01—Abstract
Summary
Summary of the 10-K filed May 30, 2000. Cited figures are marked; the original filing is the authoritative source.
Canandaigua Brands, Inc. (filed under this name; the filing is the annual report on Form 10-K for the fiscal year ended February 29, 2000) reported net sales of $2,340.5 milliona, up $843.1 million, or 56.3%, from $1,497.3 million in Fiscal 1999.
Net income rose to $77.4 millionb, or $4.18 diluted EPS, from $50.5 million ($2.69 diluted) a year earlier, an increase of 53.3%. The growth was driven mainly by acquisitions: Matthew Clark (U.K.; acquired December 1998), the Black Velvet Canadian whisky assets (April 1999) and Franciscan Estates and Simi wineries (June 1999). Operating income increased 61.1% to $235.0 million, though net interest expense more than doubled to $106.1 million from $41.5 million, a 155.9% increase, reflecting acquisition borrowings.
Leverage rose sharply. Total debt was $1,317.9 millionc at February 29, 2000, up $392.5 million, and the ratio of total debt to total capitalization increased to 71.7% from 68.0%. The company's cash flow from operations was $148.1 million, and it spent $452.9 million on acquisitions and $57.7 million on capital expenditures.
The company retains all earnings and pays no cash dividends, and its debt indentures restrict dividend payments. The company operates five segments (Canandaigua Wine, Barton, Matthew Clark, Franciscan and Corporate Operations) and states it is the second largest U.S. supplier of wine, the second largest importer of beer and the fourth largest supplier of distilled spirits. Management reports that its legal proceedings are not expected to have a material adverse effect, and it believes it complies in all material respects with applicable laws.
02—Key points
Key Highlights
- Net sales rose 56.3% to $2,340.5 million in Fiscal 2000, from $1,497.3 million, an increase of $843.1 million.
- Net income increased 53.3% to $77.4 million; diluted EPS was $4.18, compared with $2.69 in Fiscal 1999.
- Operating income grew 61.1% to $235.0 million, with gross margin improving to 30.9% of net sales from 29.9%.
- Net interest expense climbed to $106.1 million from $41.5 million, a 155.9% increase, tied to acquisition financing.
- Total debt reached $1,317.9 million, and the debt-to-total-capitalization ratio rose to 71.7% from 68.0%.
- Acquisitions in the year included Matthew Clark ($484.8 million total purchase price), Black Velvet Assets ($185.5 million) and Franciscan Estates and Simi, which together were funded with $452.9 million of net cash paid.
- The company pays no cash dividends, retaining earnings for growth, and existing debt agreements restrict dividend payments.
03—Questions
Frequently Asked Questions
What drove the large increase in revenue and profit?
Most of the growth came from acquisitions completed in Fiscal 1999 and 2000. Matthew Clark contributed net sales of $729.7 million for Fiscal 2000 versus $158.8 million in the prior year, and Franciscan contributed $62.1 million since its June 1999 acquisition date. Barton's net sales rose 26.1%, helped by Mexican beer volume and price increases and $81.3 million from the Black Velvet Assets.
How much debt did the company take on, and what is its leverage?
Total debt outstanding was $1,317.9 million at February 29, 2000, an increase of $392.5 million from February 28, 1999. The debt-to-total-capitalization ratio increased to 71.7% from 68.0%. The company issued $1,486.2 million of long-term debt during the year, including Senior Notes, Sterling Senior Notes and Senior Subordinated Notes, and it repaid $1,060.2 million of long-term debt.
Does the company pay dividends?
No. The company's policy is to retain all earnings to finance the development and expansion of its business, and it has not paid cash dividends since its 1973 initial public offering. Its senior credit facility and several note indentures restrict cash dividend payments.
What are the company's main business segments and market positions?
The company reports five segments: Canandaigua Wine (popularly priced wine and brandy), Barton (beer and spirits), Matthew Clark (U.K. cider, wine, bottled water and wholesale), Franciscan (super-premium and ultra-premium wine) and Corporate Operations and Other. It states it is the second largest supplier of wine, the second largest importer of beer and the fourth largest supplier of distilled spirits in the United States.
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