Modelo from Mexico, Tsingtao from China, Peroni from Italy and Double Diamond and Tetley's English Ale from the United Kingdom. Barton also operates the Stevens Point Brewery, a regional brewer located in Wisconsin, which produces Point Special, among other brands.
Barton is the fourth largest supplier of distilled spirits in the United States and exports distilled spirits to approximately fifteen countries from the United States. Barton's principal distilled spirits brands include Fleischmann's, Mr. Boston, Canadian LTD, Chi-Chi's prepared cocktails, Ten High, Montezuma, Barton, Monte Alban, Inver House and the recently acquired Black Velvet brand. Substantially all of Barton's spirits unit volume consists of products marketed in the price value category. Barton also sells distilled spirits in bulk and provides contract production and bottling services for third parties.
MATTHEW CLARK
The Company acquired Matthew Clark in the fourth quarter of Fiscal 1999. Matthew Clark is a leading producer and distributor of cider, wine and bottled water and a leading drinks wholesaler throughout the United Kingdom. Matthew Clark also exports its branded products to approximately 50 countries from the United Kingdom.
Matthew Clark is the second largest producer and marketer of cider in the United Kingdom. Matthew Clark distributes its cider brands in both the on-premise and off-premise markets and these brands compete in both the mainstream and premium brand categories. Matthew Clark's leading mainstream cider brands include Blackthorn and Gaymer's Olde English. Blackthorn is the number two mainstream cider brand and Gaymer's Olde English is the UK's second largest cider brand in the take-home market. Matthew Clark's leading premium cider brands are Diamond White and K.
Matthew Clark is the largest supplier of wine to the on-premise trade in the United Kingdom. Its Stowells of Chelsea brand maintains a leading share in the branded boxed wine segment. Matthew Clark also maintains a leading market share position in fortified British wine through its QC and Stone's brand names. It also produces and markets Strathmore bottled water in the United Kingdom, the leading bottled sparkling water brand in the country.
Matthew Clark is a leading independent beverage supplier to the on-premise trade in the United Kingdom and has one of the largest customer bases in the United Kingdom, with more than 16,000 on-premise accounts. Matthew Clark's wholesaling business involves the distribution of branded wine, spirits, cider, beer and soft drinks. While these products are primarily produced by third parties, they also include Matthew Clark's cider and wine branded products.
CORPORATE OPERATIONS AND OTHER
Corporate Operations and Other includes traditional corporate related items and the results of an immaterial operation.
MARKETING AND DISTRIBUTION
UNITED STATES
The Company's products are distributed and sold throughout the United States through over 1,000 wholesalers, as well as through state alcoholic beverage control agencies. Both Canandaigua Wine and Barton employ full-time, in-house marketing, sales and customer service organizations to develop and service their sales to wholesalers and state agencies. The Company believes that the organization of its sales force into separate segments positions it to maintain a high degree of focus on each of its principal product categories.
The Company's marketing strategy places primary emphasis upon promotional programs directed at its broad national distribution network, and at the retailers served by that network. The Company has extensive marketing programs for its brands including promotional programs on both a national basis and regional basis in accordance with the strength of the brands, point-of-sale materials, consumer media advertising, event sponsorship, market research, trade advertising and public relations.
During Fiscal 1999, the Company increased its advertising expenditures to put more emphasis on consumer advertising for certain wine brands, including newly introduced brands, and for its imported beer brands, primarily with respect to the Mexican brands. In addition, promotional spending for the Company's wine brands increased to address competitive factors.
UNITED KINGDOM
The Company's UK-produced branded products are distributed throughout the United Kingdom by Matthew Clark. The products are packaged at one of three production facilities. Shipments of cider and wine are then made to Matthew Clark's national distribution center for branded products. All branded products are then distributed to either the on-premise or off-premise markets with some of the sales to on-premise customers made through Matthew Clark's wholesale business. Matthew Clark's wholesale products are distributed through thirteen depots located throughout the United Kingdom. On-premise distribution channels include hotels, restaurants, pubs, wine bars and clubs. The off-premise distribution channels include grocers, convenience retail, cash and carry, and wholesalers.
Matthew Clark employs a full-time, in-house marketing and sales organization that targets off-premise customers for Matthew Clark's branded products. Matthew Clark also employs a full-time, in-house branded products marketing and sales organization that services specifically the on-premise market in the United Kingdom. Additionally, Matthew Clark employs a full-time, in-house marketing and sales organization to service the customers of its wholesale business.
TRADEMARKS AND DISTRIBUTION AGREEMENTS
The Company's products are sold under a number of trademarks, most of which are owned by the Company.
The Company also produces and sells wine and distilled spirits products
under exclusive license or distribution agreements. Important agreements include
(1) a long-term license agreement with Hiram Walker & Sons, Inc. (which expires
in 2116) for the Ten High, Crystal Palace, Northern Light and Imperial Spirits
brands; and (2) a long-term license agreement with the B. Manischewitz Company
(which expires in 2042) for the Manischewitz brand of kosher wine. On September
30, 1998, under the provisions of an existing long-term license agreement,
Nabisco Brands Company agreed to transfer to Barton all of its right, title and
interest to the corporate name "Fleischmann Distilling Company" and worldwide
trademark rights to the "Fleischmann" mark for alcoholic beverages. Pending the
completion of the assignment of such interests, the license will remain in
effect. The Company also has other less significant license and distribution
agreements related to the sale of wine and distilled spirits with terms of
various durations.
All of the Company's imported beer products are marketed and sold pursuant to exclusive distribution agreements with the suppliers of these products. These agreements have terms that vary and prohibit the Company from importing other beer from the same country. The Company's agreement to distribute Corona and its other Mexican beer brands exclusively throughout 25 primarily U.S. western states expires in December 2006 and, subject to compliance with certain performance criteria, continued retention of certain Company personnel and other terms under the agreement, will be automatically renewed for additional terms of five years. Changes in control of the Company or of its subsidiearies involved in importing the Mexican beer brands, changes in the position of the Chief Executive Officer of Barton Beers, Ltd. (including by death or disability) or the termination of the President of Barton Incorporated, may be a basis for the supplier, unless it consents to such changes, to terminate the
agreement. The supplier's consent to such changes may not be unreasonably withheld. The Company's agreement for the importation of St. Pauli Girl expires in June 2003. The Company's agreement for the importation of Tetley's English Ale expires in December 2007. The Company's agreement for the exclusive importation of Tsingtao throughout the entire United States expires in December 1999 and, subject to compliance with certain performance criteria and other terms under the agreement, will be automatically renewed until December 2002. Prior to their expiration, these agreements may be terminated if the Company fails to meet certain performance criteria. The Company believes it is currently in compliance with its material imported beer distribution agreements. From time to time, the Company has failed, and may in the future fail, to satisfy certain performance criteria in its distribution agreements. Although there can be no assurance that its beer distribution agreements will be renewed, given the Company's long-term relationships with its suppliers the Company expects that such agreements will be renewed prior to their expiration and does not believe that these agreements will be terminated.
The Company owns the trademarks for most of the brands that it acquired in the Matthew Clark Acquisition. The Company has a series of distribution agreements and supply agreements in the United Kingdom related to the sale of its products with varying terms and durations.
COMPETITION
The beverage alcohol industry is highly competitive. The Company competes on the basis of quality, price, brand recognition and distribution. The Company's beverage alcohol products compete with other alcoholic and nonalcoholic beverages for consumer purchases, as well as shelf space in retail stores and marketing focus by the Company's wholesalers. The Company competes with numerous multinational producers and distributors of beverage alcohol products, some of which have significantly greater resources than the Company. In the United States, Canandaigua Wine's principal competitors include E & J Gallo Winery and The Wine Group. Barton's principal competitors include Heineken USA, Molson Breweries USA, Labatt's USA, Guinness Import Company, Brown-Forman Beverages, Jim Beam Brands and Heaven Hill Distilleries, Inc. In the United Kingdom, Matthew Clark's principal competitors include Halewood Vintners, H.P. Bulmer, Tavern, Waverley Vintners and Perrier. In connection with its wholesale business, Matthew Clark distributes the branded wine of third parties that compete directly against its own wine brands.
PRODUCTION
In the United States, the Company's wine is produced from several varieties of wine grapes grown principally in California and New York. The grapes are crushed at the Company's wineries and stored as wine, grape juice or concentrate. Such grape products may be made into wine for sale under the Company's brand names, sold to other companies for resale under their own labels, or shipped to customers in the form of juice, juice concentrate, unfinished wine, high-proof grape spirits or brandy. Most of the Company's wine is bottled and sold within eighteen months after the grape crush. The Company's inventories of wine, grape juice and concentrate are usually at their highest levels in November and December immediately after the crush of each year's grape harvest, and are substantially reduced prior to the subsequent year's crush.
The bourbon whiskeys, domestic blended whiskeys and light whiskeys marketed by the Company are primarily produced and aged by the Company at its distillery in Bardstown, Kentucky, though it may from time to time supplement its inventories through purchases from other distillers. Following the Black Velvet Acquisition, the majority of the Company's Canadian whisky requirements
are produced and aged at its Canadian distilleries in Lethbridge, Alberta, and Valleyfield, Quebec. At its Albany, Georgia, facility, the Company produces all of the neutral grain spirits and whiskeys it uses in the production of vodka, gin and blended whiskey it sells to customers in the state of Georgia. The Company's requirements of Scotch whisky, tequila, mezcal and the neutral grain spirits it uses in the production of gin and vodka for sale outside of Georgia, and other spirits products, are purchased from various suppliers.
The Company operates three facilities in the United Kingdom that produce, bottle and package cider, wine and water. To produce Stowells of Chelsea, wine is imported in bulk from various countries such as Chile, Germany, France, Spain, South Africa and Australia, which are then packaged at the Company's facility at Bristol and distributed under the Stowells of Chelsea brand name. The Strathmore brand of bottled water (which is available in still, sparkling, and flavored varieties) is sourced and bottled in Forfar, Scotland. Cider production was consolidated at the Company's facility at Shepton Mallet, where apples of many different varieties are purchased from U.K. growers and crushed. This juice, along with European-sourced concentrate, is then fermented into cider.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The principal components in the production of the Company's branded beverage alcohol products are packaging materials (primarily glass) and agricultural products, such as grapes and grain.
The Company utilizes glass and PET bottles and other materials such as caps, corks, capsules, labels and cardboard cartons in the bottling and packaging of its products. Glass bottle costs are one of the largest components of the Company's cost of product sold. The glass bottle industry is highly concentrated with only a small number of producers. The Company has traditionally obtained, and continues to obtain, its glass requirements from a limited number of producers. The Company has not experienced difficulty in satisfying its requirements with respect to any of the foregoing and considers its sources of supply to be adequate. However, the inability of any of the Company's glass bottle suppliers to satisfy the Company's requirements could adversely affect the Company's operations.
Most of the Company's annual grape requirements are satisfied by purchases from each year's harvest which normally begins in August and runs through October. The Company believes that it has adequate sources of grape supplies to meet its sales expectations. However, in the event demand for certain wine products exceeds expectations, the Company could experience shortages.
The Company purchases grapes from over 800 independent growers, principally in the San Joaquin Valley and Monterey regions of California and in New York State. The Company enters into written purchase agreements with a majority of these growers on a year-to-year basis. The Company currently owns or leases approximately 4,200 acres of vineyards, either fully bearing or under development, in California and New York. This acreage supplies only a small percentage of the Company's total needs. The Company continues to consider the purchase or lease of additional vineyards, and additional land for vineyard plantings, to supplement its grape supply.
The distilled spirits manufactured by the Company require various agricultural products, neutral grain spirits and bulk spirits. The Company fulfills its requirements through purchases from various sources through contractual arrangements and through purchases on the open market. The Company believes that adequate supplies of the aforementioned products are available at the present time.
The Company manufactures cider, perry, light and fortified British wine from materials that are purchased either on a contracted basis or on the open market. In particular, supplies of cider apples are sourced through long term supply arrangements with owners of apple orchards. There are adequate supplies of the various raw materials at this particular time.
GOVERNMENT REGULATION
The Company's operations in the United States are subject to extensive Federal and state regulation. These regulations cover, among other matters, sales promotion, advertising and public relations, labeling and packaging, changes in officers or directors, ownership or control, distribution methods and relationships, and requirements regarding brand registration and the posting of prices and price changes. All of the Company's operations and facilities are also subject to Federal, state, foreign and local environmental laws and regulations and the Company is required to obtain permits and licenses to operate its facilities.
In the United Kingdom, the Company has secured a Customs and Excise License to carry on its excise trade. Licenses are required for all premises where wine is produced. The Company holds a license to act as an excise warehouse operator. Registrations have been secured for the production of cider and bottled water. Formal approval of product labeling is not required.
In Canada, the Company's operations are also subject to extensive federal and provincial regulation. These regulations cover, among other matters, advertising and public relations, labeling and packaging, environmental matters and customs and duty requirements. The Company is also required to obtain licenses and permits in order to operate its facilities.
The Company believes that it is in compliance in all material respects with all applicable governmental laws and regulations and that the cost of administration and compliance with, and liability under, such laws and regulations does not have, and is not expected to have, a material adverse impact on the Company's financial condition, results of operations or cash flows.
EMPLOYEES
The Company had approximately 2,300 full-time employees in the United States at the end of April 1999, of which approximately 870 were covered by collective bargaining agreements. Additional workers may be employed by the Company during the grape crushing season.
The Company had approximately 1,700 full-time employees in the United Kingdom at the end of April 1999, of which approximately 420 were covered by collective bargaining agreements. Additional workers may be employed during the peak season.
The Company had approximately 230 full-time employees in Canada at the end of April 1999, of which approximately 185 were covered by collective bargaining agreements.
The Company considers its employee relations generally to be good.
Through the Company's four business segments, the Company currently operates wineries, distilling plants, bottling plants, a brewery, cider and water producing facilities, most of which include warehousing and distribution facilities on the premises. The Company also operates separate distribution centers under the Matthew Clark segment's wholesaling business. The Company believes that all of its facilities are in good condition and working order and have adequate capacity to meet its needs for the foreseeable future.
CANANDAIGUA WINE
Canandaigua Wine maintains its headquarters in owned and leased offices in Canandaigua, New York. It operates three wineries in New York, located in Canandaigua, Naples and Batavia and six wineries in California, located in Madera, Gonzales, Escalon, Fresno, and Ukiah. All of the facilities in which these wineries operate are owned, except for the winery in Batavia, New York, which is leased. Canandaigua Wine considers its principal wineries to be the Mission Bell winery in Madera, California; the Canandaigua winery in Canandaigua, New York; and the Monterey Cellars winery in Gonzales, California. The Mission Bell winery crushes grapes, produces, bottles and distributes wine and produces grape juice concentrate. The Canandaigua winery crushes grapes and produces, bottles and distributes wine. The Monterey Cellars winery crushes grapes and produces, bottles and distributes wine for Canandaigua Wine's account and, on a contractual basis, for third parties.
Canandaigua Wine currently owns or leases approximately 4,200 acres of vineyards, either fully bearing or under development, in California and New York.
BARTON
Barton maintains its headquarters in leased offices in Chicago, Illinois. It owns and operates four distilling plants, two in the United States and two in Canada. The two distilling plants in the United States are located in Bardstown, Kentucky; and Albany, Georgia; and the two distilling plants in Canada, which were acquired in connection with the Black Velvet Acquisition, are located in Valleyfield, Quebec; and Lethbridge, Alberta. Barton considers its principal distilling plants to be the facilities located in Bardstown, Kentucky; Valleyfield, Quebec; and Lethbridge, Alberta. The Bardstown facility distills, bottles and warehouses distilled spirits products for Barton's account and, on a contractual basis, for other participants in the industry. The two Canadian facilities distill, bottle and store Canadian whisky for Barton's own account, and distill and/or bottle and store Canadian whisky, vodka, rum, gin and liqueurs for third parties.
In the United States, Barton also operates a brewery and three bottling plants. The brewery is located in Stevens Point, Wisconsin; and the bottling plants are located in Atlanta, Georgia; Owensboro, Kentucky; and Carson, California. All of these facilities are owned by Barton except for the bottling plant in Carson, California, which is operated and leased through an arrangement involving an ongoing management contract. Barton considers the bottling plant located in Owensboro, Kentucky to be one of its principal facilities. The Owensboro facility bottles and warehouses distilled spirits products for Barton's account and also performs contract bottling.
MATTHEW CLARK
Matthew Clark maintains its headquarters in owned offices in Bristol, England. It currently owns and operates two facilities in England that are located in Bristol and Shepton Mallet and one facility in Scotland, located in Forfar. Matthew Clark considers all three facilities to be its principal facilities. The Bristol facility produces, bottles and packages wine; the Shepton Mallet facility produces, bottles and packages cider; and the Forfar facility produces, bottles and packages water products. Matthew Clark also owns another facility in England, located in Taunton, the operations of which have now been consolidated into its Shepton Mallet facility. Matthew Clark plans to sell the Taunton property.
To distribute its products that are produced at the Bristol and Shepton Mallet facilities, Matthew Clark operates, in England, the National Distribution Centre, located at Severnside. This distribution facility is leased by Matthew Clark. To support its wholesaling business, Matthew Clark operates thirteen distribution centers located throughout the United Kingdom, all of which are leased. These thirteen distribution centers are used to distribute products produced by third parties, as well as by Matthew Clark. Matthew Clark has been and continues to consolidate the operations of its wholesaling distribution centers.
CORPORATE OPERATIONS AND OTHER
The Company maintains its corporate headquarters in offices leased in Fairport, New York.
The Company and its subsidiaries are subject to litigation from time to time in the ordinary course of business. Although the amount of any liability with respect to such litigation cannot be determined, in the opinion of management such liability will not have a material adverse effect on the Company's financial condition, results of operations or cash flows.
Not Applicable.
EXECUTIVE OFFICERS OF THE COMPANY
Information with respect to the current executive officers of the Company is as follows:
NAME AGE OFFICE HELD
---- --- -----------
Marvin Sands 75 Chairman of the Board
Richard Sands 48 President and Chief Executive Officer
Robert Sands 40 Chief Executive Officer, International, Executive
Vice President and General Counsel; and President
and Chief Executive Officer of Canandaigua Wine
Company, Inc.
Peter Aikens 60 President and Chief Executive Officer of Matthew
Clark plc
Alexander L. Berk 49 President and Chief Executive Officer of Barton
Incorporated
George H. Murray 52 Senior Vice President and Chief Human Resources
Officer
Thomas S. Summer 45 Senior Vice President and Chief Financial Officer
|
Marvin Sands is the founder of the Company, which is the successor to a business he started in 1945. He has been a director of the Company and its predecessor since 1946 and was Chief Executive Officer until October 1993. Marvin Sands is the father of Richard Sands and Robert Sands.
Richard Sands, Ph.D., has been employed by the Company in various capacities since 1979. He was elected Executive Vice President and a director in 1982, became President and Chief Operating Officer in May 1986 and was elected Chief Executive Officer in October 1993. He is a son of Marvin Sands and the brother of Robert Sands.
Robert Sands was appointed Chief Executive Officer, International in December 1998 and was appointed Executive Vice President and General Counsel in October 1993. He was elected a director of the Company in January 1990 and served as Vice President and General Counsel from June 1990 through October 1993. From June 1986 until his appointment as Vice President and General Counsel, Mr. Sands was employed by the Company as General Counsel. In addition, since the departure in April 1999 of the former President of Canandaigua Wine Company, Inc., a wholly-owned subsidiary of the Company, Mr. Sands has assumed, on an interim basis, the position of President and Chief Executive Officer of that company. In this capacity, Mr. Sands is in charge of the Canandaigua Wine segment, until a permanent successor is appointed. He is a son of Marvin Sands and the brother of Richard Sands.
Peter Aikens serves as President and Chief Executive Officer of Matthew Clark plc, a wholly-owned subsidiary of the Company. In this capacity, Mr. Aikens is in charge of the Company's Matthew Clark segment, and has been since the Company acquired control of Matthew Clark in December 1998. He has been the Chief Executive Officer of Matthew Clark plc since May 1990 and has been in the brewing and drinks industry for most of his career.
Alexander L. Berk serves as President and Chief Executive Officer of Barton Incorporated, a wholly-owned subsidiary of the Company. In this capacity, Mr. Berk is in charge of the Company's Barton segment. From 1990 until February 1998, Mr. Berk was President and Chief Operating Officer of Barton and from 1988 to 1990, he was the President and Chief Executive Officer of Schenley Industries. Mr. Berk has been in the alcoholic beverage industry for most of his career, serving in various positions.
George H. Murray joined the Company in April 1997 as Senior Vice President and Chief Human Resources Officer. From August 1994 to April 1997, Mr. Murray served as Vice President - Human Resources and Corporate Communications of ACC Corp., an international long distance reseller. For eight and a half years prior to that, he served in various senior management positions with First Federal Savings and Loan of Rochester, New York, including the position of Senior Vice President of Human Resources and Marketing from 1991 to 1994.
Thomas S. Summer joined the Company in April l997 as Senior Vice President and Chief Financial Officer. From November 1991 to April 1997, Mr. Summer served as Vice President, Treasurer of Cardinal Health, Inc., a large national health care services company, where he was responsible for directing financing strategies and treasury matters. Prior to that, from November 1987 to November 1991, Mr. Summer held several positions in corporate finance and international treasury with PepsiCo, Inc.
Executive officers of the Company hold office until the next Annual Meeting of the Board of Directors and until their successors are chosen and qualify.
PART II
The Company's Class A Common Stock (the "Class A Stock") and Class B Common Stock (the "Class B Stock") trade on the Nasdaq Stock Market (registered trademark) under the symbols "CBRNA" and "CBRNB," respectively. The following tables set forth for the periods indicated the high and low sales prices of the Class A Stock and the Class B Stock as reported on the Nasdaq Stock Market (registered trademark).
CLASS A STOCK
---------------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
Fiscal 1998
High $ 32 1/4 $ 42 3/4 $ 53 1/2 $ 58 1/2
Low $ 21 7/8 $ 29 3/8 $ 39 1/2 $ 43 3/4
Fiscal 1999
High $ 59 3/4 $ 52 3/8 $ 52 1/8 $ 61 1/2
Low $ 45 9/16 $ 40 1/4 $ 35 1/4 $ 45 5/8
CLASS B STOCK
---------------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
Fiscal 1998
High $ 37 $ 43 $ 54 5/8 $ 57 3/4
Low $ 27 $ 35 1/2 $ 40 3/4 $ 45
Fiscal 1999
High $ 59 3/4 $ 51 1/2 $ 52 $ 62 1/4
Low $ 45 1/2 $ 40 3/4 $ 37 1/4 $ 46 7/8
|
At May 14, 1999, the number of holders of record of Class A Stock and Class B Stock of the Company were 977 and 290, respectively.
The Company's policy is to retain all of its earnings to finance the development and expansion of its business, and the Company has not paid any cash dividends since its initial public offering in 1973. In addition, the Company's current bank credit agreement, the Company's indenture for its $130 million 8 3/4% Senior Subordinated Notes due December 2003, its indenture for its $65 million 8 3/4% Series C Senior Subordinated Notes due December 2003 and its indenture for its $200 million 8 1/2% Senior Subordinated Notes due March 2009 restrict the payment of cash dividends.
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED
FOR THE YEARS ENDED FEBRUARY 28, FEBRUARY 29, AUGUST 31,
----------------------------------------- ------------ ------------------------
1999 1998 1997 1996 1995 1994
(in thousands, except per share data) ----------- ---------- ---------- ---------- ---------- ---------
Gross sales $ 1,984,801 $1,632,357 $1,534,452 $ 738,415 $1,185,074 $ 861,059
Less-excise taxes (487,458) (419,569) (399,439) (203,391) (278,530) (231,475)
----------- ---------- ---------- ---------- ---------- ---------
Net sales 1,497,343 1,212,788 1,135,013 535,024 906,544 629,584
Cost of product sold (1,049,309) (869,038) (812,812) (389,281) (657,883) (458,311)
----------- ---------- ---------- ---------- ---------- ---------
Gross profit 448,034 343,750 322,201 145,743 248,661 171,273
Selling, general and administrative
expenses (299,526) (231,680) (208,991) (112,411) (159,196) (121,388)
Nonrecurring charges (2,616) -- -- (2,404) (2,238) (24,005)
----------- ---------- ---------- ---------- ---------- ---------
Operating income 145,892 112,070 113,210 30,928 87,227 25,880
Interest expense, net (41,462) (32,189) (34,050) (17,298) (24,601) (18,056)
----------- ---------- ---------- ---------- ---------- ---------
Income before taxes and
extraordinary item 104,430 79,881 79,160 13,630 62,626 7,824
Provision for income taxes (42,521) (32,751) (32,977) (6,221) (24,008) (2,640)
----------- ---------- ---------- ---------- ---------- ---------
Income before extraordinary item 61,909 47,130 46,183 7,409 38,618 5,184
Extraordinary item, net of income taxes (11,437) -- -- -- -- --
----------- ---------- ---------- ---------- ---------- ---------
Net income $ 50,472 $ 47,130 $ 46,183 $ 7,409 $ 38,618 $ 5,184
=========== ========== ========== ========== ========== =========
Earnings per common share:
Basic:
Income before extraordinary item $ 3.38 $ 2.52 $ 2.39 $ 0.38 $ 2.06 $ 0.34
Extraordinary item (0.62) -- -- -- -- --
----------- ---------- ---------- ---------- ---------- ---------
Earnings per common share - basic $ 2.76 $ 2.52 $ 2.39 $ 0.38 $ 2.06 $ 0.34
=========== ========== ========== ========== ========== =========
Diluted:
Income before extraordinary item $ 3.30 $ 2.47 $ 2.37 $ 0.37 $ 2.03 $ 0.33
Extraordinary item (0.61) -- -- -- -- --
----------- ---------- ---------- ---------- ---------- ---------
Earnings per common share - diluted $ 2.69 $ 2.47 $ 2.37 $ 0.37 $ 2.03 $ 0.33
=========== ========== ========== ========== ========== =========
Total assets $ 1,793,776 $1,090,555 $1,043,281 $1,045,590 $ 770,004 $ 814,718
=========== ========== ========== ========== ========== =========
Long-term debt $ 831,689 $ 309,218 $ 338,884 $ 327,616 $ 198,859 $ 289,122
=========== ========== ========== ========== ========== =========
|
For the fiscal years ended February 28, 1999 and 1998, see Management's Discussion and Analysis of Financial Condition and Results of Operations under Item 7 of this Annual Report on Form 10-K and Notes to Consolidated Financial Statements as of February 28, 1999, under Item 8 of this Annual Report on Form 10-K. During January 1996, the Board of Directors of the Company changed the Company's fiscal year end from August 31 to the last day of February.
All periods presented have been restated to reflect the Company's change in inventory valuation method from LIFO to FIFO (see Note 1 in the Notes to Consolidated Financial Statements as of February 28, 1999, under Item 8 of this Annual Report on Form 10-K).
The following discussion and analysis summarizes the significant factors affecting (i) consolidated results of operations of the Company for the year ended February 28, 1999 ("Fiscal 1999"), compared to the year ended February 28, 1998 ("Fiscal 1998"), and Fiscal 1998 compared to the year ended February 28, 1997 ("Fiscal 1997"), and (ii) financial liquidity and capital resources for Fiscal 1999. This discussion and analysis should be read in conjunction with the Company's consolidated financial statements and notes thereto included herein.
The Company operates primarily in the beverage alcohol industry in the United States and the United Kingdom. The Company reports its operating results in four segments: Canandaigua Wine (branded 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); and Corporate Operations and Other (primarily corporate related items).
During the fourth quarter of Fiscal 1999, the Company changed its method of determining the cost of inventories from the last-in, first-out ("LIFO") method to the first-in, first-out ("FIFO") method. All previously reported results have been restated to reflect the retroactive application of this accounting change as required by generally accepted accounting principles. For further discussion of the impact of this accounting change, see Note 1 to the Company's consolidated financial statements located in Item 8 of this Annual Report on Form 10-K.
RECENT ACQUISITIONS
On December 1, 1998, the Company acquired control of Matthew Clark and has since acquired all of Matthew Clark's outstanding shares. Prior to the Matthew Clark Acquisition, the Company was principally a producer and supplier of wine and an importer and producer of beer and distilled spirits in the United States. The Matthew Clark Acquisition established the Company as a leading British producer of cider, wine and bottled water and as a leading beverage alcohol wholesaler in the United Kingdom. (See also the discussions regarding Matthew Clark under Item 1 "Business" of this Annual Report on Form 10-K.) The results of operations of Matthew Clark have been included in the consolidated results of operations of the Company since the date of acquisition, December 1, 1998.
On April 9, 1999, in an asset acquisition, the Company acquired several well-known Canadian whisky brands, including Black Velvet, production facilities located in Alberta and Quebec, Canada, case goods and bulk whisky inventories and other related assets from affiliates of Diageo plc. In connection with the transaction, the Company also entered into multi-year agreements with Diageo to provide packaging and distilling services for various brands retained by Diageo. The addition of the Canadian whisky brands from this transaction strengthens the Company's position in the North American distilled spirits category, and enhances the Company's portfolio of brands and category participation.
The Matthew Clark and Black Velvet Acquisitions are significant and the Company expects them to have a material impact on the Company's future results of operations.
RECENT DEVELOPMENTS - PENDING ACQUISITIONS OF SIMI AND FRANCISCAN
On April 1, 1999, the Company entered into a definitive agreement with Moet Hennessy, Inc. to purchase all of the outstanding capital stock of Simi. The Simi Acquisition includes the Simi winery, equipment, vineyards, inventory and worldwide ownership of the Simi brand name.
On April 21, 1999, the Company entered into definitive purchase agreements with Franciscan and its shareholders, and certain parties related to Franciscan to, among other matters, purchase all of the outstanding capital stock of Franciscan and acquire certain vineyards and related vineyard assets. Pursuant to the Franciscan Acquisition, the Company will: (i) acquire the Franciscan Oakville Estate, Estancia and Mt. Veeder brands; (ii) acquire wineries located in Rutherford, Monterey and Mt. Veeder, California; (iii) acquire vineyards in the Napa Valley, Alexander Valley, Monterey and Paso Robles appellations and additionally, will enter into long-term grape contracts with certain parties related to Franciscan to purchase additional grapes grown in the Napa and Alexander Valley appellations; (iv) acquire distribution rights to the Quintessa and Veramonte brands; and (v) acquire equity interests in entities that own the Veramonte brand and the Veramonte winery and certain vineyards located in the Casablanca Valley, Chile.
The agreements for the Simi and Franciscan Acquisitions are subject to certain customary conditions prior to closing, which the Company expects will be satisfied. The Company cannot guarantee, however, that those transactions will be completed upon the agreed upon terms, or at all.
FISCAL 1999 COMPARED TO FISCAL 1998
NET SALES
The following table sets forth the net sales (in thousands of dollars) by operating segment of the Company for Fiscal 1999 and Fiscal 1998.
Fiscal 1999 Compared to Fiscal 1998
-----------------------------------------
Net Sales
-----------------------------------------
%Increase/
1999 1998 Decrease
---------- ---------- ----------
Canandaigua Wine:
Branded $ 598,782 $ 570,807 4.9 %
Other 70,711 71,988 (1.8)%
---------- ----------
Net sales $ 669,493 $ 642,795 4.2 %
---------- ----------
Barton:
Beer $ 478,611 $ 376,607 27.1 %
Spirits 185,938 191,190 (2.7)%
---------- ----------
Net sales $ 664,549 $ 567,797 17.0 %
---------- ----------
Matthew Clark:
Branded $ 64,879 $ -- --
Wholesale 93,881 -- --
---------- ----------
Net sales $ 158,760 $ -- --
---------- ----------
Corporate Operations
and Other $ 4,541 $ 2,196 106.8 %
---------- ----------
Consolidated Net Sales $1,497,343 $1,212,788 23.5 %
========== ==========
|
Net sales for Fiscal 1999 increased to $1,497.3 million from $1,212.8 million for Fiscal 1998, an increase of $284.6 million, or 23.5%.
Net sales for Canandaigua Wine for Fiscal 1999 increased to $669.5 million from $642.8 million for Fiscal 1998, an increase of $26.7 million, or 4.2%. This increase resulted primarily from (i) the introduction of two new products, Arbor Mist and Mystic Cliffs, in Fiscal 1999, (ii) Paul Masson Grande Amber Brandy growth, and (iii) Almaden boxed wine growth. These increases were partially offset by declines in other wine brands and in the Company's grape juice concentrate business.
Net sales for Barton for Fiscal 1999 increased to $664.5 million from $567.8 million for Fiscal 1998, an increase of $96.8 million, or 17.0%. This increase resulted primarily from an increase in sales of beer brands led by Barton's Mexican portfolio. This increase was partially offset by a decrease in revenues from Barton's spirits contract bottling business.
Net sales for Matthew Clark for Fiscal 1999 since the date of acquisition, December 1, 1998, were $158.8 million.
GROSS PROFIT
The Company's gross profit increased to $448.0 million for Fiscal 1999 from $343.8 million for Fiscal 1998, an increase of $104.3 million, or 30.3%. The dollar increase in gross profit resulted primarily from the sales generated by the Matthew Clark Acquisition completed in the fourth quarter of Fiscal 1999, increased beer sales and the combination of higher average selling prices and lower average costs for branded wine sales. As a percent of net sales, gross profit increased to 29.9% for Fiscal 1999 from 28.3% for Fiscal 1998. The increase in the gross profit margin resulted primarily from higher selling prices and lower costs for Canandaigua Wine's branded wine sales, partially offset by a sales mix shift towards lower margin products, particulary due to the growth in Barton's beer sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $299.5 million for Fiscal 1999 from $231.7 million for Fiscal 1998, an increase of $67.8 million, or 29.3%. The dollar increase in selling, general and administrative expenses resulted primarily from expenses related to the Matthew Clark Acquisition, as well as marketing and promotional costs associated with the Company's increased branded sales volume. The year-over-year comparison also benefited from a one time charge for separation costs incurred in Fiscal 1998 related to an organizational change within Barton. Selling, general and administrative expenses as a percent of net sales increased to 20.0% for Fiscal 1999 as compared to 19.1% for Fiscal 1998. The increase in percent of net sales resulted primarily from (i) Canandaigua Wine's investment in brand building and efforts to increase market share and (ii) the Matthew Clark Acquisition, as Matthew Clark's selling, general and administrative expenses as a percent of net sales is typically higher than for the Company's other operating segments.
NONRECURRING CHARGES
The Company incurred nonrecurring charges of $2.6 million in Fiscal 1999 related to the closure of a production facility in the United Kingdom. No such charges were incurred in Fiscal 1998.
OPERATING INCOME
The following table sets forth the operating profit/(loss) (in thousands of dollars) by operating segment of the Company for Fiscal 1999 and Fiscal 1998.
Fiscal 1999 Compared to Fiscal 1998
-----------------------------------
Operating Profit/(Loss)
-----------------------------------
%Increase/
1999 1998 (Decrease)
-------- -------- ----------
Canandaigua Wine $ 46,283 $ 45,440 1.9 %
Barton 102,624 77,010 33.3 %
Matthew Clark 8,998 -- --
Corporate Operations and Other (12,013) (10,380) (15.7)%
-------- --------
Consolidated Operating Profit $145,892 $112,070 30.2 %
======== ========
|
As a result of the above factors, operating income increased to $145.9 million for Fiscal 1999 from $112.1 million for Fiscal 1998, an increase of $33.8 million, or 30.2%.
INTEREST EXPENSE, NET
Net interest expense increased to $41.5 million for Fiscal 1999 from $32.2 million for Fiscal 1998, an increase of $9.3 million or 28.8%. The increase resulted primarily from additional interest expense associated with the borrowings related to the Matthew Clark Acquisition.
EXTRAORDINARY ITEM, NET OF INCOME TAXES
The Company incurred an extraordinary charge of $11.4 million after taxes in Fiscal 1999. This charge resulted from fees related to the replacement of the Company's bank credit facility, including extinguishment of the Term Loan. No extraordinary charges were incurred in Fiscal 1998.
NET INCOME
As a result of the above factors, net income increased to $50.5 million for Fiscal 1999 from $47.1 million for Fiscal 1998, an increase of $3.3 million, or 7.1%.
For financial analysis purposes only, the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") for Fiscal 1999 were $184.5 million, an increase of $39.3 million over EBITDA of $145.2 million for Fiscal 1998. 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.
FISCAL 1998 COMPARED TO FISCAL 1997
NET SALES
The following table sets forth the net sales (in thousands of dollars) by operating segment of the Company for Fiscal 1998 and Fiscal 1997.
Fiscal 1998 Compared to Fiscal 1997
---------------------------------------
Net Sales
---------------------------------------
%Increase/
1998 1997 (Decrease)
---------- ---------- ----------
Canandaigua Wine:
Branded $ 570,807 $ 537,745 6.1 %
Other 71,988 112,546 (36.0)%
---------- ----------
Net sales $ 642,795 $ 650,291 (1.2)%
---------- ----------
Barton:
Beer $ 376,607 $ 298,925 26.0 %
Spirits 191,190 185,289 3.2 %
---------- ----------
Net sales $ 567,797 $ 484,214 17.3 %
---------- ----------
Corporate Operations and Other $ 2,196 $ 508 332.3 %
---------- ----------
Consolidated Net Sales $1,212,788 $1,135,013 6.9%
========== ==========
|
Net sales for Fiscal 1998 increased to $1,212.8 million from $1,135.0 million for Fiscal 1997, an increase of $77.8 million, or 6.9%.
Net sales for Canandaigua Wine for Fiscal 1998 decreased to $642.8 million from $650.3 million for Fiscal 1997, a decrease of $7.5 million, or 1.2%. This decrease resulted primarily from lower sales of grape juice concentrate, bulk wine and other branded wine products, partially offset by an increase in table wine sales and brandy sales.
Net sales for Barton for Fiscal 1998 increased to $567.8 million from $484.2 million for Fiscal 1997, an increase of $83.6 million, or 17.3%. This increase resulted primarily from additional beer sales, largely Mexican beer, and additional spirits sales.
GROSS PROFIT
The Company's gross profit increased to $343.8 million for Fiscal 1998 from $322.2 million for Fiscal 1997, an increase of $21.5 million, or 6.7%. The dollar increase in gross profit resulted primarily from increased beer sales, higher average selling prices and cost structure improvements related to
branded wine sales, higher average selling prices in excess of cost increases related to grape juice concentrate sales and higher average selling prices and increased volume related to branded spirits sales. These increases were partially offset by lower sales volume of grape juice concentrate and bulk wine. As a percent of net sales, gross profit decreased slightly to 28.3% for Fiscal 1998 from 28.4% for Fiscal 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $231.7 million for Fiscal 1998 from $209.0 million for Fiscal 1997, an increase of $22.7 million, or 10.9%. The dollar increase in selling, general and administrative expenses resulted principally from marketing and selling costs associated with the Company's branded sales volume, and a one-time charge for separation costs related to an organizational change within the Barton segment. Selling, general and administrative expenses as a percent of net sales increased to 19.1% for Fiscal 1998 as compared to 18.4% for Fiscal 1997. The increase in percent of net sales resulted from the one-time charge for separation costs and from a change in the sales mix in the Canandaigua Wine segment towards branded products, which have a higher percent of marketing and selling costs relative to sales.
OPERATING INCOME
The following table sets forth the operating profit/(loss) (in thousands of dollars) by operating segment of the Company for Fiscal 1998 and Fiscal 1997.
Fiscal 1998 Compared to Fiscal 1997
-------------------------------------
Operating Profit/(Loss)
-------------------------------------
%Increase/
1998 1997 (Decrease)
-------- -------- -----------
Canandaigua Wine $ 45,440 $ 51,525 (11.8)%
Barton 77,010 73,073 5.4 %
Corporate Operations and Other (10,380) (11,388) 8.9 %
-------- --------
Consolidated Operating Profit $112,070 $113,210 (1.0)%
======== ========
|
As a result of the above factors, operating income decreased to $112.1 million for Fiscal 1998 from $113.2 million for Fiscal 1997, a decrease of $1.1 million, or 1.0%.
INTEREST EXPENSE, NET
Net interest expense decreased to $32.2 million for Fiscal 1998 from $34.1 million for Fiscal 1997, a decrease of $1.9 million or 5.5%. The decrease was primarily due to a decrease in the Company's average borrowings which was partially offset by an increase in the average interest rate.
PROVISION FOR INCOME TAXES
The Company's effective tax rate for Fiscal 1998 decreased to 41.0% from 41.7% for Fiscal 1997 as Fiscal 1997 reflected a higher effective tax rate in California caused by statutory limitations on the Company's ability to utilize certain deductions.
NET INCOME
As a result of the above factors, net income increased to $47.1 million for Fiscal 1998 from $46.2 million for Fiscal 1997, an increase of $0.9 million, or 2.1%.
For financial analysis purposes only, the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") for Fiscal 1998 were $145.2 million, an increase of $0.2 million over EBITDA of $145.0 million for Fiscal 1997. 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.
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.
FISCAL 1999 CASH FLOWS
OPERATING ACTIVITIES
Net cash provided by operating activities for Fiscal 1999 was $107.3 million, which resulted from $112.3 million in net income adjusted for noncash items, less $5.0 million representing the net change in the Company's operating assets and liabilities. The net change in operating assets and liabilities resulted primarily from post acquisition activity attributable to the Matthew Clark Acquisition resulting in a decrease in other accrued expenses and liabilities and accounts payable, partially offset by a decrease in accounts receivable.
INVESTING ACTIVITIES AND FINANCING ACTIVITIES
Net cash used in investing activities for Fiscal 1999 was $382.4 million, which resulted primarily from net cash paid of $332.2 million for the Matthew Clark Acquisition and $49.9 million of capital expenditures, including $7.0 million for vineyards.
Net cash provided by financing activities for Fiscal 1999 was $301.0 million, which resulted primarily from proceeds of $635.1 million from issuance of long-term debt, including $358.1 million of long-term debt incurred to acquire Matthew Clark. This amount was partially offset by principal
payments of $264.1 million of long-term debt, repurchases of $44.9 million of the Company's Class A Common Stock, payment of $17.1 million of long-term debt issuance costs and repayment of $13.9 million of net revolving loan borrowings.
As of February 28, 1999, under the 1998 Credit Agreement, the Company had outstanding term loans of $625.6 million bearing interest at 7.6%, $83.1 million of revolving loans bearing interest at 7.3%, undrawn revolving letters of credit of $4.0 million, and $212.9 million in revolving loans available to be drawn.
Total debt outstanding as of February 28, 1999, amounted to $925.4 million, an increase of $500.2 million from February 28, 1998. The ratio of total debt to total capitalization increased to 68.0% as of February 28, 1999, from 50.0% as of February 28, 1998.
During June 1998, the Company's Board of Directors authorized the repurchase of up to $100.0 million of its Class A Common Stock and Class B Common Stock. The repurchase of shares of common stock will be accomplished, from time to time, in management's discretion and depending upon market conditions, through open market or privately negotiated transactions. The Company may finance such repurchases through cash generated from operations or through the bank credit agreement. The repurchased shares will become treasury shares. As of May 28, 1999, the Company had purchased 1,018,836 shares of Class A Common Stock at an aggregate cost of $44.9 million, or at an average cost of $44.05 per share.
THE COMPANY'S CREDIT AGREEMENT
On December 14, 1998, the Company, its principal operating subsidiaries (other than Matthew Clark and its subsidiaries), and a syndicate of banks, for which The Chase Manhattan Bank acts as administrative agent, entered into a First Amended and Restated Credit Agreement (the "1998 Credit Agreement"), effective as of November 2, 1998, which amends and restates in its entirety the credit agreement entered into between the Company and The Chase Manhattan Bank on November 2, 1998. The 1998 Credit Agreement includes both US dollar and British pound sterling commitments of the syndicate banks of up to, in the aggregate, the equivalent of $1.0 billion (subject to increase as therein provided to $1.2 billion) with the proceeds available for repayment of all outstanding principal and accrued interest on all loans under the Company's bank credit agreement dated as of December 19, 1997, payment of the purchase price for the Matthew Clark shares, repayment of Matthew Clark's credit facilities, funding of permitted acquisitions, payment of transaction expenses and ongoing working capital needs of the Company.
The 1998 Credit Agreement provides for a $350.0 million Tranche I Term Loan facility due in December 2004, a $200.0 million Tranche II Term Loan facility due in June 2000, a $150.0 million Tranche III Term Loan facility due in December 2005, and a $300.0 million Revolving Credit facility (including letters of credit up to a maximum of $20.0 million) which expires in December 2004. Portions of the Tranche I Term Loan facility and the Revolving Credit facility are available for borrowing in British pound sterling. A brief description of the 1998 Credit Agreement is contained in Note 6 to the Company's consolidated financial statements located in Item 8 of this Annual Report on Form 10-K.
The Company expects to finance the purchase price for the Simi and Franciscan Acquisitions with borrowings under an amendment to the 1998 Credit Agreement.
SENIOR SUBORDINATED NOTES
As of February 28, 1999, the Company had outstanding $195.0 million aggregate principal amount of 8 3/4% Senior Subordinated Notes due December 2003, being the $130.0 million aggregate principal amount of 8 3/4% Senior Subordinated Notes due December 2003 issued in December 1993 (the "Original Notes") and the $65.0 million aggregate principal amount of 8 3/4% Series C Senior Subordinated Notes due December 2003 issued in February 1997 (the "Series C Notes"). The Original Notes and the Series C Notes are currently redeemable, in whole or in part, at the option of the Company. A brief description of the Original Notes and the Series C Notes is contained in Note 6 to the Company's consolidated financial statements located in Item 8 of this Annual Report on Form 10-K.
On March 4, 1999, the Company issued $200.0 million aggregate principal amount of 8 1/2% Senior Subordinated Notes due March 2009 (the "$200 Million Notes"). The Company used the proceeds from the sale of the $200 Million Notes to fund the Black Velvet Acquisition ($185.5 million) and to pay the fees and expenses related thereto with the remainder of the net proceeds to be used for general corporate purposes or to fund future acquisitions. The $200 Million 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 $200 Million Notes using the proceeds of certain equity offerings completed before March 1, 2002. A brief description of the $200 Million Notes is contained in Note 17 to the Company's consolidated financial statements located in Item 8 of this Annual Report on Form 10-K.
CAPITAL EXPENDITURES
During Fiscal 1999, the Company incurred $49.9 million for capital expenditures, including $7.0 million related to vineyards. The Company plans to spend approximately $49.6 million for capital expenditures, exclusive of vineyards, in fiscal 2000. In addition, the Company continues to consider the purchase, lease and development of vineyards. See "Business - Sources and Availability of Raw Materials" under Item 1 of this Annual Report on Form 10-K. The Company may incur additional expenditures for vineyards if opportunities become available. Management reviews the capital expenditure program periodically and modifies it as required to meet current business needs.
COMMITMENTS
The Company has agreements with suppliers to purchase various spirits and blends of which certain agreements are denominated in British pound sterling. The future obligations under these agreements, based upon exchange rates at February 28, 1999, aggregate approximately $17.2 million for contracts expiring through December 2002.
At February 28, 1999, the Company had open currency forward contracts to purchase various foreign currencies of $12.4 million which mature within twelve months. The Company's use of such contracts is limited to the management of currency rate risks related to purchases denominated in a foreign currency. The Company's strategy is to enter only into currency exchange contracts that are matched to specific purchases and not to enter into any speculative contracts.
EFFECTS OF INFLATION AND CHANGING PRICES
The Company's results of operations and financial condition have not been significantly affected by inflation and changing prices. The Company has been able, subject to normal competitive conditions, to pass along rising costs through increased selling prices.
ACCOUNTING PRONOUNCEMENT
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. The Company is required to adopt SFAS No. 133 on a prospective basis for interim periods and fiscal years beginning March 1, 2000. The Company believes the effect of adoption on its financial statements will not be material based on the Company's current risk management strategies.
YEAR 2000 ISSUE
For purposes of the following Year 2000 discussion, the information presented includes the effect of the Black Velvet Acquisition. The Company has in place detailed programs to address Year 2000 readiness in its internal systems and with its key customers and suppliers. The Year 2000 issue is the result of computer logic that was written using two digits rather than four to define the applicable year. Any computer logic that processes date-sensitive information may recognize the date using "00" as the year 1900 rather than the year 2000, which could result in miscalculations or system failures.
Pursuant to the Company's readiness programs, all major categories of information technology systems and non-information technology systems (i.e., equipment with embedded microprocessors) in use by the Company, including manufacturing, sales, financial and human resources, have been inventoried and assessed. In addition, plans have been developed for the required systems modifications or replacements. With respect to its information technology systems, the Company has completed the entire assessment phase and approximately 75% of the remediation phase. With respect to its non-information technology systems, the Company has completed the entire assessment phase and approximately 64% of the remediation phase. Selected areas, both internal and external, are being tested to assure the integrity of the Company's remediation programs. The testing is expected to be completed by September 1999. The Company plans to have all internal mission-critical information technology and non-information technology systems Year 2000 compliant by September 1999.
The Company is also communicating with its major customers, suppliers and financial institutions to assess the potential impact on the Company's operations if those third parties fail to become Year 2000 compliant in a timely manner. While this process is not yet complete, based upon responses to date, it appears that many of those customers and suppliers have only indicated that they have in place Year 2000 readiness programs, without specifically confirming that they will be Year 2000 compliant in a timely manner. Risk assessment, readiness evaluation, action plans and contingency plans
related to the Company's significant customers and suppliers are expected to be completed by September 1999. The Company's key financial institutions have been surveyed and it is the Company's understanding that they are or will be Year 2000 compliant on or before December 31, 1999.
The costs incurred to date related to its Year 2000 activities have not been material to the Company, and, based upon current estimates, the Company does not believe that the total cost of its Year 2000 readiness programs will have a material adverse impact on the Company's financial condition, results of operations or cash flows.
The Company's readiness programs also include the development of contingency plans to protect its business and operations from Year 2000-related interruptions. These plans should be complete by September 1999 and, by way of examples, will include back-up procedures, identification of alternate suppliers, where possible, and increases in inventory levels. Based upon the Company's current assessment of its non-information technology systems, the Company does not believe it necessary to develop an extensive contingency plan for those systems. There can be no assurances, however, that any of the Company's contingency plans will be sufficient to handle all problems or issues which may arise.
The Company believes that it is taking reasonable steps to identify and address those matters that could cause serious interruptions in its business and operations due to Year 2000 issues. However, delays in the implementation of new systems, a failure to fully identify all Year 2000 dependencies in the Company's systems and in the systems of its suppliers, customers and financial institutions, a failure of such third parties to adequately address their respective Year 2000 issues, or a failure of a contingency plan could have a material adverse effect on the Company's business, financial condition, results of operations or cash flows. For example, the Company would experience a material adverse impact on its business if significant suppliers of beer, glass or other raw materials, or utility systems fail to timely provide the Company with necessary inventories or services due to Year 2000 systems failures.
The statements set forth herein concerning Year 2000 issues which are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. In particular, the costs associated with the Company's Year 2000 programs and the time-frame in which the Company plans to complete Year 2000 modifications are based upon management's best estimates. These estimates were derived from internal assessments and assumptions of future events. These estimates may be adversely affected by the continued availability of personnel and system resources, and by the failure of significant third parties to properly address Year 2000 issues. Therefore, there can be no guarantee that any estimates, or other forward-looking statements will be achieved, and actual results could differ significantly from those contemplated.
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.
The Company is exposed to market risk associated with changes in interest rates and foreign currency exchange rates. To manage the volatility relating to these risks, the Company periodically enters into derivative transactions including foreign currency exchange contracts and interest rate swap agreements. The Company has limited involvement with derivative financial instruments and does not use them for trading purposes. The Company uses derivative instruments solely to reduce the financial impact of these risks.
The fair value of long-term debt is subject to interest rate risk. Generally, the fair value of long-term debt will increase as interest rates fall and decrease as interest rates rise. The estimated fair value of the Company's total long-term debt, including current maturities, was approximately $844.6 million at February 28, 1999. A hypothetical 1% increase from prevailing interest rates at February 28, 1999, would result in a decrease in fair value of long-term debt by approximately $7.7 million. Also, a hypothetical 1% increase from prevailing interest rates at February 28, 1999, would result in an approximate increase in cash required for interest on variable interest rate debt during the next five fiscal years as follows:
2000 $ 6.2 million 2001 $ 5.1 million 2002 $ 3.8 million 2003 $ 3.4 million 2004 $ 2.9 million |
The Company periodically enters into interest rate swap agreements to reduce its exposure to interest rate changes relative to its long-term debt. At February 28, 1999, the Company had no interest rate swap agreements outstanding.
The Company has exposure to foreign currency risk as a result of having international subsidiaries in the United Kingdom. The Company uses local currency borrowings to hedge its earnings and cash flow exposure to adverse changes in foreign currency exchange rates. At February 28, 1999, management believes that a hypothetical 10% adverse change in foreign currency exchange rates would not result in a material adverse impact on either earnings or cash flow. The Company also has exposure to foreign currency risk as a result of contracts to purchase inventory items that are denominated in various foreign currencies. In order to reduce the risk of foreign currency exchange rate fluctuations resulting from these contracts, the Company periodically enters into foreign exchange hedging agreements. At February 28, 1999, the potential loss on outstanding foreign exchange hedging agreements from a hypothetical 10% adverse change in foreign currency exchange rates would not be material.
Report of Independent Public Accountants............................. 28
Consolidated Balance Sheets - February 28, 1999 and 1998............. 29
Consolidated Statements of Income for the years ended
February 28, 1999, 1998 and 1997................................ 30
Consolidated Statements of Changes in Stockholders' Equity
for the years ended February 28, 1999, 1998 and 1997............ 31
Consolidated Statements of Cash Flows for the years ended
February 28, 1999, 1998 and 1997................................ 32
Notes to Consolidated Financial Statements........................... 33
Selected Financial Data.............................................. 14
Selected Quarterly Financial Information (unaudited)................. 52
|
Schedules I through V are not submitted because they are not applicable or not required under the rules of Regulation S-X.
Individual financial statements of the Registrant have been omitted because the Registrant is primarily an operating company and no subsidiary included in the consolidated financial statements has minority equity interest and/or noncurrent indebtedness, not guaranteed by the Registrant, in excess of 5% of total consolidated assets.
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Canandaigua Brands, Inc.:
We have audited the accompanying consolidated balance sheets of Canandaigua Brands, Inc. (a Delaware corporation) and subsidiaries as of February 28, 1999 and 1998, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended February 28, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Canandaigua Brands, Inc. and subsidiaries as of February 28, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended February 28, 1999 in conformity with generally accepted accounting principles.
As explained in Note 1 to the financial statements, the Company has given retroactive effect to the change in accounting for inventories from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method.
/s/ Arthur Andersen LLP
Rochester, New York
April 22, 1999
|
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
February 28,
---------------------------
1999 1998
----------- -----------
ASSETS
------
CURRENT ASSETS:
Cash and cash investments $ 27,645 $ 1,232
Accounts receivable, net 260,433 142,615
Inventories, net 508,571 411,424
Prepaid expenses and other current assets 59,090 26,463
----------- -----------
Total current assets 855,739 581,734
PROPERTY, PLANT AND EQUIPMENT, net 428,803 244,035
OTHER ASSETS 509,234 264,786
----------- -----------
Total assets $ 1,793,776 $ 1,090,555
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 87,728 $ 91,900
Current maturities of long-term debt 6,005 24,118
Accounts payable 122,746 52,055
Accrued Federal and state excise taxes 49,342 17,498
Other accrued expenses and liabilities 149,451 104,896
----------- -----------
Total current liabilities 415,272 290,467
----------- -----------
LONG-TERM DEBT, less current maturities 831,689 309,218
----------- -----------
DEFERRED INCOME TAXES 88,179 59,237
----------- -----------
OTHER LIABILITIES 23,364 6,206
----------- -----------
|
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value-
Authorized, 1,000,000 shares;
Issued, none in 1999 and 1998 -- --
Class A Common Stock, $.01 par value-
Authorized, 120,000,000 shares;
Issued, 17,915,359 shares in 1999
and 17,604,784 shares in 1998 179 176
Class B Convertible Common Stock,
$.01 par value-
Authorized, 20,000,000 shares;
Issued, 3,849,173 shares in 1999 and
3,956,183 shares in 1998 39 40
Additional paid-in capital 239,912 231,687
Retained earnings 281,081 230,609
Accumulated other comprehensive income-
Cumulative translation adjustment (4,173) --
----------- -----------
517,038 462,512
----------- -----------
Less-Treasury stock-
Class A Common Stock, 3,168,306 shares in
1999 and 2,199,320 shares in 1998,
at cost (79,559) (34,878)
Class B Convertible Common Stock, 625,725
shares in 1999 and 1998, at cost (2,207) (2,207)
----------- -----------
(81,766) (37,085)
----------- -----------
Total stockholders' equity 435,272 425,427
----------- -----------
Total liabilities and stockholders' equity $ 1,793,776 $ 1,090,555
=========== ===========
|
The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the Years Ended February 28,
---------------------------------------------
1999 1998 1997
----------- ----------- -----------
GROSS SALES $ 1,984,801 $ 1,632,357 $ 1,534,452
Less - Excise taxes (487,458) (419,569) (399,439)
----------- ----------- -----------
Net sales 1,497,343 1,212,788 1,135,013
COST OF PRODUCT SOLD (1,049,309) (869,038) (812,812)
----------- ----------- -----------
Gross profit 448,034 343,750 322,201
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (299,526) (231,680) (208,991)
NONRECURRING CHARGES (2,616) -- --
----------- ----------- -----------
Operating income 145,892 112,070 113,210
INTEREST EXPENSE, net (41,462) (32,189) (34,050)
----------- ----------- -----------
Income before taxes and
extraordinary item 104,430 79,881 79,160
PROVISION FOR INCOME TAXES (42,521) (32,751) (32,977)
----------- ----------- -----------
Income before extraordinary item 61,909 47,130 46,183
EXTRAORDINARY ITEM, NET OF INCOME TAXES (11,437) -- --
----------- ----------- -----------
NET INCOME $ 50,472 $ 47,130 $ 46,183
=========== =========== ===========
SHARE DATA:
Earnings per common share:
Basic:
Income before extraordinary item $ 3.38 $ 2.52 $ 2.39
Extraordinary item (0.62) -- --
----------- ----------- -----------
Earnings per common share - basic $ 2.76 $ 2.52 $ 2.39
=========== =========== ===========
Diluted:
Income before extraordinary item $ 3.30 $ 2.47 $ 2.37
Extraordinary item (0.61) -- --
----------- ----------- -----------
Earnings per common share - diluted $ 2.69 $ 2.47 $ 2.37
=========== =========== ===========
Weighted average common shares
outstanding:
Basic 18,293 18,672 19,333
Diluted 18,754 19,105 19,521
The accompanying notes to consolidated financial statements
are an integral part of these statements.
|
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except share data)
Accumulated
Common Stock Additional Other
---------------- Paid-In Retained Comprehensive Treasury Restricted
Class A Class B Capital Earnings Income Stock Stock Total
------- ------- ---------- -------- ------------- --------- ---------- --------
BALANCE, February 29, 1996 $174 $40 $221,133 $137,296 $ - $ (7,441) $ - $351,202
Net income and comprehensive income
for fiscal 1997 - - - 46,183 - - - 46,183
Conversion of 35,500 Class B Convertible
Common shares to Class A Common shares - - - - - - - -
Exercise of 3,750 Class A stock options - - 17 - - - - 17
Employee stock purchases of 37,768
treasury shares - - 884 - - 114 - 998
Repurchase of 787,450 Class A Common
shares - - - - - (20,765) - (20,765)
Acceleration of 18,500 Class A stock
options - - 248 - - - - 248
Tax benefit on Class A stock options
exercised - - 27 - - - - 27
Tax benefit on disposition of employee
stock purchases - - 27 - - - - 27
---- --- -------- -------- ------- -------- ------ --------
BALANCE, February 28, 1997 174 40 222,336 183,479 - (28,092) - 377,937
Net income and comprehensive income for
fiscal 1998 - - - 47,130 - - - 47,130
Exercise of 117,452 Class A stock options 2 - 1,799 - - - - 1,801
Employee stock purchases of 78,248
treasury shares - - 1,016 - - 240 - 1,256
Repurchase of 362,100 Class A Common
shares - - - - - (9,233) - (9,233)
Acceleration of 142,437 Class A stock
options - - 3,625 - - - - 3,625
Issuance of 25,000 restricted Class A
Common shares - - 1,144 - - - (1,144) -
Amortization of unearned restricted
stock compensation - - - - - - 267 267
Accelerated amortization of unearned
restricted stock compensation - - 200 - - - 877 1,077
Tax benefit on Class A stock options
exercised - - 1,382 - - - - 1,382
Tax benefit on disposition of employee
stock purchases - - 185 - - - - 185
---- --- -------- -------- ------- -------- ------ --------
BALANCE, February 28, 1998 176 40 231,687 230,609 - (37,085) - 425,427
Comprehensive income:
Net income for fiscal 1999 - - - 50,472 - - - 50,472
Cumulative translation adjustment - - - - (4,173) - - (4,173)
--------
Comprehensive income 46,299
--------
Conversion of 107,010 Class B Convertible
Common shares to Class A Common shares 1 (1) - - - - - -
Exercise of 203,565 Class A stock options 2 - 4,085 - - - - 4,087
Employee stock purchases of 49,850
treasury shares - - 1,643 - - 197 - 1,840
Repurchase of 1,018,836 Class A Common
shares - - - - - (44,878) - (44,878)
Acceleration of 1,250 Class A stock
options - - 43 - - - - 43
Tax benefit on Class A stock options
exercised - - 2,320 - - - - 2,320
Tax benefit on disposition of employee
stock purchases - - 134 - - - - 134
---- --- -------- -------- ------- -------- ------- --------
BALANCE, February 28, 1999 $179 $39 $239,912 $281,081 $(4,173) $(81,766) $ - $435,272
==== === ======== ======== ======= ======== ======= ========
The accompanying notes to consolidated financial statements are an integral part of these statements.
|
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Years Ended February 28,
--------------------------------------
1999 1998 1997
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 50,472 $ 47,130 $ 46,183
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation of property, plant and equipment 27,282 23,847 22,359
Extraordinary item, net of income taxes 11,437 - -
Amortization of intangible assets 11,308 9,314 9,480
Deferred tax provision 10,053 4,275 18,630
Loss (gain) on sale of assets 1,193 (3,001) (3,371)
Amortization of discount on long-term debt 388 352 112
Stock-based compensation expense 144 1,747 275
Change in operating assets and liabilities,
net of effects from purchase of business:
Accounts receivable, net 44,081 749 3,523
Inventories, net 1,190 (60,659) (15,137)
Prepaid expenses and other current assets (14,115) (4,354) 3,271
Accounts payable (17,560) (3,288) (431)
Accrued Federal and state excise taxes 17,124 440 (2,641)
Other accrued expenses and liabilities (31,807) 14,655 24,617
Other assets and liabilities, net (3,945) (2,452) 898
---------- ---------- ----------
Total adjustments 56,773 (18,375) 61,585
---------- ---------- ----------
Net cash provided by operating activities 107,245 28,755 107,768
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of business, net of cash acquired (332,216) - -
Purchases of property, plant and equipment (49,857) (31,203) (31,649)
Purchase of joint venture minority interest (716) - -
Proceeds from sale of assets 431 12,552 9,174
Payment of accrued earn-out amounts - - (13,848)
---------- ---------- ----------
Net cash used in investing activities (382,358) (18,651) (36,323)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt, net
of discount 635,090 140,000 61,668
Exercise of employee stock options 4,083 1,776 17
Proceeds from employee stock purchases 1,840 1,256 998
Principal payments of long-term debt (264,101) (186,367) (50,842)
Purchases of treasury stock (44,878) (9,233) (20,765)
Payment of issuance costs of long-term debt (17,109) (1,214) (1,550)
Net (repayment of) proceeds from notes payable (13,907) 34,900 (54,300)
---------- ---------- ----------
Net cash provided by (used in) financing
activities 301,018 (18,882) (64,774)
---------- ---------- ----------
Effect of exchange rate changes on cash and
cash investments 508 - -
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH INVESTMENTS 26,413 (8,778) 6,671
CASH AND CASH INVESTMENTS, beginning of year 1,232 10,010 3,339
---------- ---------- ----------
CASH AND CASH INVESTMENTS, end of year $ 27,645 $ 1,232 $ 10,010
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 36,257 $ 33,394 $ 32,615
========== ========== ==========
Income taxes $ 40,714 $ 32,164 $ 4,411
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Fair value of assets acquired, including
cash acquired $ 740,880 $ - $ -
Liabilities assumed (382,759) - -
---------- ---------- ----------
Cash paid 358,121 - -
Less - cash acquired (25,905) - -
---------- ---------- ----------
Net cash paid for purchase of business $ 332,216 $ - $ -
========== ========== ==========
Goodwill reduction on settlement of disputed
final closing net current asset statement
for Vintners Acquisition $ - $ - $ 5,894
========== ========== ==========
The accompanying notes to consolidated financial statements are an integral part of these statements.
|
CANANDAIGUA BRANDS, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS -
Canandaigua Brands, Inc., and its subsidiaries (the Company) operate primarily
in the beverage alcohol industry. The Company is principally a producer and
supplier of wine and an importer and producer of beer and distilled spirits in
the United States. It maintains a portfolio of over 170 national and regional
brands of beverage alcohol which are distributed by over 1,000 wholesalers
throughout the United States and selected international markets. The Company is
also a leading United Kingdom-based producer of its own brands of cider, wine
and bottled water and a leading independent beverage supplier to the on-premise
trade, distributing its own branded products and those of other companies to
more than 16,000 on-premise establishments in the U.K.
PRINCIPLES OF CONSOLIDATION -
The consolidated financial statements of the Company include the accounts of
Canandaigua Brands, Inc., and all of its subsidiaries. All intercompany accounts
and transactions have been eliminated.
MANAGEMENT'S USE OF ESTIMATES AND JUDGMENT -
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION -
The "functional currency" for translating the accounts of the Company's
operations outside the U.S. is the local currency. The translation from the
applicable foreign currencies to U.S. dollars is performed for balance sheet
accounts using current exchange rates in effect at the balance sheet date and
for revenue and expense accounts using a weighted average exchange rate during
the period. The resulting translation adjustments are recorded as a component of
accumulated other comprehensive income. Gains or losses resulting from foreign
currency transactions are included in selling, general and administrative
expenses.
CASH INVESTMENTS -
Cash investments consist of highly liquid investments with an original maturity
when purchased of three months or less and are stated at cost, which
approximates market value. The amounts at February 28, 1999 and 1998, are not
significant.
FAIR VALUE OF FINANCIAL INSTRUMENTS -
To meet the reporting requirements of Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments," the
Company calculates the fair value of financial instruments using quoted market
prices whenever available. When quoted market prices are not available, the
Company uses standard pricing models for various types of financial instruments
(such as forwards, options, swaps, etc.) which take into account the present
value of estimated future cash flows. The methods and assumptions used to
estimate the fair value of financial instruments are summarized as follows:
ACCOUNTS RECEIVABLE: The carrying amount approximates fair value due to the
short maturity of these instruments, the creditworthiness of the customers and
the large number of customers constituting the accounts receivable balance.
NOTES PAYABLE: These instruments are variable interest rate bearing notes
for which the carrying value approximates the fair value.
LONG-TERM DEBT: The carrying value of the debt facilities with short-term
variable interest rates approximates the fair value. The fair value of the fixed
rate debt was estimated by discounting cash flows using interest rates currently
available for debt with similar terms and maturities.
FOREIGN EXCHANGE HEDGING AGREEMENTS: The fair value of currency forward
contracts is estimated based on quoted market prices.
LETTERS OF CREDIT: At February 28, 1999 and 1998, the Company had letters
of credit outstanding totaling approximately $4.0 million and $3.9 million,
respectively, which guarantee payment for certain obligations. The Company
recognizes expense on these obligations as incurred and no material losses are
anticipated.
The carrying amount and estimated fair value of the Company's financial instruments are summarized as follows as of February 28:
1999 1998
--------------------------------- --------------------------------
Notional Carrying Fair Notional Carrying Fair
Amount Amount Value Amount Amount Value
(in thousands) -------- -------- --------- -------- -------- --------
Liabilities:
------------
Notes payable $ -- $ 87,728 $ 87,728 $ -- $ 91,900 $ 91,900
Long-term debt, including
current portion $ -- $837,694 $844,568 $ -- $333,336 $340,934
Derivative Instruments:
-----------------------
Foreign exchange hedging
agreements:
Currency forward contracts $12,444 $ -- $ (1,732) $ -- $ -- $ --
|
INTEREST RATE FUTURES AND CURRENCY FORWARD CONTRACTS -
From time to time, the Company enters into interest rate futures and a variety
of currency forward contracts in the management of interest rate risk and
foreign currency transaction exposure. The Company has limited involvement with
derivative instruments and does not use them for trading purposes. The Company
uses derivatives solely to reduce the financial impact of the related risks.
Unrealized gains and losses on interest rate futures are deferred and recognized
as a component of interest expense over the borrowing period. Unrealized gains
and losses on currency forward contracts are deferred and recognized as a
component of the related transactions in the accompanying financial statements.
Discounts or premiums on currency forward contracts are recognized over the life
of the contract. Cash flows from derivative instruments are classified in the
same category as the item being hedged. The Company's open currency forward
contracts at February 28, 1999, hedge purchase commitments denominated in
foreign currencies and mature within twelve months.
INVENTORIES -
During the fourth quarter of fiscal 1999, the Company changed its method of
determining the cost of inventories from the last-in, first-out (LIFO) method to
the first-in, first-out (FIFO) method. The primary reasons for the change in
accounting method are: management's belief that the FIFO method of accounting
better matches revenues and expenses of the Company, and therefore, will result
in a better measurement of operating results; and the FIFO method of accounting
will provide improved financial comparability to other publicly-traded companies
in the industry. All previously reported results have been restated to reflect
the retroactive application of this accounting change as required by generally
accepted accounting principles. The effect of this change was to increase
current assets, current liabilities and retained earnings by $17.4 million, $7.1
million, and $10.3 million, respectively, as of February 28, 1998. The effect of
the change increased net income for the year ended February 28, 1998, by $2.9
million, or $0.15 per share on a diluted basis, and increased net income for the
year ended February 28, 1997, by $18.5 million, or $0.95 per share on a diluted
basis. The effect of the change on the first quarter of fiscal 1999 was to
decrease net income $0.5 million, or $0.02 per share on a diluted basis. The
effect of the change on the second and third quarters of fiscal 1999 was to
increase net income $1.0 million, or $0.05 per share on a diluted basis, and
$0.5 million, or $0.03 per share on a diluted basis, respectively.
Elements of cost include materials, labor and overhead and consist of the following as of February 28:
1999 1998
-------- --------
(in thousands)
Raw materials and supplies $ 32,388 $ 14,439
Wine and distilled spirits in process 344,175 304,037
Finished case goods 132,008 92,948
-------- --------
$508,571 $411,424
======== ========
|
A substantial portion of barreled whiskey and brandy will not be sold within one year because of the duration of the aging process. All barreled whiskey and brandy are classified as in-process inventories and are included in current assets, in accordance with industry practice. Bulk wine inventories are also included as work in process within current assets, in accordance with the general practices of the wine industry, although a portion of such inventories may be aged for periods greater than one year. Warehousing, insurance, ad valorem taxes and other carrying charges applicable to barreled whiskey and brandy held for aging are included in inventory costs.
PROPERTY, PLANT AND EQUIPMENT -
Property, plant and equipment is stated at cost. Major additions and betterments
are charged to property accounts, while maintenance and repairs are charged to
operations as incurred. The cost of properties sold or otherwise disposed of and
the related accumulated depreciation are eliminated from the accounts at the
time of disposal and resulting gains and losses are included as a component of
operating income.
DEPRECIATION -
Depreciation is computed primarily using the straight-line method over the
following estimated useful lives:
Depreciable Life in Years
-------------------------
Buildings and improvements 10 to 33 1/3
Machinery and equipment 3 to 15
Motor vehicles 3 to 7
|
Amortization of assets capitalized under capital leases is included with depreciation expense. Amortization is calculated using the straight-line method over the shorter of the estimated useful life of the asset or the lease term.
OTHER ASSETS -
Other assets, which consist of goodwill, distribution rights, trademarks, agency
license agreements, deferred financing costs, prepaid pension benefits, cash
surrender value of officers' life insurance and other amounts, are stated at
cost, net of accumulated amortization. Amortization is calculated on a
straight-line or effective interest basis over the following estimated useful
lives:
Useful Life in Years
--------------------
Goodwill 40
Distribution rights 40
Trademarks 40
Agency license agreements 16 to 40
Deferred financing costs 5 to 10
|
At February 28, 1999, the weighted average remaining useful life of these assets is approximately 38 years. The face value of the officers' life insurance policies totaled $2.9 million at both February 28, 1999 and 1998.
LONG-LIVED ASSETS AND INTANGIBLES -
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," the Company reviews its long-lived assets and certain
identifiable intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable on an undiscounted cash flow basis. The statement also requires that
long-lived assets and certain identifiable intangibles to be disposed of be
reported at the lower of carrying amount or fair value less cost to sell. The
Company did not record any asset impairment in fiscal 1999.
ADVERTISING AND PROMOTION COSTS -
The Company generally expenses advertising and promotion costs as incurred,
shown or distributed. Prepaid advertising costs at February 28, 1999 and 1998,
are not material. Advertising and promotion expense for the years ended February
28, 1999, 1998, and 1997, were approximately $173.1 million, $111.7 million and
$101.3 million, respectively.
INCOME TAXES -
The Company uses the liability method of accounting for income taxes. The
liability method accounts for deferred income taxes by applying statutory rates
in effect at the balance sheet date to the difference between the financial
reporting and tax basis of assets and liabilities.
ENVIRONMENTAL -
Environmental expenditures that relate to current operations are expensed as
appropriate. Expenditures that relate to an existing condition caused by past
operations, and which do not contribute to current or future revenue generation,
are expensed. Liabilities are recorded when environmental assessments and/or
remedial efforts are probable, and the cost can be reasonably estimated.
Generally, the timing of these accruals coincides with the completion of a
feasibility study or the Company's commitment to a formal plan of action.
Liabilities for environmental costs were not material at February 28, 1999 and
1998.
COMPREHENSIVE INCOME-
During fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130). This
statement establishes rules for the reporting of comprehensive income and its
components. Comprehensive income consists of net income and foreign currency
translation adjustments and is presented in the Consolidated Statements of
Changes in Stockholders' Equity. The adoption of SFAS No. 130 had no impact on
total stockholders' equity. Prior year financial statements have been
reclassified to conform with the SFAS No. 130 requirements.
EARNINGS PER COMMON SHARE -
Basic earnings per common share excludes the effect of common stock equivalents
and is 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 reflects 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 assumes the exercise of stock options using
the treasury stock method and assumes the conversion of convertible securities,
if any, using the "if converted" method.
2. ACQUISITIONS:
MATTHEW CLARK ACQUISITION -
On December 1, 1998, the Company acquired control of Matthew Clark plc (Matthew
Clark) and has since acquired all of Matthew Clark's outstanding shares (the
Matthew Clark Acquisition). The total purchase price, including assumption of
indebtedness, for the acquisition of Matthew Clark shares was approximately
$475.0 million, net of cash acquired. Matthew Clark, founded in 1810, is a
leading U.K.-based producer and distributor of its own brands of cider, wine and
bottled water and a leading independent drinks wholesaler in the U.K.
The purchase price for the Matthew Clark shares was funded with proceeds from loans under a First Amended and Restated Credit Agreement (the "1998 Credit Agreement"), effective as of November 2, 1998, between the
Company and The Chase Manhattan Bank, as administrative agent, and a syndicate of banks who are parties to the 1998 Credit Agreement.
The Matthew Clark Acquisition was accounted for using the purchase method; accordingly, the Matthew Clark assets were recorded at fair market value at the date of acquisition, December 1, 1998. The excess of the purchase price over the estimated fair market value of the net assets acquired (goodwill), 99.3 million British pound sterling ($164.3 million as of December 1, 1998), is being amortized on a straight-line basis over 40 years. The results of operations of the Matthew Clark Acquisition have been included in the Consolidated Statements of Income since the date of the acquisition.
During fiscal 1999, the Company incurred and paid approximately $2.6 million in nonrecurring charges related to the closing of a Matthew Clark cider production facility. The charges were part of a production facility consolidation program that was begun prior to the acquisition. The unaudited pro forma results of operations for fiscal 1999 (shown in the table below) reflect total nonrecurring charges of $21.5 million ($0.69 per share on a diluted basis) related to this facility consolidation program, of which $18.9 million was incurred prior to the acquisition.
The following table sets forth unaudited pro forma results of operations of the Company for the years ended February 28, 1999 and 1998. The unaudited pro forma fiscal 1999 results of operations give effect to the Matthew Clark Acquisition as if it occurred on March 1, 1998. The unaudited pro forma fiscal 1998 results of operations give effect to the Matthew Clark Acquisition as if it occurred on March 1, 1997. The unaudited pro forma fiscal 1999 and fiscal 1998 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 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 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.
1999 1998
----------- -----------
(in thousands, except per share data)
Net sales $ 2,017,497 $ 1,883,813
Income before extraordinary item $ 49,126 $ 55,879
Extraordinary item, net of income taxes $ (11,437) $ --
Net income $ 37,689 $ 55,879
Earnings per common share:
Basic:
Income before extraordinary item $ 2.68 $ 2.99
Extraordinary item (0.62) --
----------- -----------
Earnings per common share - basic $ 2.06 $ 2.99
=========== ===========
Diluted:
Income before extraordinary item $ 2.62 $ 2.92
Extraordinary item (0.61) --
----------- -----------
Earnings per common share - diluted $ 2.01 $ 2.92
=========== ===========
Weighted average common shares outstanding:
Basic 18,293 18,672
Diluted 18,754 19,105
|
3. PROPERTY, PLANT AND EQUIPMENT:
The major components of property, plant and equipment are as follows as of February 28:
1999 1998
--------- ---------
(in thousands)
Land $ 25,700 $ 15,103
Buildings and improvements 104,152 74,706
Machinery and equipment 380,069 244,204
Motor vehicles 20,191 5,316
Construction in progress 35,468 17,485
--------- ---------
565,580 356,814
Less - Accumulated depreciation (136,777) (112,779)
--------- ---------
$ 428,803 $ 244,035
========= =========
|
4. OTHER ASSETS:
The major components of other assets are as follows as of February 28:
1999 1998
--------- ---------
(in thousands)
Goodwill $ 311,908 $ 150,595
Distribution rights, agency license
agreements and trademarks 179,077 119,346
Other 53,779 23,686
--------- ---------
544,764 293,627
Less - Accumulated amortization (35,530) (28,841)
--------- ---------
$ 509,234 $ 264,786
========= =========
|
5. OTHER ACCRUED EXPENSES AND LIABILITIES:
The major components of other accrued expenses and liabilities are as follows as of February 28:
1999 1998
-------- --------
(in thousands)
Accrued advertising and promotions $ 38,604 $ 16,048
Accrued salaries and commissions 15,584 23,704
Other 95,263 65,144
-------- --------
$149,451 $104,896
======== ========
|
6. BORROWINGS:
Borrowings consist of the following as of February 28:
1999 1998
---------------------------------------- ---------
(in thousands) Current Long-term Total Total
-------- --------- --------- ---------
Notes Payable:
--------------
Senior Credit Facility:
Revolving Credit Loans $ 83,075 $ -- $ 83,075 $ 91,900
Other 4,653 -- 4,653 --
-------- --------- --------- ---------
$ 87,728 $ -- $ 87,728 $ 91,900
======== ========= ========= =========
Long-term Debt:
---------------
Senior Credit Facility:
Term Loan, variable rate, aggregate proceeds of
$140,000, due in installments through June 2003 $ -- $ -- $ -- $ 140,000
Tranche I Term Loan, variable rate, aggregate
proceeds of $275,630 (denominated in British
pound sterling), due in installments beginning
December 1999 through December 2004 4,934 270,696 275,630 --
Tranche II Term Loan, variable rate, aggregate
proceeds of $200,000, due in June 2000 -- 200,000 200,000 --
Tranche III Term Loan, variable rate, aggregate
proceeds of $150,000, due in installments
beginning December 1999 through December 2005 375 149,625 150,000 --
Senior Subordinated Notes:
8.75% currently redeemable due December 2003 -- 130,000 130,000 130,000
8.75% Series C currently redeemable, due December
2003 (less unamortized discount of $2,480 -
effective rate 9.76%) -- 62,520 62,520 62,132
Other Long-term Debt 696 18,848 19,544 1,204
-------- --------- --------- ---------
$ 6,005 $ 831,689 $ 837,694 $ 333,336
======== ========= ========= =========
|
SENIOR CREDIT FACILITY - On December 14, 1998, the Company, its principal operating subsidiaries (other than Matthew Clark and its subsidiaries), and a syndicate of banks (the Syndicate Banks), for which The Chase Manhattan Bank acts as administrative agent, entered into the 1998 Credit Agreement, effective as of November 2, 1998, which amends and restates in its entirety the credit agreement entered into between the Company and The Chase Manhattan Bank on November 2, 1998. The 1998 Credit Agreement includes both U.S. dollar and British pound sterling commitments of the Syndicate Banks of up to, in the aggregate, the equivalent of $1.0 billion (subject to increase as therein provided to $1.2 billion) with the proceeds available for repayment of all outstanding principal and accrued interest on all loans under the Company's bank credit agreement dated as of December 19, 1997, payment of the purchase price for the Matthew Clark shares, repayment of Matthew Clark's credit facilities, funding of permitted acquisitions, payment of transaction expenses and ongoing working capital needs of the Company. The Company incurred an extraordinary loss of $19.3 million ($11.4 million after taxes) in the fourth quarter of 1999 resulting from fees related to the replacement of the bank credit agreement, including extinguishment of the Term Loan.
The 1998 Credit Agreement provides for a $350.0 million Tranche I Term Loan facility due in December 2004, a $200.0 million Tranche II Term Loan facility due in June 2000, a $150.0 million Tranche III Term Loan facility due in December 2005, and a $300.0 million Revolving Credit facility (including letters of credit up to a maximum of $20.0 million) which expires in December 2004. Portions of the Tranche I Term Loan facility and the Revolving Credit facility are available for borrowing in British pound sterling.
The Tranche I Term Loan facility requires quarterly repayments, starting at $6.3 million in December 1999, increasing annually thereafter with a balloon payment at maturity of approximately $110.0 million. The Tranche II Term Loan facility requires no principal payments prior to the stated maturity. The Tranche III Term Loan facility requires quarterly repayments, starting at $0.4 million in December 1999 and increasing to approximately $18.0 million in March 2004. There are certain mandatory term loan prepayments, including those based on excess cash flow, sale of assets, issuance of debt or equity, and fluctuation in the U.S. dollar/British pound sterling exchange rate, in each case subject to baskets and thresholds which (other than with respect to those pertaining to fluctuations in the U.S. dollar/British pound sterling exchange rate, which were inapplicable under the previous bank credit agreement) are generally more favorable to the Company than those contained in its previous bank credit agreement.
The rate of interest payable, at the Company's option, is a function of the London interbank offering rate (LIBOR) plus a margin, federal funds rate plus a margin, or the prime rate plus a margin. The margin is adjustable based upon the Company's Debt Ratio (as defined in the 1998 Credit Agreement). The initial margin on LIBOR borrowings ranges between 1.75% and 2.50% and (other than for the Tranche II Term Loan facility) may be reduced after November 30, 1999, to between 1.125% and 1.50%, depending on the Company's Debt Ratio. Conversely, if the Debt Ratio of the Company should increase, the margin would be adjusted upwards to between 2.0% and 2.75% for LIBOR based borrowings. In addition to interest, the Company pays a facility fee on the Revolving Credit commitments, initially at 0.50% per annum and subject to reduction after November 30, 1999, to 0.375%, depending on the Company's Debt Ratio.
Each of the Company's principal operating subsidiaries (other than Matthew Clark and its subsidiaries) has guaranteed the Company's obligation under the 1998 Credit Agreement, and the Company and those subsidiaries have given security interests to the Syndicate Banks in substantially all of their assets. The Company and its subsidiaries are subject to customary secured lending covenants including those restricting additional liens, incurring additional indebtedness, the sale of assets, the payment of dividends, transactions with affiliates and the making of certain investments. The primary financial covenants require the maintenance of a debt coverage ratio, a senior debt coverage ratio, a fixed charges ratio and an interest coverage ratio. Among the most restrictive covenants contained in the 1998 Credit Agreement is the requirement to maintain a fixed charges ratio of not less than 1.0 at the last day of each fiscal quarter for the most recent four quarters.
As of February 28, 1999, under the 1998 Credit Agreement, the Company had outstanding term loans of $625.6 million bearing interest at 7.62% and $83.1 million of revolving loans bearing interest at 7.25%. The Company had average outstanding Revolving Credit Loans of approximately $75.5 million, $59.9 million and $88.8 million for the years ended February 28, 1999, 1998 and 1997, respectively. Amounts available to be drawn down under the Revolving Credit Loans were $212.9 million and $89.2 million at February 28, 1999 and 1998, respectively. The average interest rate on the Revolving Credit Loans was 6.23%, 6.57% and 6.58% for fiscal 1999, fiscal 1998, and fiscal 1997, respectively.
SENIOR SUBORDINATED NOTES -
On December 27, 1993, the Company issued $130.0 million aggregate principal
amount of 8.75% Senior Subordinated Notes due in December 2003 (the Original
Notes). Interest on the Original Notes is payable semiannually on June 15 and
December 15 of each year. The Original Notes are unsecured and subordinated to
the prior payment in full of all senior indebtedness of the Company, which
includes the 1998 Credit Agreement. The Original Notes are guaranteed, on a
senior subordinated basis, by all of the Company's significant operating
subsidiaries (other than Matthew Clark and its subsidiaries).
The Trust Indenture relating to the Original Notes contains certain covenants, including, but not limited to, (i) limitation on indebtedness; (ii) limitation on restricted payments; (iii) limitation on transactions with affiliates; (iv) limitation on senior subordinated indebtedness; (v) limitation on liens; (vi) limitation on sale of assets; (vii) limitation on issuance of guarantees of and pledges for indebtedness; (viii) restriction on transfer of assets; (ix) limitation on subsidiary capital stock; (x) limitation on the creation of any restriction on the ability of the Company's subsidiaries to make distributions and other payments; and (xi) restrictions on mergers, consolidations and the transfer of all or substantially all of the assets of the Company to another person. The limitation on indebtedness covenant is governed by a rolling four quarter fixed charge ratio requiring a specified minimum.
On October 29, 1996, the Company issued $65.0 million aggregate principal amount of 8.75% Series B Senior Subordinated Notes due in December 2003 (the Series B Notes). In February 1997, the Company exchanged $65.0 million aggregate principal amount of 8.75% Series C Senior Subordinated Notes due in December 2003 (the Series C Notes) for the Series B Notes. The terms of the Series C Notes are substantially identical in all material respects to the Original Notes.
DEBT PAYMENTS -
Principal payments required under long-term debt obligations during the next
five fiscal years and thereafter are as follows:
(in thousands)
2000 $ 6,005
2001 224,972
2002 35,963
2003 42,876
2004 244,826
Thereafter 285,532
---------
$ 840,174
=========
|
7. INCOME TAXES:
The provision for income taxes consists of the following for the years ended February 28:
1999 1998 1997
------------------------------------------- -------- --------
State
and
Federal Local Foreign Total Total Total
-------- -------- ------- -------- -------- --------
(in thousands)
Current income tax provision $ 23,827 $ 8,539 $ 102 $ 32,468 $ 28,476 $ 14,347
Deferred income tax provision 5,732 2,195 2,126 10,053 4,275 18,630
-------- -------- ------- -------- -------- --------
$ 29,559 $ 10,734 $ 2,228 $ 42,521 $ 32,751 $ 32,977 $
======== ======== ======= ======== ======== ========
|
A reconciliation of the total tax provision to the amount computed by applying the expected U.S. Federal income tax rate to income before provision for income taxes is as follows for the years ended February 28:
1999 1998 1997
------------------ ------------------ ------------------
% of % of % of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
-------- ------ -------- ------ -------- ------
(in thousands)
Computed "expected" tax provision $ 36,551 35.0 $ 27,958 35.0 $ 27,706 35.0
State and local income taxes, net
of Federal income tax benefit 6,977 6.7 4,793 6.0 5,462 6.9
Miscellaneous items, net (1,007) (1.0) - - (191) (0.2)
-------- ------ -------- ------ -------- ------
$ 42,521 40.7 $ 32,751 41.0 $ 32,977 41.7
======== ====== ======== ====== ======== ======
|
Deferred tax liabilities (assets) are comprised of the following as of February 28:
1999 1998
-------- --------
(in thousands)
Depreciation and amortization $ 89,447 $ 70,303
LIFO reserve 16,546 6,469
Inventory reserves 6,975 6,974
Other accruals (15,009) (18,193)
-------- --------
$ 97,959 $ 65,553
======== ========
|
At February 28, 1999, the Company has state and U.S. Federal net operating loss
(NOL) carryforwards of $5.4 million and $2.7 million, respectively, to offset
future taxable income that, if not otherwise utilized, will expire as follows:
state NOLs of $0.6 million and $4.8 million during fiscal 2002 and fiscal 2003,
respectively, and Federal NOL of $2.7 million during fiscal 2011.
8. PROFIT SHARING RETIREMENT PLANS AND RETIREMENT SAVINGS PLAN:
Effective March 1, 1998, the Company's existing retirement savings and profit sharing retirement plans and the Barton profit sharing and 401(k) plan were merged into the Canandaigua Brands, Inc. 401(k) and Profit Sharing Plan (the Plan). The Plan covers substantially all employees, excluding those employees covered by collective bargaining agreements and Matthew Clark employees. The 401(k) portion of the Plan permits eligible employees to defer a portion of their compensation (as defined in the Plan) on a pretax basis. Participants may defer up to 10% of their compensation for the year, subject to limitations of the Plan. The Company makes a matching contribution of 50% of the first 6% of compensation a participant defers. The amount of the Company's contribution under the profit sharing portion of the Plan is in such discretionary amount as the Board of Directors may annually determine, subject to limitations of the Plan. Company contributions were $6.8 million, $5.9 million and $5.7 million for the years ended February 28, 1999, 1998 and 1997, respectively.
The Company's subsidiary, Matthew Clark, currently provides for two pension plans: the Matthew Clark Group Pension Plan; and the Matthew Clark Executive Pension Plan (the Plans). The Plans are defined benefit plans with assets held by a Trustee who administers funds separately from the Company's finances. The following table summarizes the funded status of the Company's pension plans and the related amounts that are primarily included in "other assets" in the Consolidated Balance Sheets.
(in thousands)
Change in benefit obligation:
Benefit obligation at December 1, 1998 $ 165,997
Service cost 1,335
Interest cost 2,671
Plan participants' contributions 481
Benefits paid (1,517)
Foreign currency exchange rate changes (5,287)
---------
Benefit obligation at February 28, 1999 $ 163,680
=========
Change in plan assets:
Fair value of plan assets at December 1, 1998 $ 194,001
Actual return on plan assets 7,935
Plan participants' contributions 481
Benefits paid (1,517)
Foreign currency exchange rate changes (6,294)
---------
Fair value of plan assets at February 28, 1999 $ 194,606
=========
Funded status of the plan as of February 28, 1999:
Funded status $ 30,927
Unrecognized actuarial loss (3,950)
---------
Prepaid benefit cost $ 26,977
=========
Assumptions as of February 28, 1999:
Rate of return on plan assets 8.0%
Discount rate 6.5%
Increase in compensation levels 4.5%
Components of net periodic benefit cost for the
three month period ended February 28, 1999:
Service cost $ 1,335
Interest cost 2,671
Expected return on plan assets (3,848)
---------
Net periodic benefit cost $ 158
=========
|
9. STOCKHOLDERS' EQUITY:
COMMON STOCK -
The Company has two classes of common stock: Class A Common Stock and Class B
Convertible Common Stock. Class B Convertible Common Stock shares are
convertible into shares of Class A Common Stock on a one-to-one basis at any
time at the option of the holder. Holders of Class B Convertible Common Stock
are entitled to ten votes per share. Holders of Class A Common Stock are
entitled to only one vote per share but are entitled to a cash dividend premium.
If the Company pays a cash dividend on Class B Convertible Common Stock, each
share of Class A Common Stock will receive an amount at least ten percent
greater than the amount of the cash dividend per share paid on Class B
Convertible Common Stock. In addition, the Board of Directors may declare and
pay a dividend on Class A Common Stock without paying any dividend on Class B
Convertible Common Stock.
At February 28, 1999, there were 14,747,053 shares of Class A Common Stock and 3,223,448 shares of Class B Convertible Common Stock outstanding, net of treasury stock.
STOCK REPURCHASE AUTHORIZATION -
In January 1996, the Company's Board of Directors authorized the repurchase of
up to $30.0 million of its Class A Common Stock and Class B Convertible Common
stock. The Company was permitted to finance such purchases, which became
treasury shares, through cash generated from operations or through the bank
credit agreement. Throughout the year ended February 28, 1997, the Company
repurchased 787,450 shares of Class A Common Stock totaling $20.8 million. The
Company completed its repurchase program during fiscal 1998, repurchasing
362,100 shares of Class A Common Stock for $9.2 million.
In June 1998, the Company's Board of Directors authorized the repurchase of up to $100.0 million of its Class A Common Stock and Class B Convertible Common Stock. The Company may finance such purchases, which will become treasury shares, through cash generated from operations or through the bank credit agreement. During fiscal 1999, the Company repurchased 1,018,836 shares of Class A Common Stock for $44.9 million.
INCREASE IN NUMBER OF AUTHORIZED SHARES OF CLASS A COMMON STOCK-
In July 1998, the stockholders of the Company approved an increase in the number
of authorized shares of Class A Common Stock from 60,000,000 shares to
120,000,000 shares, thereby increasing the aggregate number of authorized shares
of the Company to 141,000,000 shares.
LONG-TERM STOCK INCENTIVE PLAN -
Under the Company's Long-Term Stock Incentive Plan, nonqualified stock options,
stock appreciation rights, restricted stock and other stock-based awards may be
granted to employees, officers and directors of the Company. Grants, in the
aggregate, may not exceed 4,000,000 shares of the Company's Class A Common
Stock. The exercise price, vesting period and term of nonqualified stock options
granted are established by the committee administering the plan (the Committee).
Grants of stock appreciation rights, restricted stock and other stock-based
awards may contain such vesting, terms, conditions and other requirements as the
Committee may establish. During fiscal 1999 and fiscal 1998, no stock
appreciation rights were granted. During fiscal 1999, no restricted stock was
granted and during fiscal 1998, 25,000 shares of restricted Class A Common Stock
were granted. At February 28, 1999, there were 1,228,753 shares available for
future grant.
A summary of nonqualified stock option activity is as follows:
Weighted Weighted
Shares Avg. Avg.
Under Exercise Options Exercise
Option Price Exercisable Price
--------- -------- ----------- --------
Balance, February 29, 1996 1,093,725 $ 28.70 28,675 $ 4.44
Options granted 1,647,700 $ 22.77
Options exercised (3,750) $ 4.44
Options forfeited/canceled (1,304,700) $ 32.09
---------
Balance, February 28, 1997 1,432,975 $ 18.85 51,425 $ 10.67
Options granted 569,400 $ 38.72
Options exercised (117,452) $ 15.33
Options forfeited/canceled (38,108) $ 17.66
---------
Balance, February 28, 1998 1,846,815 $ 25.23 360,630 $ 25.46
Options granted 728,200 $ 50.57
Options exercised (203,565) $ 20.08
Options forfeited/canceled (116,695) $ 37.13
---------
Balance, February 28, 1999 2,254,755 $ 33.26 492,285 $ 24.55
=========
|
The following table summarizes information about stock options outstanding at February 28, 1999:
Options Outstanding Options Exercisable
------------------------------------- ----------------------
Weighted Avg. Weighted Weighted
Remaining Avg. Avg.
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
--------------- ----------- ------------- -------- ----------- --------
$ 4.44 - $11.50 21,525 2.7 years $ 9.64 21,525 $ 9.64
$17.00 - $25.63 817,015 6.5 years $ 17.25 256,775 $ 17.57
$26.75 - $31.25 340,440 7.5 years $ 28.47 106,400 $ 27.37
$35.38 - $57.13 1,075,775 9.2 years $ 47.41 107,585 $ 41.39
--------- -------
2,254,755 7.9 years $ 33.26 492,285 $ 24.55
========= =======
|
The weighted average fair value of options granted during fiscal 1999, fiscal 1998 and fiscal 1997 was $26.21, $20.81 and $10.27, respectively. The fair value of options is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: risk-free interest rate of 5.3% for fiscal 1999, 6.4% for fiscal 1998 and 6.6% for fiscal 1997; volatility of 40.6% for fiscal 1999, 41.3% for fiscal 1998 and 42.7% for fiscal 1997; expected option life of 7.0 years for fiscal 1999, 6.9 years for fiscal 1998 and 4.7 years for fiscal 1997. The dividend yield was 0% for fiscal 1999, 1998 and 1997. Forfeitures are recognized as they occur.
INCENTIVE STOCK OPTION PLAN -
Under the Company's Incentive Stock Option Plan, incentive stock options may be
granted to employees, including officers, of the Company. Grants, in the
aggregate, may not exceed 1,000,000 shares of the Company's Class A Common
Stock. The exercise price of any incentive stock option may not be less than the
fair market value of the Company's Class A Common Stock on the date of grant.
The vesting period and term of incentive stock options granted are established
by the Committee. The maximum term of incentive stock options is ten years.
During fiscal 1999 and fiscal 1998, no incentive stock options were granted.
EMPLOYEE STOCK PURCHASE PLAN -
The Company has a stock purchase plan under which 1,125,000 shares of Class A
Common Stock can be issued. Under the terms of the plan, eligible employees may
purchase shares of the Company's Class A Common Stock through payroll
deductions. The purchase price is the lower of 85% of the fair market value of
the stock on the first or last day of the purchase period. During fiscal 1999,
fiscal 1998 and fiscal 1997, employees purchased 49,850, 78,248 and 37,768
shares, respectively.
The weighted average fair value of purchase rights granted during fiscal 1999, fiscal 1998 and fiscal 1997 was $12.35, $11.90 and $8.41, respectively. The fair value of purchase rights is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: risk-free interest rate of 4.7% for fiscal 1999, 5.3% for fiscal 1998 and 5.6% for fiscal 1997; volatility of 33.5% for fiscal 1999, 35.1% for fiscal 1998 and 65.4% for fiscal 1997; expected purchase right life of 0.5 years for fiscal 1999, 0.5 years for fiscal 1998 and 0.8 years for fiscal 1997. The dividend yield was 0% for fiscal 1999, 1998 and 1997.
PRO FORMA DISCLOSURE -
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for its
plans. The Company adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," (SFAS No. 123). Accordingly, no incremental compensation expense
has been recognized for its stock-based compensation plans. Had the Company
recognized the compensation cost based upon the fair value at the date of grant
for awards under its plans consistent with the methodology prescribed by SFAS
No. 123, net income and earnings per common share would have been reduced to the
pro forma amounts as follows for the years ended February 28:
1999 1998 1997
-------------------- --------------------- --------------------
As As As
Reported Pro Forma Reported Pro Forma Reported Pro Forma
-------- --------- -------- --------- -------- ---------
(in thousands, except per share data)
Net income $ 50,472 $ 46,942 $ 47,130 $ 43,230 $ 46,183 $ 43,546
======== ======== ======== ======== ======== ========
Earnings per common share:
Basic $ 2.76 $ 2.57 $ 2.52 $ 2.32 $ 2.39 $ 2.25
Diluted $ 2.69 $ 2.50 $ 2.47 $ 2.26 $ 2.37 $ 2.23
|
The pro forma effect on net income may not be representative of that to be expected in future years.
10. EARNINGS PER COMMON SHARE:
The following table presents earnings per common share for the years ended February 28:
1999 1998 1997
-------- -------- --------
(in thousands, except per share data)
Income before extraordinary item $ 61,909 $ 47,130 $ 46,183
Extraordinary item, net of income taxes (11,437) -- --
-------- -------- --------
Income applicable to common shares $ 50,472 $ 47,130 $ 46,183
======== ======== ========
Weighted average common shares
outstanding - basic 18,293 18,672 19,333
Stock options 461 433 188
-------- -------- --------
Weighted average common shares
outstanding - diluted 18,754 19,105 19,521
======== ======== ========
Earnings per common share:
Basic:
Income before extraordinary item $ 3.38 $ 2.52 $ 2.39
Extraordinary item (0.62) -- --
-------- -------- --------
Earnings per common share - basic $ 2.76 $ 2.52 $ 2.39
======== ======== ========
Diluted:
Income before extraordinary item $ 3.30 $ 2.47 $ 2.37
Extraordinary item (0.61) -- --
-------- -------- --------
Earnings per common share - diluted $ 2.69 $ 2.47 $ 2.37
======== ======== ========
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11. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES -
Future payments under noncancelable operating leases having initial or remaining
terms of one year or more are as follows during the next five fiscal years and
thereafter:
(in thousands)
2000 $ 13,292
2001 11,478
2002 10,576
2003 10,109
2004 9,624
Thereafter 102,122
--------
$157,201
========
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Rental expense was approximately $8.2 million, $5.6 million and $4.7 million for fiscal 1999, fiscal 1998 and fiscal 1997, respectively.
PURCHASE COMMITMENTS AND CONTINGENCIES -
The Company has agreements with three suppliers to purchase blended Scotch
whisky through December 2002. The purchase prices under the agreements are
denominated in British pound sterling. Based upon exchange rates at February 28,
1999, the Company's aggregate future obligation is approximately $17.2 million
for the contracts expiring through December 2002.
At February 28, 1999, the Company had two agreements with Diageo plc (Diageo) to purchase Canadian blended whisky through September 1, 2000, with a maximum obligation of approximately $4.9 million. The Company also had an agreement with Diageo to purchase Canadian new distillation whisky through December 1999 at purchase prices of approximately $1.4 million to $1.7 million. These agreements have been superseded as a result of the Company's definitive agreement with Diageo. See Note 17 - Subsequent Events. At February 28, 1999, the Company also had an agreement with a different supplier to purchase Canadian new distillation whisky through December 2005, with a maximum obligation of approximately $6.4 million.
All of the Company's imported beer products are marketed and sold pursuant to exclusive distribution agreements from the suppliers of these products. The Company's agreement to distribute Corona Extra and its other Mexican beer brands exclusively throughout 25 primarily western states was renewed effective November 22, 1996, and expires December 2006, with automatic five year renewals thereafter, subject to compliance with certain performance criteria and other terms under the agreement. The remaining agreements expire through December 2007. Prior to their expiration, these agreements may be terminated if the Company fails to meet certain performance criteria. At February 28, 1999, the Company believes it is in compliance with all of its material distribution agreements and, given the Company's long-term relationships with its suppliers, the Company does not believe that these agreements will be terminated.
In connection with previous acquisitions, the Company assumed purchase contracts with certain growers and suppliers. In addition, the Company has entered into other purchase contracts with various growers and suppliers in the normal course of business. Under the grape purchase contracts, the Company is committed to purchase all grape production yielded from a specified number of acres for a period of time ranging up to nineteen years. The actual tonnage and price of grapes that must be purchased by the Company will vary each year depending on certain factors, including weather, time of harvest, overall market conditions and the agricultural practices and location of the growers and suppliers under contract. The Company purchased $126.6 million of grapes under these contracts during fiscal 1999. Based on current production yields and published grape prices, the Company estimates that the aggregate purchases under these contracts over the remaining term of the contracts will be approximately $846.4 million.
The Company's aggregate obligations under bulk wine purchase contracts will be approximately $40.6 million over the remaining term of the contracts which expire through fiscal 2001.
EMPLOYMENT CONTRACTS -
The Company has employment contracts with certain of its executive officers and
certain other management personnel with remaining terms ranging up to two years.
These agreements provide for minimum salaries, as adjusted for annual increases,
and may include incentive bonuses based upon attainment of specified management
goals. In addition, these agreements provide for severance payments in the event
of specified termination of employment. The aggregate commitment for future
compensation and severance, excluding incentive bonuses, was approximately $6.4
million as of February 28, 1999, of which approximately $1.8 million is accrued
in other liabilities as of February 28, 1999.
EMPLOYEES COVERED BY COLLECTIVE BARGAINING AGREEMENTS -
Approximately 32% of the Company's full-time employees are covered by collective
bargaining agreements at February 28, 1999. Agreements expiring within one year
cover approximately 5% of the Company's full-time employees.
LEGAL MATTERS -
The Company is subject to litigation from time to time in the ordinary course of
business. Although the amount of any liability with respect to such litigation
cannot be determined, in the opinion of management such liability will not have
a material adverse effect on the Company's financial condition, results of
operations or cash flows.
12. SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK:
Gross sales to the five largest customers of the Company represented 25.2%, 26.4% and 22.9% of the Company's gross sales for the fiscal years ended February 28, 1999, 1998 and 1997, respectively. Gross sales to the Company's largest customer, Southern Wine and Spirits, represented 10.9%, 12.1% and 10.5% of the Company's gross sales for the fiscal years ended February 28, 1999, 1998 and 1997, respectively. Accounts receivable from the Company's largest customer represented 8.5%, 14.1% and 11.3% of the Company's total accounts receivable as of February 28, 1999, 1998 and 1997, respectively. Gross sales to the Company's five largest customers are expected to continue to represent a significant portion of the Company's revenues. The Company's arrangements with certain of its customers may, generally, be terminated by either party with prior notice. The Company performs ongoing credit evaluations of its customers' financial position, and management of the Company is of the opinion that any risk of significant loss is reduced due to the diversity of customers and geographic sales area.
13. SUMMARIZED FINANCIAL INFORMATION - SUBSIDIARY GUARANTORS:
The following table presents summarized financial information for the Company, the parent company, the combined subsidiaries of the Company which guarantee the Company's senior subordinated notes (Subsidiary Guarantors) and the combined subsidiaries of the Company which are not Subsidiary Guarantors, primarily Matthew Clark (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 and certain other subsidiaries which individually, and in the aggregate, are inconsequential. 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) ------- ---------- ------------- ------------ ------------
BALANCE SHEET DATA:
February 28, 1999
-----------------
Current assets $114,243 $ 532,028 $209,468 $ -- $ 855,739
Noncurrent assets $646,133 $ 396,125 $421,867 $(526,088) $ 938,037
Current liabilities $157,648 $ 126,803 $130,821 $ -- $ 415,272
Noncurrent liabilities $815,421 $ 73,178 $ 54,633 $ -- $ 943,232
February 28, 1998
-----------------
Current assets $102,869 $ 478,013 $ 852 $ -- $ 581,734
Noncurrent assets $481,574 $ 395,225 $ 93 $(368,071) $ 508,821
Current liabilities $180,420 $ 109,339 $ 708 $ -- $ 290,467
Noncurrent liabilities $312,877 $ 61,784 $ -- $ -- $ 374,661
INCOME STATEMENT DATA:
For the year ended February 28, 1999
------------------------------------
Net sales $615,270 $1,080,466 $158,761 $(357,154) $1,497,343
Gross profit $168,575 $ 237,437 $ 42,022 $ -- $ 448,034
Income before taxes and
extraordinary item $ 4,849 $ 96,935 $ 2,646 $ -- $ 104,430
Net income $ 2,861 $ 45,781 $ 1,830 $ -- $ 50,472
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- 50 -
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
------- ---------- ------------- ------------ ------------
For the year ended February 28, 1998
------------------------------------
Net sales $562,760 $ 985,757 $ 2,197 $(337,926) $1,212,788
Gross profit $151,092 $ 191,658 $ 1,000 $ -- $ 343,750
Income (loss) before taxes $ 21,024 $ 59,285 $ (428) $ -- $ 79,881
Net income (loss) $ 12,404 $ 35,154 $ (428) $ -- $ 47,130
For the year ended February 28, 1997
------------------------------------
Net sales $552,424 $ 907,387 $ 508 $(325,306) $1,135,013
Gross profit $127,289 $ 195,841 $ (929) $ -- $ 322,201
Income (loss) before taxes $ 2,581 $ 78,672 $ (2,093) $ -- $ 79,160
Net income (loss) $ 1,506 $ 45,898 $ (1,221) $ -- $ 46,183
|
14. ACCOUNTING PRONOUNCEMENT:
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. The Company is required to adopt SFAS No. 133 on a prospective basis for interim periods and fiscal years beginning March 1, 2000. The Company believes the effect of adoption on its financial statements will not be material based on the Company's current risk management strategies.
15. BUSINESS SEGMENT INFORMATION:
Effective March 1, 1998, the Company has adopted the provisions of Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement establishes annual and interim reporting standards for an enterprise's operating segments and related disclosures about its products, services, geographic areas and major customers. Adoption of this statement had no impact on the Company's consolidated financial position, results of operations or cash flows. Comparative information for earlier years has been restated. The restatement of comparative information for interim periods in the initial year of adoption is to be reported for interim periods in the second year of application. The Company reports its operating results in four segments: Canandaigua Wine (branded 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); 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 in the summary of significant accounting policies. The Company evaluates performance based on operating profits of the respective business units.
Segment information for the years ended February 28, 1999, 1998 and 1997, is as follows:
(in thousands) 1999 1998 1997
---------- ---------- ----------
CANANDAIGUA WINE:
Net sales:
Branded $ 598,782 $ 570,807 $ 537,745
Other 70,711 71,988 112,546
---------- ---------- ----------
Net sales $ 669,493 $ 642,795 $ 650,291
Operating profit $ 46,283 $ 45,440 $ 51,525
Long-lived assets $ 191,762 $ 185,317 $ 185,298
Total assets $ 650,578 $ 632,636 $ 608,759
Capital expenditures $ 25,275 $ 25,666 $ 24,452
Depreciation and amortization $ 20,838 $ 21,189 $ 19,955
BARTON:
Net sales:
Beer $ 478,611 $ 376,607 $ 298,925
Spirits 185,938 191,190 185,289
---------- ---------- ----------
Net sales $ 664,549 $ 567,797 $ 484,214
Operating profit $ 102,624 $ 77,010 $ 73,073
Long-lived assets $ 50,221 $ 51,574 $ 51,504
Total assets $ 478,580 $ 439,317 $ 410,351
Capital expenditures $ 3,269 $ 5,021 $ 4,988
Depreciation and amortization $ 10,765 $ 10,455 $ 9,453
MATTHEW CLARK:
Net sales:
Branded $ 64,879 $ -- $ --
Wholesale 93,881 -- --
---------- ---------- ----------
Net sales $ 158,760 $ -- $ --
Operating profit $ 8,998 $ -- $ --
Long-lived assets $ 169,693 $ -- $ --
Total assets $ 631,313 $ -- $ --
Capital expenditures $ 10,444 $ -- $ --
Depreciation and amortization $ 4,836 $ -- $ --
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(in thousands) 1999 1998 1997
---------- ---------- ----------
CORPORATE OPERATIONS AND OTHER:
Net sales $ 4,541 $ 2,196 $ 508
Operating loss $ (12,013) $ (10,380) $ (11,388)
Long-lived assets $ 17,127 $ 7,144 $ 12,750
Total assets $ 33,305 $ 18,602 $ 24,171
Capital expenditures $ 10,869 $ 516 $ 2,209
Depreciation and amortization $ 2,151 $ 1,517 $ 2,431
CONSOLIDATED:
Net sales $1,497,343 $1,212,788 $1,135,013
Operating profit $ 145,892 $ 112,070 $ 113,210
Long-lived assets $ 428,803 $ 244,035 $ 249,552
Total assets $1,793,776 $1,090,555 $1,043,281
Capital expenditures $ 49,857 $ 31,203 $ 31,649
Depreciation and amortization $ 38,590 $ 33,161 $ 31,839
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The Company's areas of operations are principally in the United States. Operations outside the United States consist of Matthew Clark's operations, which are primarily in the United Kingdom. No other single foreign country or geographic area is significant to the consolidated operations.
16. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
A summary of selected quarterly financial information is as follows:
QUARTER ENDED
----------------------------------------------------
May 31, August 31, November 30, February 28,
Fiscal 1999 (1) 1998 1998 1998 1999 Full Year
------------------------------------- -------- ---------- ------------ ------------ -----------
(in thousands, except per share data)
Net sales $312,928 $349,386 $375,586 $459,443 $1,497,343
Gross profit $ 92,061 $103,236 $115,695 $137,042 $ 448,034
Income before extraordinary item $ 13,099 $ 16,731 $ 20,161 $ 11,918 $ 61,909
Extraordinary item, net of income taxes (2) $ -- $ -- $ -- $(11,437) $ (11,437)
Net income $ 13,099 $ 16,731 $ 20,161 $ 481 $ 50,472
Earnings per common share: (3)
Basic:
Income before extraordinary item $ 0.70 $ 0.90 $ 1.13 $ 0.67 $ 3.38
Extraordinary item -- -- -- (0.64) (0.62)
-------- -------- -------- -------- ----------
Earnings per common share - basic $ 0.70 $ 0.90 $ 1.13 $ 0.03 $ 2.76
======== ======== ======== ======== ==========
Diluted:
Income before extraordinary item $ 0.68 $ 0.88 $ 1.10 $ 0.65 $ 3.30
Extraordinary item -- -- -- (0.62) (0.61)
-------- -------- -------- -------- ----------
Earnings per common share - diluted $ 0.68 $ 0.88 $ 1.10 $ 0.03 $ 2.69
======== ======== ======== ======== ==========
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QUARTER ENDED
----------------------------------------------------
May 31, August 31, November 30, February 28,
Fiscal 1998 (1) 1997 1997 1997 1998 Full Year
------------------------------------- -------- ---------- ------------ ------------ -----------
(in thousands, except per share data)
Net sales $306,011 $301,524 $322,703 $282,550 $1,212,788
Gross profit $ 83,108 $ 85,324 $ 96,184 $ 79,134 $ 343,750
Net income $ 11,448 $ 12,698 $ 16,540 $ 6,444 $ 47,130
Earnings per common share: (3)
Basic $ 0.61 $ 0.68 $ 0.89 $ 0.34 $ 2.52
Diluted $ 0.60 $ 0.67 $ 0.86 $ 0.33 $ 2.47
(1) Restated for the change in accounting for inventories from the last-in,
first-out (LIFO) method to the first-in, first-out (FIFO) method.
(2) Represents fees related to the replacement of the bank credit facility,
including extinguishment of the term loan.
(3) The sum of the quarterly earnings per common share in fiscal 1999 and
fiscal 1998 may not equal the total computed for the respective years as
the earnings per common share are computed independently for each of the
quarters presented and for the full year.
|
17. SUBSEQUENT EVENTS:
DEBT OFFERING -
On March 4, 1999, the Company issued $200.0 million aggregate principal amount
of 8 1/2% Senior Subordinated Notes due March 2009 (the $200 Million Notes). The
net proceeds of the offering (approximately $195.0 million) were used to fund
the acquisition of the Black Velvet Canadian Whisky brand and other assets from
affiliates of Diageo plc (see Acquisitions below) and to pay the fees and
expenses related thereto with the remainder of the net proceeds to be used for
general corporate purposes or to fund future acquisitions. Interest on the $200
Million Notes is payable semiannually on March 1 and September 1 of each year,
beginning September 1, 1999. The $200 Million 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 $200 Million Notes using the
proceeds of certain equity offerings completed before March 1, 2002. The $200
Million Notes are unsecured and subordinated to the prior payment in full of all
senior indebtedness of the Company, which includes the 1998 Credit Agreement.
The $200 Million Notes are guaranteed, on a senior subordinated basis, by
certain of the Company's significant operating subsidiaries.
The Indenture and Supplemental Indenture governing the $200 Million Notes contains certain covenants, including, but not limited to, (i) limitation on indebtedness; (ii) limitation on restricted payments; (iii) limitation on transactions with affiliates; (iv) limitation on senior subordinated indebtedness; (v) limitation on liens; (vi) limitation on sale of assets; (vii) limitation on guarantees by certain subsidiaries for indebtedness; (viii) limitation on certain subsidiary capital stock; (ix) limitation on the creation of any restriction on the ability of the Company's subsidiaries to make distributions and other payments; and (x) restrictions on mergers, consolidations and the transfer of all or substantially all of the assets of the Company to another person. The limitation on indebtedness covenant is governed by a rolling four quarter fixed charge ratio requiring a specified minimum.
ACQUISITIONS-
On April 9, 1999, in an asset acquisition, the Company acquired several
well-known Canadian whisky brands, including Black Velvet, production facilities
located in Alberta and Quebec, Canada, case goods and bulk whisky inventories
and other related assets from affiliates of Diageo plc. Other principal brands
acquired in the transaction were Golden Wedding, OFC, MacNaughton, McMaster's
and Triple Crown. In connection with the transaction, the Company also entered
into multi-year agreements with Diageo to provide packaging and distilling
services for various brands retained by Diageo. The purchase price was
approximately $185.5 million and was financed by the proceeds from the sale of
the $200 Million Notes.
On April 1, 1999, the Company entered into a definitive agreement with Moet Hennessy, Inc. to purchase all of the outstanding capital stock of Simi Winery, Inc. (the Simi Acquisition). The Simi Acquisition includes the Simi winery, equipment, vineyards, inventory and worldwide ownership of the Simi brand name. The Simi Acquisition
is expected to close in the second quarter of fiscal 2000 and the purchase price is expected to be financed through the Company's bank credit facility.
On April 21, 1999, the Company entered into definitive purchase agreements with Franciscan Vineyards, Inc. (Franciscan) and its shareholders, and certain parties related to Franciscan to, among other matters, purchase all of the outstanding capital stock of Franciscan and acquire certain vineyards and related vineyard assets (collectively, the Franciscan Acquisition). Pursuant to the Franciscan Acquisition, the Company will: (i) acquire the Franciscan Oakville Estate, Estancia and Mt. Veeder brands; (ii) acquire wineries located in Rutherford, Monterey and Mt. Veeder, California; (iii) acquire vineyards in the Napa Valley, Alexander Valley, Monterey and Paso Robles appellations and additionally, will enter into long-term grape contracts with certain parties related to Franciscan to purchase additional grapes grown in the Napa and Alexander Valley appellations; (iv) acquire distribution rights to the Quintessa and Veramonte brands; and (v) acquire equity interests in entities that own the Veramonte brand and the Veramonte winery and certain vineyards located in the Casablanca Valley, Chile. The Franciscan Acquisition is expected to close in the second quarter of fiscal 2000 and the purchase price is expected to be financed through the Company's bank credit facility.
Not Applicable.
PART III
The information required by this Item (except for the information regarding executive officers required by Item 401 of Regulation S-K which is included in Part I hereof in accordance with General Instruction G(3)) is incorporated herein by reference to the Company's proxy statement to be issued in connection with the Annual Meeting of Stockholders of the Company to be held on July 20, 1999, under those sections of the proxy statement titled "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance", which proxy statement will be filed within 120 days after the end of the Company's fiscal year.
The information required by this Item is incorporated herein by reference to the Company's proxy statement to be issued in connection with the Annual Meeting of Stockholders of the Company to be held on July 20, 1999, under that section of the proxy statement titled "Executive Compensation" and that caption titled "Director Compensation" under "Election of Directors", which proxy statement will be filed within 120 days after the end of the Company's fiscal year.
The information required by this Item is incorporated herein by reference to the Company's proxy statement to be issued in connection with the Annual Meeting of Stockholders of the Company to be held on July 20, 1999, under those sections of the proxy statement titled "Beneficial Ownership" and "Stock Ownership of Management", which proxy statement will be filed within 120 days after the end of the Company's fiscal year.
The information required by this Item is incorporated herein by reference to the Company's proxy statement to be issued in connection with the Annual Meeting of Stockholders of the Company to be held on July 20, 1999, under that section of the proxy statement titled "Executive Compensation", which proxy statement will be filed within 120 days after the end of the Company's fiscal year.
PART IV
(a) 1. Financial Statements
The following consolidated financial statements of the Company are submitted herewith:
Report of Independent Public Accountants
Consolidated Balance Sheets - February 28, 1999 and 1998
Consolidated Statements of Income for the years ended February 28, 1999, 1998 and 1997
Consolidated Statements of Changes in Stockholders' Equity for the years ended February 28, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended February 28, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
The following consolidated financial information is submitted herewith:
Selected Financial Data
Selected Quarterly Financial Information (unaudited)
All other schedules are not submitted because they are not applicable or not required under Regulation S-X or because the required information is included in the financial statements or notes thereto.
Individual financial statements of the Registrant have been omitted because the Registrant is primarily an operating company and no subsidiary included in the consolidated financial statements has minority equity interests and/or noncurrent indebtedness, not guaranteed by the Registrant, in excess of 5% of total consolidated assets.
3. Exhibits required to be filed by Item 601 of Regulation S-K
The following exhibits are filed herewith or incorporated herein by reference, as indicated:
2.1 Asset Purchase Agreement dated August 3, 1994 between the Company and Heublein, Inc. (filed as Exhibit 2(a) to the Company's Current Report on Form 8-K dated August 5, 1994 and incorporated herein by reference).
2.2 Amendment dated November 8, 1994 to Asset Purchase Agreement
between Heublein, Inc. and the Company (filed as Exhibit 2.2 to
the Company's Registration Statement on Form S-3 (Amendment No.
2) (Registration No. 33-55997) filed with the Securities and
Exchange Commission on November 8, 1994 and incorporated herein
by reference).
2.3 Amendment dated November 18, 1994 to Asset Purchase Agreement between Heublein, Inc. and the Company (filed as Exhibit 2.8 to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994 and incorporated herein by reference).
2.4 Amendment dated November 30, 1994 to Asset Purchase Agreement between Heublein, Inc. and the Company (filed as Exhibit 2.9 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 1994 and incorporated herein by reference).
2.5 Asset Purchase Agreement among Barton Incorporated (a wholly-owned subsidiary of the Company), United Distillers Glenmore, Inc., Schenley Industries, Inc., Medley Distilling Company, United Distillers Manufacturing, Inc., and The Viking Distillery, Inc., dated August 29, 1995 (filed as Exhibit 2(a) to the Company's Current Report on Form 8-K, dated August 29, 1995 and incorporated herein by reference).
2.6 Recommended Cash Offer, by Schroders on behalf of Canandaigua Limited, a wholly-owned subsidiary of the Company, to acquire Matthew Clark plc (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K dated December 1, 1998 and incorporated herein by reference).
2.7 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).
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, 1998 and incorporated herein by reference).
3.2 Amended and Restated 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, 1998 and incorporated herein by reference).
4.1 Indenture, dated as of December 27, 1993, among the Company, its Subsidiaries and The Chase Manhattan Bank (as successor to Chemical Bank) (filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 1993 and incorporated herein by reference).
4.2 First Supplemental Indenture, dated as of August 3, 1994, among the Company, Canandaigua West, Inc. (a subsidiary of the Company now known as Canandaigua Wine Company, Inc.) and The Chase Manhattan Bank (as
successor to Chemical Bank) (filed as Exhibit 4.5 to the Company's Registration Statement on Form S-8 (Registration No. 33-56557) and incorporated herein by reference).
4.3 Second Supplemental Indenture, dated August 25, 1995, among the Company, V Acquisition Corp. (a subsidiary of the Company now known as The Viking Distillery, Inc.) and The Chase Manhattan Bank (as successor to Chemical Bank) (filed as Exhibit 4.5 to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1995 and incorporated herein by reference).
4.4 Third Supplemental Indenture, dated as of December 19, 1997, among the Company, Canandaigua Europe Limited, Roberts Trading Corp. and The Chase Manhattan Bank (filed as Exhibit 4.4 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1998 and incorporated herein by reference).
4.5 Fourth Supplemental Indenture, dated as of October 2, 1998, among the Company, Polyphenolics, Inc. and The Chase Manhattan Bank (filed as Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 1998 and incorporated herein by reference).
4.6 Fifth Supplemental Indenture, dated as of December 11, 1998, among the Company, Canandaigua B.V., Canandaigua Limited and The Chase Manhattan Bank (filed herewith).
4.7 Indenture with respect to the 8 3/4% Series C Senior Subordinated Notes due 2003, dated as of October 29, 1996, among the Company, its Subsidiaries and Harris Trust and Savings Bank (filed as Exhibit 4.2 to the Company's Registration Statement on Form S-4 (Registration No. 333-17673) and incorporated herein by reference).
4.8 First Supplemental Indenture, dated as of December 19, 1997, among the Company, Canandaigua Europe Limited, Roberts Trading Corp. and Harris Trust and Savings Bank (filed as Exhibit 4.6 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1998 and incorporated herein by reference).
4.9 Second Supplemental Indenture, dated as of October 2, 1998, among the Company, Polyphenolics, Inc. and Harris Trust and Savings Bank (filed as Exhibit 4.8 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 1998 and incorporated herein by reference).
4.10 Third Supplemental Indenture, dated as of December 11, 1998, among the Company, Canandaigua B.V., Canandaigua Limited and Harris Trust and Savings Bank (filed herewith).
4.11 First Amended and Restated Credit Agreement, dated as of November 2, 1998, between the Company, its principal operating subsidiaries, and certain banks for which The Chase Manhattan Bank acts as Administrative Agent (filed as Exhibit
4.1 to the Company's Current Report on Form 8-K dated December 1, 1998 and incorporated herein by reference).
4.12 Indenture with respect to 8 1/2% Senior Subordinated Notes due 2009, dated as of February 25, 1999, among the Company, as issuer, its principal operating subsidiaries, as Guarantors, and Harris Trust and Savings Bank, as Trustee (filed as Exhibit 99.1 to the Company's Current Report on Form 8-K dated February 25, 1999 and incorporated herein by reference).
4.13 Supplemental Indenture No. 1, dated as of February 25, 1999, by and among the Company, as Issuer, its principal operating subsidiaries, as Guarantors, and Harris Trust and Savings Bank, as Trustee (filed as Exhibit 99.2 to the Company's Current Report on Form 8-K dated February 25, 1999 and incorporated herein by reference).
10.1 Barton Incorporated Management Incentive Plan (filed as Exhibit 10.6 to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1993 and incorporated herein by reference).
10.2 Marvin Sands Split Dollar Insurance Agreement (filed as Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1993 and incorporated herein by reference).
10.3 Letter agreement, effective as of October 7, 1995, as amended, addressing compensation, between the Company and Daniel Barnett (filed as Exhibit 10.23 to the Company's Transition Report on Form 10-K for the Transition Period from September 1, 1995 to February 29, 1996 and incorporated herein by reference).
10.4 Employment Agreement between Barton Incorporated and Alexander L. Berk dated as of September 1, 1990 as amended by Amendment No. 1 to Employment Agreement between Barton Incorporated and Alexander L. Berk dated November 11, 1996 (filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1998 and incorporated herein by reference).
10.5 Amendment No. 2 to Employment Agreement between Barton Incorporated and Alexander L. Berk dated October 20, 1998 (filed herewith).
10.6 First Amended and Restated Credit Agreement, dated as of November 2, 1998, between the Company, its principal operating subsidiaries, and certain banks for which The Chase Manhattan Bank acts as Administrative Agent (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated December 1, 1998 and incorporated herein by reference).
10.7 Long-Term Stock Incentive Plan, which amends and restates the Canandaigua Wine Company, Inc. Stock Option and Stock Appreciation Right Plan (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 1997 and incorporated herein by reference).
10.8 Amendment Number One to the Long-Term Stock Incentive Plan of the Company (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 1997 and incorporated herein by reference).
10.9 Incentive Stock Option Plan of the Company (filed as Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 1997 and incorporated herein by reference).
10.10 Amendment Number One to the Incentive Stock Option Plan of the Company (filed as Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 1997 and incorporated herein by reference).
10.11 Annual Management Incentive Plan of the Company (filed as Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 1997 and incorporated herein by reference).
10.12 Amendment Number One to the Annual Management Incentive Plan of the Company (filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1998 and incorporated herein by reference).
10.13 Lease, effective December 25, 1997, by and among Matthew Clark Brands Limited and Pontsarn Investments Limited (filed herewith).
10.14 Supplemental Executive Retirement Plan of the Company (filed herewith).
11.1 Statement re Computation of Per Share Earnings (filed herewith).
18.1 Letter re Change in Accounting Principles (filed herewith).
21.1 Subsidiaries of Company (filed herewith).
23.1 Consent of Arthur Andersen LLP (filed herewith).
27.1 Financial Data Schedule for fiscal year ended February 28, 1999 (filed herewith).
27.2 Restated Financial Data Schedule for the fiscal quarter ended November 30, 1998 (filed herewith).
27.3 Restated Financial Data Schedule for the fiscal quarter ended August 31, 1998 (filed herewith).
27.4 Restated Financial Data Schedule for the fiscal quarter ended May 31, 1998 (filed herewith).
27.5 Restated Financial Data Schedule for the fiscal year ended February 28, 1998 (filed herewith).
27.6 Restated Financial Data Schedule for the fiscal quarter ended November 30, 1997 (filed herewith).
27.7 Restated Financial Data Schedule for the fiscal quarter ended August 31, 1997 (filed herewith).
27.8 Restated Financial Data Schedule for the fiscal quarter ended May 31, 1997 (filed herewith).
27.9 Restated Financial Data Schedule for the fiscal year ended February 28, 1997 (filed herewith).
99.1 1989 Employee Stock Purchase Plan of the Company, as amended by Amendment Number 1 through Amendment Number 5 (filed as Exhibit 99.1 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1998 and incorporated herein by reference).
99.2 Amendment Number 6 to the 1989 Employee Stock Purchase Plan of the Company (filed herewith).
(b) Reports on Form 8-K
The following Reports on Form 8-K were filed by the Company with the Securities and Exchange Commission during the fourth quarter of the fiscal year ended February 28, 1999:
(i) Form 8-K dated December 1, 1998. This Form 8-K reported information under Item 2 (Acquisition or Disposition of Assets) and Item 7 (Financial Statements and Exhibits). The following financial statements were filed with this Form 8-K:
The Matthew Clark plc Balance Sheets, as of 30 April 1998 and 1997, and the related Consolidated Profit and Loss Accounts and Consolidated Cash Flow Statements for each of the three years in the period ended 30 April 1998, and the report of KPMG Audit Plc, independent auditors, thereon, together with the notes thereto.
The pro forma condensed combined balance sheet (unaudited) as of August 31, 1998, and the pro forma condensed combined statement of income (unaudited) for the year ended February 28, 1998, and the pro forma condensed combined statement of income (unaudited) for the six months ended August 31, 1998, and the notes thereto.
(ii) Form 8-K/A dated December 1, 1998. This Form 8-K/A reported information under Item 7 (Financial Statements and Exhibits). The following financial statements were filed with this Form 8-K/A:
The Matthew Clark plc Balance Sheets, as of 30 April 1998 and 1997, and the related Consolidated Profit and Loss Accounts and Consolidated Cash Flow Statements for each of the three years in the period ended 30 April 1998, and the report of KPMG Audit Plc, independent auditor, thereon, together with the notes thereto.
The Matthew Clark plc Balance Sheets (unaudited), as of October 31, 1998 and 1997 and the related Consolidated Profit and Loss Accounts (unaudited) and Consolidated Cash Flow Statements (unaudited) for the six month periods ended October 31, 1998 and 1997, together with the notes thereto.
The pro forma condensed combined balance sheet (unaudited) as of November 30, 1998, the pro forma combined statement of income (unaudited) for the year ended February 28, 1998, the pro forma combined statement of income (unaudited) for the nine months ended November 30, 1998, and the notes thereto, and the pro forma combined statement of income (unaudited) for the twelve months ended November 30, 1998, and the notes thereto.
(iii) Form 8-K dated December 2, 1998. This Form 8-K reported information under Item 5 (Other Events).
(iv) Form 8-K dated February 22, 1999. This Form 8-K reported information under Item 5 (Other Events).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 1, 1999 CANANDAIGUA BRANDS, INC.
By:/s/ Richard Sands
----------------------------------
Richard Sands, President and Chief
Executive Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ Richard Sands /s/ Thomas S. Summer
---------------------------------- ----------------------------------
Richard Sands, President, Chief Thomas S. Summer, Senior Vice
Executive Officer and Director President and Chief Financial
(Principal Executive Officer ) Officer (Principal Financial
Dated: June 1, 1999 Officer and Principal Accounting
Officer)
Dated: June 1, 1999
/s/ Marvin Sands /s/ Robert Sands
---------------------------------- ----------------------------------
Marvin Sands, Chairman of the Board Robert Sands, Director
Dated: June 1, 1999 Dated: June 1, 1999
/s/ George Bresler /s/ James A. Locke
---------------------------------- ----------------------------------
George Bresler, Director James A. Locke, III, Director
Dated: June 1, 1999 Dated: June 1, 1999
/s/ Thomas C. McDermott /s/ Paul L. Smith
---------------------------------- ----------------------------------
Thomas C. McDermott, Director Paul L. Smith, Director
Dated: June 1, 1999 Dated: June 1, 1999
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 1, 1999 BATAVIA WINE CELLARS, INC.
By: /s/ Ned Cooper
----------------------------------
Ned Cooper, President
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Dated: June 1, 1999 /s/ Ned Cooper
----------------------------------
Ned Cooper, President
(Principal Executive Officer)
Dated: June 1, 1999 /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: June 1, 1999 /s/ Richard Sands
----------------------------------
Richard Sands, Director
Dated: June 1, 1999 /s/ Robert Sands
----------------------------------
Robert Sands, Director
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 1, 1999 CANANDAIGUA WINE COMPANY, INC.
By: /s/ Robert Sands
----------------------------------
Robert Sands, President and
Chief Executive Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Dated: June 1, 1999 /s/ Robert Sands
----------------------------------
Robert Sands, President, Chief
Executive Officer and Director
(Principal Executive Officer)
Dated: June 1, 1999 /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: June 1, 1999 /s/ Richard Sands
----------------------------------
Richard Sands, Director
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 1, 1999 CANANDAIGUA EUROPE LIMITED
By: /s/ Douglas Kahle
----------------------------------
Douglas Kahle, President
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Dated: June 1, 1999 /s/ Douglas Kahle
----------------------------------
Douglas Kahle, President
(Principal Executive Officer)
Dated: June 1, 1999 /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: June 1, 1999 /s/ Richard Sands
----------------------------------
Richard Sands, Director
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 1, 1999 CANANDAIGUA LIMITED
By: /s/ Robert Sands
----------------------------------
Robert Sands, Chief Executive
Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Dated: June 1, 1999 /s/ Robert Sands
----------------------------------
Robert Sands, Chief Executive
Officer and Director
(Principal Executive Officer)
Dated: June 1, 1999 /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, Finance Director
(Principal Financial Officer and
Principal Accounting Officer)
Dated: June 1, 1999 /s/ Richard Sands
----------------------------------
Richard Sands, Director
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 1, 1999 POLYPHENOLICS, INC.
By: /s/ Richard Keeley
----------------------------------
Richard Keeley, President
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Dated: June 1, 1999 /s/ Richard Keeley
----------------------------------
Richard Keeley, President and
Director (Principal Executive
Officer)
Dated: June 1, 1999 /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 1, 1999 ROBERTS TRADING CORP.
By: /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, President and
Treasurer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Dated: June 1, 1999 /s/ Thomas S. Summer
----------------------------------
Thomas S. Summer, President and
Treasurer (Principal Executive
Officer, Principal Financial
Officer and Principal Accounting
Officer)
Dated: June 1, 1999 /s/ Richard Sands
----------------------------------
Richard Sands, Director
Dated: June 1, 1999 /s/ Robert Sands
----------------------------------
Robert Sands, Director
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 1, 1999 BARTON INCORPORATED
By: /s/ Alexander L. Berk
----------------------------------
Alexander L. Berk, President and
Chief Executive Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Dated: June 1, 1999 /s/ Alexander L. Berk
----------------------------------
Alexander L. Berk, President,
Chief Executive Officer and
Director (Principal Executive
Officer)
Dated: June 1, 1999 /s/ Raymond E. Powers
----------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: June 1, 1999 /s/ Edward L. Golden
----------------------------------
Edward L. Golden, Director
Dated: June 1, 1999 /s/ William F. Hackett
----------------------------------
William F. Hackett, Director
Dated: June 1, 1999 /s/ Richard Sands
----------------------------------
Richard Sands, Director
Dated: June 1, 1999 /s/ Robert Sands
----------------------------------
Robert Sands, Director
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 1, 1999 BARTON BRANDS, LTD.
By: /s/ Edward L. Golden
----------------------------------
Edward L. Golden, President
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Dated: June 1, 1999 /s/ Edward L. Golden
----------------------------------
Edward L. Golden, President and
Director (Principal Executive
Officer)
Dated: June 1, 1999 /s/ Raymond E. Powers
----------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: June 1, 1999 /s/ Alexander L. Berk
----------------------------------
Alexander L. Berk, Director
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 1, 1999 BARTON BEERS, LTD.
By: /s/ Richard Sands
----------------------------------
Richard Sands, Chief Executive
Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Dated: June 1, 1999 /s/ Richard Sands
----------------------------------
Richard Sands, Chief Executive
Officer and Director (Principal
Executive Officer)
Dated: June 1, 1999 /s/ Raymond E. Powers
----------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: June 1, 1999 /s/ Alexander L. Berk
----------------------------------
Alexander L. Berk, Director
Dated: June 1, 1999 /s/ William F. Hackett
----------------------------------
William F. Hackett, Director
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 1, 1999 BARTON BRANDS OF CALIFORNIA, INC.
By: /s/ Alexander L. Berk
----------------------------------
Alexander L. Berk, President
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Dated: June 1, 1999 /s/ Alexander L. Berk
----------------------------------
Alexander L. Berk, President and
Director (Principal Executive
Officer)
Dated: June 1, 1999 /s/ Raymond E. Powers
----------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: June 1, 1999 /s/ Edward L. Golden
----------------------------------
Edward L. Golden, Director
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 1, 1999 BARTON BRANDS OF GEORGIA, INC.
By: /s/ Alexander L. Berk
----------------------------------
Alexander L. Berk, President
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Dated: June 1, 1999 /s/ Alexander L. Berk
----------------------------------
Alexander L. Berk, President and
Director (Principal Executive
Officer)
Dated: June 1, 1999 /s/ Raymond E. Powers
----------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: June 1, 1999 /s/ Edward L. Golden
----------------------------------
Edward L. Golden, Director
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 1, 1999 BARTON DISTILLERS IMPORT CORP.
By: /s/ Alexander L. Berk
----------------------------------
Alexander L. Berk, President
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Dated: June 1, 1999 /s/ Alexander L. Berk
-----------------------------------
Alexander L. Berk, President and
Director (Principal Executive
Officer)
Dated: June 1, 1999 /s/ Raymond E. Powers
----------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: June 1, 1999 /s/ Edward L. Golden
----------------------------------
Edward L. Golden, Director
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 1, 1999 BARTON FINANCIAL CORPORATION
By: /s/ Raymond E. Powers
----------------------------------
Raymond E. Powers, President
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Dated: June 1, 1999 /s/ Raymond E. Powers
----------------------------------
Raymond E. Powers, President,
Secretary and Director (Principal
Executive Officer)
Dated: June 1, 1999 /s/ Charles T. Schlau
----------------------------------
Charles T. Schlau, Treasurer and
Director (Principal Financial
Officer and Principal Accounting
Officer)
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 1, 1999 STEVENS POINT BEVERAGE CO.
By: /s/ James P. Ryan
----------------------------------
James P. Ryan, President and Chief
Executive Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Dated: June 1, 1999 /s/ James P. Ryan
----------------------------------
James P. Ryan, President, Chief
Executive Officer and Director
(Principal Executive Officer)
Dated: June 1, 1999 /s/ Raymond E. Powers
----------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: June 1, 1999 /s/ Alexander L. Berk
----------------------------------
Alexander L. Berk, Director
Dated: June 1, 1999 /s/ William F. Hackett
----------------------------------
William F. Hackett, Director
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 1, 1999 MONARCH IMPORT COMPANY
By: /s/ James P. Ryan
James P. Ryan, Chief Executive
Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Dated: June 1, 1999 /s/ James P. Ryan
----------------------------------
James P. Ryan, Chief Executive
Officer (Principal Executive
Officer)
Dated: June 1, 1999 /s/ Raymond E. Powers
----------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: June 1, 1999 /s/ Alexander L. Berk
----------------------------------
Alexander L. Berk, Director
Dated: June 1, 1999 /s/ William F. Hackett
----------------------------------
William F. Hackett, Director
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 1, 1999 THE VIKING DISTILLERY, INC.
By: /s/ Alexander L. Berk
----------------------------------
Alexander L. Berk, President
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Dated: June 1, 1999 /s/ Alexander L. Berk
----------------------------------
Alexander L. Berk, President and
Director (Principal Executive
Officer)
Dated: June 1, 1999 /s/ Raymond E. Powers
----------------------------------
Raymond E. Powers, Executive Vice
President, Treasurer, Assistant
Secretary and Director (Principal
Financial Officer and Principal
Accounting Officer)
Dated: June 1, 1999 /s/ Edward L. Golden
----------------------------------
Edward L. Golden, Director
|
INDEX TO EXHIBITS
2.1 Asset Purchase Agreement dated August 3, 1994 between the Company and Heublein, Inc. (filed as Exhibit 2(a) to the Company's Current Report on Form 8-K dated August 5, 1994 and incorporated herein by reference).
2.2 Amendment dated November 8, 1994 to Asset Purchase Agreement between Heublein, Inc. and the Company (filed as Exhibit 2.2 to the Company's Registration Statement on Form S-3 (Amendment No. 2) (Registration No. 33-55997) filed with the Securities and Exchange Commission on November 8, 1994 and incorporated herein by reference).
2.3 Amendment dated November 18, 1994 to Asset Purchase Agreement between Heublein, Inc. and the Company (filed as Exhibit 2.8 to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1994 and incorporated herein by reference).
2.4 Amendment dated November 30, 1994 to Asset Purchase Agreement between Heublein, Inc. and the Company (filed as Exhibit 2.9 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 1994 and incorporated herein by reference).
2.5 Asset Purchase Agreement among Barton Incorporated (a wholly-owned subsidiary of the Company), United Distillers Glenmore, Inc., Schenley Industries, Inc., Medley Distilling Company, United Distillers Manufacturing, Inc., and The Viking Distillery, Inc., dated August 29, 1995 (filed as Exhibit 2(a) to the Company's Current Report on Form 8-K, dated August 29, 1995 and incorporated herein by reference).
2.6 Recommended Cash Offer, by Schroders on behalf of Canandaigua Limited, a wholly-owned subsidiary of the Company, to acquire Matthew Clark plc (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K dated December 1, 1998 and incorporated herein by reference).
2.7 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).
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, 1998 and incorporated herein by reference).
3.2 Amended and Restated 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, 1998 and incorporated herein by reference).
4.1 Indenture, dated as of December 27, 1993, among the Company, its Subsidiaries and The Chase Manhattan Bank (as successor to Chemical Bank) (filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 1993 and incorporated herein by reference).
4.2 First Supplemental Indenture, dated as of August 3, 1994, among the Company, Canandaigua West, Inc. (a subsidiary of the Company now known as Canandaigua Wine Company, Inc.) and The Chase Manhattan Bank (as successor to Chemical Bank) (filed as Exhibit 4.5 to the Company's Registration Statement on Form S-8 (Registration No. 33-56557) and incorporated herein by reference).
4.3 Second Supplemental Indenture, dated August 25, 1995, among the Company, V Acquisition Corp. (a subsidiary of the Company now known as The Viking Distillery, Inc.) and The Chase Manhattan Bank (as successor to Chemical Bank) (filed as Exhibit 4.5 to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1995 and incorporated herein by reference).
4.4 Third Supplemental Indenture, dated as of December 19, 1997, among the Company, Canandaigua Europe Limited, Roberts Trading Corp. and The Chase Manhattan Bank (filed as Exhibit 4.4 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1998 and incorporated herein by reference).
4.5 Fourth Supplemental Indenture, dated as of October 2, 1998, among the Company, Polyphenolics, Inc. and The Chase Manhattan Bank (filed as Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 1998 and incorporated herein by reference).
4.6 Fifth Supplemental Indenture, dated as of December 11, 1998, among the Company, Canandaigua B.V., Canandaigua Limited and The Chase Manhattan Bank (filed herewith).
4.7 Indenture with respect to the 8 3/4% Series C Senior Subordinated Notes due 2003, dated as of October 29, 1996, among the Company, its Subsidiaries and Harris Trust and Savings Bank (filed as Exhibit 4.2 to the Company's Registration Statement on Form S-4 (Registration No. 333-17673) and incorporated herein by reference).
4.8 First Supplemental Indenture, dated as of December 19, 1997, among the Company, Canandaigua Europe Limited, Roberts Trading Corp. and Harris Trust and Savings Bank (filed as Exhibit 4.6 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1998 and incorporated herein by reference).
4.9 Second Supplemental Indenture, dated as of October 2, 1998, among the Company, Polyphenolics, Inc. and Harris Trust and Savings Bank (filed as Exhibit 4.8 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 1998 and incorporated herein by reference).
4.10 Third Supplemental Indenture, dated as of December 11, 1998, among the Company, Canandaigua B.V., Canandaigua Limited and Harris Trust and Savings Bank (filed herewith).
4.11 First Amended and Restated Credit Agreement, dated as of November 2, 1998, between the Company, its principal operating subsidiaries, and certain banks for which The Chase Manhattan Bank acts as Administrative Agent (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated December 1, 1998 and incorporated herein by reference).
4.12 Indenture with respect to 8 1/2% Senior Subordinated Notes due 2009, dated as of February 25, 1999, among the Company, as issuer, its principal operating subsidiaries, as Guarantors, and Harris Trust and Savings Bank, as Trustee (filed as Exhibit 99.1 to the Company's Current Report on Form 8-K dated February 25, 1999 and incorporated herein by reference).
4.13 Supplemental Indenture No. 1, dated as of February 25, 1999, by and among the Company, as Issuer, its principal operating subsidiaries, as Guarantors, and Harris Trust and Savings Bank, as Trustee (filed as Exhibit 99.2 to the Company's Current Report on Form 8-K dated February 25, 1999 and incorporated herein by reference).
10.1 Barton Incorporated Management Incentive Plan (filed as Exhibit 10.6 to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1993 and incorporated herein by reference).
10.2 Marvin Sands Split Dollar Insurance Agreement (filed as Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1993 and incorporated herein by reference).
10.3 Letter agreement, effective as of October 7, 1995, as amended, addressing compensation, between the Company and Daniel Barnett (filed as Exhibit 10.23 to the Company's Transition Report on Form 10-K for the Transition Period from September 1, 1995 to February 29, 1996 and incorporated herein by reference).
10.4 Employment Agreement between Barton Incorporated and Alexander L. Berk dated as of September 1, 1990 as amended by Amendment No. 1 to Employment Agreement between Barton Incorporated and Alexander L. Berk dated November 11, 1996 (filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1998 and incorporated herein by reference).
10.5 Amendment No. 2 to Employment Agreement between Barton Incorporated and Alexander L. Berk dated October 20, 1998 (filed herewith).
10.6 First Amended and Restated Credit Agreement, dated as of November 2, 1998, between the Company, its principal operating subsidiaries, and certain banks for which The Chase Manhattan Bank acts as Administrative Agent (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated December 1, 1998 and incorporated herein by reference).
10.7 Long-Term Stock Incentive Plan, which amends and restates the Canandaigua Wine Company, Inc. Stock Option and Stock Appreciation Right Plan (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 1997 and incorporated herein by reference).
10.8 Amendment Number One to the Long-Term Stock Incentive Plan of the Company (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 1997 and incorporated herein by reference).
10.9 Incentive Stock Option Plan of the Company (filed as Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 1997 and incorporated herein by reference).
10.10 Amendment Number One to the Incentive Stock Option Plan of the Company (filed as Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 1997 and incorporated herein by reference).
10.11 Annual Management Incentive Plan of the Company (filed as Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 1997 and incorporated herein by reference).
10.12 Amendment Number One to the Annual Management Incentive Plan of the Company (filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1998 and incorporated herein by reference).
10.13 Lease, effective December 25, 1997, by and among Matthew Clark Brands Limited and Pontsarn Investments Limited (filed herewith).
10.14 Supplemental Executive Retirement Plan of the Company (filed herewith).
11.1 Statement re Computation of Per Share Earnings (filed herewith).
18.1 Letter re Change in Accounting Principles (filed herewith).
21.1 Subsidiaries of Company (filed herewith).
23.1 Consent of Arthur Andersen LLP (filed herewith).
27.1 Financial Data Schedule for fiscal year ended February 28, 1999 (filed herewith).
27.2 Restated Financial Data Schedule for the fiscal quarter ended November 30, 1998 (filed herewith).
27.3 Restated Financial Data Schedule for the fiscal quarter ended August 31, 1998 (filed herewith).
27.4 Restated Financial Data Schedule for the fiscal quarter ended May 31, 1998 (filed herewith).
27.5 Restated Financial Data Schedule for the fiscal year ended February 28, 1998 (filed herewith).
27.6 Restated Financial Data Schedule for the fiscal quarter ended November 30, 1997 (filed herewith).
27.7 Restated Financial Data Schedule for the fiscal quarter ended August 31, 1997 (filed herewith).
27.8 Restated Financial Data Schedule for the fiscal quarter ended May 31, 1997 (filed herewith).
27.9 Restated Financial Data Schedule for the fiscal year ended February 28, 1997 (filed herewith).
99.1 1989 Employee Stock Purchase Plan of the Company, as amended by Amendment Number 1 through Amendment Number 5 (filed as Exhibit 99.1 to the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1998 and incorporated herein by reference).
99.2 Amendment Number 6 to the 1989 Employee Stock Purchase Plan of the Company (filed herewith).
FIFTH SUPPLEMENTAL INDENTURE (the "Supplement"), dated as of December 11, 1998, is entered into by and among CANANDAIGUA BRANDS, INC. (formerly known as Canandaigua Wine Company, Inc.), a Delaware corporation (the "Company"), and CANANDAIGUA BV, a private company with limited liability incorporated under the laws of the Netherlands, and CANANDAIGUA LIMITED, a corporation formed under the laws of England and Wales, both wholly owned subsidiaries of the Company (individually and collectively the "New Guarantor"), and THE CHASE MANHATTAN BANK, a New York banking corporation, as Trustee (the "Trustee").
RECITALS OF THE COMPANY AND THE NEW GUARANTOR
WHEREAS, the Company, the Guarantors and the Trustee have executed and delivered an Indenture, dated as of December 27, 1993, as supplemented, among the Company, the Guarantors and the Trustee (the "Indenture") providing for the issuance by the Company of $130,000,000 aggregate principal amount of the Company's 8 3/4% Senior Subordinated Notes due 2003 (the "Securities") and pursuant to which the Guarantors have agreed to guarantee, jointly and severally, the full and punctual payment and performance when due of all Indenture Obligations.
WHEREAS, the New Guarantors has become a Subsidiary and pursuant to Section 1014(b) of the Indenture are obligated to enter into the Supplement thereby guaranteeing the punctual payment and performance when due of all Indenture Obligations;
WHEREAS, pursuant to Section 901(e) of the Indenture, the Company, the New Guarantor and the Trustee may enter into this Supplement without the consent of any Holder;
WHEREAS, the execution and delivery of this Supplement have been duly authorized by a Board Resolution of the respective Boards of Directors of the Company and the New Guarantor; and
WHEREAS, all conditions and requirements necessary to make the Supplement valid and binding upon the Company and the New Guarantor, and enforceable against the Company and the New Guarantor in accordance with its terms, have been performed and fulfilled;
NOW, THEREFORE, in consideration of the above premises, each of the parties hereto agrees, for the benefit of the others and for the equal and proportionate benefit of the Holders of the Securities, as follows:
ARTICLE ONE
THE NEW GUARANTEE
Section 1.01. For value received, the New Guarantor, in accordance with Article Fourteen of the Indenture, hereby absolutely, unconditionally and irrevocably guarantees (the "New Guarantee"), jointly and severally among itself and the Guarantors, to the Trustee and the Holders, as if the New Guarantor was the principal debtor, the punctual payment and
performance when due of all Indenture Obligations (which for purposes of the New Guarantee shall also be deemed to include all commissions, fees, charges, costs and other expenses (including reasonable legal fees and disbursements of one counsel) arising out of or incurred by the Trustee or the Holders in connection with the enforcement of the New Guarantee). The agreements made and obligations assumed hereunder by the New Guarantor shall constitute and shall be deemed to constitute a Guarantee under the Indenture and for all purposes of the Indenture, and the New Guarantor shall be considered a Guarantor for all purposes of the Indenture as if it was originally named therein as a Guarantor.
Section 102. The New Guarantee shall be automatically and unconditionally released and discharged upon the occurrence of the events set forth in Section 1014(c) of the Indenture.
Section 103. The New Guarantor hereby waives and will not in any manner whatsoever, claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Subsidiary as a result of any payment by such New Guarantor under its Guarantee under the Indenture.
ARTICLE TWO
MISCELLANEOUS
Section 201. Except as otherwise expressly provided or unless the context otherwise requires, all terms used herein which are defined in the Indenture shall have the meanings assigned to them in the Indenture. Except as supplemented hereby, the Indenture (including the Guarantees incorporated therein) and the Securities are in all respects ratified and confirmed and all the terms and provisions thereof shall remain in full force and effect.
Section 202. This Supplement shall be effective as of the close of business on the date hereof.
Section 203. The recitals contained herein shall be taken as the statements of the Company and the New Guarantor, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Supplement.
Section 204. This Supplement shall be governed by and construed in accordance with the laws of the jurisdiction which govern the Indenture and its construction.
Section 2.05. This Supplement may be executed in any number of counterparts each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be duly executed and their respective seals to be affixed hereunto and duly attested all as of the day and year first above written.
CANANDAIGUA BRANDS, INC.
[Corporate Seal] By: /s/ Thomas S. Summer
-------------------------
Name: Thomas S. Summer
Title: Senior Vice President
Attest:
/s/ David S. Sorce
---------------------------
Title: Assistant Secretary
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CANANDAIGUA BV
[Corporate Seal] By: /s/ Thomas S. Summer
-------------------------
Name: Thomas S. Summer
Title: Authorized Attorney
for Managing Director
Attest:
|
CANANDAIGUA LIMITED
[Corporate Seal] By: /s/ Thomas S. Summer
-------------------------
Name: Thomas S. Summer
Title: Director
Attest:
/s/ David S. Sorce
---------------------------
Title: Secretary
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THE CHASE MANHATTAN BANK
[Corporate Seal] By: /s/ James D. Heaney
-------------------------
Name: James D. Heaney
Title: (Vice President)
Attest:
/s/ Signature Illegible
--------------------------
Title: Senior Trust Officer
|
THIRD SUPPLEMENTAL INDENTURE (the "Supplement"), dated as of December 11, 1998, is entered into by and among CANANDAIGUA BRANDS, INC. (formerly known as Canandaigua Wine Company, Inc.), a Delaware corporation (the "Company"), and CANANDAIGUA BV, a private company with limited liability incorporated under the laws of the Netherlands, and CANANDAIGUA LIMITED, a corporation formed under the laws of England and Wales, both wholly owned subsidiaries of the Company (individually and collectively the "New Guarantor"), and HARRIS TRUST AND SAVINGS BANK , as Trustee (the "Trustee").
RECITALS OF THE COMPANY AND THE NEW GUARANTOR
WHEREAS, the Company, the Guarantors and the Trustee have executed and delivered an Indenture, dated as of October 29, 1996, as supplemented, among the Company, the Guarantors and the Trustee (the "Indenture") providing for the issuance by the Company of $65,000,000 aggregate principal amount of the Company's 8 3/4% Senior Subordinated Notes due 2003 (the "Securities") and pursuant to which the Guarantors have agreed to guarantee, jointly and severally, the full and punctual payment and performance when due of all Indenture Obligations.
WHEREAS, the New Guarantor has become a Subsidiary and pursuant to Section 1014(b) of the Indenture is obligated to enter into the Supplement thereby guaranteeing the punctual payment and performance when due of all Indenture Obligations;
WHEREAS, pursuant to Section 901(e) of the Indenture, the Company, the New Guarantor and the Trustee may enter into this Supplement without the consent of any Holder;
WHEREAS, all conditions and requirements necessary to make the Supplement valid and binding upon the Company and the New Guarantor, and enforceable against the Company and the New Guarantor in accordance with its terms, have been performed and fulfilled;
NOW, THEREFORE, in consideration of the above premises, each of the parties hereto agrees, for the benefit of the others and for the equal and proportionate benefit of the Holders of the Securities, as follows:
ARTICLE ONE
THE NEW GUARANTEE
Section 1.01. For value received, the New Guarantor, in accordance with Article Fourteen of the Indenture, hereby absolutely, unconditionally and irrevocably guarantees (the "New Guarantee"), jointly and severally among itself and the Guarantors, to the Trustee and the Holders, as if the New Guarantor was the principal debtor, the punctual payment and performance when due of all Indenture Obligations (which for purposes of the New Guarantee shall also be deemed to include all commissions, fees, charges, costs and other expenses (including reasonably legal fees and disbursements of one counsel) arising out of or incurred by the Trustee or the Holders in connection with the enforcement of this New Guarantee). The
agreements made and obligations assumed hereunder by the New Guarantor shall constitute and shall be deemed to constitute a Guarantee under the Indenture and for all purposes of the Indenture as if it was originally named therein as a Guarantor.
Section 102. The New Guarantee shall be automatically and unconditionally released and discharged upon the occurrence of the events set forth in Section 1014(c) of the Indenture.
Section 103. The New Guarantor hereby waives and will not in any manner whatsoever, claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Subsidiary as a result of any payment by such Subsidiary under its Guarantee under the Indenture.
ARTICLE TWO
MISCELLANEOUS
Section 201. Except as otherwise expressly provided or unless the context otherwise requires, all terms used herein which are defined in the Indenture shall have the meanings assigned to them in the Indenture. Except as supplemented hereby, the Indenture (including the Guarantees incorporated therein) and the Securities are in all respects ratified and confirmed and all the terms and provisions thereof shall remain in full force and effect.
Section 202. This Supplement shall be effective as of the close of business on the date hereof.
Section 203. The recitals contained herein shall be taken as the statements of the Company and the New Guarantor, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Supplement.
Section 204. This Supplement shall be governed by and construed in accordance with the laws of the jurisdiction which govern the Indenture and its construction.
Section 2.05. This Supplement may be executed in any number of counterparts each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be duly executed and their respective seals to be affixed hereunto and duly attested all as of the day and year first above written.
CANANDAIGUA BRANDS, INC.
[Corporate Seal] By: /s/ Thomas S. Summer
-------------------------
Name: Thomas S. Summer
Title: Senior Vice President
Attest:
/s/ David S. Sorce
---------------------------
Title: Assistant Secretary
|
CANANDAIGUA BV
[Corporate Seal] By: /s/ Thomas S. Summer
-------------------------
Name: Thomas S. Summer
Title: Authorized Attorney
for Managing Director
Attest:
/s/ David S. Sorce
----------------------------
Title:
|
CANANDAIGUA LIMITED
[Corporate Seal] By: /s/ Thomas S. Summer
-------------------------
Name: Thomas S. Summer
Title: Director
Attest:
/s/ David S. Sorce
----------------------------
Title: Secretary
|
HARRIS TRUST AND SAVINGS BANK
[Corporate Seal] By: /s/ J. Bartolini
-------------------------
Name: J. Bartolini
Title: Vice President
Attest:
/s/ Signature Illegible
---------------------------
Title: Assistant Secretary
|
AMENDMENT NO. 2 TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT (this "Amendment") dated October 20, 1998 is by and between BARTON INCORPORATED, a Delaware corporation (the "Company"), and ALEXANDER L. BERK (the "Employee").
WHEREAS, the Company and Employee are parties to that certain Employment Agreement dated September 1, 1990 (as amended by Amendment No. 1 to Employment Agreement dated November 11, 1996, the "Agreement"), and desire to further amend the Agreement on the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Position and Duties. Paragraph 2 of the Agreement is hereby deleted in its entirety and the following inserted therefor:
"Employee shall serve as the President and Chief Executive Officer of the Company and as a member of the boards of directors of the Company and its principal subsidiaries, and as a member of the Company's Management Committee. The Employee shall report and be responsible directly to the Chief Executive Officer of Canandaigua Brands, Inc. ("CBI"), with such powers and duties consistent with his offices as may from time to time be authorized or directed by CBI's Chief Executive Officer. Employee shall devote his full-time services to the employment provided for herein. All services and duties of Employee rendered hereunder shall be performed faithfully, diligently and competently and to the highest standards of loyalty."
2. No Further Modifications. Except as specifically set forth herein, the Agreement shall remain in full force and unaffected hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written.
COMPANY: EMPLOYEE:
BARTON INCORPORATED /s/ Alexander L. Berk
------------------------------
Alexander L. Berk
/s/ Richard Sands
-------------------------------
Richard Sands
Vice President
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PONTSARN INVESTMENTS LIMITED
- to -
MATTHEW CLARK BRANDS LIMITED
- and -
MATTHEW CLARK PC
UNDERLEASE
- of -
Premises situate at
Plot 2000 Severnside Distribution Park
Western Approach, Bristol
Term commences: 25th December 1997 Term of years: 25 years Term expires: 24th December 2022 Annual rent: [poundsymbol]1,550,000 (Subject to increase) |
Nabarro Nathanson 50 Stratton Street London W1X 6NX
Tel: 0171 493 9933
PARTICULARS
1. DATE Thirty First December 1997
2. LANDLORD AND TENANT NEW LEASE COVENANTS) ACT 1995
3. LANDLORD PONTSARN INVESTMENTS LIMITED whose registered office is at Knighton House, 56 Mortimer Street, London W1N 8BD.
4. TENANT MATTHEW CLARK BRANDS LIMITED whose registered office is at Whitchurch Lane, Bristol BS14 OJZ Company Registration Number 137407.
5. SURETY MATTHEW CLARK PLC whose registered office is at Whitchurch Lane aforesaid Company Registration Number 163952.
6. THE DEMISED PREMISES The Premises known as Plot 2000 Western Approach Distribution Centre, Bristol more particularly described in Part I of the First Schedule hereto.
7. DATE OF COMMENCEMENT 25th December 1997.
OF TERM
8. LENGTH OF TERM 25 years.
9. INITIAL RENT ONE MINION FIVE HUNDRED AND
FIFTY THOUSAND POUNDS
[pound symbol] 1,550,000
per annum.
10. RENT COMMENCEMENT DATE The date six months after the date hereof.
11. RENT REVIEW DATE(S) Every fifth anniversary of the Date of Commencement of Term.
12. SPECIFIED USER Use as a distribution centre and/or for storage or any other purpose within Class B8 of Part B of the Schedule to the Town & Country Planning (Use Classes) Order 1987 (hereinafter called "Class B8") including (as ancillary thereto) the right to use areas of the Demised Premises which are not built upon
for storage purposes; and/or (but only after 6 May 2007 or such later date as and when the transfer of the freehold to the Landlord has occurred and as is provided for by such transfer) for any use or purpose specified in Class B2 of Part B of the Schedule to the Town & Country Planning (Use Classes) Order 1987 (meaning - in both the aforementioned cases - only the said Order and not any modification or re-enactment thereof).
13. BREAK DATE 25th December 2017.
CONTENTS
Page
2. DEMISE ...............................................................5
3. TENANT'S COVENANTS ...................................................6
To pay rents................................................................6 To pay outgoings............................................................6 To repair...................................................................7 Decoration..................................................................7 Maintaining plant and fittings..............................................7 Not to overcrowd............................................................8 Comply with Statutory Requirements..........................................8 To comply with the Planning Acts............................................9 To permit the Landlord to enter............................................10 Not to obstruct............................................................11 Not to make alterations....................................................11 Not to erect signs.........................................................14 Not to allow acquisition of easements......................................14 General obligations regarding insurance....................................14 Restrictions on user.......................................................15 User ..................................................................16 Alienation.................................................................16 Registration of Assignments etc............................................20 To permit display of notices for disposal..................................20 To inform the Landlord of notices and claims...............................20 Defective Premises Act 1972................................................20 Drainage ..................................................................20 Electrical installations...................................................20 To permit building on adjoining land.......................................21 Electronic equipment.......................................................21 Indemnity..................................................................21 To yield up................................................................21 Interest on arrears........................................................22 To pay Landlord's Expenses.................................................22 VAT ..................................................................22 Notices ...................................................................23 Guarantor..................................................................23 Superior Interests.........................................................24 Continuation of Lease......................................................24 Covenants in Freehold Title................................................24 |
4. LANDLORD'S COVENANTS................................................ 25
Quiet Enjoyment............................................................25
To insure..................................................................25
Superior Lease Rents.......................................................26
Services ..................................................................26
Highway Adoption...........................................................26
The Option Deed............................................................27
5. PROVISO..............................................................27
Proviso for re-entry.......................................................27
Proviso for cesser of rent.................................................28
Exclusion of Landlord's Liability..........................................28
Rights Easements etc.......................................................28
Service of notices.........................................................29
No warranty as to planning.................................................29
Tenant's goods left in Demised Premises....................................29
Statutory Compensation.....................................................29
Disputes between Landlord and Tenant.......................................29
Tenant's Option to Determine...............................................30
Failure to Repair Obligations..............................................30
Landlord and Tenant (Covenants) Act 1995...................................30
Headlease..................................................................30
Interpretation.............................................................31
Headings ..................................................................31
6. SURETY COVENANT......................................................31
THE FIRST SCHEDULE
PART I...............................................................32
PART II..............................................................32
PART III.............................................................34
THE SECOND SCHEDULE Rent Review .............................................36
THE THIRD SCHEDULE Form of Surety Covenant..................................41
THE FIFTH SCHEDULE (Tenant's Works disregarded on review) ..................46
|
THIS LEASE is made on the date stated in the Particulars.
BETWEEN the Landlord specified in the Particulars (hereinafter called the "LANDLORD") of the first part and the Tenant specified in the Particulars (hereinafter called the "TENANT") of the second part and the Surety specified in the Particulars (hereinafter called the "SURETY") of the third part.
NOW THIS DEED WITNESSETH AS FOLLOWS:
1.1 In this Deed the following expressions shall have where the context so admits the following meanings respectively:
"ADJOINING PREMISES"
means the parts of the Estate excluding the Demised Premises
"CODE"
means the Code of Measurement Practice (current edition as at the date reference requires to be made to it) produced jointly by the Royal Institution of Chartered Surveyors and the Institute of Valuers and Auctioneers (or if replaced, any successor document)
"CONDUIT"
means any conducting medium or other thing by means of which any facility service or substance may pass
"CONNECTION"
means the surface water drain or drains constructed or to be constructed from the Demised Premises as shown for the purpose of identification only coloured blue on Plan Number 1 into the rhine lying on the Adjoining Premises to the north west of the Demised Premises (such surface water drain or drains being located directly opposite the existing outfalls into such rhine on the Adjoining Premises to the north west of the Demised Premises)
"ESTATE"
means Severnside Distribution Park Bristol Avon shown for identification only edged blue on Plan Number 2 together with any additions or alterations or extensions thereof
"HEADLEASE"
means the Lease dated 6th May 1997 made between Imperial Chemical Industries PLC and the Tenant the term of which is (as at the date hereof) vested in the Landlord
"HEALTH AND SAFETY LAW"
means any Act, approved Code of Practice issued by the Health and Safety Commission and any directive regulation or other law of the European Union concerning:
(a) the health, safety and welfare of the Tenant's employees,
(b) the health, safety and welfare of persons other than the Tenant's employees who are exposed to risks to their health and safety, arising out of or in connection with the Tenant's undertaking at the Demised Premises,
(c) the control, keeping use and transport of explosive, highly flammable or dangerous substances or substances hazardous to human health
"MANAGEMENT DEED"
means the Deed of Covenant dated 6th May 1997 between
Severnside Distribution Park (Bristol) Management Ltd (the
"Management Company") (1) and Imperial Chemical Industries PLC
(2) and/or any supplemental deed entered into by the Landlord
having reference to the same subject matter (and not being a
deed which directly or indirectly varies in a manner adverse
to the Tenant the rights and obligations passed to the Tenant
by this Lease) and any renewal of the Deed of Covenant entered
into between the Management Company and the Landlord on the
Landlord acquiring the freehold to the Demised Premises.
"OPTION DEED"
means the Option Deed dated 6th May 1997 made between Imperial Chemical Industries PLC (1) and the Tenant (2) (including any supplemental document thereto created for the purpose of making the terms thereof binding upon the Landlord)
"PARTICULARS"
means the details and descriptions appearing in the pages which precede the Contents pages of this Lease and comprising part of this Deed
"PERMITTED PART"
means a self contained part of the Demised Premises (which if separated from the balance of the Demised Premises - excluding any other areas already comprising Permitted Parts - would leave such balance as a self contained premises) comprising not less than 75,000 square feet gross internal area measured in accordance with the Code
"PLANS"
means the plans annexed hereto and "Plan No. 1" and "Plan No.
2" shall be construed accordingly
"PLANT"
means all (if any) lifts boilers central heating refrigeration air conditioning and ventilation plant apparatus communications special installations hot and cold water and drinking water installations and boosting pumps sprinkler systems and other fire prevention and fire fighting equipment fire smoke and security alarms cameras and systems smoke extraction systems lighting and lightning protection installations standby generators automatic controls and any other electrical and mechanical equipment now or hereafter in or serving the Demised Premises
"RENT"
means the Initial Rent or such other Rent as may become reserved or payable in accordance with the provisions of the Second Schedule hereto
"RENTS"
means the aggregate of the rent first reserved and all other sums whatsoever as become payable by the Tenant to the Landlord under the provisions of this Lease
"SERVICE CHARGE"
means the payments due from the Landlord by way of Service Rent (as defined in and payable under the Headlease) while the Headlease remains in force and thereafter the payments due pursuant to the Management Deed (or any variation or replacement thereof so far as it deals with the same matters or with provision of services for the benefit of the Demised Premises)
"SERVICES"
means the Services to be provided by the Management Company pursuant to the Management Deed
"SERVICE CORRIDOR"
means the strip of land forming part of the Estate adjacent to
the carriageway on the Estate road shown for the purposes of
identification only coloured green on plan no. 2 which is
comprised within the land to be adopted pursuant to the
agreement dated 18 March 1996 made between Avon County Council
(1) and Imperial Chemical Industries Plc (2) under (inter
alia) Section 38 of the Highways Act 1980
"SUPERIOR LANDLORD"
means the person in whom the reversionary interest in the Headlease is vested (from time to time)
"SUPPLEMENTAL DOCUMENT"
means any deed agreement licence memorandum letter or other document which in any way varies this Lease or which is or become supplemental to this Lease whether or not expressed to be so
"TERM"
means the term described in the Particulars which where applicable shall include the period of any holding over or any extension or continuance thereof whether by statute or at common law
"TERMINATION DATE"
means the date of expiration or sooner determination of the Term
"VAT"
means Value Added Tax or any similar tax from time to time replacing it or performing a similar fiscal function
"VAT ACT"
means references to the VAT Act include the Value Added Tax Act 1994 any other statutes concerned with VAT as amended from time to time any Act from time to time replacing re-enacting or consolidating the same any regulations made pursuant to the same and any directives and regulations adopted by the Council of the European Communities which relate to VAT
"VAT ELECTION"
means an election made by any person under paragraph 2 of Schedule 10 to the VAT Act which has the effect of a waiver of exemption on any VAT Supply made by the Landlord or by the representative member of any VAT Group of which the Landlord is a member in relation to the Demised Premises
"VAT GROUP"
means a group of companies within the meaning of Section 43 of the VAT Act
"VAT SUPPLY"
the meaning which "supply" has for the purpose of the VAT Act and any reference to a VAT Supply by or to any person shall include a reference to a
supply by or to the representative member of any VAT Group of which the person is a member
1.2 INCLUSION OF PARTICULARS
In this Lease the details and descriptions appearing in the Particulars shall be included in the Lease and form part of the Deed and shall in this Lease where the context so admits have the meanings ascribed hereto in the Particulars
2. DEMISE
2.1 In consideration of the rents covenants and conditions hereinafter
reserved and contained, the Landlord HEREBY DEMISES unto the Tenant ALL
THOSE the Demised Premises EXCEPT AND RESERVED unto the Landlord and
any other persons entitled thereto the rights set out in Part II of the
First Schedule hereto and TOGETHER WITH the rights set out in Part III
of the First Schedule
2.2 TO HOLD the Demised Premises unto the Tenant for the Length of Term
commencing on the Date of Commencement of Term
2.3 SUBJECT TO all rights easements privileges restrictions and
stipulations of whatever nature appertaining to or affecting the
Demised Premises
2.4 YIELDING AND PAYING therefor unto the Landlord yearly during the Term
and so in proportion for any less time than a year:
2.4.1 FIRST during the Term commencing from and including the Rent
Commencement Date:
(a) the Initial Rent or (if higher)
(b) such other rent or rents as become payable under and by virtue
of the provisions of the Second Schedule hereto
to be paid clear of all deductions by equal quarterly payments in
advance on the usual quarter days in every year (by banker's order if
the Landlord so requires) the first payment to be for the period
commencing on the Rent Commencement Date to the day immediately
preceding the next usual quarter day next following such date and to be
made on the Rent Commencement Date
2.4.2 SECONDLY by way of further and additional rent the whole of the yearly
sum which the Landlord shall from time to time pay by way of premium or
premiums for keeping the Demised Premises and all fixtures therein
(excluding (unless the Landlord elects otherwise) any tenant's or trade
fixtures or alterations) insured in the full reinstatement value
thereof including (without limitation) allowance for inflation in
building costs demolition and site clearance expenses for temporary
support and protection of any building cost of compliance with local
authority requirements Architects' fees and Quantity Surveyors' fees
and other incidental expenses and (if the Landlord in its reasonable
discretion from time to time sees fit) VAT on all matters hereinbefore
referred
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to whether or not the Landlord has made a VAT Election against loss or
damage by fire storm tempest lightning explosion or aircraft (not being
hostile aircraft) and things dropped therefrom and against such other
Insurable Risk or risks as the Landlord may from time to time deem
prudent (all such risks being hereinafter called the "INSURED RISKS")
and the premium or premiums which the Landlord shall from time to time
pay for insuring loss of the Rent payable under this Lease (having
regard to any review of the Rent which may become due under this Lease)
for three years such further rent in each case to be payable from the
date hereof and to be paid in each year on demand
2.4.3 THIRDLY with effect from the Date of Commencement of Term as additional
yearly rent the Service Charge payable in accordance with Schedule 4
2.4.4 FOURTHLY by way of further and additional rent (but without prejudice
to any other right remedy or power herein contained or otherwise
available to the Landlord) all such sum or sums as may become payable
by the Tenant to the Landlord under the provisions of this Lease
(including interest and VAT) such sum or sums to be paid on the
relevant dates provided for in this Lease or (if not so provided for)
upon demand
2.4.5 FIFTHLY as additional rent interest (calculated in accordance with
clause 3.29 below) payable on demand on any sum of whatsoever nature
due from the Tenant to the Landlord (whether as rent or otherwise)
which shall not be received by the Landlord within fourteen days of the
date the sum is due
3. TENANT'S COVENANTS
3.1 TO PAY RENTS
To pay the respective rents hereby reserved on the days and in the
manner aforesaid clear of any legal or equitable set-off or any other
deductions whatsoever
3.2 TO PAY OUTGOINGS
3.2.1 To pay all existing and future rates taxes charges assessments
outgoings and impositions whether parliamentary parochial or otherwise
assessed charged or imposed upon or in respect of the Demised Premises
or upon the owner or occupier in respect thereof
3.2.2 To pay and indemnify the Landlord against all rates taxes duties
charges assessments impositions and outgoings which are or become
payable by the Landlord as a result of the Demised Premises being
vacant at a date prior to the Termination Date and the Tenant's
obligations under this sub-clause shall remain in force following the
Termination Date
3.2.3 To pay or in the absence of direct assessment on the Demised Premises
to repay to the Landlord the proportion properly attributable to the
Demised Premises (such proportion to be determined by the Landlord's
surveyor whose decision shall be conclusive) on demand all charges in
respect of gas electricity steam soil water telephone electrical
impulses and other services supplied to or consumed in the Demised
Premises
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3.3 TO REPAIR
3.3.1 To repair and keep in good and substantial repair and condition and to
maintain and decorate the Demised Premises and all additions thereto
(damage by any of the Insured Risks excepted save to the extent that
the policy or policies of insurance shall have been vitiated or payment
of any of the policy moneys withheld or refused in whole or in part by
reason of any act neglect or default of the Tenant or any underlessee
or any of their respective servants agents licensees or invitees) and
in particular but without prejudice to the generality of the foregoing
to clean all open or landscaped areas and to keep the Demised
Premises
in a clean and tidy condition
3.3.2 To pay on written demand to the Landlord or to whomsoever it may direct
a fair proportion (to be reasonably assessed by the Landlord's
surveyor) of the costs of repairing, maintaining and replacing all
party walls fences and gutters and other party structures and all
sewers drains pipes wires and cables which serve the Demised Premises
in common with other Premises
3.3.3 Where the Tenant shall fail to leave the Demised Premises in the
condition referred to in this Clause 3.3 on the Termination Date the
Landlord may do or effect all such repairs maintenance and decoration
for which the Tenant shall be liable hereunder and the proper costs
thereof shall be paid by the Tenant to the Landlord on demand and the
Tenant will also pay to the Landlord mesne profits at the rate of the
Open Market Rent on the day immediately after the Termination Date (and
which shall be ascertained in accordance with the provisions of the
Second Schedule hereto) during the period reasonably required for the
carrying out of such works and the amount of such mesne profits shall
be added to the cost of carrying out such works as aforesaid and shall
also be paid on demand
3.3.4 To keep any part of the Demised Premises which may not be built upon
adequately surfaced in good condition swept clean and all landscaped
areas properly cultivated and free from weeds and to ensure all grassed
areas are mown as and when necessary so that the same shall have a neat
and tidy appearance at all times.
3.4 DECORATION
3.4.1 During the fifth year every fifth year thereafter and in the last year
of the Term (howsoever determined) to paint in a proper and workmanlike
manner with two coats at least of best quality paint all parts usually
painted of the Demised Premises and all additions thereto and after
each internal painting to redecorate with high quality materials all
such parts of the interior of the Demised Premises as have been
previously so dealt with and so often as in the reasonable opinion of
the Landlord may be necessary and in any event during the last six
months of the Term (howsoever determined) to clean all external
surfaces of the Demised Premises and to repoint any brickwork
3.5 MAINTAINING PLANT AND FITTINGS
To keep the Landlord's Plant machinery fixtures and fittings now or at
any time during the Term in or upon any part of the Demised Premises in
good working order repair and condition and from time to time (when
beyond repair or when reasonable so to do) to
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replace the same or any of them by suitable articles or equipment of similar and modern kind and equal value to the reasonable satisfaction of the Landlord and (without limitation) immediately prior to the Termination Date if reasonably necessary to renew all carpets and suspended ceilings in any offices areas within the Demised Premises
3.6 NOT TO OVERCROWD
Without prejudice to any other provisions of this Lease not to permit to be working in the Demised Premises at any time such a number of persons that the requirements as to sanitary conveniences and washing facilities contained in or imposed under the Offices Shops and Railway Premises Act 1963 or any Act amending or replacing that Act will not be complied with and at all times to comply with the provisions of or made under the said Act or other Acts in respect of such conveniences and facilities
3.7 COMPLY WITH STATUTORY REQUIREMENTS
3.7.1 In this Clause the following expression bears the following meaning
namely "ACT OF PARLIAMENT" means every Act of Parliament that may be
relevant to the Demised Premises its use or anything or any person
thereon at any time including (without limitation) every Act of
Parliament whether in force at the date hereof or not any subsequent
statutory re-enactment or modification of any Act of Parliament and any
order regulation directive (including European Union directives and
regulations) bye-law rule consent or licence made or granted under any
Act of Parliament or by any European Union legislative body or any
other Public or Local Authority (acting in its official capacity) or by
any Court of competent jurisdiction and any reference to a specific Act
of Parliament shall be construed accordingly
3.7.2 At all times during the Term:
(a) to observe and comply in all respects with the provisions and
requirements of every Act of Parliament so far as they relate
to or affect the Demised Premises or any additions or
improvements thereto or the user thereof for the purposes of
any manufacture process trade or business or the employment
therein of any person or persons or any fixtures machinery
plant or chattels for the time being thereon or used for the
purposes thereof and
(b) to execute all works and provide and maintain all arrangements
which by or under any Act of Parliament are or may be directed
or required to be executed and maintained at any time during
the Term upon or in respect of the Demised Premises or any
additions or improvements thereto or in respect of any user
thereof or employment therein of any person or persons or
fixtures, machinery plant or chattels as aforesaid whether by
the landlord or tenant thereof
(c) to indemnify the Landlord against all costs charges and
expenses of or incidental to the execution of any works or the
provision or maintenance of any arrangements so directed or
required as aforesaid and not at any time during the Term to
do omit or suffer to be done or omitted on or about the
Demised Premises
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any act or thing by reason of which the Landlord may become
liable to pay any penalty damages compensation costs charges
or expenses
3.7.3 Without limitation to the preceding provisions of this Clause 3.7 at
all times during the Term complying with the Health and Safety Law and
in particular:
(a) with any requirements relating to the use or occupation of the
Demised Premises
(b) to prepare (when and to the extent required by the Health and
Safety Law) a formal assessment of the risks to the health and
safety of the Tenant's employees, and of persons other than
the Tenant's employees, arising out of or in connection with
the Tenant's undertaking at the Demised Premises; and
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(c) to provide to the Landlord on written request:
(i) a copy of its current health and safety policy statement; and
(ii) full details of any accidents or events reportable under Health and Safety Law together with copies of any notices served by any regulatory body on the Tenant or other occupier of the Demised Premises under Health and Safety Law and copies of any associated correspondence
3.8 TO COMPLY WITH THE PLANNING ACTS
3.8.1 In this Clause the following expressions bear the following meanings
namely: the "PLANNING ACTS" means the Town and Country Planning Act
1990 the Planning (Listed Building and Conservation Areas) Act 1990 the
Planning (Hazardous Substances) Act 1990 the Planning (Consequential
Provisions) Act 1990 the Planning and Compensation Act 1991 and all
supplemental planning legislation and the Public Health Acts 1936 to
1961 or any statutory modification or re-enactment thereof for the time
being in force and any regulations or orders made thereunder "PLANNING
PERMISSION" means any permission consent or approval given or deemed to
be given under the Planning Acts and "DEVELOPMENT" bears the same
meaning as in the Planning Acts
3.8.2 To comply in all respects with the provisions and requirements of the
Planning Acts and of all Planning Permissions so far as the same relate
to or affect the Demised Premises or any operations works acts or
things already or hereafter to be carried out executed done or omitted
thereon or the use thereof for any purpose
3.8.3 During the Term so often as occasion shall require at the expense in
all respects of the Tenant to obtain all such Planning Permissions and
serve all such notices as may be required for the carrying out of any
operations on the Demised Premises or the institution or continuance
thereon of any use thereof which may constitute Development but so that
no application for planning permission shall be made without the
previous written consent of the Landlord (which consent in relation to
any application that cannot result - whether immediately or at a later
date - in the loss of the entitlement to continue to use the Demised
Premises for Class B8 is not to be unreasonably withheld)
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3.8.4 Subject only to any statutory direction to the contrary to pay and
satisfy any charge or levy that may now or hereafter be imposed under
the Planning Acts in respect of the institution or continuance of any
such use as aforesaid
3.8.5 Notwithstanding any consent which may be granted by the Landlord under
this Lease not to carry out or make any alteration or addition to the
Demised Premises or any change of use thereof (being an alteration or
addition or change of use which is prohibited by or for which the
Landlord's consent is required to be obtained under this Lease and for
which a Planning Permission needs to be obtained) before all necessary
notices under the Planning Acts have been served or before all such
notices and all such necessary Planning Permissions have been produced
to the Landlord and approved by it in writing BUT so that the Landlord
may refuse such approval on the grounds that anything contained therein
or omitted therefrom or (as regards Planning Permission) the period
thereof in the reasonable opinion of the Landlord or its surveyor would
be or be likely to be prejudicial to it or to its interest in the
Demised Premises or could result in the loss of the entitlement to
continue to use the Demised Premises for Class B8 whether during the
Term or following the Termination Date PROVIDED THAT subject to the
aforementioned protection for the Landlord the said approval of the
Landlord shall not be unreasonably withheld
3.8.6 Unless the Landlord shall otherwise direct to carry out and complete
before the Termination Date:
(a) any works stipulated to be carried out to the Demised Premises
by a date subsequent to the Termination Date as a condition of
any Planning Permission granted before the Termination Date
and
(b) any Development begun upon the Demised Premises in respect of
which the Landlord shall or may be or become liable for any
charge or levy under the Planning Acts
3.8.7 If and when called upon so to do to produce to the Landlord or its
surveyor all such plans documents and other evidence as the Landlord
may reasonably require in order to satisfy itself that the provisions
of these covenants have been complied with in all respects
3.9 TO PERMIT THE LANDLORD TO ENTER
To permit the Landlord with or without its agents surveyors workmen and
others at reasonable times after at least twenty four hours' notice
(except in case of emergency):
3.9.1 to enter and view the condition of the Demised Premises and to give the
Tenant or leave on the Demised Premises notice in writing of any
defects decays or wants of reparation to the Demised Premises or other
works or acts for which the Tenant shall be liable hereunder AND if the
Tenant shall not within fourteen days (or such longer period not
exceeding three months as is reasonable in the circumstances) after
such notice (or immediately in case of emergency) commence and proceed
diligently to comply with such notice it shall be lawful for the
Landlord and its contractors agents and workmen (but without prejudice
to the rights of re-entry hereinafter referred to) to enter the
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Demised Premises and do such works and do such acts as may be necessary
to comply with the said notice and the proper cost thereof shall be a
debt due from the Tenant to the Landlord and shall be forthwith
recoverable by action or by distress as rent in arrear
3.9.2 to enter the Demised Premises for the purpose of taking schedules or
inventories of the fixtures and things in the Demised Premises to be
yielded up at the Termination Date
3.10 NOT TO OBSTRUCT
Not to:
3.10.1 place or suspend any excessive or undue weight on or front the floors
ceilings or walls of the Demised Premises
3.10.2 allow empty containers (other than trade empties or pallets which are
stored tidily) or rubbish of any description to accumulate upon the
Demised Premises or any pavement or area and generally to keep the
Demised Premises all open or landscaped areas in a clean and tidy
condition free from deposits of materials oil waste or other
deleterious matter
3.10.3 bring or keep upon the Demised Premises anything which is or may become
untidy unclean unsightly or in any way detrimental to the amenity of
the Demised Premises or the neighbourhood and forthwith to comply with
the requirements of any written notice to restore the amenity as
aforesaid and in the event of the Tenant failing to comply with such
notice the Landlord shall be entitled to enter upon the Demised
Premises and carry out any works necessary to comply therewith and to
recover the cost thereof from the Tenant upon demand but this covenant
shall be subject to the right of the Tenant to store tidily trade
empties and pallets both inside and outside the buildings on the
Demised Premises
3.10.4 stop up darken or obstruct any windows or lights openings in or
belonging to the Demised Premises
3.11 NOT TO MAKE ALTERATIONS
3.11.1 Not to erect any new building or new structure of any kind upon the
Demised Premises or any part thereof of a nature not permitted under
the Headlease
3.11.2 Not to erect any new building or carry out any alteration which would
prejudice either the structural integrity of any building on the
Demised Premises or the value of the Landlord's interest in the Demised
Premises subject to and with the benefit of this Lease
3.11.3 Subject to sub-clauses 3.11.1, 3.11.2 and 3.11.4 of this clause not
without the prior written consent of the Landlord (which shall not be
unreasonably withheld) at any time during the Term to:
(a) make any external or internal alteration or addition to the
Demised Premises or cut maim or remove any of the walls beams
columns or other parts of the Demised Premises
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(b) erect or affix any machinery (other than usual machinery
appropriate for a distribution warehouse or storage premises)
upon or to the Demised Premises
(c) make any external projections from the Demised Premises
(d) make any change to the existing design or appearance or the
external decorative scheme of the Demised Premises
(e) alter the electrical wiring and installations in the Demised
Premises other than in accordance with the Regulations of the
Institution of Electrical Engineers and without the prior
written consent of the Landlord (such consent not to be
unreasonably withheld)
(f) remove any of the Plant
3.11.4 The Tenant shall not require the Landlord's consent for internal
non-structural alterations to the Demised Premises and related
alterations to electrical wiring and other utilities but shall not make
such alterations without producing to the Landlord before commencing
the same detailed plans and specifications of the relevant works and an
unconditional undertaking to remove the same and reinstate the Demised
Premises prior to the Termination Date
3.11.5 Without prejudice to Clause 3.28 hereof the Tenant shall on or before
the Termination Date:
(a) unless the Landlord directs the Tenant in writing to the
contrary remove any alterations or improvements permitted
under this Lease including any signs or signboards displayed
by the Tenant and reinstate the Demised Premises to their
original state and condition and
(b) if requested in writing by the Landlord remove all (if any)
internal partitioning in the Demised Premises (whether or not
they comprise Landlord's fixtures or fittings) which has been
installed by the Tenant during the Term
(c) making good any damage thereby caused to the reasonable
satisfaction of the Landlord
3.11.6 If the Tenant makes any alterations or additions to the Premises in
breach of this Clause 3.11 then in addition to any other remedies and
powers available to the Landlord (and without prejudice to them) the
Landlord may remove and reinstate such additions or alterations and the
reasonable and proper cost of carrying out such work will be repaid to
the Landlord by the Tenant on demand.
3.11.7 In relation to any works to the Demised Premises the responsibility of
or which are undertaken by the Tenant or any other person pursuant to
or in accordance with any provision of this Lease and to which the
Construction (Design and Management) Regulations 1994 (the
"REGULATIONS") apply (the "WORKS")
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(a) to procure that the Regulations are complied with; and
(b) to procure that the Tenant (or as the case may be any Permitted Underlessee) shall act as sole "client" for the purposes of the Regulations and that a declaration to that effect will be made by the Tenant under Regulation 4 of the Regulations (with a copy sent at the same time to the Landlord); and
(c) promptly to provide to the Landlord a full and complete copy of the health and safety file for the Works prepared in accordance with the Regulations and any Code of Practice or other guidance issued by any competent authority and (no later than the Termination Date) the original health and safety file itself; and
(d) to procure that there shall be granted to the Landlord a royalty free and irrevocable licence to use and copy any design as built and maintenance and operational information and documentation and other information comprised in the health and safety file for any purpose connected with the Demised Premises and on the basis that such licence shall include the right to grant sub-licences to and shall be assignable to third parties without consent
(e) the Tenant shall not allow any material which is deleterious, polluting or dangerous (to persons or property) to enter from the Demised Premises into the subsoil or to any adjoining or nearby property and shall not do anything on the Demised Premises or cause to be present on the Demised Premises any matter or thing which may cause loss to the Landlord by reason of any Environmental Law Provided Always that the Tenant shall have no liability in respect of any Dangerous Substance which existed at the Demised Premises prior to the date upon which the Tenant commenced its building operations for the original erection of the buildings at the Demised Premises
(f) subject to the proviso to the preceding sub-clause the Tenant shall ensure that all Environmental Laws relating to the carrying out of any operations on the Demised Premises or the use thereof or the existence of the Demised Premises shall be complied with at all times
(g) In this clause:
(i) "Dangerous Substances" means any substance (whether in the form of a solid, liquid, gas or vapour) the generation, keeping, transportation, storage, use or disposal of which gives rise to a risk of causing harm) to humans or to any other living organism, or causing damage to the Environment and includes any controlled, special, hazardous, toxic, radioactive or dangerous waste.
(ii) "Environmental" means the environment as defined in
Section 1(2) of the Environmental Protection Act
1990.
(iii) "Environmental Law" means any legal rule, regulation or obligation in force from time to time concerning the protection of human health or the Environment or Dangerous Substances.
3.12 NOT TO ERECT SIGNS
(a) Subject to subclause 3.12(b) not to affix or exhibit or permit
to be affixed or exhibited to or upon any part of the exterior
of the Demised Premises (or within the same so as to be
visible from the exterior thereof) any placard poster
signboard notice or other advertisement save for any
reasonable notice or signs stating the name and/or business of
the Tenant and/or any undertenants which notices shall be of a
form appropriate for a high class distribution warehouse or
storage park and the location form and size of such notices
shall be first approved in writing by the Landlord (such
approval not to be unreasonably withheld)
(b) Landlord's consent shall not be required for reasonable
directional signs and other reasonable signs relating to the
operation of the Tenant's business at the Demised Premises
3.13 NOT TO ALLOW ACQUISITION OF CASEMENTS
Not to permit or suffer any encroachment upon the Demised Premises or
the acquisition of any new right to light passage drainage or other
easement on over or under the Demised Premises and if any such
encroachment or easement shall be made or acquired or threatened and at
the cost of the Tenant to do all such things as may be proper for the
purpose of preventing the making of such encroachment or the
acquisition of such easement or right PROVIDED ALWAYS that if the
Tenant shall omit or neglect forthwith to do all such things as
aforesaid it shall be lawful for the Landlord or its agents officers
servants and workmen to enter the Demised Premises and to do the same
and any expenses reasonably so incurred by the Landlord shall be repaid
to the Landlord by the Tenant within seven days of a written demand in
that behalf
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3.14 GENERAL OBLIGATIONS REGARDING INSURANCE
3.14.1 Not to do anything which may prejudice any insurance effected by the
Landlord under this Lease over the Demised Premises or which may result
in any insurance under this Lease becoming void or voidable or (without
the prior written consent of the Landlord which shall not be
unreasonably withheld) the rate of premium under such insurance being
increased and the Tenant will at all times comply with all requirements
and recommendations of the Landlord's insurers and (without prejudice
to the Landlord's rights of action in respect of a breach of the
provisions contained in this sub-clause) repay to the Landlord on
demand all sums paid by way of increased premiums and all expenses
incurred by it in consequence of a breach of the provisions contained
in this Clause and all such payments shall be added to and form part of
the Rents reserved by this Lease and be recoverable as rent in arrear
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3.14.2 To keep the Demised Premises supplied with such fire fighting equipment
as the Landlord's insurers or any competent fire authority may properly
require and will maintain that equipment to the satisfaction of all
those persons
3.14.3 Not to store inflammable substances or goods (save in proper containers
and approved when necessary by the insurers and any relevant regulatory
authority) nor explosive substances or goods at the Demised Premises or
obstruct the access to any fire equipment or the means of escape from
or over the Demised Premises and will immediately give notice to the
Landlord of any event which may affect any of the insurances effected
by the Landlord under this Lease
3.14.4 To pay to the Landlord on demand the cost of a periodic valuation of
the Demised Premises made (not more frequently than at intervals of 3
years) by or for the Landlord for insurance purposes
3.14.5 To pay to the Landlord on demand the whole of any amount reasonably
determined by the Landlord or its surveyor to be the expenses
reasonably incurred by the Landlord in making pursuing or enforcing any
claim against the Landlord's insurers arising from the Landlord's
insurance under this Lease
3.14.6 Not to effect any insurance of the Demised Premises in respect of the
Insured Risks other than insurance of Tenant's fixtures (not insured by
the Landlord) which fall outside the Landlord's reinstatement
obligation
3.14.7 If the payment of any insurance monies is refused in whole or in part
by reason of any act or default of the Tenant or anyone under its
control the Tenant will pay to the Landlord on demand the amount so
refused
3.14.8 To pay to the Landlord on demand the amount of any excess required by
the insurers in connection with any damage or destruction to the
Demised Premises
3.14.9 If requested by the Landlord to remove its fixtures and effects from
the Demised Premises to allow the Landlord to repair or reinstate the
Demised Premises
3.15 RESTRICTIONS ON USER
3.15.1 Not to do or permit to be done anything in or upon the Demised Premises
which may be or become an unlawful nuisance damage disturbance or
danger to the Landlord or other occupiers of any adjoining property
owned by the Landlord
3.15.2 Not to permit the Demised Premises or any part thereof to be used for
any illegal or immoral purposes or for any offensive disreputable noisy
or dangerous trade business pursuit or occupation or as a betting
office or for residential or sleeping purposes
3.15.3 Not to play or use in the Demised Premises any musical instrument
loudspeaker tape recorder gramophone radio or other equipment or
apparatus that is unduly noisy
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3.16 USER
Not to use the Demised Premises or any part thereof for any purpose
other than the Specified User
3.17 ALIENATION
Generally
3.17.1 In this Clause the following expressions bear the following meanings
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namely:
(a) "PERMITTED UNDERLEASE" sell shall be an underlease which:
(i) contains provision for review of rent (in an upwards direction only) corresponding both as to terms and dates with the rent review provisions in this Lease
(ii) is granted without taking any fine or premium
(iii) reserves not less than the higher of (aa) the rent reserved under this Lease (or an apportioned part thereof) as at the date of its creation (provided that this subclause (aa) shall only apply to underleases granted before the agreement or determination of the rent review due under this Lease on 25th December 2002 or the failure of either party to implement that review on that date) and (bb) the open market rent for the premises thereby demised as at the date of its creation
(iv) is not in breach of clause 3(21)(d) of the Headlease
(at a time when the Headlease still subsists)
(v) does not demise any land or interest in land other than the Demised Premises or part thereof and the rights hereby granted
(vi) provides for an annual rent which is to be paid by equal quarterly payments in advance on the usual quarter days
(vii) contains covenants on the part of the undertenant similar in all respects to the covenants on the part of the Tenant contained in this Lease save in relation to such covenants as do not relate to the sub-demised premises or are otherwise inappropriate in the context of all underletting
(viii) contains a condition for re-entry on breach of any covenant by the undertenant or in the event of the undertenant's insolvency
(b) In the case of a Permitted Part:
(i) is validly contracted out of Sections 24-28 (inclusive) of the Landlord and Tenant Act 1954 by order of a County Court
(ii) contains comprehensive service charge provisions for the recovery of (without limitation) the cost of maintenance repair and decoration of the main structure (if not demised) and common parts of the Demised Premises such service charge provision (and the lessor's obligation to provide such services) to be in a form first approved by the Landlord (such approval not to be unreasonably withheld or delayed)
(iii) contains rights and reservation which are first approved by the Landlord (such approval not to be unreasonably withheld or delayed)
(iv) prohibits any sub division or underletting of part of the Permitted Part
(c) "PERMITTED UNDERLESSEE" shall be a person who shall prior to any underletting have entered into a direct covenant with the Landlord to observe and perform the covenants contained in the underlease on the part of the lessee to be observed and performed In the event of a Permitted Underlessee being an unquoted limited company such company shall not be a Permitted Underlessee unless if the Landlord reasonably so requires one or more acceptable guarantors for the proposed underlessee enters into a direct covenant with the Landlord in such form as the Landlord reasonably requires
(d) "AUTHORISED GUARANTEE AGREEMENT"
has the meaning defined in and for the purposes of Section 16 of the Landlord and Tenant (Covenants) Act 1995 which shall be made by separate deed
3.17.2 GENERAL PROHIBITIONS
(a) Not to assign or part with or share possession or occupation
of the whole or any part of the Demised Premises nor to charge
or mortgage part only of the Demised Premises nor agree to do
any of the foregoing save in accordance with sub-clauses
3.17.3 and 3.17.6 below
(b) Not to allow any person to have beneficial occupation of the
Demised Premises or any part thereof except by virtue of one
of the permitted transactions set out in sub-clauses 3.17.3
and 3.17.6 below
(c) Not to hold or occupy the Demised Premises or any part thereof
as trustee or agent or otherwise for the benefit of any other
person
(d) Not to grant any underlease of any part of the Demised
Premises which could result in there being more than four
separate occupiers
3.17.3 PERMITTED TRANSACTIONS
Not without the previous written consent of the Landlord (which shall
not be unreasonably withheld or delayed and in the case of 3.17.3(a)
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subject always to Clauses 3.17.4(a) and 3.17.4(b):
(a) to assign the whole of the Demised Premises
(b) to underlet the whole of the Demised Premises by a Permitted Underlease to a Permitted Underlessee
(c) to underlet a Permitted Part by a Permitted Underlease to a Permitted Underlessee
(d) to permit the assignment of any Permitted Underlease of the whole or a Permitted Part of the Demised Premises except to another Permitted Underlessee
3.17.4 CONSENTS ETC
(a) It is agreed that the Landlord shall not be regarded as unreasonably withholding consent to any proposed assignment of the whole of the Demised Premises if it is withheld on the ground (and it is the case) that one or more of the circumstances mentioned below exist whether or not such withholding is solely on such ground or on that ground together with other grounds:
(i) that there are any Rents due which have not been paid to the Landlord
(ii) that in the reasonable opinion of the Landlord the proposed assignee is a person who is not likely to be able to meet its obligations under this Lease and/or who could be such a person following the assignment
(iii) that the proposed assignment is to a "HOLDING COMPANY" "SUBSIDIARY" or "WHOLLY-OWNED SUBSIDIARY" (all of which shall have the meanings ascribed to them in Section 736 of the Companies Act 1985) of the Tenant
(b) On any assignment the Tenant shall:
(i) enter into an Authorised Guarantee Agreement which will encompass the obligations set out in the Third Schedule to this Lease and which shall otherwise be in such form as the Landlord may reasonably require and be prepared by or on behalf of the Landlord and at the cost of the Tenant
(ii) if the Landlord reasonably so requires the Tenant will obtain one or more acceptable guarantors for the proposed assignee who will covenant with the Landlord in the terms (mutatis mutandis) set out in the Third Schedule
(c) Clauses 3.17.4(a) and 3.17.4(b) shall operate without prejudice to the right of the Landlord to refuse such consent on any other ground or grounds where such refusal would be reasonable or to impose further conditions upon the grant of consent where such imposition would be reasonable
(d) Not more than three underleases of Permitted Parts shall subsist at any one time in the Demised Premises (but if the Tenant shall have wholly vacated the said maximum shall be
four)
3.17.5 UNDERLEASE MANAGEMENT
In relation to any Permitted Underlease:
(a) to use reasonable endeavours to enforce the covenants or
conditions on the part of any Permitted Underlessee but the
Tenant shall not be obliged to re-enter on the relevant
premises unless it is reasonably necessary so to do having
regard to the severity of the breach and the availability of
other remedies
(b) not to commute or waive any rents payable by a Permitted
Underlessee
(c) not to vary the terms thereof accept any surrender thereof
without the previous written consent of the Landlord (such
consent not to be unreasonably withheld)
(d) not do or permit to be done any action which shall prejudice
the right to review the rent payable and with all due speed
and diligence to take all such action as shall be necessary to
secure that the said rent shall be reviewed in accordance with
the terms thereof (unless in the reasonable opinion of the
Tenant such review would be unlikely to result in an increased
rent) at all times keeping the Landlord fully informed of
progress on rent reviews and furnishing any information
reasonably required to the Landlord
(e) to observe and perform all the obligations imposed on the
Tenant as sub-lessor
3.17.6 SHARING OCCUPATION
Notwithstanding the foregoing provisions of this Clause 3.17 the Tenant
may without the consent of the Landlord part with or share possession
or occupation of the Demised Premises or any part or parts thereof with
a company or companies which are members of the same group (as defined
by Section 42 of the Landlord and Tenant Act 1954) (a "PERMITTED
OCCUPIER") PROVIDED THAT:
(a) no relationship of landlord and tenant shall be created or
exist between the Tenant and the Permitted Occupier
(b) the rights of the Permitted Occupier shall forthwith determine
on it ceasing to fall within the definition of Permitted
Occupier
(c) the Tenant shall give notice to the Landlord within fourteen
days of the commencement and termination of each such parting
with or sharing possession or occupation of the Demised
Premises
3.17.7 INFORMATION
From time to time during the Term to furnish to the Landlord on demand
full particulars of all derivative interests of or in the Demised
Premises howsoever remote or inferior
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3.18 REGISTRATION OF ASSIGNMENTS ETC
To leave two certified copies of every assignment transfer mortgage
charge underlease probate letters of administration order instrument or
other writing effecting or evidencing any transmission or devolution of
any estate or interest (derivative or otherwise) in the Demised
Premises or any part thereof to the Solicitors of the Landlord for
registration within one month from the date thereof and to pay to the
Landlord's Solicitors their reasonable registration fee and any VAT
payable thereon for each such registration
3.19 TO PERMIT DISPLAY OF NOTICES FOR DISPOSAL
To permit the Landlord without interference during the six months
immediately preceding the Termination Date to affix and retain upon any
part of the Demised Premises a notice for the disposal of the same and
to permit persons with the authority of the Landlord or its agents at
reasonable times to view the Demised Premises
3.20 TO INFORM THE LANDLORD OF NOTICES AND CLAIMS
To give immediate notice to the Landlord of any notice or claim
affecting the Demised Premises or any part thereof
3.21 DEFECTIVE PREMISES ACT 1972
To give written notice to the Landlord of any defect in the Demised
Premises which might give rise to an obligation on the Landlord to do
or refrain from doing any act or thing in order to comply with the duty
of care imposed on the Landlord pursuant to the Defective Premises Act
1972 and at all times to display and maintain all notices which the
Landlord may reasonably from time to time require to be displayed at
the Demised Premises
3.22 DRAINAGE
To take all such measures as may be necessary to ensure that any
effluent discharged into the Conduits which serve the Demised Premises
(whether within the Demised Premises or not) will not be corrosive or
in any way harmful to the Conduits or cause any blockage obstruction or
deposit therein
3.23 ELECTRICAL INSTALLATIONS
Not to use electrical wiring and electrical installations in the
Demised Premises in such a way as to overload the wiring system or any
part of the electrical installations and forthwith following any
reasonable request by the Landlord in that behalf to produce a
certificate of test of the electrical wiring and the electrical
installations in the Demised Premises such certificate to be given by a
competent electrical engineer in accordance with the regulations of the
Institution of Electrical Engineers and the local electricity supply
authority or either of them
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3.24 TO PERMIT BUILDING ON ADJOINING LAND
To permit the Landlord or any party now or hereafter authorised by the
Landlord at any time during the Term to erect or build or alter any
buildings or erections facing adjoining or near to the Demised Premises
to any extent in any manner the Landlord or such other party may think
fit and notwithstanding that such buildings or erections are built or
altered in any way that may obstruct or interfere with the access of
light or air enjoyed by the Demised Premises
3.25 ELECTRONIC EQUIPMENT
Without prejudice to Clause 3.15.1 hereof to indemnify the Landlord
against any claim resulting from any radio or electronic equipment
being used in the Demised Premises in such manner or conditions as to
cause electric electronic or other forms of interference to equipment
operated in any adjoining or neighbouring premises
3.26 INDEMNITY
To keep the Landlord fully indemnified against damages losses costs
expenses proceedings and liabilities arising directly or indirectly out
of the existence state of repair or user of the Demised Premises any
breach of the Tenant's covenants contained in this Lease or contained
in any superior lease (other than in the case of a superior lease in
respect of non-payment of rent or in respect of premises other than the
Demised Premises) or against any liability for any tax levy charge or
other fiscal imposition of whatsoever nature including penalties and
interest on overdue tax (where the Landlord could not reasonably have
paid the tax on the due date) for which the Landlord shall be liable as
a result of any material development carried out on the Demised
Premises and shall on demand pay to the Landlord the amount of any such
sum
3.27 TO YIELD UP
3.27.1 At the Termination Date peaceably and in accordance with the full and
due performance by the Tenant of the covenants on the part of the
Tenant herein contained to surrender and yield up the Demised Premises
unto the Landlord together with all fixtures and additions except those
in the nature of tenant's and trade fixtures provided that the same
shall be removed prior to the Termination Date the Tenant forthwith
making good all damage occasioned thereby
3.27.2 Wherever any plant or other fixtures fittings or improvements to be
removed are connected to or take supplies from any of the mains
services the same shall be disconnected in such manner that all
redundant service media are removed and sealed off at points as close
as possible to the various ring mains or principal distribution pipes
which provide the supplies such removal and sealing to be carried out
so as not to interfere with the continued function of the remaining
services
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3.28 INTEREST ON ARREARS
If and whenever the Tenant shall fail to pay the Rents or any other
monies due under this Lease on the due date (including payments which
the Landlord may have reasonably declined to accept in relation to any
actual or anticipated breach of any of the terms of this Lease) the
Tenant shall pay to the Landlord interest at the rate of Four per cent
(4%) per annum above the base rate of National Westminster Bank MC on
such Rents or other monies as the case may be from the date when it was
due to the date on which it is actually paid
3.29 TO PAY LANDLORD'S EXPENSES
3.29.1 To pay all properly incurred expenses (including Solicitors' Counsels'
Surveyors' Agents' and other professional consultants' fees
disbursements bailiffs commissions and VAT) of the Landlord:
(a) resulting from all applications by the Tenant for any consent
of the Landlord required by this Lease including in cases
where consent is refused or the application is withdrawn
(b) in contemplation of or in connection with the preparation and
service of a notice under Section 146 or 147 of the Law of
Property Act 1925 or any other notice hereunder (including in
particular a notice relating to a Schedule of Dilapidations)
notwithstanding that forfeiture shall be avoided otherwise
than by relief granted by the Court
(c) in connection with any breach of covenant by the Tenant or the
recovery of arrears of the Rents or any monies from time to
time payable by the Tenant to the Landlord pursuant to this
Lease or any Supplemental Document or any matter arising
herefrom
3.29.2 To pay on demand to the Landlord the whole or (as the case may be) a
fair proportion (such proportion to be fairly determined from time to
time by the Landlord's surveyor) of any costs charges expenses or
outgoings of whatsoever nature (including a management charge of 10% of
such costs charges expenses or outgoings) which the Landlord may
reasonably be required to expend or incur in relation to the Demised
Premises or in any way in connection with the Demised Premises as a
result of any application by the Tenant or as a result of any activity
of the Tenant at the Demised Premises which is unlawful or in breach of
obligation hereunder
3.30 VAT
3.30.1 OUTPUT TAX
(a) Where this Lease requires the Tenant to pay repay reimburse or
provide any amount or other consideration in respect of a VAT
Supply to the Tenant by the Landlord that amount or other
consideration will be deemed to be exclusive of any VAT
chargeable on that VAT Supply (whether by virtue of a VAT
Election
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made or to be made or otherwise) and the Tenant will when
paying or providing the relevant amount or other consideration
also pay to the Landlord a sum equal to that VAT on receipt of
valid VAT invoice
(b) If the grant of this Lease is or gives rise to a VAT Supply
(whether by virtue of a VAT Election or otherwise) by the
Landlord to the Tenant then (except in so far as provided for
by Clause 3.31.1(a)) the Tenant will pay to the Landlord a sum
equal to the VAT chargeable on that VAT Supply on the date of
the grant or (if later) when demanded by the Landlord and (in
either case) on receipt of a valid VAT invoice
3.30.2 INPUT TAX
Where this Lease requires the Tenant to pay repay reimburse or provide
any amount or other consideration in respect of a VAT Supply to the
Landlord the Tenant will pay to the Landlord a sum equal to any VAT
charged to the Landlord on that VAT Supply less any part of that VAT
for which the Landlord obtains credit or which the Landlord is
otherwise able to recover as input tax
3.31 NOTICES
3.31.1 In this Clause "NOTICE" means any written permission notice order or
proposal relevant to the Demised Premises or to the use of the Demised
Premises whether or not contained within a communication dealing also
with other subject-matter
3.31.2 Within seven days of receipt by the Tenant of any Notice given to the
Tenant or the occupier of the Demised Premises the Tenant will give to
the Landlord full particulars and a copy of the Notice
3.31.3 The Tenant will expeditiously take all necessary steps to comply with
any Notice (if it is not able to procure that such notice is not
withdrawn modified or otherwise challenged) and the Tenant's proposals
as to the way in which it will comply with or challenge any Notice must
first be approved by the Landlord in writing (such approval not to be
unreasonably withheld)
3.31.4 Notwithstanding Clause 3.32.3 at the request of the Landlord the Tenant
will make or join with the Landlord in making any objections or
representations which the Landlord may reasonably require to have made
against or in respect of any Notice
3.32 GUARANTOR
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3.32.1. To procure that any person who has guaranteed to the Landlord the Tenant's obligations contained in this Lease joins with the Tenant and becomes a party to any Supplemental Document to consent to the Tenant entering into such Supplemental Document and to confirm that its covenants remain in full force and effect in respect of the Lease as varied or amended by such Supplemental Document
3.32.2 Within fourteen days of the death during the Term of any person who has
or shall have guaranteed to the Landlord the Tenant's obligations
contained in this Lease or of such person becoming bankrupt or having a
receiving order made against him or being a company passing a
resolution to wind up or entering into liquidation then to give notice
thereof to the Landlord and if so required by the Landlord at the
expense of the Tenant within Twenty eight days to procure some other
person reasonably acceptable to the Landlord to execute a guarantee in
respect of the Tenant's obligations contained in this Lease in the form
set out in the Fourth Schedule hereto
3.33 SUPERIOR INTERESTS
3.33.1 Any provision for consent or approval of the Landlord shall be deemed
to be subject to the consent or approval of the superior landlord
(under the Headlease (unless and until it terminates whether by merger
with the freehold or otherwise) and the costs and expenses of obtaining
such consents (whether or not consent is forthcoming) shall be repaid
by the Tenant to the Landlord on demand
3.33.2 To comply with all the tenant's covenants contained in the Headlease
(other than the covenants to pay rent to insure and those relating to
reinstatement) until it terminates as if such covenants were set out in
this Lease in full as covenants to be performed by the Tenant and
indemnify the Landlord against all fees payable to any Superior
Landlord and any costs charges damages or liabilities arising from any
non compliance
3.34 CONTINUATION OF LEASE
3.34.1 To give notice in writing to the Landlord not less than three months
(and not more than twelve months) prior to the expiry of the
contractual term granted by this Lease if the Tenant does not require
the Lease to be continued under the provisions of the Landlord & Tenant
Act 1954 (as amended) (the "ACT") whether or not the Act applies
34.2 In the event of any notices having been served under the Act or any
proceedings pursuant thereto being current not to cease business use or
give up occupation of the Demised Premises without giving at least
three months' advance written notice to the Landlord
3.34.3 In the event of any breach of the above provisions the Tenant shall pay
as a liquidated debt to the Landlord a sum equivalent to three months'
rent reserved by this Lease at the rate current at the relevant time
but in the event of the Tenant having given notice of less than three
months but otherwise in accordance with the above provisions the amount
of the debt shall be reduced to in amount equivalent to rent for such
period as would (together with the length of notice actually given)
amount of three months
3.35 COVENANTS IN TITLE
To observe and perform the covenants and conditions contained in or
referred to in the title of the Landlord and any Superior Landlord to
the Demised Premises (including the covenants and conditions to be
created which are contained in the agreed form of transfer annexed to
the Option Agreement)
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4. LANDLORD'S COVENANTS
THE Landlord HEREBY COVENANTS with the Tenant (but so that no liability shall attach to the Landlord in respect of any breach by the Landlord of its obligations under this Lease occurring after the reversion immediately expectant on the determination of the Term has ceased to be vested in the Landlord) as follows:
4.1 QUIET ENJOYMENT
That the Tenant paying the Rents and observing and performing the covenants on the part of the Tenant hereinbefore contained shall peaceably enjoy the Demised Premises for the Term without any interruption by the Landlord or any person lawfully claiming through under or in trust for it
4.2 TO INSURE
4.2.1 To keep the Demised Premises insured against the Insured Risks (using
reasonable endeavours to ensure competitive quotations are secured)
subject to such excesses exclusions and limitations and other terms and
conditions which may be imposed by the insurers in some insurance
office of repute in the full reinstatement value thereof procuring a
note of the Tenant's interest upon the policy and whenever reasonably
so requested to provide to the Tenant details thereof and in the event
of damage or destruction by any of the Insured Risks with all
convenient speed (as soon as is practicable after all necessary labour
and material permits and consents have been obtained) and when
otherwise lawful so to do to cause all monies received by virtue of
such insurance (other than in respect of loss of Rent) together with
all monies received from the Tenant under clauses 3.14.7 and 3.14.8 to
be laid out in rebuilding or reinstating (so far as practicable) the
Demised Premises either as previously existing or in accordance with
the then latest techniques materials and requirements (as determined by
the Landlord) and the, Landlord will make up any shortfall (which is
not attributable to the default of the Tenant) out of its own resources
PROVIDED THAT such reinstatement shall exclude any fitting out or new
works or alterations by the Tenant unless at or after the time of any
such Tenant's items being originally installed it is agreed in writing
between the Landlord and the Tenant that the same shall comprise part
of the Demised Premises for the purposes of this reinstatement
obligation or unless (and to the extent that) such items are in any
event covered by the Landlord's insurance policy
4.2.2 In the event of the insurance policy being made subject to any
qualifications, conditions or excesses, where the same are negotiable
with the insurance company, to consult with the Tenant and have regard
to the views of the Tenant on the amount of any excess (and accepting a
greater excess than might otherwise be available in the event of the
Tenant undertaking to pay the relevant sums should a claim arise)
4.2.3 Provided always that in the event of the Demised Premises being damaged
or destroyed by an insured risk and the policy of insurance not having
been vitiated by any act or default of the Tenant and the Demised
Premises not having been reinstated by the expiry of the third
anniversary of the date of such damage then either party shall have the
right
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at any time after the expiry of such third anniversary to give three months written notice to the other determining this lease and upon the expiry of such notice this lease shall be void and of no further effect (save in relation to any antecedent or accrued claims) provided that the Landlord may not serve such notice if it is in breach of its obligation to reinstate nor may the Tenant serve such notice if it is in material breach of any of its obligations so as to adversely affect the ability of the Landlord to reinstate
4.3 SUPERIOR LEASE RENTS
To pay the rents reserved by any superior lease for the time being in force and at the request and cost of the Tenant to enforce the obligations of the superior landlord under the superior lease (while it subsists) and the obligations on the part of the Transferor under the agreed form of transfer annexed to the Option Deed (following the acquisition of the freehold pursuant to that Deed)
4.4 SERVICES
4.4.1 Subject (and as a precondition) to the Tenant paying the Service Charge
and indemnifying the Landlord against all liabilities in relation to
the same, to use all reasonable endeavours to provide or procure the
provision of the Services in accordance with the terms of the
Management Deed and the Agreement dated 6th May 1997 made between
Imperial Chemical Industries plc (1) and the Tenant (2) (relating to
the supply of the Services among other things) (such Agreement and the
Management Deed being together hereinafter referred to as "the
Management Documentation")
4.4.2 Subject (and as a precondition) to the Tenant undertaking to pay all
costs and indemnifying the Landlord against all liabilities in relation
to the same, whenever reasonably so requested by the Tenant, to enforce
the obligations of the other parties and to exercise all rights
available to it under the Management Documentation (so far as the same
is consistent with ensuring the supply of Services is kept at an
optimum level and appropriate for a high quality distribution park with
all modern and up to date (from time to time) facilities) including
(among other rights) the rights under the Management Documentation to
secure consultations, provision of information and maintenance of the
Service Charge at reasonable levels (including all rights to query the
quantum of any charges from time to time if specifically so requested)
4.5 HIGHWAY ADOPTION
At the request and cost of the Tenant and subject to the Tenant fully
indemnifying the Landlord against any liabilities incurred by the
Landlord pursuant to such request, to take all necessary and
appropriate action to ensure that the benefit of the indemnity from
Imperial Chemical Industries plc in relation to the costs of adoption
of highways by the local authority remains available so as to preclude
the possibility of any such costs devolving upon the Tenant PROVIDED
THAT this covenant shall lapse upon the adoption of the highway leading
to the Estate
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4.6 THE OPTION DEED
During such time only as the freehold has not yet become vested in the
Landlord
4.6.1 Not to assign the Landlord's interest as lessee under the Headlease
without assigning to that assignee the Option Deed and not to assign
the Option Deed other than to an assignee of the Headlease
4.6.2 To exercise the Call Option within the Call Option Period (both as
defined in the Option Deed) unless the Put Option (as therein defined)
has been exercised first
4.6.3 To supply to the Tenant a certified copy of the completed Transfer
pursuant to the Option Deed within 14 days after completion
4.6.4 To procure that on the exercise of the option the freehold is acquired
in the name of the Landlord and that the Headlease, shall as soon as
reasonably practicable thereafter terminate by merger on completion of
such acquisition
5. PROVISO
IT IS HEREBY AGREED AND DECLARED that:
5.1 PROVISO FOR RE-ENTRY
Notwithstanding and without prejudice to any other remedies and powers
herein contained or otherwise available to the Landlord if:
5.1.1 the Rents hereby reserved or any part thereof shall be unpaid for
twenty one (21) days after becoming payable (whether formally demanded
or not) or
5.1.2 any covenant on the Tenant's part herein contained shall not be
performed or observed or
5.1.3 the Tenant (being a company) shall:
(a) enter into liquidation whether compulsorily or voluntarily
(save for the purpose of reconstruction or amalgamation
forthwith put into effect)
(b) have a Petition for an Administration Order under Part II of
the Insolvency Act 1986 presented in respect of it
(c) have a receiver or an administrative receiver appointed in
respect of the whole or any part of its assets or
5.1.4 the Tenant (being all individual or being more than one individual any
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one of them) shall:
(a) become bankrupt or
(b) enter into composition with his or their creditors or
(c) have a Receiving Order made against him or them or
(d) fail to pay a debt or debts which is or are in the aggregate equal to or in excess of the bankruptcy level from time to time and a statutory demand thereof having been neither complied with or set aside
then and in any of the said cases it shall be lawful for the Landlord at any time thereafter to re-enter the Premises in the name of the whole and thereupon this demise shall absolutely determine but without prejudice to any right of action or remedy of the Landlord in respect of any breach of the Tenant's covenants herein contained
5.2 PROVISO FOR CESSER OF RENT
If the Demised Premises or any part thereof shall at any time be destroyed or damaged by any of the Insured Risks so as to render the Demised Premises unfit for occupation and use (and the relative policy or policies of insurance effected by the Landlord shall not have been vitiated or payment of the policy monies refused (and the shortfall not made good by the Tenant) in whole or in part in consequence of any act or default on the part of or suffered by the Tenant its undertenants and its or their respective agents licensees and invitees) then the Rent (or a fair and just proportion thereof according to the nature and extent of the damage sustained) shall be suspended and cease to be payable until the Demised Premises shall again be rendered fit for occupation and use or until the expiration of three years from the date of the happening of such destruction or damage as aforesaid (whichever period shall be the shorter) and in case of dispute as to the proportion or period of such abatement the same shall be referred to arbitration in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof for the time being in force
5.3 EXCLUSION OF LANDLORD'S LIABILITY
So far as permitted by law the Landlord shall not be responsible to the Tenant or any underlessee servant agent licensee or invitee of the Tenant or other person occupying or on the Demised Premises or any part of it or calling upon the Tenant or such other persons as aforesaid for any accident or injury suffered by any person or damage to or loss of any chattel or property sustained on the Demised Premises or in the event of any works carried out or other things done by the Landlord permitted or required by the provisions of this Lease
5.4 RIGHTS EASEMENTS ETC
The operation of Section 62 of the Law of Property Act 1925 is excluded from this Lease and the Tenant will not by virtue of this Lease during the Term acquire or become entitled (by any means whatever) to any easement from or over or affecting any other land or premises now or at any time after the date of this Lease belonging to the Landlord and not comprised in this Lease
5.5 SERVICE OF NOTICES
In addition to any other prescribed mode of service any notices requiring to bc served hereunder shall be validly served if served in accordance with Section 196 of the Law of Property Act 1925 as amended by the Recorded Delivery Service Act 1962 or in the case of the Tenant if left addressed to it or if there shall be more than one to any of them or sent to it him or any of them by post or left at the last known address or addresses of it him or any of them in Great Britain
5.6 NO WARRANTY AS TO PLANNING
No representation or warranty is given or made or shall be deemed to have been given or made by the Landlord as to any matter affected by the Planning Acts or any regulations made thereunder
5.7 TENANT'S GOODS LEFT IN DEMISED PREMISES
If after the Termination Date any property of the Tenant shall remain in the Demised Premises and the Tenant shall fail to remove the same within five days after being requested in writing by the Landlord so to do the Landlord may as the agent of the Tenant (and the Landlord is hereby appointed by the Tenant to act as such) sell such property and shall then hold the proceeds of sale after deducting the costs and expenses of removal storage and sale reasonably and properly incurred by it to the order of the Tenant PROVIDED THAT the Tenant will indemnify the Landlord against any liability incurred by it to any third party whose property shall have been sold by the Landlord in the bona fide mistaken belief (which shall be presumed unless the contrary be proved) that such property belonged to the Tenant and was liable to be dealt with as such pursuant to this sub-clause
5.8 STATUTORY COMPENSATION
Except where a statutory provision prohibits the Tenant's right to compensation being reduced or excluded by agreement the Tenant will not be entitled to claim from the Landlord on quitting the Demised Premises any compensation under the Landlord and Tenant Act 1954
5.9 DISPUTES BETWEEN LANDLORD AND TENANT
5.9.1 Save in relation to any disputes arising under or in relation to the
exercise of the Landlord's rights under Clause 5.1 or any disputes
where a separate procedure is provided for in this Lease if any dispute
shall arise between the Landlord and the Tenant with regard to the
construction or effect of this Lease or any provision hereof or
otherwise in connection with the Demised Premises such dispute shall be
determined by a single Arbitrator appointed by the President for the
time being of the Royal Institution of Chartered Surveyors and in
relation to matters of construction (and where there is no agreement as
to whether the dispute does or does not relate to matters of
construction) such dispute shall be determined by a single Arbitrator
appointed by the President for the time being of the Law Society in
each case in accordance with the Arbitration Act 1996
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or any statutory re-enactment or modification thereof PROVIDED THAT any
non payment of monies due hereunder shall not be governed by the
provisions of this clause 5.9
5.9.2 In the event of any person to whom a dispute under this Lease is
referred being unable to or precluded from acting in connection with
the same then such dispute shall be referred in place of such person to
an Arbitrator agreed between the Landlord and the Tenant or failing
agreement nominated by the President for the time being of the Royal
Institution of Chartered Surveyors or the Law Society (in accordance
with the principles set out in clause 5.9.1) upon the application of
either the Landlord or the Tenant
5.10 TENANT'S OPTION TO DETERMINE
5.10.1 If the Tenant shall desire to determine the Term on the Break Date
(time being of the essence for such date) and shall give to the
Landlord written notice to that effect not earlier than 24 months
beforehand and not later than 12 months beforehand (time being of the
essence for such notice) (the "BREAK NOTICE") then subject to the
provisions of clause 5.10.2 below being satisfied on the Break Date the
Term shall thereupon cease and determine but without prejudice to any
rights or liabilities in respect of any antecedent breaches of any
party
5.10.2 It shall be a requirement for the operation of the clause 5.10 that as
at the Break Date vacant possession of the whole of the Demised
Premises is given to the Landlord
5.11 FAILURE TO REPAIR OBLIGATIONS
The Landlord shall not in any event be liable to the Tenant in respect
of any failure of the Landlord to perform any of its obligations to the
Tenant hereunder whether expressed or implied unless the Tenant has so
notified the Landlord and the Landlord has failed within a reasonable
time to remedy the same and then in such case the Landlord shall be
liable to compensate the Tenant only for loss or damage sustained by
the Tenant after such reasonable time has elapsed
5.12 LANDLORD AND TENANT (COVENANTS) ACT 1995
5.12.1 The Landlord and the Tenant declare that this is a new lease for the
purposes of the Landlord and Tenant (Covenants) Act 1995 (for the
purposes of this Clause referred to as the "ACT")
5.12.2 If the Landlord agrees with the Tenant whether prior to on or after the
date of this Lease to postpone the payment of any of the Rents due
under this Lease then for the purposes of the Act the date upon which
such Rents shall be due shall be treated as the date upon which the
postponed Rents are due
5.13 HEADLEASE
5.13.1 In the event of the Headlease being determined or no longer being in
existence due to merger or for any other reason, the obligations of the
Tenant hereunder to comply with
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the terms thereof shall remain in full force and effect as if the same
remains in existence to the intent (and to the extent only) that any
obligation to indemnify the Landlord against liabilities in the
Headlease shall remain effective so long as the Landlord remains
directly or indirectly liable for such matters and the same have not
been abrogated by virtue of the Headlease no longer being in existence
5.13.2 Any consent or approval of the Landlord which may be required under
this Lease shall be subject to a precondition that the consent and
approval of the Superior Landlord is obtained under the Headlease
(where required) and the Tenant shall be responsible to pay all costs,
charges and expenses in securing the same whether or not it is granted
or lawfully refused or the application withdrawn
5.14 INTERPRETATION
5.14.1 In this Lease where the context so admits the expression the "LANDLORD"
shall include the reversioner for the time being immediately expectant
on the term hereby created and the expression the "TENANT" shall
include the successors in title and assigns of the Tenant and where
there are two or more individuals included in the expressions the
"TENANT" or the "SURETY" (if any) covenants herein expressed to be made
by the Tenant or the Surety (as the case may be) shall be deemed to be
made by such persons jointly and severally
5.14.2 Any reference in this Lease to any statute or order shall include any
statutory extension modification or re-enactment of such statute or
order or any regulations or orders made thereunder
5.14.3 Any covenant by the Tenant not to do any act or thing shall be deemed
to include an obligation not to permit such act or thing to be done
5.14.4 Each of the Clauses of this Lease is distinct and severable from the
others and if at any time one or more of such provisions is or becomes
illegal invalid or unenforceable the validity legality and
enforceability of the remaining provisions will not in any way be
affected or impaired
5.15 HEADINGS
The headings hereto shall not affect the construction of these presents
6. SURETY COVENANT
In consideration of this Lease being made at its request the Surety
herewith covenants with the Landlord in the terms set out in the Third
Schedule hereto
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I N W I T N E S S whereof this Lease has been duly executed the day and year first before written
THE FIRST SCHEDULE
PART I
The land and buildings shown delineated edged red on Plan Number 1 and whose
approximate position on the Estate is for identification only edged red on Plan
Number 2 (the boundary of the Demised Premises at the southern corner abutting
the roadway to be adopted pursuant to the Agreement dated 18th March 1996 made
between Avon County Council (1) and the Superior Landlord (2) under (inter alia)
Section 38 Highways Act 1980) EXCEPT and RESERVED as mentioned in Part II of
this Schedule and TOGETHER with the rights mentioned in Part III of this
Schedule
PART II
EXCEPT AND RESERVED to the Landlord (and all other persons having like rights) the free and uninterrupted rights:
(1) to the passage and running of water soil gas electricity telephone and other services or supply through and the right to connect into the Conduits which are now or may at any time during the Perpetuity Period (being 80 years from the, date of this Lease) be in on under or passing through or over the Demised Premises and are intended for use by other parts of the Estate or any land adjoining or neighbouring the Estate with the right to construct and maintain new services (other than oil or chemical pipelines to the nearby ICI Severnside Works or other conduits which are not drains or utilities connected with the development and use of the Estate and/or the Adjoining Premises) on unbuilt parts of the Demised Premises for the benefit of any Adjoining Premises and the right to repair maintain and renew such existing and new services and Conduits and the right at any time but (except in emergency) after giving reasonable notice to enter (or in an emergency or after the giving of reasonable notice in the Tenant's absence to break and enter) the Demised Premises in the exercise of such rights the person exercising such right making good any damage caused to the Demised Premises but being under no liability to pay compensation PROVIDED THAT before constructing any new services on the Demised Premises the Landlord will first consult with the Tenant and will only lay such services where they will not impede or interfere with proposed building works and if reasonably required by the Tenant in connection with any future development of the Demised Premises the Tenant may relocate such new services to some other position within the Demised Premises as may be designated by the Tenant with the prior approval of the Landlord (such approval not to be unreasonably withheld) but not so as to interfere with the uninterrupted supply of such services
(2) to enter the Demised Premises for the purposes and in manner mentioned in this Lease
(3) of light air support and protection now or after the date of this Lease enjoyed by any Adjoining Premises
(4) at any time hereafter to build or construct any buildings or structures on any Adjoining Premises or to alter raise the height of rebuild construct make connections to or demolish
any buildings or structures on or to be built or constructed on any Adjoining Premises in such manner as the person exercising the right shall think fit notwithstanding the same may obstruct affect or interfere with the amenity of or the passage of light and air to the Demised Premises
(5) to enter the Demised Premises with or without vehicles plant and machinery for the purposes of repairing maintaining and renewing the boundary fence on the north west side of the Demised Premises provided that for so long as the Tenant maintains a security fence in the vicinity of such boundary this right of access may be restricted by the Tenant (but not in such a way as to render the said right incapable of exercise) to the strip of land between the said boundary fence and the Tenant's said security fence within the Demised Premises
(6) (a) to enter on the Demised Premises after giving reasonable notice and by prior appointment unless the Tenant shall refuse to make such an appointment or to arrange an appointment within a reasonable period of time for the purpose of constructing within the Perpetuity Period surface water drain or drains from the Adjoining Premises on the South East side of the Demised Premises into the rhine which runs inside the boundary of the Demised Premises (such rhine to be constructed by the Tenant in the position already agreed) and thereafter the right (subject to paying a fair and proper proportion of the costs of cleaning and repairing maintaining and renewing such rhine assessed according to user) to maintain in position and use those drains for the drainage of surface water into the rhine from the Adjoining Premises in compliance with all applicable statutory and other requirements of the relevant competent authorities and so that the amount of surface water discharged from the Adjoining Premises into the rhine shall not have a detrimental affect on the Tenant's drainage system on the Demised Premises or otherwise cause damage to any part of the Demised Premises; and
(b) an ancillary right of entry onto the Demised Premises on reasonable notice and at all reasonable times (except in emergency) and by prior appointment unless the Tenant shall refuse to make such an appointment or to arrange an appointment within a reasonable period of time for the purpose of maintenance repair and renewal of those drains but only in compliance with the reasonable security and operational requirements of the Tenant
PROVIDED THAT the Landlord shall cause as little interference as is reasonably practicable in all the circumstances to the business of the Tenant (but so that the Landlord shall not be liable in any circumstances to the Tenant in respect of my interference to and/or loss of business arising out of the lawful exercise of this right) and forthwith making good any damage caused to the Demised Premises to the Tenant's reasonable satisfaction and the Landlord shall indemnify the Tenant against any actions proceedings claims or demands brought against the Tenant as a result of the exercise of this right
(7) at convenient times and upon reasonable notice (except in emergency) to enter the Demised Premises if it shall be reasonable to do so in order to view the state or condition of the Adjoining Premises
(8) The right at any time to enter the Demised Premises:
(a) to inspect or view the condition of the Demised Premises and/or
(b) to carry out any work to any adjacent premises and/or
(c) to carry out repairs or other work or to do anything which the Landlord must or may carry out under the provisions of this Lease
(d) for any purpose connected with the Landlord's interest in reversion to this Lease
PROVIDED THAT if the Landlord exercises any of the rights in paragraphs (1),
(2), (5), (7) and (8) above by carrying out work on the Demised Premises it
shall forthwith make good any damage caused to the Premises and will carry out
such works in such manner as shall cause as little disturbance to the Tenant as
reasonably practicable and in compliance with all reasonable security and
operational requirements of the Tenant
PART III
(1) TOGETHER WITH the benefit of the rights (insofar as the Landlord has power to grant the same and in common with the Landlord its tenants and licensees and all others now or hereafter entitled to like rights): to the passage and running of water soil gas electricity telephone and other services or supply to and from the Demised Premises through the Conduits in or under Adjoining Premises
(2) at convenient times and upon reasonable notice (except in emergency) to enter any Adjoining Premises comprised in the Estate if it shall be necessary to do so in order to view the state or condition of the Demised Premises provided that the Tenant shall forthwith make good any damage and disturbance caused in the exercise of this right and comply with all reasonable security and operational requirements of the relevant owner and occupiers
(3) of way with vehicles over the roadways and on foot over the footpaths comprised in the Estate (including without limitation those shown for the purpose of identification only edged brown on Plan No. 2) to and from the Demised Premises at all times and for all purposes in connection with the use of the Demised Premises authorised by this Lease PROVIDED ALWAYS THAT the rights of way over the roadways shall determine if and when and to the extent that they may be adopted as highways maintainable at the public expense
(4) of support and protection from the Adjoining Premises as now enjoyed by the Demised Premises
(5) to construct and maintain new services under the Service Corridor within the Estate for the benefit of the Demised Premises and the right to repair maintain and renew all existing and new service conduits serving the Demised Premises in the Service Corridor within the Estate subject to the Tenant first consulting with the Landlord as to the
route
and specification of any new services and with a view to minimising the damage and disturbance resulting from the exercise of such rights and making good any damage caused to the Service Corridor and the remainder of the Estate in exercise of such rights PROVIDED THAT the Tenant shall before exercising any such rights first request that such works are carried out by the Landlord (with the Tenant being responsible for the Landlord's reasonable and proper costs) and allow the Landlord a reasonable opportunity to carry out and complete such works PROVIDED FURTHER THAT this right shall determine if and when and to the extent that the strip of land comprising the Service Corridor within the Estate is adopted as highway maintainable at public expense
(i) to enter on the Adjoining Premises to the north-west after giving reasonable notice and by prior appointment unless the owner and occupiers thereof shall refuse to make such an appointment or to arrange an appointment within a reasonable period of time and subject to compliance with the owner and occupiers reasonable security and operational requirements for the purpose of constructing within the Perpetuity Period the Connection from the Demised Premises into the rhine which runs inside the boundary of that Adjoining Premises (referred to in paragraph (6) (a) of Part II of this Schedule) and thereafter the right (subject to the Tenant paying a fair and proper proportion of the costs of cleaning repairing maintaining and renewing the rhine lying on the Adjoining Premises into which the Connection is made assessed according to user) to maintain in position and use the Connection for the drainage of surface water from the Demised Premises in compliance with all applicable statutory and other requirements of the relevant competent authorities and so that the amount of surface water discharged from the Promises into the rhine shall not have a detrimental affect on the owner and occupiers drainage system on the Adjoining Premises or otherwise cause damage to any part of the Adjoining Premises; and
(ii) all ancillary right of entry onto the Adjoining Premises on reasonable notice and at all reasonable times (except in emergency) and by prior appointment unless the owner and occupiers thereof shall refuse to make such an appointment or to arrange an appointment within a reasonable period of time for the purpose of maintenance repair and renewal of the Connection but only in compliance with the owner and occupiers reasonable security and operational requirement
PROVIDED THAT the Tenant shall cause as little interference as is reasonably practicable in all the circumstances to the business of the owner and/or occupiers of the Adjoining Premises (but so that the Tenant shall not be liable in any circumstances to the said owner and/or occupiers in respect of any interference to and/or loss of business arising out of the lawful exercise of this right) and forthwith in making good any damage caused to the Adjoining Premises to the Landlord and the said owner and occupiers reasonable satisfaction and the Tenant shall indemnify and keep indemnified the Landlord and the said owner and occupiers against any actions proceedings claims or demands brought against the Landlord and/or the said owner and/or occupiers as a result of the exercise of this right
THE SECOND SCHEDULE
Rent Review
DEFINITIONS
1.1 In this Schedule the following expressions shall have the meanings assigned to them hereunder:
"RENT REVIEW DATES"
means the dates specified in the Particulars
"NOTIONAL PROPERTY"
means a warehouse building:
(a) constructed at the same time as construction of the actual building at the Demised Premises; and
(b) having a gross internal area of 75,000 square feet measured in accordance with the Code; and
(c) being situated on a site of an area which has the same proportion to the gross internal ground floor area of the notional warehousing building as the Demised Premises has to the gross internal ground floor area of the actual building at the date of this Lease (in both cases being gross internal floor area measured in accordance with the Code) in the same location as the Demised Premises and having the same rights over adjoining land as the Demised Premises has under this Lease and subject to the same title matters
(d) being constructed to an equivalent specification to the actual building on the Demised Premises (with such amendments as are appropriate in relation to the size of the building) and
(e) constructed in accordance with all necessary planning and building regulations consents (subject to the same conditions as attach to the actual consents applicable to the actual building on the Demised Premises so far as not inconsistent with the above provisions) and
(f) constructed and completed in a good and workmanlike manner and kept in repair in accordance with the repairing covenants in the Lease and
(g) assuming the actual building at the Demised Premises is not in existence
"NOTIONAL RENT"
means the rent per square foot of the gross internal area of the Notional Property as at the relevant Rent Review Date assessed in similar manner to the assessment of the Open Market Rent but with all necessary or appropriate adjustments and adaptations to be applicable to the Notional Property
"OPEN MARKET RENT"
means the yearly rent which might reasonably be expected to be paid by a willing tenant to a willing landlord for a letting of the Demised Premises on the relevant Rent Review Date with vacant possession in the open market without taking a fine or premium for a term of fifteen years commencing on the relevant Rent Review Date subject to the provisions of this Lease as amended by any subsequent document
(a) except that:
(i) the provisions in this schedule relating to Notional Property, Notional Rent and paragraph 2.4 of this Schedule shall be deemed to be deleted
(ii) there shall be deemed to be omitted from the
terms of such lease the amount of the
Initial Rent; the tenant's break clause
(5.10) above; and any reference to a minimum
figure as contained in paragraph 2.3 of this
Schedule;
(iii) there shall be deemed to be rent reviews on each fifth anniversary of the relevant Rent Review Date which will be upwards only to open market rental levels (so far as applicable on the basis of this definition of Open Market Rent and without any unusual assumptions or disregards which might distort rent from normal market levels)
(b) on the assumptions that at the relevant Rent Review Date:
(i) there has been a reasonable period in which to negotiate the terms of the letting taking into account the nature of the Property and the state of the market
(ii) no account will be taken of any additional rent which might be offered by a prospective tenant with a special interest
(iii) the Demised Premises are fit for immediate occupation and use
(iv) no work has been carried out on the Demised Premises by the Tenant, any permitted occupier and/or its or their respective
predecessors in title which has diminished
the rental value of the Demised Premises
(v) in case the Demised Premises or any access or essential services have been destroyed or damaged they have been fully reinstated and
(vi) the covenants contained in this Lease or the part of the Tenant have been fully performed and observed
(vii) the benefit of all rent free periods and other initial rental concessions (attributable only to time for fitting out as distinct from contributions to costs of fitting out or reverse premiums or incentive payments to prospective tenants) available to prospective tenants in the open market at the relevant Rent Review Date have been exhausted for the benefit of the prospective tenant to the intent that the Open Market Rent is to be the figure which would be payable at the expiry of any such period
(viii) the willing landlord has or has not elected to waive exemption for VAT purposes in respect of supplies made by it in relation to the Demised Premises according to the actual position of the Landlord in relation to the Demised Premises at the time
(ix) the gross internal area of the Demised Premises (measured in accordance with the Code) as now constructed shall be deemed to be 312,500 square feet
(c) and disregarding at the relevant Rent Review Date any:
(i) effect on rent of the fact that the Tenant any undertenant or any of their respective predecessors in title has been or is in occupation of the Demised Premises
(ii) goodwill attached to the Demised Premises by reason of the carrying on thereat of the business of the Tenant any undertenant or their respective predecessors in title
(iii) any improvement to the Demised Premises which:
(A) was carried out by and at the expense of the Tenant or a permitted undertenant or any of their respective predecessors in title and
(B) was not carried out pursuant to an obligation to the Landlord or its predecessors in title and
(C) was carried out with Landlord's consent where required under this Lease and
(D) was carried out and completed during the Term or during any period of occupation immediately before the start of the Term (but not prior to practical completion of the original construction of the Demised Premises) under a licence or agreement for lease
(iv) obligation of the Tenant to reinstate any works for which the Landlord may have granted consent
(v) any enhancement to rental value attributable to the items set out in Schedule 5
2. RENT PAYABLE
The yearly rent payable under Clause 2.4.1 of this Lease shall from and after each relevant Rent Review Date be whichever is the highest of:
2.1 the yearly rent reserved under Clause 2.4.1 of this Lease immediately before the relevant Rent Review Date
2.2 the Open Market Rent on the relevant Rent Review Date
2.3 [pound symbol] 1,796,875
2.4 the product of the number of square feet as comprise the gross internal area of the Demised Premises (as specified in paragraph (b) (ix) of the definition of Open Market Rent) and the Notional Rent
3. APPOINTED SURVEYOR
3.1 If the Landlord and the Tenant shall not have agreed the Open Market Rent or the Notional Rent by the relevant Rent Review Date or (if earlier) within three months of the service of any notice by the Landlord requiring the rent to be reviewed then the Open Market Rent and/or the Notional Rent (as the case may be) may be determined by a valuer (hereinafter called the "APPOINTED SURVEYOR") who shall be agreed upon in writing by the Landlord and the Tenant and in default of such agreement shall be nominated at the joint expense of the Landlord and the Tenant by the President for the time being of the Royal Institution of Chartered Surveyors (hereinafter in this Schedule called the "PRESIDENT") upon the application of either party at any time after the said three month period or the relevant Rent Review Date (as the case may be)
3.2 In the event that the Landlord gives notice that it does not require both the Open Market Rent and the Notional Rent to be determined it any relevant Rent Review Date (but only requires one of them to be determined) then there shall be no requirement to determine the other
4. SURVEYOR'S DETERMINATION
The Appointed Surveyor shall be an expert in rental values in the immediate vicinity of the Demised Premises and shall be bound to afford to both the Landlord and the Tenant the opportunity to make representations (whether written or oral at his option) regarding the Open Market Rent for the Demised Premises and/or the Notional Rent The Appointed Surveyor shall make his determination of the Open Market Rent and/or the Notional Rent acting as all Arbitrator and the provisions of the Arbitration Act 1996 (including any statutory modification or re-enactments thereof) shall apply and his determination shall be conclusive and binding on the parties and his fees which shall be fixed on a quantum merit basis shall be borne as he may determine
5. LATE DECISIONS
If on the relevant Rent Review Date the Open Market Rent or the Notional Rent (or whichever of them requires in accordance with paragraph 3 above to be determined) shall not have been agreed or determined as aforesaid the yearly rent reserved hereunder immediately before the relevant Rent Review Date shall continue to be payable until so agreed or until the determination of the Open Market Rent or the Notional Rent by the Appointed Surveyor but so that immediately on demand after such agreement or determination the excess difference (if any) over the amount actually so reserved and the amount that would have been payable had the determination been made before the relevant Rent Review Date shall be paid by the Tenant to the Landlord together with interest thereon at the base rate of National Westminster Bank PLC in respect of the period from the relevant Rent Review Date (or such later quarter day on which the payment would have been due) until the date of payment and if not so paid shall be recoverable as rent in arrear
6. MEMORANDUM
When the Open Market Rent or the Notional Rent (and the revised rent payable consequent thereon) shall be agreed or determined as aforesaid the memorandum endorsed on this Lease and Counterpart shall be completed and signed by the Landlord and the Tenant
7. TIME NOT TO BE OF THE ESSENCE
Time shall not be of the essence for any periods of time referred to in this Schedule
THE THIRD SCHEDULE
Form of Surety Covenant
The Surety COVENANTS with the Landlord as a primary obligation and on a full and unqualified indemnity basis as follows:
1. The Tenant will pay the Rents payable under this Lease on the date on
which Rents become due and payable and will comply with all the
obligations and conditions contained in this Lease relating to any
other matter
2. In default of compliance the Surety will pay the Rents or (as
appropriate) comply with the obligation or condition in respect of
which the Tenant has defaulted and the Surety will make good to the
Landlord on demand all costs damage expense and liabilities resulting
from any such default
3. As and when called upon to do so by either the Landlord or the Tenant
the Surely will enter into any Supplemental Document for the purpose of
consenting to the Tenant entering into such Supplemental Document and
confirming that all covenants by the Surety will remain in full force
and effect in respect of the Lease as varied or amended by such
Supplemental Document
4. The Surety's liability shall remain in full force and effect and shall
not be released notwithstanding any of the following it being
acknowledged that the items in the list below are each separate and
independent and not to be interpreted in the light of any other item:
4.1 any time or indulgence granted by the Landlord to the Tenant or to
any other person liable or by the Landlord dealing with exchanging
varying or failing to perfect or enforce any of its rights and
remedies against the Tenant or any other person liable
4.2 any variation of or addition to or reduction from the terms of
this Lease or any Supplemental Document
4.3 any non-acceptance of Rents or any of them in circumstances where
the Landlord has reason to suspect a breach of covenant by the
Tenant
4.4 the occurrence of any of the contingencies specified in Clause 5.1
of this Lease
4.5 a surrender of part of the Demised Premises except that the Surety
will have no liability in relation to the surrendered part in
respect of any period following the date of surrender
4.6 any document which has the effect of operating as a deemed
surrender and re-grant
4.7 this Lease being forfeited (subject to paragraph 15)
4.8 any incapacity or change in the name style or constitution of the
Tenant
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4.9 any change in the constitution of the Landlord or its absorption
in or amalgamation with or the acquisition of all or part of its
undertaking or assets by any other person or any reconstruction or
reorganisation of any kind
4.10 any other act or thing by virtue of which (but for this provision)
the Surety would have been released
5. This guarantee covenant:
5.1 secures the ultimate balance from time to time owing to the
Landlord by the Tenant and is a continuing security
notwithstanding any settlement of account or other matter
5.2 is in addition to any present or future indemnity or guarantee or
other document containing some obligation to pay discharge or be
responsible for any indebtedness or liability of the Tenant (a
"COLLATERAL INSTRUMENT") or right or remedy held by or available
to the Landlord and
5.3 will not be in any way prejudiced or affected by the existence of
any Collateral Instrument rights or remedies or by the Collateral
Instrument becoming wholly or in part void voidable or
unenforceable on any ground or by the Landlord compounding with
any other person liable
6. The Landlord will not be obliged to make any claim or demand on the
Tenant or to resort to any Collateral Instrument or other means of
payment held by or available to the Landlord before enforcing the
Surety's covenants and no action taken or omitted by the Landlord in
connection with any Collateral Instrument or other means of payment
will discharge reduce prejudice or affect the liability of the Surety
nor will the Landlord be obliged to apply any money or other property
received or recovered in consequence of any enforcement or realisation
of any Collateral Instrument or other means of payment in reduction of
the liabilities which are guaranteed by the Surety
7. The Surety warrants that it has not taken or received and undertakes
that until all the liabilities which are guaranteed by the Surety have
been paid or discharged in full it will not take or receive the benefit
of any security from the Tenant or any other person in respect of its
obligations under this guarantee
8. Until all the liabilities guaranteed by the Surety have been paid
discharged or satisfied in full (and notwithstanding payment of a
dividend in any liquidation or bankruptcy or under any compromise or
arrangement) the Surety agrees that without the prior written consent
of the Landlord it will not:
8.1 exercise its rights of subrogation reimbursement and indemnity
against the Tenant
8.2 demand or accept repayment in whole or in part of any indebtedness
due to the Surety from the Tenant or from any other person liable
or demand or accept any Collateral Instrument in respect of the
same or dispose of the same
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8.3 take any step to enforce any right against the Tenant or any other
person liable in respect of any liabilities guaranteed by the
Surety or
8.4 claim any set-off or counterclaim against the Tenant or any other
person liable or claim or prove in competition with the Landlord
in the bankruptcy or liquidation of the Tenant or any other person
liable or have the benefit of or share in any payment from or
composition with the Tenant or any other person liable or any
other Collateral Instrument held by the Landlord for any
liabilities guaranteed by the Surety or for the obligations or
liabilities of any other person liable but so that if so directed
by the Landlord it will prove for the whole or any part of its
claim in the liquidation or bankruptcy of the Tenant on terms that
the benefit of such proof and of all money received by it in
respect of such proof shall be held on trust for the Landlord and
applied in or towards discharge of the liabilities guaranteed by
the Surety in such manner as the Landlord shall deem appropriate
9. If contrary to Paragraphs 7 or 8.2 the Surety takes or receives the
benefit of any security or receives or recovers any money or other
property such security money or other property will be held on trust
for the Landlord and will be delivered to the Landlord on demand
10. The Surety agrees to reimburse the Landlord on demand for all legal and
other costs charges and expenses on a full and unqualified indemnity
basis which may be reasonably incurred by the Landlord in relation to
the enforcement of the Surety's covenants
11. All payments to be made by the Surety will be made in full without any
set-off (legal or equitable) condition or counterclaim and subject as
provided below free and clear of any deductions or withholdings If at
any time any applicable law regulation or regulatory requirement or any
governmental authority monetary agency or central bank requires the
Surety to make any deduction or withholding in respect of taxes levies
duties imposts or any charges from any payment due from the Surety the
sum due from the Surety in respect of such payment shall be increased
to the extent necessary to ensure that after making such deduction or
withholding the Landlord receives on the due date for such payment and
retains (free from any liability in respect of such deduction or
withholding) a net sum equal to the sum which it would have received
had no such deduction or withholding been required to be made The
Surety shall indemnify the Landlord against any losses or costs
incurred by reason of any failure of the Surety to make any such
deduction or withholding or by reason of any increased payment not
being made on the due date for such payment The Surety shall promptly
deliver to the Landlord any receipts certificates or other proof
evidencing the amount (if any) paid or payable in respect of any
deduction or withholding as aforesaid
12. Each of the provisions of this guarantee covenant is distinct and
severable from the others and if at any time one or more of such
provisions is or becomes illegal invalid or unenforceable the validity
legality and enforceability of the remaining provisions will not in any
way be affected or impaired
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13. The Surety agrees to pay interest on each amount demanded of it under this Schedule at the rate referred to in Clause 3.28 of this Lease from the date of demand until repayment (as well after as before judgment)
14. If a liquidator or trustee in bankruptcy surrenders or disclaims this Lease or if this Lease becomes forfeited the Surety will at the request of the Landlord made within the three months following that surrender or disclaimer or forfeiture (as the case may be) take from the Landlord a lease of the Demised Premises for a term equal to the residue of the Term which would have remained had there been no surrender or disclaimer or forfeiture at the same rents and subject to the same obligations and conditions as are contained in this Lease That lease is to take effect from the date of such surrender or disclaimer or forfeiture (as the case may be) and in such case the Surety will pay the costs of that new lease and execute and deliver a counterpart of it to the Landlord
15. If the Landlord does not require the Surety to take a new lease of the Demised Premises under the preceding Paragraph 14 the Surety will nevertheless on demand pay to the Landlord a sum equal to the Rents which would have been payable under this Lease but for the surrender or disclaimer or forfeiture (as the case may be) in respect of the period from the date of that surrender or disclaimer or forfeiture (as the case may be) until the expiration of three months from it or until the Demised Premises become re-let by the Landlord (whichever occurs first) together with all arrears of Rents outstanding under this Lease
THE FOURTH SCHEDULE
(Service Charge)
1. The provisions of this Schedule shall have effect with regard to payment of the Service Charge and the expressions "Service Rent" and "Service Charge" shall have the meanings respectively given to them by the Headlease and the Management Deed
2. The Tenant will pay to the Landlord in manner hereafter specified the Service Charge
3. Payment will be made by the Tenant within 14 days of written demand therefor by the Landlord
4. The Landlord may demand payment from the Tenant at any time:
(a) after; or
(b) within 14 days before
the payment by the Landlord in respect of the Service Rent or Service Charge falls due under the Headlease or Management Deed (as the case may be)
5. If at the expiration of the Term the payments by the Tenant hereunder shall have resulted in a credit to which the Landlord is entitled as against the Superior Landlord and/or the Management Company such credit shall be refunded by the Landlord to the Tenant
6. The Certificate of the Management Company (or its Accountants) as to the amount of Service Rent or Service Charge shall (save in the case of manifest error and subject as stated in the Management Deed) be final and binding on the parties to this Lease
7. Nothing in this Lease contained shall impose any obligation on the Landlord to do or perform any of the Services other than complying with the Landlord's obligations under Clause 4.4 of this Lease
THE FIFTH SCHEDULE
(Tenant's Works disregarded on review)
1. Catering equipment
2. Staff lockers
3. Emergency generator
4. Waste compactor
S. Data voice and comms. Installations
6. Data cable trunking
7. Telephone and switchgear equipment
8. Radio communication systems
9. Material handling equipment
10. Access control systems
11. Aisle wire guided systems
12. Signage
13. Warehouse heating and ventilation
14. Warehouse lighting
15. Gatehouse
16. Security Systems
17. Racking
18. External lighting
19. External canopy
20. Battery charging area - fixtures and fittings
( THE COMMON SEAL of PONTSARN
( INVESTMENTS LIMITED
( hereunto affixed in the presence of
Director/s/Signature Illegible
Secretary/s/Signature Illegible
MEMORANDUM
|
We being the Landlord in whom the reversion immediately expectant upon the determination of the term granted by the within written Lease is vested and being the Tenant in whom the benefit of the said term is vested desire to record the fact that the rent payable under the within written Lease has been reviewed under the provisions hereof and fixed in accordance with those provisions at POUNDS ([pound symbol] ) per annum with effect from the day of
Dated this day of , 20
SIGNED for and on behalf of SIGNED for and on behalf of the Landlord the Tenant ----------------------------- --------------------------- |
MEMORANDUM
We being the Landlord in whom the reversion immediately expectant upon the determination of the term granted by the within written Lease is vested and being the Tenant in whom the benefit of the said term is vested desire to record the fact that the rent payable under the within written Lease has been reviewed under the provisions hereof and fixed in accordance with those provisions at POUNDS ([pound symbol] ) per annum with effect from the day of
Dated this day of , 20
SIGNED for and on behalf of SIGNED for and on behalf of the Landlord the Tenant ------------------------- ---------------------------- |
MEMORANDUM
We being the Landlord in whom the reversion immediately expectant upon the determination of the term granted by the within written Lease is vested and being the Tenant in whom the benefit of the said term is vested desire to record the fact that the rent payable under the within written Lease bas been reviewed under the provisions hereof and fixed in accordance with those provisions at POUNDS ([pound symbol] ) per annum with effect from the day of
Dated this day of , 20
SIGNED for and on behalf of SIGNED for and on behalf of the Landlord the Tenant -------------------------- ---------------------------- |
MEMORANDUM
We being the Landlord in whom the reversion immediately expectant upon the determination of the term granted by the within written Lease is vested and being the Tenant in whom the benefit of the said term is vested desire to record the fact that the rent payable under the within written Lease bas been reviewed under the provisions hereof and fixed in accordance with those provisions at POUNDS ([pound symbol] ) per annum with effect from the day of
Dated this day of , 20
SIGNED for and on behalf of SIGNED for and on behalf of the Landlord the Tenant -------------------------- ---------------------------- |
[MAP DEPICTING LEASED PREMISES]
CANANDAIGUA BRANDS, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
CANANDAIGUA BRANDS, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Section 1
INTRODUCTION
1.1 THE SERP AND ITS EFFECTIVE DATE. The Canandaigua Brands, Inc. Supplemental Executive Retirement Plan (the "SERP") is hereby established by Canandaigua Brands, Inc. (the "Company") effective March 1, 1998, as provided herein.
1.2 PURPOSE. The Company maintains the Canandaigua Brands, Inc. 401(k) and Profit Sharing Plan (the "Plan"). Code Section 401(a)(17) limits to $160,000 (in 1997 and 1998, as adjusted in subsequent years as provided by the Secretary of the Treasury) the amount of compensation which may be taken into account for a Plan Year under a qualified plan ("Compensation Limit"). In addition other, limits may apply to limit or reduce the contributions which a participant may receive under the Plan.
However, the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), permits the provision of benefits under an unfunded plan maintained
by the Company primarily for the purpose of providing deferred compensation for
a select group of management or highly compensated employees. The purpose of the
SERP is to provide benefits to those employees of the Company or a Related
Business, as selected by the Company from year to year, which would be provided
under the Plan with respect to Plan Years beginning on March 1, 1997, in the
amount of Employer Basic Contributions which could not be provided under the
Plan because of the Compensation Limit determined without regard to the Code
Section 415 Limits. In addition, the Company may from time to time determine to
credit to the SERP Accounts of specified employees such amounts' with respect to
other limited or reduced contributions (other than elective contributions) under
the Plan as it shall determine.
1.3 DEFINED TERMS. Except as otherwise indicated capitalized terms used in this plan document which are not defined herein have the same meaning as the same term in the Plan.
Section 2
PARTICIPATION AND BENEFITS
2.1 ELIGIBILITY FOR BENEFITS. The Company in its discretion shall select the employees of the Company or a Related Business who shall receive Annual Benefit Credits as defined in Section 2.2, under the SERP for a Plan Year ("Active Participant"). The
Company in its discretion may designate an employee as an Active Participant for the purpose of receiving credits with respect to the reduction of some types of contributions under the Plan and not others and need not credit all Active Participants with credits for the same types of reduced or limited Plan contributions. A person who becomes an Active Participant shall remain a participant ("Participant") for purposes of receiving distributions, maintaining account balances and being credited with net earnings, gains and losses until all amounts credited to his account under the Plan ("SERP Account") have been distributed whether or not such person is selected as an Active Participant for a subsequent Plan Year.
2.2 AMOUNT OF BENEFIT CREDITS. As determined by the Company in accordance with Section 2.1, the amount credited to an Active Participant's SERP Account for a Plan Year ("Annual Benefit Credits") shall equal (a) the amount, if any, of Employer Basic Contributions the Active Participant would have received under the Plan for that Plan Year if he had received Employer Basic Contributions with respect to his base compensation above the Compensation Limit at the same rate that he received Employer Basic Contributions under the Plan with respect to his Compensation not greater than the Compensation Limit and (b) such other amounts as the Company shall from time to time, in its discretion, determine to credit to the Active Participant's SERP Account with respect to other limited or reduced contributions (other than elective contributions) under the Plan. The payment of Annual Benefit Credits of an Active Participant shall be an obligation of the Company.
2.3 SERP ACCOUNTS AND INCOME CREDITS. Effective from March 1, 1998, through the last business day through and including November 30, 1998, each Participant's SERP Account shall be credited with interest of 6 percent per year, calculated as if the Participant's Annual Benefit Credits with respect to the year beginning on March 1, 1997, had been credited to the Participant's SERP Account on March 1, 1998. Annual Benefit Credits credited to a Participant's SERP Account with respect to periods beginning the first business day after the date of execution hereof, shall be credited with net earnings, gains and losses as of each Valuation Date ("Income Credits") in an amount equal to the amount which such account would have earned, gained or lost if at all times from the first business date such Annual Benefit Credits were credited to the Participant's SERP Account and such amounts were fully invested as provided in the following paragraph. The payment of Income Credits shall be an obligation of the Company.
From time to time the Company shall determine the method of determining Participants' Income Credits under the SERP. The Company may, in its discretion, determine Income Credits by
treating the Participants' Annual Benefit Credits and Income Credits as if invested in a manner, designated by the Company or by permitting Participants' to self-direct the manner in which their Income Credits are to be determined from among such investment options and in accordance with such rules and procedures as the Company shall from time to time determine. Any changes which the Company shall make in the method for determining Income Credits shall be determined and announced to Participants in advance of the date it becomes effective and shall represent a rate which the Company could, ignoring the effect of federal, state and local income taxes, replicate by investing its assets in available markets if it chose to do so.
2.4 VESTING. Except as otherwise provided herein, a Participant shall be vested in his SERP Account to the same extent that he is vested in his contributions of the same type (e.g. Employer Basic Contributions and New Matching Contributions) under the Plan.
2.5 PAYMENT OF BENEFITS. Payments of the amount credited to a Participant's SERP Account, including the total of all Benefit Creditors, Income Credits and other earnings, shall be made as follows:
(a) DISTRIBUTIONS. Except as provided in Section 2.5(b) a Participant's SERP Account shall be paid to him in a lump sum in cash promptly after his Termination Date.
In the event that a Participant is an employee of a Related Business, other than the Company, and 50 percent or more of the combined voting power of the Related Business becomes owned by an entity or person that is not a Related Business or substantially all of the assets of a Related Business are sold, conveyed or otherwise transferred to a person or entity that is not a Related Business, the Participant shall be 100% vested in his SERP Account and the Participant's entire SERP Account shall be distributed to his promptly in the form of a lump sum distribution. Notwithstanding the preceding sentence, such vesting and distribution shall only occur if the Company or an entity that is a Related Business after such transaction does not employ Participant after such sale, transfer or change in ownership.
(b) CHANGE OF CONTROL. Notwithstanding anything in this Section 2.5 to the contrary, in the event of the occurrence of a Change of Control with respect to the Company all Participants shall be 100% vested in their SERP Accounts, the SERP shall be terminated and the entire SERP Account of each Participant, whether or not in pay status, shall be distributed to the Participant promptly in the form of a lump
sum distribution. For this purpose a "Change of Control" shall mean: (i)
the purchase or other acquisition by any person, entity or group of
persons, within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934 ("Act"), or any comparable successor provisions, of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Act) of more than 50 percent of the combined voting power of the
Company's then outstanding voting securities entitled to vote generally, or
(ii) the approval by the stockholders of the Company of a reorganization,
merger, or consolidation, in each case, with respect to which persons who
were stockholders of the Company and who own more than 50 percent of the
combined voting power entitled to vote generally in the election of
directors of such entity immediately prior to such reorganization, merger,
or consolidation do not immediately thereafter own more than 50 percent of
the combined voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated Company's then
outstanding securities, or (iii) a liquidation or dissolution of the
Company or the sale of all or substantially all of the Company's assets.
For the purpose hereof, a Change of Control shall not occur upon:
(1) the transfer of voting securities of the Company;
(i) among or between persons or members of their immediate family or trusts or other entities controlled by or operated for the benefit of such persons or members of their immediate family who own more than 50 percent of the combined voting power entitled to vote generally in the election of directors of the Company; or
(ii) among or between the Company and a Related Business or two or more Related Businesses; or
(2) the reorganization, merger or consolidation of the Company with a Related Business or sale of all or substantially all of Company's assets to a Related Business.
For purposes of this Section 2.5(b), the term, immediate family, shall include the spouse and the lineal ascendants and descendants of an individual and the spouses of such lineal ascendants and descendants and the other individuals who share a common parent or grandparent with such individual and the spouses of such individuals. Adopted children shall be considered as the descendants of their adoptive parents
and their parents' parents in the same manner as would be the biological children of such parents.
2.6 BENEFICIARY DESIGNATION. A Participant's SERP Account shall be paid to the beneficiary designated by the Participant to receive his SERP Account hereunder. Such distribution shall be made in a lump sum distribution. If the Participant fails to effectively designate a beneficiary hereunder, including if the Participant's designated beneficiary predeceases him, upon the Participant's death his SERP Account shall be paid to the person or entity which is his beneficiary under the Plan whether by designation of the Participant or by the terms of the Plan.
2.7 VALUATION OF ACCOUNTS. The value of a Participant's SERP Account shall be paid in cash and shall be valued as of the Valuation Date on which such distribution is made based upon the value which the SERP Account would have if at all times it were earning the rate of return specified by the Company or were fully invested in the investment options designated by the Company or selected by the Participant, pursuant to Section 2.3.
2.8 FUNDING. Benefits payable under the SERP to any person shall be paid directly by the Company. The Company shall not be required to fund, or otherwise segregate assets to be used for payment of benefits under the SERP. While the Company may make investments in amounts equal or unequal to amounts payable hereunder, the Company shall not be under any obligation to make such investments and any such investments shall remain an asset of the Company subject to the claims of its general creditors. Notwithstanding the foregoing, the Company may maintain one or more trusts to hold assets to be used for payment of benefits under the SERP; provided that the assets of each trust shall be subject to the creditors of the Company in the event the Company becomes Insolvent as defined in such trust. Any payments by such a trust of benefits provided to a Participant under the SERP shall be considered payment by the Company and shall discharge the Company of any further liability under the SERP to the extent of the payments made by such trust.
Section 3
MISCELLANEOUS
3.1 PLAN ADMINISTRATION. The SERP shall be administered by a committee consisting of one or more individuals appointed by the Board of Directors ("Committee"). The Committee shall have, to the extent appropriate, the same powers, rights, duties and obligations with respect to the SERP as the Committee under the Plan has with respect to the Plan. In the event that the Board of Directors does not appoint a Committee, the Company shall act as the Committee.
3.2 EMPLOYMENT RIGHTS. Establishment of the SERP shall not be construed to give any employee the right to be retained in the service of the Company or a Related Business or to any benefits not specifically provided by the SERP.
3.3 INTERESTS NOT TRANSFERABLE. Except as to withholding of any tax under the laws of the United States or any state or locality, no benefit payable at any time under the SERP shall be subject in any manner to alienation, sale, transfer, assignment, pledge, attachment, or other legal process, or encumbrance of any kind. Any attempt to alienate, sell, transfer, assign, pledge or otherwise encumber any such benefits, whether currently or thereafter payable, shall be void. No benefit shall, in any manner, be liable for or subject to the debts or liabilities of any person entitled to such benefits. If any person shall attempt to, or shall alienate, sell, transfer, assign, pledge or otherwise encumber his benefits under the SERP, or if by reason of his bankruptcy or other event happening at any time, such benefits would devolve upon any other person or would not be enjoyed by the person entitled thereto under the SERP, then the Company, in its discretion, may terminate the interest in any such benefits of the person entitled thereto under the SERP and hold or apply them to or for the benefit of such person entitled thereto under the SERP or his spouse, children or other dependents, or any of them, in such manner as the Company may deem proper.
3.4 UNCLAIMED AMOUNTS. Unclaimed amounts shall consist of the amounts of the SERP Accounts of a Participant which cannot be distributed because of the Committee's inability to locate the payee, after a reasonable search, within a period of two (2) years after the payment of benefits becomes due. Unclaimed amounts shall be forfeited at the end of such two-year period. These forfeitures will reduce the obligations of the Company under the SERP. After an unclaimed amount has been forfeited, the Participant or beneficiary, as applicable, shall have no further right to his SERP Account.
3.5 CONTROLLING LAW. The law of the State of New York, except its law with respect to choice of law, shall be controlling in all matters relating to the SERP to the extent not preempted by ERISA.
3.6 GENDER AND NUMBER. Words in the masculine gender shall include the feminine, and the plural shall include the singular and the singular shall include the plural.
3.7 ACTION BY AN EMPLOYER. Except as otherwise specifically provided herein, any action required of or permitted by the Company under the SERP shall be by resolution of the Board of
Directors of the Company or person(s) authorized by resolution of the Board of Directors of the Company.
Section 4
AMENDMENT AND TERMINATION
4.1 COMPANY AUTHORITY TO AMEND. The Company intends the SERP to be permanent, but reserves the right at any time by action of its Board of Directors to modify, amend or terminate the SERP, notwithstanding that an amendment may change the timing or the optional form of benefit elected by a Participant or the timing or optional form of benefit in which a Participant's or beneficiary's benefits would otherwise have been paid under Section 2; provided however, that if a Participant has a SERP Account, benefits provided under Section 2.1 shall constitute an irrevocable obligation of the Company as applicable, to the same extent that such Account, had it been an account under the Plan, would have been an irrevocable obligation of the Plan.
CANANDAIGUA BRANDS, INC.
By: /s/ George H. Murray
-------------------------------
Its: Senior Vice President and Chief
Human Resources Officer
-------------------------------
|
2181398.08
EXHIBIT 11.1
------------
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(in thousands, except per share data)
For the Years Ended February 28,
-----------------------------------------------------------------
1999 1998 1997
------------------- ------------------- -------------------
Basic Diluted Basic Diluted Basic Diluted
-------- -------- -------- -------- -------- --------
Income before extraordinary item $ 61,909 $ 61,909 $ 47,130 $ 47,130 $ 46,183 $ 46,183
Extraordinary item, net of income taxes (11,437) (11,437) -- -- -- --
-------- -------- -------- -------- -------- --------
Income applicable to common shares $ 50,472 $ 50,472 $ 47,130 $ 47,130 $ 46,183 $ 46,183
======== ======== ======== ======== ======== ========
Shares:
Weighted average common shares outstanding 18,293 18,293 18,672 18,672 19,333 19,333
Adjustments:
Stock options -- 461 -- 433 -- 188
-------- -------- -------- -------- -------- --------
Adjusted weighted average common shares
outstanding 18,293 18,754 18,672 19,105 19,333 19,521
======== ======== ======== ======== ======== ========
Earnings per common share:
Income before extraordinary item $ 3.38 $ 3.30 $ 2.52 $ 2.47 $ 2.39 $ 2.37
Extraordinary item (0.62) (0.61) -- -- -- --
-------- -------- -------- -------- -------- --------
Earnings per common share $ 2.76 $ 2.69 $ 2.52 $ 2.47 $ 2.39 $ 2.37
======== ======== ======== ======== ======== ========
|
ARTHUR
ANDERSEN
Arthur Andersen LLP
Suite 1500
One Marine Midland Plaza
Rochester NY 14604-2494
716 399 2800
April 22, 1999
Canandaigua Brands, Inc.
Re: Form 10-K Report for the year ended February 28, 1999
Gentlemen/Ladies:
This letter is written to meet the requirements of Regulation S-K calling for a letter from a registrant's independent accountants whenever there has been a change in accounting principle or practice.
As of February 28, 1999, the Company changed from the last-in, first-out ("LIFO") method of accounting for inventories to the first-in, first-out ("FIFO") method. According to the management of the Company, this change was made for the following reasons: (1) a better matching of revenues and expenses of the Company's products sold, and therefore a better method of reporting the Company's results of operations; and (2) the FIFO method of accounting will provide improved financial comparability to other publicly-traded companies in the industry.
A complete coordinated set of financial and reporting standards for determining the preferability of accounting principles among acceptable alternative principles has not been established by the accounting profession. Thus, we cannot make an objective determination of whether the change in accounting described in the preceding paragraph is to a preferable method. However, we have reviewed the pertinent factors, including those related to financial reporting, in this particular case on a subjective basis, and our opinion stated below is based on our determination made in this manner.
We are of the opinion that the Company's change in method of accounting is to an acceptable alternative method of accounting, which, based upon the reasons stated for the change and our discussions with you, is also preferable under the circumstances in this particular case. In arriving at this opinion, we have relied on the business judgment and business planning of your management.
Very truly yours,
/s/ Arthur Andersen LLP |
EXHIBIT 21.1
SUBSIDIARIES OF CANANDAIGUA BRANDS, INC.
PLACE OF INCORPORATION SUBSIDIARY
New York Batavia Wine Cellars, Inc.
New York Canandaigua Wine Company, Inc.
New York Canandaigua Europe Limited
Netherlands Canandaigua B.V.
England and Wales Canandaigua Limited
New York Polyphenolics, Inc.
New York Roberts Trading Corp.
Delaware Barton Incorporated
Delaware Barton Brands, Ltd.
Maryland Barton Beers, Ltd.
Connecticut Barton Brands of California, Inc.
Georgia Barton Brands of Georgia, Inc.
Illinois Barton Canada, Ltd.
New York Barton Distillers Import Corp.
Delaware Barton Financial Corporation
Canada Schenley Distilleries Inc. / Les
Distilleries Schenley Inc.
Wisconsin Stevens Point Beverage Co.
Illinois Monarch Import Company
Georgia The Viking Distillery, Inc.
England and Wales Matthew Clark plc
England and Wales Freetraders Group Limited
England and Wales Matthew Clark Wholesale Limited
England and Wales Matthew Clark Brands Limited
England and Wales Strathmore Mineral Water Company Limited
England and Wales Taunton Cider plc
England and Wales The Gaymer Group Europe Limited
England and Wales The Gaymer Group Limited
|
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into the Company's previously filed Registration Statements on Form S-8 file numbers 33-26694 and 33-56557 and Form S-3 file numbers 333-40571 and 333-67037.
/s/ Arthur Andersen LLP
Rochester, New York,
June 1, 1999
|
| ARTICLE 5 |
| EXHIBIT 27.1 This schedule contains summary financial information extracted from the Company's February 28, 1999 Form 10-K and is qualified in its entirety by reference to such financial statements. |
| CIK: 0000016918 |
| NAME: CANANDAIGUA BRANDS, INC. |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | FEB 28 1999 |
| PERIOD END | FEB 28 1999 |
| CASH | 27,645 |
| SECURITIES | 0 |
| RECEIVABLES | 260,433 |
| ALLOWANCES | 0 |
| INVENTORY | 508,571 |
| CURRENT ASSETS | 855,739 |
| PP&E | 565,580 |
| DEPRECIATION | 136,777 |
| TOTAL ASSETS | 1,793,776 |
| CURRENT LIABILITIES | 415,272 |
| BONDS | 831,689 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 218 |
| OTHER SE | 435,054 |
| TOTAL LIABILITY AND EQUITY | 1,793,776 |
| SALES | 1,497,343 |
| TOTAL REVENUES | 1,497,343 |
| CGS | 1,049,309 |
| TOTAL COSTS | 1,049,309 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 41,462 |
| INCOME PRETAX | 104,430 |
| INCOME TAX | 42,521 |
| INCOME CONTINUING | 61,909 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 11,437 |
| CHANGES | 0 |
| NET INCOME | 50,472 |
| EPS BASIC | 2.76 |
| EPS DILUTED | 2.69 |
| ARTICLE 5 |
| EXHIBIT 27.2: RESTATED FINANCIAL DATA SCHEDULE This schedule contains summary financial information extracted from the Company's November 30, 1998 Form 10-Q and is qualified in its entirety by reference to such financial statements. |
| RESTATED: |
| CIK: 0000016918 |
| NAME: CANANDAIGUA BRANDS, INC. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 9 MOS |
| FISCAL YEAR END | FEB 28 1999 |
| PERIOD END | NOV 30 1998 |
| CASH | 2,141 |
| SECURITIES | 0 |
| RECEIVABLES | 173,760 |
| ALLOWANCES | 0 |
| INVENTORY | 460,061 |
| CURRENT ASSETS | 659,322 |
| PP&E | 376,872 |
| DEPRECIATION | 129,373 |
| TOTAL ASSETS | 1,186,246 |
| CURRENT LIABILITIES | 395,657 |
| BONDS | 291,386 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 217 |
| OTHER SE | 434,631 |
| TOTAL LIABILITY AND EQUITY | 1,186,246 |
| SALES | 1,037,900 |
| TOTAL REVENUES | 1,037,900 |
| CGS | 726,908 |
| TOTAL COSTS | 726,908 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 23,700 |
| INCOME PRETAX | 84,731 |
| INCOME TAX | 34,740 |
| INCOME CONTINUING | 49,991 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 49,991 |
| EPS BASIC | 2.72 |
| EPS DILUTED | 2.66 |
| ARTICLE 5 |
| EXHIBIT 27.3: RESTATED FINANCIAL DATA SCHEDULE This schedule contains summary financial information extracted from the Company's August 31, 1998 Form 10-Q and is qualified in its entirety by reference to such financial statements. |
| RESTATED: |
| CIK: 0000016918 |
| NAME: CANANDAIGUA BRANDS, INC. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 6 MOS |
| FISCAL YEAR END | FEB 28 1999 |
| PERIOD END | AUG 31 1998 |
| CASH | 1,473 |
| SECURITIES | 0 |
| RECEIVABLES | 154,550 |
| ALLOWANCES | 0 |
| INVENTORY | 364,117 |
| CURRENT ASSETS | 557,690 |
| PP&E | 370,797 |
| DEPRECIATION | 124,640 |
| TOTAL ASSETS | 1,065,851 |
| CURRENT LIABILITIES | 283,311 |
| BONDS | 297,407 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 217 |
| OTHER SE | 420,234 |
| TOTAL LIABILITY AND EQUITY | 1,065,851 |
| SALES | 662,314 |
| TOTAL REVENUES | 662,314 |
| CGS | 467,017 |
| TOTAL COSTS | 467,017 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 15,952 |
| INCOME PRETAX | 50,559 |
| INCOME TAX | 20,729 |
| INCOME CONTINUING | 29,830 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 29,830 |
| EPS BASIC | 1.60 |
| EPS DILUTED | 1.56 |
| ARTICLE 5 |
| EXHIBIT 27.4: RESTATED FINANCIAL DATA SCHEDULE This schedule contains summary financial information extracted from the Company's May 31, 1998 Form 10-Q and is qualified in its entirety by reference to such financial statements. |
| RESTATED: |
| CIK: 0000016918 |
| NAME: CANANDAIGUA BRANDS, INC. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 3 MOS |
| FISCAL YEAR END | FEB 28 1999 |
| PERIOD END | MAY 31 1998 |
| CASH | 765 |
| SECURITIES | 0 |
| RECEIVABLES | 169,590 |
| ALLOWANCES | 0 |
| INVENTORY | 379,435 |
| CURRENT ASSETS | 571,847 |
| PP&E | 362,443 |
| DEPRECIATION | 118,780 |
| TOTAL ASSETS | 1,079,967 |
| CURRENT LIABILITIES | 272,048 |
| BONDS | 303,311 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 216 |
| OTHER SE | 439,328 |
| TOTAL LIABILITY AND EQUITY | 1,079,967 |
| SALES | 312,928 |
| TOTAL REVENUES | 312,928 |
| CGS | 219,117 |
| TOTAL COSTS | 219,117 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 8,527 |
| INCOME PRETAX | 22,202 |
| INCOME TAX | 9,103 |
| INCOME CONTINUING | 13,099 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 13,099 |
| EPS BASIC | 0.70 |
| EPS DILUTED | 0.68 |
| ARTICLE 5 |
| EXHIBIT 27.5: RESTATED FINANCIAL DATA SCHEDULE This schedule contains summary financial information extracted from the Company's February 28, 1998 Form 10-K and is qualified in its entirety by reference to such financial statements. |
| RESTATED: |
| CIK: 0000016918 |
| NAME: CANANDAIGUA BRANDS, INC. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | FEB 28 1998 |
| PERIOD END | FEB 28 1998 |
| CASH | 1,232 |
| SECURITIES | 0 |
| RECEIVABLES | 142,615 |
| ALLOWANCES | 0 |
| INVENTORY | 411,424 |
| CURRENT ASSETS | 581,734 |
| PP&E | 356,814 |
| DEPRECIATION | 112,779 |
| TOTAL ASSETS | 1,090,555 |
| CURRENT LIABILITIES | 290,467 |
| BONDS | 309,218 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 216 |
| OTHER SE | 425,211 |
| TOTAL LIABILITY AND EQUITY | 1,090,555 |
| SALES | 1,212,788 |
| TOTAL REVENUES | 1,212,788 |
| CGS | 869,038 |
| TOTAL COSTS | 869,038 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 32,189 |
| INCOME PRETAX | 79,881 |
| INCOME TAX | 32,751 |
| INCOME CONTINUING | 47,130 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 47,130 |
| EPS BASIC | 2.52 |
| EPS DILUTED | 2.47 |
| ARTICLE 5 |
| EXHIBIT 27.6: RESTATED FINANCIAL DATA SCHEDULE This schedule contains summary financial information extracted from the Company's November 30, 1997 Form 10-Q and is qualified in its entirety by reference to such financial statements. |
| RESTATED: |
| CIK: 0000016918 |
| NAME: CANANDAIGUA BRANDS, INC. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 9 MOS |
| FISCAL YEAR END | FEB 28 1998 |
| PERIOD END | NOV 30 1997 |
| CASH | 2,298 |
| SECURITIES | 0 |
| RECEIVABLES | 184,992 |
| ALLOWANCES | 0 |
| INVENTORY | 442,897 |
| CURRENT ASSETS | 649,482 |
| PP&E | 350,183 |
| DEPRECIATION | 108,802 |
| TOTAL ASSETS | 1,155,018 |
| CURRENT LIABILITIES | 394,615 |
| BONDS | 275,300 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 215 |
| OTHER SE | 412,331 |
| TOTAL LIABILITY AND EQUITY | 1,155,018 |
| SALES | 930,238 |
| TOTAL REVENUES | 930,238 |
| CGS | 665,622 |
| TOTAL COSTS | 665,622 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 23,885 |
| INCOME PRETAX | 68,959 |
| INCOME TAX | 28,273 |
| INCOME CONTINUING | 40,686 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 40,686 |
| EPS BASIC | 2.18 |
| EPS DILUTED | 2.14 |
| ARTICLE 5 |
| EXHIBIT 27.7: RESTATED FINANCIAL DATA SCHEDULE This schedule contains summary financial information extracted from the Company's August 31, 1997 Form 10-Q and is qualified in its entirety by reference to such financial statements. |
| RESTATED: |
| CIK: 0000016918 |
| NAME: CANANDAIGUA BRANDS, INC. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 6 MOS |
| FISCAL YEAR END | FEB 28 1998 |
| PERIOD END | AUG 31 1997 |
| CASH | 4,278 |
| SECURITIES | 0 |
| RECEIVABLES | 160,885 |
| ALLOWANCES | 0 |
| INVENTORY | 360,077 |
| CURRENT ASSETS | 545,802 |
| PP&E | 357,630 |
| DEPRECIATION | 110,918 |
| TOTAL ASSETS | 1,058,271 |
| CURRENT LIABILITIES | 293,652 |
| BONDS | 298,995 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 215 |
| OTHER SE | 394,137 |
| TOTAL LIABILITY AND EQUITY | 1,058,271 |
| SALES | 607,535 |
| TOTAL REVENUES | 607,535 |
| CGS | 439,553 |
| TOTAL COSTS | 439,553 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 16,024 |
| INCOME PRETAX | 40,925 |
| INCOME TAX | 16,779 |
| INCOME CONTINUING | 24,146 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 24,146 |
| EPS BASIC | 1.29 |
| EPS DILUTED | 1.27 |
| ARTICLE 5 |
| EXHIBIT 27.8: RESTATED FINANCIAL DATA SCHEDULE This schedule contains summary financial information extracted from the Company's May 31, 1997 Form 10-Q and is qualified in its entirety by reference to such financial statements. |
| RESTATED: |
| CIK: 0000016918 |
| NAME: CANANDAIGUA BRANDS, INC. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 3 MOS |
| FISCAL YEAR END | FEB 28 1998 |
| PERIOD END | MAY 31 1997 |
| CASH | 1,621 |
| SECURITIES | 0 |
| RECEIVABLES | 160,797 |
| ALLOWANCES | 0 |
| INVENTORY | 315,042 |
| CURRENT ASSETS | 496,516 |
| PP&E | 347,829 |
| DEPRECIATION | 106,196 |
| TOTAL ASSETS | 1,006,414 |
| CURRENT LIABILITIES | 226,184 |
| BONDS | 328,969 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 215 |
| OTHER SE | 380,709 |
| TOTAL LIABILITY AND EQUITY | 1,006,414 |
| SALES | 306,011 |
| TOTAL REVENUES | 306,011 |
| CGS | 222,903 |
| TOTAL COSTS | 222,903 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 8,479 |
| INCOME PRETAX | 19,404 |
| INCOME TAX | 7,956 |
| INCOME CONTINUING | 11,448 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 11,448 |
| EPS BASIC | 0.61 |
| EPS DILUTED | 0.60 |
| ARTICLE 5 |
| EXHIBIT 27.9: RESTATED FINANCIAL DATA SCHEDULE This schedule contains summary financial information extracted from the Company's February 28, 1997 Form 10-K and is qualified in its entirety by reference to such financial statements. |
| RESTATED: |
| CIK: 0000016918 |
| NAME: CANANDAIGUA BRANDS, INC. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | FEB 28 1997 |
| PERIOD END | FEB 28 1997 |
| CASH | 10,010 |
| SECURITIES | 0 |
| RECEIVABLES | 142,592 |
| ALLOWANCES | 0 |
| INVENTORY | 349,006 |
| CURRENT ASSETS | 523,395 |
| PP&E | 355,968 |
| DEPRECIATION | 106,416 |
| TOTAL ASSETS | 1,043,281 |
| CURRENT LIABILITIES | 255,749 |
| BONDS | 338,884 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 214 |
| OTHER SE | 377,723 |
| TOTAL LIABILITY AND EQUITY | 1,043,281 |
| SALES | 1,135,013 |
| TOTAL REVENUES | 1,135,013 |
| CGS | 812,812 |
| TOTAL COSTS | 812,812 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 34,050 |
| INCOME PRETAX | 79,160 |
| INCOME TAX | 32,977 |
| INCOME CONTINUING | 46,183 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 46,183 |
| EPS BASIC | 2.39 |
| EPS DILUTED | 2.37 |
AMENDMENT NUMBER 6
TO THE
CANANDAIGUA BRANDS, INC.
1989 EMPLOYEE STOCK PURCHASE PLAN
This Amendment Number 6 to the Canandaigua Brands, Inc. 1989 Employee Stock Purchase Plan (the "Plan") was approved pursuant to Paragraph 20 of the Plan by the Board of Directors of Canandaigua Brands, Inc. (the "Company") and is subject to stockholder approval. Capitalized terms used herein which are not otherwise defined shall have the meanings ascribed to them in the Plan.
1. Paragraph 6 is amended, effective December 22, 1998, by deleting the present paragraph in its entirety and substituting in its place the following:
6. Eligibility. Any employee of the Company or any subsidiary of the
Company who, on the Effective Date of that Offering under the
Plan, is customarily employed for more than seventeen and
one-half (17 1/2) hours per week and for more than five (5)
months per year may participate in that Offering; provided, that
(1) the employee does not own stock possessing 5% or more of the
combined voting power or value of all classes of stock of the
Company, as defined for purposes of Section 423(b)(3) of the
Code, (2) the employee is not a member of the Committee, and (3)
the employee is employed by the Company or a subsidiary of the
Company that the Committee designates as being a subsidiary whose
employees are eligible to participate in the Plan.
Notwithstanding any provision to the contrary, the Committee is
authorized to designate the subsidiaries of the Company whose
employees are eligible to participate in the Plan.
2. Paragraph 20 is amended, effective December 22, 1998, by deleting the present paragraph in its entirety and substituting in its place the following:
20. Amendment of the Plan. To the extent permitted by law, the Board of Directors may at any time and from time to time make such changes in the Plan and additions to it as it deems advisable; provided, however, that except as provided in Paragraphs 18 and 19 hereof, and except with respect to changes or additions in order to make the Plan comply with Section 423 of the Code, the Board may not make any changes or additions which would adversely affect subscription rights previously granted under the Plan and may not, without the approval of the stockholders of the Company, make any changes or additions which would (a) increase the aggregate number of shares of Class A Stock subject to the Plan or which may be subscribed to by an employee, (b) decrease the minimum purchase price for a share of Class A Stock, or (c) change any of the provisions of the Plan relating to eligibility for participation in Offerings, provided that the Committee is authorized to designate without stockholder approval the subsidiaries of the Company whose employees are eligible to participate in the Plan.
3. This Amendment becomes effective December 22, 1998, subject to stockholder approval. If stockholder approval is not obtained within 12 months of the date the Amendment was adopted by the Board of Directors of the Company, the Amendment will be retroactively rescinded.
IN WITNESS WHEREOF, Canandaigua Brands, Inc. has caused this instrument to be executed as of December 23, 1998.
CANANDAIGUA BRANDS, INC.
By: /s/ Richard Sands
------------------------
Richard Sands, President
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