UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 23, 2001
---------------
COMMISSION FILE NUMBER 001-08495
DELAWARE CONSTELLATION BRANDS, INC. 16-0716709
and its subsidiaries:
NEW YORK BATAVIA WINE CELLARS, INC. 16-1222994
NEW YORK CANANDAIGUA WINE COMPANY, INC. 16-1462887
NEW YORK CANANDAIGUA EUROPE LIMITED 16-1195581
ENGLAND AND WALES CANANDAIGUA LIMITED 98-0198402
NEW YORK POLYPHENOLICS, INC. 16-1546354
NEW YORK ROBERTS TRADING CORP. 16-0865491
NETHERLANDS CANANDAIGUA B.V. 98-0205132
DELAWARE FRANCISCAN VINEYARDS, INC. 94-2602962
CALIFORNIA ALLBERRY, INC. 68-0324763
CALIFORNIA CLOUD PEAK CORPORATION 68-0324762
CALIFORNIA M.J. LEWIS CORP. 94-3065450
CALIFORNIA MT. VEEDER CORPORATION 94-2862667
DELAWARE BARTON INCORPORATED 36-3500366
DELAWARE BARTON BRANDS, LTD. 36-3185921
MARYLAND BARTON BEERS, LTD. 36-2855879
CONNECTICUT BARTON BRANDS OF CALIFORNIA, INC. 06-1048198
GEORGIA BARTON BRANDS OF GEORGIA, INC. 58-1215938
ILLINOIS BARTON CANADA, LTD. 36-4283446
NEW YORK BARTON DISTILLERS IMPORT CORP. 13-1794441
DELAWARE BARTON FINANCIAL CORPORATION 51-0311795
WISCONSIN STEVENS POINT BEVERAGE CO. 39-0638900
ILLINOIS MONARCH IMPORT COMPANY 36-3539106
(State or other (Exact name of registrant as (IRS Employer
jurisdiction of specified in its charter) Identification
incorporation) No.)
300 WillowBrook Office Park, Fairport, New York 14450
----------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 218-2169
--------------
-------------------------------------------------------------
(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE.
-------
The financial statements listed below of Ravenswood Winery, Inc. are being
filed with this report. Ravenswood Winery, Inc. was acquired on July 2, 2001.
Financial Statements of Ravenswood Winery, Inc.
-----------------------------------------------
1. Report of Independent Accountants
2. Balance Sheet at June 30, 2000 and 1999
3. Statement of Income for the Fiscal Years Ended June 30, 2000, 1999 and
1998
4. Statement of Shareholders' Equity for the Fiscal Years Ended June 30,
2000, 1999 and 1998
5. Statement of Cash Flows for the Fiscal Years Ended June 30, 2000, 1999
and 1998
6. Notes to Financial Statements
7. Balance Sheet at March 31, 2001 (unaudited) and June 30, 2000
8. Unaudited Statement of Income for the Three Months Ended March 31,
2001 and 2000, and for the Nine Months Ended March 31, 2001 and 2000
9. Unaudited Statement of Cash Flows for the Three Months Ended March 31,
2001 and 2000, and for the Nine Months Ended March 31, 2001 and 2000
10. Notes to Financial Statements
RAVENSWOOD WINERY, INC.
FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT ACCOUNTANTS
* * * * *
JUNE 30, 2000
August 11, 2000
To the Board of Directors and Shareholders of
Ravenswood Winery, Inc.
REPORT OF INDEPENDENT ACCOUNTANTS
In our opinion, the accompanying balance sheet and the related statements
of income, shareholders' equity and cash flows present fairly, in all material
respects, the financial position of Ravenswood Winery, Inc. at June 30, 2000
and 1999, and the results of its operations and its cash flows for each of the
fiscal years in the three-year period ended June 30, 2000, in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audits 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
ODENBERG, ULLAKKO, MURANISHI & CO. LLP
San Francisco, California
RAVENSWOOD WINERY, INC.
BALANCE SHEET
ASSETS
June 30,
------------------------------
2000 1999
------------ ------------
Current assets:
Cash and cash equivalents .......................................... $ 5,769,373 $ 11,390,903
Accounts receivable, less allowance for doubtful accounts of
$10,000 at June 30, 2000 and 1999 ................................ 4,166,816 2,763,418
Inventories ........................................................ 20,521,284 14,581,973
Prepaid income taxes ............................................... 277,500 15,850
Prepaid expenses ................................................... 100,131 105,301
Deferred tax assets ................................................ -- 162,800
------------ ------------
Total current assets ............................................. 30,835,104 29,020,245
Property, plant and equipment, net .................................. 14,787,553 9,001,147
Deferred tax assets ................................................. 180,000 --
Note receivable from shareholder .................................... 310,000 310,000
Other assets ........................................................ 60,433 186,921
------------ ------------
$ 46,173,090 $ 38,518,313
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ................................. $ 83,597 $ 109,722
Current portion of capital lease obligations ...................... 617,979 368,203
Short-term borrowings ............................................. 500,000 1,700,000
Accounts payable .................................................. 3,217,036 3,382,118
Accrued commissions ............................................... 514,379 396,358
Accrued liabilities ............................................... 390,010 433,011
------------ ------------
Total current liabilities ....................................... 5,323,001 6,389,412
Long-term liabilities:
Long-term debt, net ............................................... 6,453,407 4,525,231
Capital lease obligations, net .................................... 2,392,497 1,551,762
Convertible debentures ............................................ 1,687,500 2,502,500
------------ ------------
Total liabilities ............................................... 15,856,405 14,968,905
------------ ------------
Shareholders' equity:
Preferred stock, no par value; 1 million shares authorized,
none issued ...................................................... -- --
Common stock, no par value, 20 million shares authorized .......... 15,054,373 14,211,018
Retained earnings ................................................. 15,176,560 9,338,390
Unrealized gain on available-for-sale securities .................. 85,752 --
------------ ------------
Total shareholders' equity ...................................... 30,316,685 23,549,408
------------ ------------
Commitments and contingencies (See Note 14)
$ 46,173,090 $ 38,518,313
============ ============
See accompanying notes to financial statements.
RAVENSWOOD WINERY, INC.
STATEMENT OF INCOME
Year ended June 30,
-----------------------------------------------
2000 1999 1998
------------ ------------ ------------
Gross sales ............................... $ 35,615,207 $ 23,729,787 $ 17,016,866
Less excise taxes ....................... 1,263,567 908,446 552,499
Less discounts, returns and allowances... 1,125,503 752,655 573,762
------------ ------------ ------------
Net sales ................................. 33,226,137 22,068,686 15,890,605
Cost of goods sold ........................ 15,696,651 10,259,357 7,397,362
------------ ------------ ------------
Gross profit .............................. 17,529,486 11,809,329 8,493,243
Operating expenses:
Deferred compensation expense ........... -- -- 2,206,096
Other operating expenses ................ 7,735,493 5,238,493 4,033,747
------------ ------------ ------------
Operating income .......................... 9,793,993 6,570,836 2,253,400
------------ ------------ ------------
Other income (expense):
Interest expense ........................ (861,992) (459,851) (523,551)
Other, net .............................. 272,269 233,481 49,211
------------ ------------ ------------
(589,723) (226,370) (474,340)
------------ ------------ ------------
Income before tax provision ............... 9,204,270 6,344,466 1,779,060
Provision for income taxes ................ 3,366,100 2,441,000 1,592,169
------------ ------------ ------------
Net income ................................ $ 5,838,170 $ 3,903,466 $ 186,891
============ ============ ============
Earnings per share:
Basic .................................. $ 1.24 $ 1.04 $ 0.05
============ ============ ============
Diluted ................................ $ 1.19 $ 0.96 $ 0.05
============ ============ ============
Weighted average number of common
shares outstanding:
Basic ................................. 4,712,478 3,763,765 3,512,069
============ ============ ============
Diluted ............................... 5,010,955 4,171,245 3,814,820
============ ============ ============
See accompanying notes to financial statements.
RAVENSWOOD WINERY, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
Common Stock
---------------------------- Retained Unrealized
Shares Amount Earnings Gain Total
------------ ------------- ------------- ------------ ------------
Balance at June 30, 1997 ................. 3,149,998 $ 737,804 $ 5,521,288 $ -- $ 6,259,092
Repurchase of common shares
from former officer .................... (157,500) (5,000) (273,255) (278,255)
Compensation related to deferred
compensation plan ...................... 2,206,096 2,206,096
Net income ............................... 186,891 186,891
------------ ------------- ------------- ----------- ------------
Balance at June 30, 1998 ................. 2,992,498 2,938,900 5,434,924 -- 8,373,824
Common stock issued:
Initial public offering, net ........... 1,000,000 9,534,618 9,534,618
Private placement ...................... 212,623 1,687,500 1,687,500
Convertible debentures ................. 17,500 50,000 50,000
Deferred compensation .................. 345,731
Net income ............................... 3,903,466 3,903,466
------------ ------------- ------------- ----------- ------------
Balance at June 30, 1999 ................. 4,568,352 14,211,018 9,338,390 -- 23,549,408
Common stock issued:
Convertible debentures ................. 285,250 815,000 815,000
Employee stock plan .................... 3,177 28,355 28,355
Unrealized gain on
available-for-sale securities .......... 85,752 85,752
Net income ............................... 5,838,170 5,838,170
------------ ------------- ------------- ----------- ------------
Balance at June 30, 2000 ................. 4,856,779 $ 15,054,373 $ 15,176,560 $ 85,752 $ 30,316,685
============ ============= ============= =========== ============
See accompanying notes to financial statements.
RAVENSWOOD WINERY, INC.
STATEMENT OF CASH FLOWS
Year ended June 30,
------------------------------------------------
2000 1999 1998
------------ ------------- ------------
Operating activities:
Net income ............................................. $ 5,838,170 $ 3,903,466 $ 186,891
Items not requiring the current use of cash:
Depreciation and amortization ........................ 1,128,407 437,760 391,844
Deferred income taxes ................................ 301,800 108,022 (77,868)
Unrealized gain on available-for-sale securities ..... 85,752 -- --
Deferred compensation ................................ -- -- 2,206,096
Changes in other operating items:
Accounts receivable ................................ (1,403,398) (856,920) (338,007)
Inventories ........................................ (5,939,311) (4,154,614) (3,269,357)
Prepaid income taxes ............................... (580,650) 57,999 (39,963)
Prepaid expenses ................................... 5,170 (62,258) 9,202
Other assets ....................................... 126,488 (36,469) (8,220)
Accounts payable ................................... (165,082) 1,051,151 604,979
Accrued liabilities and accrued commission ......... 75,020 201,872 200,292
------------ ------------ ------------
Cash provided by (used for) operations ............... (527,634) 650,009 (134,111)
------------ ------------ ------------
Investing activities:
Additions to plant and equipment ....................... (5,405,337) (4,397,848) (490,621)
Officer receivables, net ............................... -- (286,163) --
------------ ------------ ------------
Cash used for investing activities .................. (5,405,337) (4,684,011) (490,621)
------------ ------------ ------------
Financing activities:
Short-term borrowings, net ............................. (1,200,000) 350,000 651,801
Proceeds from long-term debt ........................... 2,097,234 2,818,464 410,642
Repayment of long-term debt ............................ (614,148) (415,688) (269,145)
Issuance of common shares .............................. 28,355 12,091,489 --
Stock offering costs ................................... -- (965,382) --
Proceeds from convertible debentures ................... -- 1,443,750 --
Repurchase of common shares from former officer ........ -- -- (278,255)
------------ ------------ ------------
Cash provided by financing activities ................ 311,441 15,322,633 515,043
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents ....... (5,621,530) 11,288,631 (109,689)
Cash and cash equivalents at beginning of period ....... 11,390,903 102,272 211,961
------------ ------------ ------------
Cash and cash equivalents at end of period ............. $ 5,769,373 $ 11,390,903 $ 102,272
============ ============ ============
See accompanying notes to financial statements.
RAVENSWOOD WINERY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Ravenswood Winery, Inc. (the "Company") was founded in 1976, became a
California Limited Partnership in 1979, and was subsequently incorporated in
the State of California on December 23, 1986. The Company produces, markets,
and sells premium California wines exclusively under the Ravenswood brand name.
CONCENTRATION OF RISK
The Company obtains its grapes from over eighty independent grape growers
and bulk wine suppliers located primarily in Sonoma, Napa and other Northern
California counties. These sources account for 95% or more of its annual wine
production. The Company relies upon certain varietals, notably Zinfandel, which
accounted for approximately 65% of the total dollar sales for the fiscal year
ended June 30, 2000 (67% of the total dollar sales for the fiscal year ended
June 30, 1999). In addition, the Company relies on the winemaking capacity of
other companies and typically enters into one-year contracts with all custom
crush facilities.
In fiscal 2000, approximately 75% of gross sales were made using brokers,
with one broker accounting for 21% of gross sales. (In fiscal 1999,
approximately 75% of gross sales were made using brokers, with one broker
accounting for 22% of gross sales.)
The Company performs ongoing credit evaluations of its distributors and
customers and generally does not require collateral. The Company's credit
losses have been within the reserves provided.
The Company places its cash and temporary cash investments with financial
institutions. At June 30, 2000 and periodically throughout the fiscal year,
such investments were in excess of FDIC insurance limits.
A summary of significant accounting policies follows:
REVENUE RECOGNITION
Revenue is recognized when merchandise is shipped and title passes to the
customer. Revenue from products sold at our tasting room location is recognized
at the time of sale.
CASH AND CASH EQUIVALENTS
The Company considers all short-term, interest-bearing investments with
original maturities of less than three months to be cash equivalents. These
investments are currently held in U.S. Treasuries, commercial paper, government
securities and money market funds.
INVENTORIES
Inventories are stated at the lower of cost or market (on the first-in,
first-out basis), and include finished goods, raw materials, packaging
materials and product merchandise. Finished goods include costs of raw
materials (grapes and bulk wine), packaging, labor used in wine production,
bottling, warehousing and overhead on winery facilities and equipment.
Costs associated with growing crops are recorded as inventory and are
recognized as inventory costs in the fiscal year in which the related crop is
harvested.
In accordance with general practice in the wine industry, wine inventories
are included in current assets, although a portion of such inventories may be
aged for periods longer than one year.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost. The cost of repairs and
maintenance is expensed as incurred; major replacements and improvements are
capitalized. Costs incurred in developing vineyards, including interest costs,
are capitalized until the vineyards become commercially productive.
RAVENSWOOD WINERY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
When assets are retired or disposed of, the cost and accumulated
depreciation are removed from the accounts, and any resulting gains or losses
are included in income in the year of disposition.
Depreciation is computed using both the straight-line and accelerated
methods over the estimated useful lives of the assets, generally 7 years for
vineyards, 39 years for building and improvements, 5 to 15 years for machinery
and equipment and 3 to 7 years for office equipment. Leased equipment under
capitalized leases is generally amortized over the shorter of the terms of the
leases or their estimated useful lives. Leasehold improvements are amortized
over the estimated useful lives of the improvements or the terms of the related
lease, whichever is shorter.
Impairment of long-lived assets is measured on the basis of anticipated
undiscounted cash flows for each asset. No impairment loss was recognized for
the fiscal years ended June 30, 2000, 1999 and 1998.
INCOME TAXES
Deferred income taxes are computed using the liability method. Under the
liability method, taxes are recorded based on the future tax effects of the
difference between the tax and financial reporting bases of the Company's
assets and liabilities.
USE OF ESTIMATES
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 when ultimately realized could differ from
those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of accounts receivable, prepaid expenses, accounts
payable, accrued liabilities, short-term borrowings, long-term debt, capital
lease obligations and convertible debentures are reasonable estimates of the
fair value of these financial instruments.
EARNINGS PER SHARE
Basic earnings per share represents income available to common
shareholders divided by the weighted average number of common shares
outstanding during the measurement period, after giving retroactive effect to:
1) shares issued under a deferred compensation arrangement in July 1998; and 2)
common stock issued in December 1998 (using the "treasury stock method") at
prices below the initial public offering price of $10.50.
Diluted earnings per share represents the income available to common
shareholders divided by: 1) the weighted average number of common shares
outstanding during the measurement period, after giving retroactive effect to
a) shares issued under a deferred compensation arrangement in July 1998; and b)
common stock issued in December 1998 (using the "treasury stock method") at
prices below the initial public offering price of $10.50 per share; and 2) the
potentially dilutive common shares issuable for convertible debt and stock
options that were outstanding during the measurement period.
STOCK-BASED COMPENSATION
The Company has adopted SFAS No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"). As permitted by SFAS 123, the Company measures
compensation cost in accordance with Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees ("APB No. 25"), and related
interpretations. Accordingly, no accounting recognition is given to stock
options granted at fair market value until they are exercised. Upon exercise,
net proceeds, including income tax benefits realized, are credited to equity.
RAVENSWOOD WINERY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
RECLASSIFICATION OF FINANCIAL STATEMENT PRESENTATION
Certain prior period amounts have been reclassified in order to conform to
the fiscal 2000 financial statement presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
that establishes accounting and reporting standards for derivative instruments
and hedging activities. It requires that derivatives be recognized in the
balance sheet at fair value and specifies the accounting for changes in fair
value. In June 1999, the FASB issued SFAS No. 137, which defers the effective
date of SFAS No. 133 until fiscal years beginning after June 15, 2000. The
adoption of SFAS No. 133 is not expected to have a material effect on the
Company's financial statements.
NOTE 2. INVENTORIES:
Inventories are summarized as follows:
June 30,
----------------------------
2000 1999
------------ ------------
Bulk wine ..................... $ 15,262,865 $ 10,355,759
Bottled wine .................. 4,716,701 3,870,548
Crop costs .................... 137,051 88,725
Supplies ...................... 233,943 124,298
Tasting room merchandise ...... 170,724 142,643
------------ ------------
$ 20,521,284 $ 14,581,973
============ ============
Certain of the foregoing assets are pledged as security for certain
indebtedness (see Notes 5 and 6).
NOTE 3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are summarized as follows:
June 30,
-----------------------------
2000 1999
------------ ------------
Land ................................... $ 245,135 $ 245,135
Vineyards .............................. 345,473 345,473
Buildings and improvements ............. 1,647,637 1,647,637
Leasehold improvements ................. 9,832,748 174,331
Machinery and equipment ................ 1,080,251 1,020,007
Equipment held under capital leases .... 4,118,953 2,623,977
Office equipment ....................... 298,837 131,127
------------ ------------
17,569,034 6,187,687
Less accumulated depreciation .......... 2,781,481 1,653,074
------------ ------------
14,787,553 4,534,613
Construction in progress ............... -- 4,466,534
------------ ------------
$ 14,787,553 $ 9,001,147
============ ============
RAVENSWOOD WINERY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
Included in leasehold improvements are costs associated with the new
Quarry facility including the following: building core and shell, equipment
installation and related improvement costs and site improvements. Included in
equipment held under capital leases are barrels and other equipment with net
book values of $2,874,654 and $1,932,484, respectively, at June 30, 2000 and
1999.
Substantially all of the property, plant and equipment is pledged as
security for certain indebtedness (see Notes 5, 6 and 7).
NOTE 4. NOTE RECEIVABLE FROM SHAREHOLDER:
The note receivable from shareholder at June 30, 2000 and 1999 consists of
a $310,000 note bearing annual interest at 5.3%, payable in annual interest
only installments commencing December 21, 1999 until maturity on December 21,
2008. The Company provided the loan to the officer to pay taxes related to his
receipt of common stock under a deferred compensation plan.
NOTE 5. SHORT-TERM BORROWING ARRANGEMENTS:
At June 30, 2000, the Company has a $2 million revolving line of credit
with Pacific Coast Farm Credit Services (the "Association") that expires on
June 1, 2001. The loan agreement provides that the principal advances under the
facility cannot exceed certain percentages of eligible accounts receivable and
wine inventories as defined in the agreement. The borrowings bear annual
interest at a variable rate established by the Association (9.02% and 8.11% at
June 30, 2000 and 1999, respectively). The borrowings are secured by the
Company's accounts receivable, wine inventories and equipment. Borrowings under
the line of credit at June 30, 2000 and 1999 were $500,000 and $1,700,000,
respectively.
The revolving credit line and certain of the long-term debt contain
various covenants which include, among other things, a requirement to maintain
a minimum working capital of $3.25 million, a ratio of liabilities to tangible
net worth of not greater than 1.5 to 1, a current ratio of at least 1.75 to 1
and restrictions on the payment of dividends and distributions to shareholders.
RAVENSWOOD WINERY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
NOTE 6. LONG-TERM DEBT:
Long-term debt is summarized as follows:
June 30,
-------------------------------
2000 1999
-------------- --------------
Note payable to Pacific Coast Farm Credit Services ("Association") with
annual interest at a variable rate established by the Association
(8.56% and 6.9% at June 30, 2000 and 1999, respectively), payable in
quarterly interest installments until December 1, 1999 and commencing
March 1, 2000 in quarterly principal and interest installments of
$34,795 through December 1, 2024, secured by property, plant and
equipment (see Note 3) .................................................. $ 1,543,775 $ 1,552,500
Construction mortgage loan payable ($4.58 million commitment) to the
Association with annual interest at a variable rate established by the
Association (8.56% and 6.9% at June 30, 2000 and 1999, respectively),
payable in quarterly interest installments until January 1, 2001; and
commencing April 1, 2001 in quarterly principal and interest install-
ments of $98,117 through January 1, 2026, secured by property, plant
and equipment (see Note 3) .............................................. 4,125,000 2,013,353
Construction revolving equity line of credit payable to the Association
with annual interest at a variable rate established by the Association
(8.56% and 6.9% at June 30, 2000 and 1999, respectively), payable
in quarterly interest only installments until December 1, 1999 and
commencing March 1, 2000 in equal quarterly principal and interest
installments of $19,284 through December 1, 2024, secured by property,
plant and equipment (see Note 3) ........................................ 829,550 835,000
Note payable to the Association with annual interest at a variable rate
established by the Association (8.11% at June 30, 1999), payable in
quarterly principal and interest installments of $17,390 through
June 1, 2002, secured by accounts receivable and wine inventories.
Paid in full during fiscal 2000 ......................................... -- 175,459
Other notes payable with annual interest ranging from 10% to 11%,
payable in monthly principal and interest installments as defined to
November 2000 through June 2001 ......................................... 38,679 58,641
----------- -----------
6,537,004 4,634,953
Less current portion ...................................................... 83,597 109,722
----------- -----------
$ 6,453,407 $ 4,525,231
=========== ===========
Scheduled annual maturities of long-term debt are as follows:
$83,597--fiscal 2001; $121,609--fiscal 2002; $121,505--fiscal 2003;
$127,509--fiscal 2004; $137,508--fiscal 2005; and $5,945,276 thereafter.
RAVENSWOOD WINERY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
NOTE 7. CAPITAL LEASE OBLIGATIONS:
The Company leases barrels and other equipment that are accounted for as
capital leases. Minimum future lease payments under the capital leases are as
follows:
Fiscal Year
-----------
2001 ............................................. $ 864,744
2002 ............................................. 787,123
2003 ............................................. 708,322
2004 ............................................. 597,150
2005 ............................................. 424,587
Thereafter ....................................... 282,967
-----------
Net minimum lease payments ....................... 3,664,893
Less--amount representing interest (weighted
average--8.4%) ................................. 654,417
-----------
Present value of net minimum lease payments ...... 3,010,476
Less--current portion ............................ 617,979
-----------
$ 2,392,497
===========
The net book value of leased barrels and equipment included in property,
plant and equipment at June 30, 2000 is $2,874,654 (see Note 3).
Subsequent to June 30, 2000, the Company has obtained a $2 million lease
line commitment for the acquisition of oak barrels, various stainless steel
cooperage and wine production equipment.
NOTE 8. CONVERTIBLE DEBENTURES:
Convertible debentures are summarized as follows:
June 30,
----------------------------
2000 1999
----------- -----------
1998 convertible debentures ...... $ 1,687,500 $ 1,687,500
1994 convertible debentures ...... -- 815,000
----------- -----------
$ 1,687,500 $ 2,502,500
=========== ===========
In December 1998, the Company completed a sale of $1,687,500 in
convertible debentures due December 31, 2008. Each $10,000 debenture is
convertible into 900 shares of common stock at any time prior to December 31,
2003 upon request of the holder. If the debentures are not converted, the
Company may redeem them at face value at any time during the period from
January 1, 2004 until the maturity date. The Company pays interest quarterly on
the debentures in an amount equal to the prime interest rate quoted by Bank of
America NT & SA plus 1% (10% and 8.75% at June 30, 2000 and 1999). The interest
rate is adjusted every 18 months, except that in no period may the interest
rate adjustment exceed 2% or the maximum interest rate exceed 11%.
In December 1994, the Company completed a sale of $865,000 in convertible
debentures due December 31, 2004. Each $10,000 debenture was convertible into
3,500 shares of common stock at any time prior to December 31, 1999 upon
request of the holder. If the debentures were not converted, the Company could
redeem them at face value at any time during the period from January 1, 2000
until the maturity date. The Company paid interest quarterly on the debentures
in an amount equal to a floating index tied to prime bank rates for a five-year
period (9.25% at June 30, 1999). The interest rate was adjusted every 18
months, except that in no period could the interest rate adjustment exceed 2%,
or the
RAVENSWOOD WINERY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
maximum interest rate exceed 11%. During the fiscal year ended June 30, 2000,
the remaining 1994 debentures ($815,000) were converted into 285,250 shares of
common stock.
NOTE 9. INCOME TAXES:
The provision for income taxes is as follows:
Fiscal Year Ended June 30,
------------------------------------------
2000 1999 1998
------------ ------------ ------------
Current tax expense:
Federal .................... $ 2,815,000 $ 1,831,000 $ 1,306,069
State and local ............ 576,100 502,000 363,968
------------ ------------ ------------
3,391,100 2,333,000 1,670,037
------------ ------------ ------------
Deferred tax expense (benefit):
Federal .................... 260,000 55,000 (71,875)
State and local ............ (285,000) 53,000 (5,993)
------------ ------------ ------------
(25,000) 108,000 (77,868)
------------ ------------ ------------
$ 3,366,100 $ 2,441,000 $ 1,592,169
============ ============ ============
Deferred income taxes are provided for the temporary differences between
the financial reporting and tax bases of the Company's assets and liabilities.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.
Deferred tax assets and liabilities are comprised of the following:
June 30,
------------------------
2000 1999
---------- ----------
Deferred tax assets:
Basis difference in inventory ................... $ 190,000
California manufacturer's tax credit carryover .. 210,000
State taxes ..................................... 205,000 $ 170,000
---------- ----------
605,000 170,000
Deferred tax liabilities:
Depreciation and amortization ................... (425,000) (7,200)
---------- ----------
Net deferred tax asset (liability) ................ $ 180,000 $ 162,800
========== ==========
RAVENSWOOD WINERY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
A reconciliation of income tax computed at the federal statutory corporate
tax rate to the provision for income taxes follows (in thousands):
Fiscal Year Ended June 30,
--------------------------------------------------------------------------------
2000 1999 1998
----------------------- ------------------------ -----------------------
Amount % Amount % Amount %
---------- ---------- ---------- ---------- ---------- ----------
Income taxes at federal statutory rate ...... $ 3,130 34.0% $ 2,157 34.0% $ 605 34.0%
Increase (decrease) in income taxes
resulting from:
State and local income taxes, net of
federal benefit ........................... 534 5.8% 369 5.8% 228 12.9%
Permanent differences:
Deferred compensation ....................... -- -- -- -- 759 42.6%
California manufacturer's tax credit ........ (329) -3.5% (6) -0.1% -- --
Other ....................................... 31 0.3% (79) -1.2% -- --
---------- ---------- ---------- ---------- ---------- ----------
$ 3,366 36.6% $ 2,441 38.5% $ 1,592 89.5%
========== ========== ========== ========== ========== ==========
The Company has California manufacturer's tax credit carryforwards
available to offset future taxable income for California income tax purposes of
approximately $320,000, which do not expire.
NOTE 10. DEFERRED COMPENSATION AGREEMENT:
On August 25, 1992, the Company entered into a deferred compensation
agreement with its chairman and chief executive officer, W. Reed Foster. The
agreement established an account with 5,487.8 units. Each unit was the
equivalent value of one share of common stock and contained an equivalent right
to cash and common stock dividends and all stock splits and other benefits paid
to the shareholders of the Company. Compensation expense relating to this
agreement was $2,206,096 for fiscal 1998, and is included in operating expenses
in the accompanying statement of income.
As of July 1, 1998, the deferred compensation agreement was terminated and
the Company issued 345,731 shares of common stock to Mr. Foster. No
compensation expense was incurred for the fiscal years ended June 30, 2000 or
1999.
NOTE 11. VOTING TRUST:
On August 25, 1992, the Board of Directors authorized the creation of a
Voting Trust for certain shares of the common stock of the Company. On November
1, 1993, the shareholders approved the terms and conditions contained in the
Trust which provided for four trustees (Joel Peterson, W. Reed Foster, Justin
Faggioli and Callie S. Konno). The original Voting Trust Agreement was amended
by a Voting Trust Agreement dated May 27, 1998 that extended the term to May
26, 2008. During fiscal 2000 the trustees voted to terminate the Voting Trust.
NOTE 12. SHAREHOLDERS' EQUITY:
In December 1998, the Company completed a sale of 212,623 shares of common
stock, resulting in proceeds to the Company of $1,687,500. In April 1999, the
Company completed a public offering of 1,000,000 shares of common stock,
resulting in net proceeds, after deducting underwriting fees and other costs,
to the Company of $9,534,618. In December 1999, the remaining 1994 debentures
($815,000) were converted into 285,250 shares of common stock.
RAVENSWOOD WINERY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
NOTE 13. STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS:
STOCK OPTION PLAN
On February 1, 1999, the Company's Board of Directors established the 1999
Equity Incentive Plan to provide for the grant of incentive stock options,
non-qualified stock options, restricted stock awards and other stock-based
awards to the Company's officers, employees, directors, independent
contractors, consultants, vendors and suppliers. No awards may be granted under
the Plan after January 2009, but the vesting of awards previously granted may
extend beyond that date.
Under the Equity Incentive Plan, the Company is authorized to grant
incentive stock options, non-qualified stock options, restricted stock awards
and other stock based awards for a total of 750,000 shares of common stock. The
stock options may not be granted for less than the fair market value of the
common stock at the date of grant. The stock options are exercisable over a
period determined by the Board at the time of grant, but not to exceed ten
years after the date they are granted. These options generally vest over a
five-year period from the date of grant and expire five to ten years after the
date of grant.
The per share weighted average fair value of stock options granted during
the fiscal years ended June 30, 2000 and June 30, 1999 were $5.31 and $4.86
respectively. These amounts were determined using the Black-Scholes
option-pricing model, which values options based on the stock price at the date
of grant, the expected life of the option, the estimated volatility of the
stock, expected dividend payments, and the risk-free interest rate over the
expected life of the option. The assumptions used in the Black-Scholes model for
fiscal 2000 and 1999 were as follows: a weighted average expected life of 5
years; an expected volatility of common stock of 43.7% and 46.4% respectively;
and weighted average risk-free interest rate of 5.24% and 5.08% respectively. No
dividend yield was used, as the Company has not paid dividends in the past and
does not anticipate paying dividends in the future.
The Company applies APB No. 25 in accounting for its stock plan and,
accordingly, no compensation costs have been recognized in the Company's
financial statements for incentive or non-qualified stock options granted. If,
under SFAS 123, the Company determined compensation costs based on the fair
value at the grant date for its stock options, the net income of $5,838,170 as
reported for fiscal 2000 would compare to a pro forma net income of $5,424,716.
(Fiscal 1999 net income of $3,903,466 would compare to a pro forma net income
of $3,846,173). Basic and diluted earnings per share as reported for fiscal
2000 of $1.24 and $1.19, respectively, would compare to pro forma basic and
diluted earnings per share of $1.15 and $1.11, respectively. (Basic and diluted
earnings per share as reported for fiscal 1999 of $1.04 and $0.96,
respectively, would compare to pro forma basic and diluted earnings per share
of $1.02 and $0.94, respectively). The Equity Incentive Plan was established in
fiscal 1999 and had no effect on fiscal 1998 net income or earnings per share.
RAVENSWOOD WINERY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
A summary of the status of the Equity Incentive Plan as of June 30, 2000
and changes during the fiscal year then ended are presented below:
Weighted
Number of Average
Shares Exercise Price
--------- --------------
Outstanding at June 30, 1998 ..................... -- $ --
Granted (weighted average fair value of $4.86) ... 280,000 10.88
Exercised ........................................ -- --
Forfeited ........................................ (500) 10.50
-------
Outstanding at June 30, 1999 ..................... 279,500 10.88
Granted (weighted average fair value of $5.31) ... 204,750 11.63
Exercised ........................................ -- --
Forfeited ........................................ (1,000) 10.50
-------
Outstanding at June 30, 2000 ..................... 483,250 11.20
-------
Options exercisable at June 30, 2000 ............. 55,700 $ 10.88
======= =========
The Company granted 100,000 options in fiscal 2000 whose exercise price
was greater than its market price on the date of grant. The weighted average
fair value of these options was $5.16. No option was granted in fiscal 2000
whose exercise price was less than its market price on the date of grant.
The following table summarizes information about stock options outstanding
at June 30, 2000:
Options Outstanding Options Exercisable
------------------------------------------- ---------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
--------------- ------------- ----------- ---------- ------------- -----------
$10.50 - $12.23 483,250 7.1 years $ 10.88 55,700 $ 10.88
At June 30, 2000, the outstanding stock options expire as follows: 100,000
in April 2004; 178,500 in April 2009; 100,000 in February 2005; 10,750 in
August 2009; 93,000 in February 2010; and 1,000 in June 2010.
EMPLOYEE STOCK PURCHASE PLAN
On February 1, 1999, the Company's Board of Directors adopted and the
Company's shareholders approved the Employee Stock Purchase Plan with 50,000
shares of common stock available for issuance thereunder. The Plan, which is
intended to qualify as an employee stock purchase plan under Section 423 of the
Internal Revenue Code, provides that all employees of the Company, including
directors of the Company who are employees, whose customary employment is more
than 20 hours per week for more than five months in any calendar year, are
eligible to participate in the Plan. Employees who would immediately after the
grant own 5% or more of the total combined voting power or value of the stock
of the Company or any subsidiary are not eligible to participate. Eligible
employees may elect to have up to 10% of their earnings withheld and applied to
the purchase of common stock at a price equal to a minimum of 85% of the
average market price per share (as defined in the Plan) of the common stock on
either the first day or the last day of the relevant offering period, whichever
is lower. An employee may not purchase more than 500 shares in any one offering
period. The Company issued 3,177 shares of common stock under the Plan in
fiscal 2000 (no shares of common stock were issued in fiscal 1999).
RAVENSWOOD WINERY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
NOTE 14. COMMITMENTS AND CONTINGENCIES:
The Company leases certain warehouse space under noncancellable operating
leases that terminate on dates ranging from September 2000 to January 2003.
Under the terms of certain of the leases, rent is contingent on the amount of
bulk wine and/or case goods stored at any given time and is adjusted annually
for increases in building operating costs.
In January 1999, the Company entered into an agreement to lease
approximately 20 acres of land in Sonoma County, California from Sandra D.
Donnell and Bruce B. Donnell, the wife and brother-in-law, respectively, of
Justin M. Faggioli, the Company's Executive Vice President. The Company has
built a new winery facility (the "Quarry Facility") on the leased property, to
expand its production capacity. The lease provides for monthly payments that
are adjusted annually for inflation (as defined) and for a lease term ending
December 31, 2032. In addition, the lease provides the Company with a right of
first refusal to purchase a portion of the property and a first option to rent
upon its expiration if specific conditions are met.
Rental expense (including contingent rent) was $920,571, $701,889, and
$468,616 for fiscal 2000, 1999, and 1998, respectively. Minimum future rental
payments for each of the next five fiscal years and thereafter are as follows:
$445,000--fiscal 2001; $448,000--fiscal 2002; $248,000--fiscal 2003;
$107,000--fiscal 2004; $101,000--fiscal 2005; and $1,203,000 thereafter.
The Company typically contracts with various growers and certain wineries
to supply its grape and bulk wine requirements. While most of these contracts
call for prices to be determined by market conditions, several long-term
contracts provide for minimum grape or bulk wine purchase prices.
The Company has exposure to legal actions arising in the ordinary course
of business. In the opinion of management, the Company has adequate legal
defenses or insurance coverage with respect to any such actions and does not
believe that they will materially affect the Company's results of operations or
financial position.
NOTE 15. 401(k) SAVINGS PLAN:
The Company has a 401(k) savings plan that is available to eligible
employees. Employer contributions to the plan are at the discretion of the
Board of Directors and amounted to $65,762, $67,866, and $53,089 for fiscal
2000, 1999, and 1998 respectively.
NOTE 16. EARNINGS PER SHARE:
Basic earnings per share represents income available to common
shareholders divided by the weighted average number of common shares
outstanding during the measurement period, after giving retroactive effect to:
1) shares issued under a deferred compensation arrangement in July 1998 (see
Note 10); and 2) common stock issued in December 1998 (using the "treasury
stock method") at prices below the initial public offering price of $10.50 (see
Note 12).
Diluted earnings per share represents the income available to common
shareholders divided by: 1) the weighted average number of common shares
outstanding during the measurement period, after giving retroactive effect to
a) shares issued under a deferred compensation arrangement in July 1998; and b)
common stock issued in December 1998 (using the "treasury stock method") at
prices below the initial public offering price of $10.50; and 2) the
potentially dilutive common shares issuable for convertible debt and stock
options that were outstanding during the measurement period.
RAVENSWOOD WINERY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
Fiscal Year Ended June 30,
---------------------------------------------
2000 1999 1998
------------ ------------ ------------
BASIC
Average shares outstanding ................ 4,712,478 3,696,801 3,005,625
Shares issued under deferred compensation
arrangement[A] ........................... -- -- 345,731
Shares issued in December 1998[B] ......... -- 66,964 160,713
------------ ------------ ------------
Weighted average number of common shares
outstanding .............................. 4,712,478 3,763,765 3,512,069
============ ============ ============
Net income ................................ $ 5,838,170 $ 3,903,466 $ 186,891
============ ============ ============
Per share amount .......................... $ 1.24 $ 1.04 $ 0.05
============ ============ ============
Fiscal Year Ended June 30,
----------------------------------------------
2000 1999 1998
------------ ------------ ------------
DILUTED
Average shares outstanding ......................... 4,712,478 3,696,801 3,005,625
Shares issued under deferred compensation
arrangement[A] ................................... -- -- 345,731
Shares issued in December 1998[B] .................. -- 66,964 160,713
Net effect of potentially dilutive common stock
issuable for convertible debentures .............. 293,752 407,480 302,751
Net effect of potentially dilutive common stock
issuable for stock options ....................... 4,725 -- --
------------ ------------ ------------
Weighted average number of shares and
equivalents outstanding .......................... 5,010,955 4,171,245 3,814,820
============ ============ ============
Net income ......................................... 5,838,170 $ 3,903,466 $ 186,891
Interest on convertible debt, net of tax benefit ... 114,374 112,836 49,305
------------ ------------ ------------
Net income, after adding interest on debentures .... $ 5,952,544 $ 4,016,302 $ 236,196
============ ============ ============
Per share amount ................................... $ 1.19 $ 0.96 $ 0.05
============ ============ ============
--------------
[A] Reflects the retroactive effect of the shares issued under a deferred
compensation arrangement in July 1998.
[B] Represents the retroactive effect using the "treasury stock method" for
common stock issued in December 1998 at prices below the initial public
offering price.
NOTE 17. SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest, net of amounts capitalized, was $875,265,
$542,127, and $484,670 for the fiscal years ended June 30, 2000, 1999, and
1998, respectively. Cash paid for income taxes was $3,645,000, $2,275,000, and
$1,660,344 for the fiscal years ended June 30, 2000, 1999, and 1998,
respectively.
RAVENSWOOD WINERY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
A summary of non-cash investing and financing information is as follows:
Fiscal Year Ended June 30,
----------------------------------------------
2000 1999 1998
------------ ------------ ------------
Plant and equipment purchased with capitalized
leases and notes payable ........................ $ 1,509,476 $ 1,778,569 $ 241,086
============ ============ ============
Construction in progress acquired by issuing
convertible debentures and common shares to
related parties ................................. $ -- $ 283,511 $ --
============ ============ ============
Convertible debentures redeemed for common
shares .......................................... $ 815,000 $ 50,000 $ --
============ ============ ============
Convertible debentures issued by reclassifying
note and interest payable to shareholder ........ $ -- $ 56,250 $ --
============ ============ ============
NOTE 18. COMPREHENSIVE INCOME:
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 - Reporting Comprehensive Income ("SFAS
130"). SFAS 130 requires the additional reporting of a new measure of income
which takes into account certain elements otherwise recorded as part of equity.
For all years presented, the difference between net income and comprehensive
income consists of the changes in the unrealized gain in securities
available-for-sale included as part of the Company's equity.
The following is a reconciliation of net income and comprehensive income:
Fiscal Year Ended June 30,
------------------------------------------
2000 1999 1998
------------ ------------ ------------
Net income .................................... $ 5,838,170 $ 3,903,466 $ 186,891
Change in unrealized gain on available-for-sale
securities .................................. 85,752 -- --
------------ ------------ ------------
Comprehensive income .......................... $ 5,923,922 $ 3,903,466 $ 186,891
============ ============ ============
RAVENSWOOD WINERY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
NOTE 19. QUARTERLY HIGHLIGHTS (UNAUDITED):
Selected highlights for each of the fiscal quarters during the years ended
June 30, 2000 and 1999 (in thousands, except per share data):
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
--------- --------- --------- ---------
Year ended June 30, 2000:
Net sales ........................... $ 7,692 $ 9,924 $ 8,127 $ 7,484
Gross profit ........................ 4,229 5,110 4,230 3,961
Net income .......................... 1,498 1,780 1,317 1,243
Earnings per share--Basic ........... 0.33 0.39 0.27 0.26
Earnings per share--Diluted ......... 0.31 0.36 0.27 0.25
Year ended June 30, 1999:
Net sales ........................... $ 5,962 $ 5,621 $ 4,961 $ 5,525
Gross profit ........................ 3,433 3,083 2,556 2,737
Net income .......................... 1,217 1,068 756 862
Earnings per share--Basic ........... 0.35 0.31 0.22 0.19
Earnings per share--Diluted ......... 0.32 0.28 0.21 0.18
Earnings per share calculations for each of the quarters are based on the
weighted average common and common share equivalents outstanding for each
period, and the sum of the quarters may not necessarily be equal to the
full-year earnings per share amount.
RAVENSWOOD WINERY, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RAVENSWOOD WINERY, INC.
BALANCE SHEET
March 31, June 30,
2001 2000
------------- -------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 6,074,776 $ 5,769,373
Accounts receivable, less allowance of $10,000 5,392,293 4,166,816
Inventories 26,640,342 20,521,284
Prepaid expenses 411,511 377,631
------------- -------------
Total current assets 38,518,922 30,835,104
Property, plant and equipment, net 14,382,850 14,787,553
Note receivable from shareholder 310,000 310,000
Deferred tax assets 273,000 180,000
Other assets 72,802 60,433
------------- -------------
$ 53,557,574 $ 46,173,090
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 73,118 $ 83,597
Current portion of capital lease obligations 723,177 617,979
Short-term borrowings - 500,000
Accounts payable 4,834,431 3,217,036
Accrued commissions 624,498 514,379
Accrued liabilities 899,775 390,010
------------- -------------
Total current liabilities 7,154,999 5,323,001
Long-term liabilities:
Long-term debt, net 6,850,869 6,453,407
Capital lease obligations, net 2,282,857 2,392,497
Convertible debentures 1,562,500 1,687,500
Deferred tax liability 124,000 -
------------- -------------
Total liabilities 17,975,225 15,856,405
------------- -------------
Shareholders' equity:
Preferred stock, no par value; 1 million shares
authorized, none issued - -
Common stock, no par value; 20 million shares authorized,
4,876,067 and 4,856,779 issued and outstanding 15,262,226 15,054,373
Retained earnings 20,215,120 15,176,560
Unrealized gain on available-for-sale securities 105,003 85,752
------------- -------------
Total shareholders' equity 35,582,349 30,316,685
------------- -------------
$ 53,557,574 $ 46,173,090
============= =============
See accompanying notes to financial statements.
RAVENSWOOD WINERY, INC.
STATEMENT OF INCOME
(UNAUDITED)
Three Months Ended March 31, Nine Months Ended March 31,
-------------------------------- -------------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Gross Sales $ 9,720,088 $ 8,692,139 $ 30,686,303 $ 27,418,528
Less excise taxes (201,757) (325,967) (774,033) (859,657)
Less discounts, allowances
and returns (289,115) (239,319) (1,075,551) (816,243)
------------ ------------ ------------ ------------
Net sales 9,229,216 8,126,853 28,836,719 25,742,628
Cost of goods sold 4,233,459 3,897,343 13,187,659 12,174,519
------------ ------------ ------------ ------------
Gross profit 4,995,757 4,229,510 15,649,060 13,568,109
Operating expenses 2,212,408 1,831,691 6,833,304 5,573,023
------------ ------------ ------------ ------------
Operating income 2,783,349 2,397,819 8,815,756 7,995,086
Interest expense (253,267) (237,883) (755,626) (594,327)
Other income (expenses) (4,628) 32,514 224,430 190,590
------------ ------------ ------------ ------------
(257,895) (205,369) (531,196) (403,737)
Income before income taxes 2,525,454 2,192,450 8,284,560 7,591,349
Provision for income taxes 960,000 875,000 3,246,000 2,996,130
------------ ------------ ------------ ------------
Net income $ 1,565,454 $ 1,317,450 $ 5,038,560 $ 4,595,219
============ ============ ============ ============
Earnings per share:
Basic $ 0.32 $ 0.27 $ 1.04 $ 0.99
============ ============ ============ ============
Diluted $ 0.31 $ 0.27 $ 1.00 $ 0.94
============ ============ ============ ============
Weighted average number of
common shares outstanding:
Basic 4,870,896 4,855,053 4,866,206 4,664,947
============ ============ ============ ============
Diluted 5,105,914 5,008,985 5,100,828 5,007,370
============ ============ ============ ============
See accompanying notes to financial statements.
RAVENSWOOD WINERY, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
Three months ended March 31, Nine months ended March 31,
------------------------------ -----------------------------
2001 2000 2001 2000
------------ ------------- ------------ ------------
Operations:
-----------
Net income $ 1,565,454 $ 1,317,450 $ 5,038,560 $ 4,595,219
Items not requiring the current use of cash:
Depreciation and amortization 428,940 268,649 1,221,306 727,480
Unrealized gain on available -
for-sale securities 15,600 33,694 19,251 76,910
Deferred income taxes (84,000) - 31,000 7,800
Changes in other operating items:
Accounts receivable 166,202 108,649 (1,225,477) (2,271,970)
Inventories 422,840 716,304 (6,119,058) (4,662,033)
Prepaid expenses (67,576) (34,052) (33,879) (240,251)
Other assets (3,805) (4,107) (12,369) (15,995)
Accounts payable (2,521,119) (1,883,809) 1,617,395 1,089,384
Accrued liabilities 205,154 99,962 509,765 307,205
Accrued commissions (62,046) (70,788) 110,119 210,807
------------ ------------- ------------ ------------
Cash provided by (used for) operations 65,644 551,952 1,156,613 (175,444)
------------ ------------- ------------ ------------
Investing:
Additions to plant & equipment (159,140) (1,127,413) (330,092) (5,611,873)
------------ ------------- ------------ ------------
Cash used for investing activities (159,140) (1,127,413) (330,092) (5,611,873)
------------ ------------- ------------ ------------
Financing:
Short-term borrowings, net - - (500,000) (700,000)
Proceeds from long-term debt - - 455,000 2,252,036
Proceeds from issuance of stock 43,574 - 82,852 -
Proceeds from sale of securities - - - 12,947
Repayments of long-term debt (213,465) (118,251) (558,970) (276,586)
------------ ------------- ------------ ------------
Cash provided by (used for) financing activities (169,891) (118,251) (521,118) 1,288,397
------------ ------------- ------------ ------------
Change in cash & cash equivalents (263,387) (693,712) 305,403 (4,498,920)
Balance at beginning of period 6,338,163 7,585,695 5,769,373 11,390,903
------------ ------------- ------------ ------------
Balance at end of period $ 6,074,776 $ 6,891,983 $ 6,074,776 $ 6,891,983
============ ============= ============ ============
Cash paid during the period for:
Interest $ 261,128 $ 274,229 $ 736,473 $ 612,687
============ ============= ============ ============
Taxes $ 1,160,000 $ 740,000 $ 3,180,000 $ 2,995,000
============ ============= ============ ============
Noncash investing and financing:
Plant and equipment purchased with
long-term liabilities $ - $ 185,759 $ 486,511 $ 805,353
============ ============= ============ ============
Conversion of convertible debentures
to common stock $ 62,500 $ - $ 125,000 $ 815,000
============ ============= ============ ============
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
RAVENSWOOD WINERY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION:
The financial statements included herein for Ravenswood Winery, Inc. (the
"Company") have been prepared by the Company, without audit pursuant to the
rules and regulations of the Securities and Exchange Commission. In management's
opinion, the interim financial data presented includes all adjustments (which
include only normal recurring adjustments) necessary for a fair presentation.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations.
The results of operations for the three-month and nine-month periods ended
March 31, 2001 are not necessarily indicative of the operating results expected
for the entire fiscal year. The financial statements included herein should be
read in conjunction with other documents the Company files from time to time
with the Securities and Exchange Commission, including the Company's Form 10-KSB
for the fiscal year ended June 30, 2000.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES
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 when ultimately realized could differ from
those estimates.
RECLASSIFICATION
Certain prior period amounts have been reclassified in order to conform to
the current period presentation.
NOTE 3. EARNINGS PER SHARE
Basic EPS represents the income available to common shareholders divided by
the weighted average number of common shares outstanding for the period. Diluted
EPS represents the income available to common shareholders divided by the
weighted average of common shares outstanding while also giving effect to the
potential dilution that could occur if securities or other contracts to issue
common stock (e.g. stock options and convertible debentures) were exercised and
converted into stock. For all periods presented, the difference between basic
and diluted EPS for the Company is due to the dilutive effect of stock options
and convertible debentures. This effect is calculated using the treasury stock
method.
During the nine month period ended March 31, 2001, 6,450 shares of common
stock were purchased under Ravenswood's 1999 Equity Incentive Plan; 1,586 shares
of common stock were issued under the Company's Employee Stock Purchase Plan and
debentures with a face value of $125,000 were converted into 11,251 shares of
the Company's common stock.
NOTE 4. INVENTORIES:
Inventories are summarized as follows:
March 31, June 30,
2001 2000
------------ ------------
(Unaudited)
Bulk wine $ 21,500,213 $ 15,262,865
Bottled wine 4,487,664 4,716,701
Crop costs 82,807 137,051
Supplies 415,195 233,943
Tasting room merchandise 154,463 170,724
------------ ------------
$ 26,640,342 $ 20,521,284
============ ============
NOTE 5. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are summarized as follows:
March 31, June 30,
2001 2000
----------- -----------
(Unaudited)
Land $ 245,135 $ 245,135
Vineyards 345,473 345,473
Buildings and improvements 1,647,634 1,647,637
Leasehold improvements 9,844,563 9,832,748
Machinery and equipment 1,211,580 1,080,251
Equipment held under capital leases 4,605,465 4,118,953
Office equipment 336,768 298,837
Construction in progress 145,435 -
----------- -----------
18,382,053 17,569,034
Less-accumulated depreciation 3,999,203 2,781,481
----------- -----------
$14,382,850 $14,787,553
=========== ===========
NOTE 6. COMPREHENSIVE INCOME:
Comprehensive income includes unrealized gain on available-for-sale
securities. The following is a reconciliation of net income and comprehensive
income (unaudited):
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------------- ---------------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Net income $1,565,454 $1,317,450 $5,038,560 $4,595,219
Change in unrealized gain on
available-for-sale securities 15,600 5,649 19,251 43,216
---------- ---------- ---------- ----------
Comprehensive income $1,581,054 $1,323,099 $5,057,811 $4,638,435
========== ========== ========== ==========
NOTE 7. SUBSEQUENT EVENT:
On April 10, 2001, Ravenswood entered into an Agreement and Plan of Merger
with Constellation Brands, Inc., pursuant to which Ravenswood would be merged
with a wholly-owned indirect subsidiary of Constellation Brands, Inc.
--------------------------------------------------------------------------------
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
-------
Exhibits:
---------
23.1 - Consent of Odenberg, Ullakko, Muranishi & Co. LLP
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONSTELLATION BRANDS, INC.
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Executive Vice
President and Chief Financial
Officer
SUBSIDIARIES
BATAVIA WINE CELLARS, INC.
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Treasurer
CANANDAIGUA WINE COMPANY, INC.
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Treasurer
CANANDAIGUA EUROPE LIMITED
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Treasurer
CANANDAIGUA LIMITED
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Finance Director
(Principal Financial Officer and
Principal Accounting Officer)
POLYPHENOLICS, INC.
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
and Treasurer
ROBERTS TRADING CORP.
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, President and
Treasurer
CANANDAIGUA B.V.
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Chief
Financial Officer
FRANCISCAN VINEYARDS, INC.
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
and Treasurer
ALLBERRY, INC.
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
and Treasurer
CLOUD PEAK CORPORATION
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
and Treasurer
M.J. LEWIS CORP.
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
and Treasurer
MT. VEEDER CORPORATION
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
and Treasurer
BARTON INCORPORATED
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
BARTON BRANDS, LTD.
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
BARTON BEERS, LTD.
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
BARTON BRANDS OF CALIFORNIA, INC.
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
BARTON BRANDS OF GEORGIA, INC.
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
BARTON CANADA, LTD.
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
BARTON DISTILLERS IMPORT CORP.
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
BARTON FINANCIAL CORPORATION
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
STEVENS POINT BEVERAGE CO.
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
MONARCH IMPORT COMPANY
Dated: August 23, 2001 By: /s/ Thomas S. Summer
--------------------------------
Thomas S. Summer, Vice President
INDEX TO EXHIBITS
(1) UNDERWRITING AGREEMENT
Not Applicable.
(2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR
SUCCESSION
Not Applicable.
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES
Not Applicable.
(16) LETTER RE CHANGE IN CERTIFYING ACCOUNTANT
Not Applicable.
(17) LETTER RE DIRECTOR RESIGNATION
Not Applicable.
(20) OTHER DOCUMENTS OR STATEMENTS TO SECURITY HOLDERS
Not Applicable.
(23) CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of Odenberg, Ullakko, Muranishi & Co. LLP (filed herewith).
(24) POWER OF ATTORNEY
Not Applicable.
(99) ADDITIONAL EXHIBITS
None.