-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DZAOMyAcQQNx4lSFucfLtGmshUq0M1RpcQD0HPC6UsEWxCIvkCGDLM1EwwV5o+X3 6g5HDKZaUKnuYR2yYNQxGg== 0000912057-99-006082.txt : 19991117 0000912057-99-006082.hdr.sgml : 19991117 ACCESSION NUMBER: 0000912057-99-006082 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLDEN STATE VINTNERS INC CENTRAL INDEX KEY: 0001059581 STANDARD INDUSTRIAL CLASSIFICATION: MALT BEVERAGES [2082] IRS NUMBER: 770412762 FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14305 FILM NUMBER: 99755131 BUSINESS ADDRESS: STREET 1: 500 DRAKES LANDING ROAD CITY: GREENBRAE STATE: CA ZIP: 94904 BUSINESS PHONE: 4154614400 MAIL ADDRESS: STREET 1: 500 DRAKES LANDING ROAD CITY: GREENBRAE STATE: CA ZIP: 94904 10-Q 1 FORM 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-Q (MARK ONE) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 000-24651 ------------------------ GOLDEN STATE VINTNERS, INC. (Exact name of registrant as specified in its charter) DELAWARE 77-0412761 (State or other jurisdiction (I.R.S. Employer Identification of incorporation or organization) No.) 500 DRAKE'S LANDING ROAD, GREENBRAE, CALIFORNIA 94904 (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (415) 461-4400 None (Former name, former address and former fiscal year, if changed since last report) ------------------------ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES /X/ NO / / The number of shares of the Registrant's Class A and Class B Common Stock outstanding as of November 12, 1999 was 4,342,528 and 5,155,733 shares, respectively. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- GOLDEN STATE VINTNERS, INC. TABLE OF CONTENTS
PAGE ---- PART I -- FINANCIAL INFORMATION: Item 1: Financial Statements Consolidated Balance Sheets as of September 30, 1999 and June 30, 1999 . . . . . . . . . . . . . . . . . . . . . . . . 3 Consolidated Statements of Operations for the Three Months Ended September 30, 1999 and 1998 . . . . . . . . . . . . . . . . 4 Consolidated Statements of Cash Flows for the Three Months Ended September 30, 1999 and 1998 . . . . . . . . . . . . . . . . 5 Notes to Consolidated Financial Statements . . . . . . . . . . . . 6 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . 8 Item 3: Quantitative and Qualitative Disclosures About Market Risk. . . . . 11 PART II -- OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . 12
2 PART 1 -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GOLDEN STATE VINTNERS, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
SEPTEMBER 30, JUNE 30, 1999 1999 ------------- -------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash and equivalents $ 51 $ 30 Trade and other receivables - net 14,248 9,939 Inventories 42,749 27,172 Refundable income taxes 4,131 4,131 Prepaid expenses and other current assets 583 729 Deferred income taxes 228 388 ---------- ---------- Total current assets 61,990 42,389 PROPERTY, PLANT AND EQUIPMENT - Net 86,202 84,034 NOTE RECEIVABLE 1,722 1,722 OTHER ASSETS 359 375 ---------- ---------- TOTAL ASSETS $ 150,273 $ 128,520 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Bank line of credit $ 13,900 $ 8,100 Cash overdraft 2,989 965 Accounts payable 2,786 4,029 Grower payable 16,359 660 Payroll and related liabilities 545 634 Accrued interest 400 191 Other accrued liabilities 721 886 Current portion of long-term debt 4,869 4,899 ---------- ---------- Total current liabilities 42,569 20,364 LONG-TERM DEBT 38,419 39,250 DEFERRED INCOME TAXES 11,470 11,422 STOCKHOLDERS' EQUITY: Class A common stock, par value $.01; 6,000,000 shares authorized; 4,342,528 issued and outstanding at September 30, 1999 and June 30, 1999, respectively. 44 44 Class B common stock, par value $.01; 54,000,000 shares authorized; 5,155,733 shares issued and outstanding at September 30, 1999 and June 30, 1999, respectively. 51 51 Paid-in capital 44,837 44,837 Retained earnings 12,883 12,552 ---------- ---------- Total stockholders' equity 57,815 57,484 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 150,273 $ 128,520 ---------- ---------- ---------- ----------
See accompanying notes to consolidated financial statements. 3 GOLDEN STATE VINTNERS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SEPTEMBER 30, ----------------------------- 1999 1998 REVENUES: Bulk wine and juice $ 5,259 $ 4,575 Wine grapes 6,211 6,066 Case goods 4,579 3,893 Brandy and spirits 307 3,222 ---------- --------- Total revenues 16,356 17,756 COST OF SALES 13,273 12,803 ---------- --------- GROSS PROFIT 3,083 4,953 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,509 1,549 ---------- --------- INCOME FROM OPERATIONS 1,574 3,404 INTEREST EXPENSE 1,007 1,395 OTHER EXPENSE 28 6 ---------- --------- INCOME BEFORE INCOME TAXES 539 2,003 INCOME TAXES 208 817 ---------- --------- NET INCOME 331 1,186 ACCRETION ON PREFERRED STOCK - (1,928) REDEEMABLE PREFERRED STOCK DIVIDENDS - (400) ---------- --------- INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS $ 331 $ (1,142) ---------- --------- ---------- --------- EARNINGS (LOSS) PER COMMON SHARE: BASIC $ 0.03 $ (0.13) ---------- --------- ---------- --------- DILUTED $ 0.03 $ (0.13) ---------- --------- ---------- --------- WEIGHTED AVERAGE SHARES OUTSTANDING: BASIC 9,498 8,934 ---------- --------- ---------- --------- DILUTED 9,603 8,934 ---------- --------- ---------- ---------
See accompanying notes to consolidated financial statements. 4 GOLDEN STATE VINTNERS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS)
THREE MONTHS ENDED SEPTEMBER 30, ----------------------------- 1999 1998 OPERATING ACTIVITIES: Net income $ 331 $ 1,186 Adjustments to reconcile net income to net cash flows used in operating activities: Depreciation and amortization 1,195 964 Loss on disposal of assets 20 - Deferred income taxes 208 810 Changes in assets and liabilities: Receivables (4,309) (8,438) Inventories (15,383) (13,331) Prepaid expenses and other current assets 146 (695) Accounts payable (1,243) 1,369 Grower payable 15,699 13,490 Payroll and related liabilities (89) (5,663) Other accrued liabilities 209 (340) Accrued interest (165) (397) Income taxes refundable/payable - 3,096 --------- --------- Net cash used in operating activities (3,381) (7,949) INVESTING ACTIVITIES -- Purchases of property, plant and equipment (3,543) (1,860) FINANCING ACTIVITIES: Borrowings on line of credit 7,300 22,050 Payments on line of credit (1,500) (23,450) Change in cash overdraft 2,024 689 Repayments of long-term debt (879) (12,595) Redemption of Sr. Preferred Stock - (10,000) Payment of dividends - (400) Proceeds from the sale of common stock - 33,992 Public offering costs - (472) --------- --------- Net cash provided by financing activities 6,945 9,814 --------- --------- INCREASE IN CASH AND EQUIVALENTS 21 5 CASH AND EQUIVALENTS, BEGINNING OF PERIOD 30 40 --------- --------- CASH AND EQUIVALENTS, END OF PERIOD $ 51 $ 45 --------- --------- --------- --------- OTHER CASH FLOW INFORMATION: Interest paid $ 1,265 $ 1,843 --------- --------- --------- --------- Notes/leases issued to acquire property and equipment $ - $ 1,916 --------- --------- --------- ---------
See accompanying notes to consolidated financial statements. 5 GOLDEN STATE VINTNERS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION: In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (which include all normal and recurring adjustments) necessary to present fairly the Company's financial position at September 30, 1999 and its results of operations and its cash flows for the three month periods ended September 30, 1999 and 1998. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from the accompanying financial statements. The unaudited financial statements set forth in this quarterly report on Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K (the "10-K") for the fiscal year ended June 30, 1999, on file at the Securities and Exchange Commission. The Company's results for the three months ended September 30, 1999 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2000. NOTE 2 - INVENTORIES: Inventories consist of the following (in thousands):
SEPTEMBER 30, JUNE 30, 1999 1999 ------------- ------------- Bulk wine $ 33,781 $ 14,250 Cased and bottled wine 3,352 3,584 Brandy 2,153 916 Juice, supplies and other 1,517 1,214 Unharvested crop costs 1,946 7,208 ------------- ------------- Total $ 42,749 $ 27,172 ------------- ------------- ------------- -------------
NOTE 3 - NEW ACCOUNTING PRONOUNCEMENTS In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments," SFAS 137 extends the effective date of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," SFAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. The statement requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. As amended by SFAS 137, SFAS 133 is effective for the Company's fiscal year ending June 30, 2001. The Company is currently evaluating what impact, if any, this statement may have on its financial statements. NOTE 4 - BUSINESS SEGMENT INFORMATION Effective July 1, 1998, the Company adopted the provisions of Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement required that a public business enterprise report financial and descriptive information about its reportable operating segments. Adoption of this statement had no impact on the Company's consolidated financial position, results of operations or cash flows. The Company's chief decision maker evaluates performance based on gross profit of the following four segments: bulk wine, wine grapes, case goods and brandy. The bulk wine segment includes the production and sale of bulk wine, the provision of custom crushing services, the storage of bulk wine in tanks and barrels and the delivery of bulk wine barreling services, such as racking and topping. The Company's wine grapes segment consists of the farming and harvesting of Company owned vineyards and subsequent sales or internal use of produced grapes as well as grapes purchased by the Company for resale. The case goods segment includes the production of proprietary and private label bottled wine and wine-related beverages and the provision of custom bottling and storage services. The Company's brandy segment includes the production of brandy and spirits and the provision of brandy barrel storage and related barreling services. The Company also analyzes information on capital expenditures, depreciation and amortization and assets utilized by each of the four segments. 6 GOLDEN STATE VINTNERS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 4 - BUSINESS SEGMENT INFORMATION (CONTINUED) Segment information as of September 30 and June 30, 1999 and for the three month periods ended September 30, 1999 and 1998 is as follows (in thousands):
THREE MONTHS ENDED SEPTEMBER 30, ------------------------------- 1999 1998 ----------- ----------- Revenues, net: Bulk wine................... $ 5,259 $ 4,575 Wine grapes................. 6,211 6,066 Case goods.................. 4,579 3,893 Brandy...................... 307 3,222 ----------- ----------- Total revenues, net........ 16,356 17,756 Cost of Sales: Bulk wine................... 4,301 3,635 Wine grapes................. 5,126 3,905 Case goods.................. 3,700 2,944 Brandy...................... 146 2,319 ----------- ----------- Total cost of sales........ 13,273 12,803 Gross Profit: Bulk wine................... 958 940 Wine grapes................. 1,085 2,161 Case goods.................. 879 949 Brandy...................... 161 903 ----------- ----------- Total gross profit......... $ 3,083 $ 4,953 ----------- ----------- ----------- ----------- Capital Expenditures: Bulk wine................... $ 2,014 $ 3,093 Wine grapes................. 198 181 Case goods.................. 767 54 Brandy...................... 553 447 Corporate................... 11 1 ----------- ----------- Total...................... $ 3,543 $ 3,776 ----------- ----------- ----------- ----------- Depreciation and amortization: Bulk wine................... $ 535 $ 304 Wine grapes................. 515 469 Case goods.................. 41 25 Brandy...................... 21 55 Corporate................... 83 111 ----------- ----------- Total...................... $ 1,195 $ 964 ----------- ----------- ----------- -----------
SEPTEMBER 30, JUNE 30, 1999 1999 ------------- -------- Total Assets: Bulk wine................... $ 84,347 $ 63,311 Wine grapes................. 37,711 39,641 Case goods.................. 10,811 9,840 Brandy...................... 9,774 7,763 Corporate................... 7,630 7,965 ------------- -------- Total...................... $ 150,273 $128,520 ------------- -------- ------------- --------
7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. THE FOLLOWING DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF GOLDEN STATE VINTNERS, INC. (THE "COMPANY") CONTAINS "FORWARD-LOOKING STATEMENTS," AS DEFINED IN SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. FORWARD-LOOKING STATEMENTS ARE STATEMENTS OTHER THAN HISTORICAL INFORMATION OR STATEMENTS OF CURRENT CONDITION AND RELATE TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF THE COMPANY. SOME FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY USE OF SUCH TERMS AS "BELIEVES," "ANTICIPATES," "INTENDS" OR "EXPECTS." SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY'S RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF A NUMBER OF FACTORS, INCLUDING WITHOUT LIMITATION, THOSE FACTORS DISCUSSED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 1999, AS FILED WITH SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 28, 1999. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. Recent Developments Seasonality and Quarterly Results The Company has experienced and expects to continue to experience seasonal and quarterly fluctuations in its revenues. Because of the inherent seasonality of its operations, the Company has historically reported its highest revenues and net income in its first and second fiscal quarters as the Company sells most of its grapes in the first quarter, immediately after harvest, sells most of its bulk wine in its second quarter, immediately after crush, and performs many of its wine processing services in the first and second quarters. As a result the Company typically reports lower revenues and net income (loss) in the third and fourth fiscal quarters. In fiscal 1999 and 2000 El Nino-related weather conditions, among other things, caused an approximate four week delay in the California wine grape harvest as compared to normal harvests. The Company anticipates that the late harvest of grapes will result in the substantial reallocation of revenues relating directly to the 1999 crush into the Company's second and third fiscal quarters. THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 Revenues Revenues for the first quarter of fiscal 2000 were $16.4 million, a decrease of $1.4 million or 7.9%, as compared to revenues of $17.8 million for the first quarter of fiscal 1999. The decrease in revenues was primarily due to a delay in the production and sale of brandy and spirits partially offset by increased bulk wine, wine grapes and case goods revenues. Bulk Wine and Related Services. For the first quarter of fiscal 2000, revenues from bulk wine and related services were $5.3 million, an increase of $.7 million or 15.2%, as compared to revenues of $4.6 million in the first quarter of fiscal 1999. The increase in bulk wine and related services revenue resulted from a favorable mix of bulk wine sold compared to the prior year resulting in higher per gallon sales prices partially offset by a decrease in overall gallons sold. 8 Wine grapes. In the first quarter of fiscal 2000, revenues from grape sales were $6.2 million, an increase of $.1 million or 1.6%, as compared to revenues of $6.1 million in the first quarter of fiscal 1999. Wine grapes revenues consist of revenues from grapes grown on the Company's vineyards and grapes purchased from outside growers that are resold to various third parties or "resold grapes". Company grown grape tons delivered to customers decreased to approximately 14,600 tons (or $4.1 million in revenues) in the first quarter of 2000 compared to 23,400 tons (or $5.9 million in revenues) in the first fiscal quarter 1999 primarily as a result of overall decreased yields on Company owned vineyards as compared to the prior year and the Company's restructuring of grape contracts to utilize a greater percentage of its own grapes toward the internal production of bulk wine and brandy. Resold grape revenue increased to $2.1 million from $.2 million for the first quarters of fiscal 2000 and 1999 respectively. Case goods and related services. For the first quarter of fiscal 2000, revenues from case goods and related services were $4.6 million, an increase of $.7 million or 17.9%, as compared to revenues of $3.9 million in the first quarter of fiscal 1999. The period to period increase in case goods and related services revenues was primarily due to an increase in private label case goods and related services. Brandy. For the first quarter of fiscal 2000, revenues from the sale of brandy and grape spirits were $.3 million, a decrease of $2.9 million or 90.6%, as compared to revenues of $3.2 million in the first quarter of fiscal 1999. The period to period decline in brandy revenue was due to delayed production of brandy due to a later harvest and required product blending. Management expects brandy revenues to be recognized primarily in the second quarter of fiscal 2000. Cost of Sales For the first quarter of fiscal 2000, total cost of sales was $13.3 million, an increase of $.5 million or 3.9%, from $12.8 million in the first quarter of fiscal 1999. As a percentage of revenues, for the first quarter of fiscal 2000, cost of sales was 81.2%, an increase from 72.1% for the first quarter of fiscal 1999. The increase in cost of sales on a percentage of revenue basis resulted primarily from 1) increased grape per ton costs due to decreased grape yields from Company owned vineyards and 2) overall decrease in case goods margins. Gross Profit In the first quarter of fiscal 2000, the Company realized gross profit of $3.1 million, a decrease of $1.9 million or 38.0%, as compared to gross profit of $5.0 million in the first quarter of fiscal 1999. As a percentage of revenues, in the first quarter of fiscal 2000 gross margin declined to 18.8%, from 27.9% in the first quarter of fiscal 1999. The Company's gross margin for the first quarter of fiscal 2000 was primarily impacted by the items discussed above under "Cost of Sales". Selling, General and Administrative Expenses Selling, general and administrative expenses included general administrative items, and corporate overhead. For the first quarters of fiscals 1999 and 2000, selling, general and administrative expenses were $1.5 million. Interest Expense For the first quarter of fiscal 2000, interest expense was $1.0 million, a decrease of $.4 million or 28.6%, as compared to interest expense of $1.4 million in the first quarter of fiscal 1999. The period to period decline is due to decreased average borrowings on the Company's line of credit and the Company's use of proceeds from the IPO during July and August 1998 to repay approximately $11.9 million in long-term debt, $5.7 million in officer notes and to reduce its outstanding line of credit balance by $4.7 million. Net Income For the first quarter of fiscal 2000, net income was $.3 million, a decrease of $.9 million or 75.0%, as compared to net income of $1.2 million in the first quarter of fiscal 1999. Net income in the first quarter of fiscal 2000 was adversely impacted primarily by a reduction in revenues from grape sales realized from Company owned vineyards as explained above. Earnings Per Share For the first quarter of fiscal 2000, the basic earnings per share was $0.03, as compared to basic loss per share of $.13 for the first quarter of fiscal 1999. Net loss available to common shareholders for the first quarter of 1999 was impacted by net income of $1.2 million offset by dividend payments of $.4 million on shares of Senior Preferred Stock and, as a result of the Company's initial public offering, accretion of $1.9 million with respect to Senior Preferred Stock redeemed and Junior Preferred Stock converted. 9 Liquidity and Capital Resources The Company's working capital position at September 30, 1999 was $19.4 million, as compared to $22.0 million at June 30, 1999. The decrease in working capital is primarily due to internally financed additions to property, plant and equipment. The Company maintains a revolving line of credit for working capital purposes which is secured by inventory, accounts receivable, the current year's wine grape crop and other collateral. Collateral balances at September 30, 1999 are adequate for the Company's working capital requirements. Borrowings under the line typically peak in November, during the Company's second fiscal quarter. Revolving line of credit balances were $13.9 million and $8.1 million at September 30, 1999 and June 30, 1999, respectively. Unused availability under the line of credit was $18.6 million at September 30, 1999. Net cash used in operating activities for the first quarter of fiscal 2000 was $3.4 million, as compared to net cash used in operations of $7.9 million for the first quarter of fiscal 1999. In the first quarter of fiscal 1999, the Company made payments on officer notes aggregating $5.7 million. Management expects that the Company's working capital requirements will grow as the business expands and that peak borrowing needs will continue to occur in the second quarter of the Company's fiscal year. Management believes that current working capital, cash generated from operations and funds available under the Company's line of credit will be sufficient to fund working capital requirements and operations during the Company's 2000 fiscal year. Year 2000 Compliance A significant percentage of the software that runs most of the computers in the United States relies on two-digit date codes to perform a number of computation and decision making functions. Commencing on January 1, 2000, these computer programs may fail from an inability to interpret date codes properly, misreading "00" for the year 1900 instead of the year 2000. The Company has completed a comprehensive program to identify, evaluate and address issues associated with the ability of its information technology and non-information technology systems to properly recognize the Year 2000 in order to avoid interruption of the operation of these systems and a material adverse effect on the Company's operations as a result of the century change. Each of the information technology software programs that the Company currently uses has either been certified by its respective vendor as Year 2000 compliant or will be replaced with software that is so certified prior to January 1, 2000. The Company has conducted comprehensive tests of all of its software programs for Year 2000 compliance as part of its Year 2000 readiness program. The Company believes that its core non-information technology systems, such as its bottling and production equipment, air conditioning/refrigeration units, telephones and faxes will not be adversely affected by the Year 2000, due to the completion of its tests and evaluation of such equipment. As part of its Year 2000 compliance program, the Company also intends to contact its significant vendors, suppliers and customers to ascertain whether the systems used by such third parties are Year 2000 compliant. The Company has completed virtually all Year 2000 compliance software testing. To date, the Company has spent approximately $198,000 to reprogram, replace and test its information technology software for Year 2000 compliance. The Company estimates the costs of these efforts will be between $210,000 and $220,000 (inclusive of the $198,000). Costs and expenses arising in connection with the Company's Year 2000 compliance efforts have been, and will be, expensed as incurred. The Company currently anticipates that both its information technology and non-information technology systems will be Year 2000 compliant in sufficient time to avoid business interruptions, though no assurances can be given that the Company's compliance testing will not detect unanticipated Year 2000 compliance problems. Furthermore, the Company does not yet know the Year 2000 compliance status of third parties that are integral to the Company's business and is therefore currently unable to assess the likelihood or the risk to the Company of third party system failures. However, a system failure by any of the Company's significant customers, suppliers or vendors could result in a material adverse effect on the Company's business and operations. The Company has developed contingency plans to handle a Year 2000 system failure experienced by its information technology systems. These backup procedures, including manual record keeping and processing, have been tested and utilized by the Company in the past during times of unplanned system failure. 10 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in the Company's market risk exposure from that reported in the Company's Form 10-K for the fiscal year ended June 30, 1999. 11 PART II ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in the Company's market risk exposure from that reported in the Company's Form 10-K for the fiscal year ended June 30, 1999. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 11 Statement Regarding Computation of Per Share Earnings 27 Summary Financial Information 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: November 6, 1999 GOLDEN STATE VINTNERS, INC. By: /s/ BRIAN R. THOMPSON --------------------------------- Brian R. Thompson Chief Financial Officer (Principal Financial & Accounting Officer and Duly Authorized Officer) 13 EX-11 2 EXHIBIT 11 GOLDEN STATE VINTNERS, INC. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (IN THOUSANDS, EXCEPT PER SHARE DATA) EXHIBIT 11 Basic and fully diluted earnings per share ("EPS") are determined as follows:
Three Months Ended September 30, ------------------------ 1999 1998 --------- --------- Basic EPS Computation Numerator: Net income $ 331 $ 1,186 Less: Accretion of redeemed senior preferred stock -- (1,771) Accretion of converted junior preferred stock -- (157) Redeemable preferred stock dividends -- (400) --------- --------- Income (loss) available to common stockholders $ 331 $ (1,142) --------- --------- --------- --------- Denominator: Weighted average common shares 9,498 8,934 --------- --------- --------- --------- Basic EPS $ 0.03 $ (0.13) --------- --------- --------- --------- Diluted EPS Computation Numerator: Income (loss) available to common stockholders $ 331 $ (1,142) --------- --------- --------- --------- Denominator: Weighted average common shares outstanding 9,498 8,934 Stock options 105 - --------- --------- Adjusted weighted average common shares 9,603 8,934 --------- --------- --------- --------- Diluted EPS $ 0.03 $ (0.13) --------- --------- --------- ---------
12 EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON PAGES 2 AND 3 OF THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JUN-30-2000 JUN-30-1999 SEP-30-1999 51 0 15,520 1,272 42,749 61,990 103,899 17,697 150,273 42,569 0 0 0 95 57,720 150,273 0 16,356 0 13,273 1,509 0 1,007 539 208 331 0 0 0 331 $0.03 $0.03
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