Attached files
file | filename |
---|---|
EX-31.1 - EX-31.1 - CONSTELLATION BRANDS, INC. | l39498exv31w1.htm |
10-K - FORM 10-K - CONSTELLATION BRANDS, INC. | l39498e10vk.htm |
EX-21.1 - EX-21.1 - CONSTELLATION BRANDS, INC. | l39498exv21w1.htm |
EX-32.2 - EX-32.2 - CONSTELLATION BRANDS, INC. | l39498exv32w2.htm |
EX-31.2 - EX-31.2 - CONSTELLATION BRANDS, INC. | l39498exv31w2.htm |
EX-23.1 - EX-23.1 - CONSTELLATION BRANDS, INC. | l39498exv23w1.htm |
EX-23.2 - EX-23.2 - CONSTELLATION BRANDS, INC. | l39498exv23w2.htm |
EX-32.1 - EX-32.1 - CONSTELLATION BRANDS, INC. | l39498exv32w1.htm |
Exhibit 99.2
Financial Statements as of and for three years ended
December 31, 2009
December 31, 2009
Crown Imports LLC
Table of Contents
Table of Contents
Page(s)
Report of Independent Auditors |
1 | |||
Financial Statements |
||||
Balance Sheets |
2 | |||
Statements of Income |
3 | |||
Statements of Changes in Members Equity |
4 | |||
Statements of Cash Flows |
5 | |||
Notes to Financial Statements |
6-14 |
Report of Independent Auditors
To the Board of Directors and Members of
Crown Imports LLC
Crown Imports LLC
In our opinion, the accompanying balance sheets and the related statements of income, changes in
members equity and cash flows present fairly, in all material respects, the financial position of
Crown Imports LLC (a limited liability company) at December 31, 2009 and 2008, and the results of
its operations and its cash flows for each of the three years in the period ended December 31,
2009, in conformity with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Companys 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 auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, 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 our opinion.
/s/ PricewaterhouseCoopers LLC | ||||
Chicago, Illinois | ||||
February 17, 2010 |
1
Crown Imports LLC
Balance Sheets
As of December 31, 2009 and 2008
(Dollars in thousands)
Balance Sheets
As of December 31, 2009 and 2008
(Dollars in thousands)
2009 | 2008 | |||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 52,195 | $ | 42,617 | ||||
Accounts receivable net |
99,067 | 100,869 | ||||||
Inventories |
94,695 | 131,770 | ||||||
Prepaid expenses and other current assets |
16,096 | 25,098 | ||||||
Receivables from related parties |
9,652 | 6,559 | ||||||
Total current assets |
271,705 | 306,913 | ||||||
Property and equipment, net |
5,227 | 5,348 | ||||||
Long-term assets |
||||||||
Intangible assets |
14,239 | 14,239 | ||||||
Goodwill |
13,003 | 13,003 | ||||||
Total intangible assets |
27,242 | 27,242 | ||||||
Other assets |
68 | 80 | ||||||
Total assets |
$ | 304,242 | $ | 339,583 | ||||
Liabilities and Members Equity |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ | 12,878 | $ | 16,586 | ||||
Accrued excise taxes |
5,442 | 9,263 | ||||||
Accrued expenses |
29,970 | 19,208 | ||||||
Accrued distribution to member |
25,000 | | ||||||
Payables to related parties |
30,031 | 19,365 | ||||||
Total current liabilities |
103,321 | 64,422 | ||||||
Long-term liabilities |
||||||||
Long-term incentive plan |
3,381 | 2,950 | ||||||
Other liabilities |
46 | 148 | ||||||
Total long-term liabilities |
3,427 | 3,098 | ||||||
Members equity |
197,494 | 272,063 | ||||||
Total liabilities and members equity |
$ | 304,242 | $ | 339,583 | ||||
The accompanying notes are an integral part of these financial statements.
2
Crown Imports LLC
Statements of Income
For the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands)
Statements of Income
For the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands)
2009 | 2008 | 2007 | ||||||||||
Sales |
$ | 2,464,510 | $ | 2,628,602 | $ | 2,653,524 | ||||||
Less: Excise taxes |
(191,134 | ) | (202,309 | ) | (205,685 | ) | ||||||
Net sales |
2,273,376 | 2,426,293 | 2,447,839 | |||||||||
Cost of product sold |
1,607,190 | 1,698,425 | 1,699,590 | |||||||||
Gross profit |
666,186 | 727,868 | 748,249 | |||||||||
Operating expenses |
||||||||||||
Selling, general and administrative |
219,631 | 224,944 | 224,545 | |||||||||
Operating income |
446,555 | 502,924 | 523,704 | |||||||||
Interest income |
248 | 1,330 | 2,268 | |||||||||
Net income |
$ | 446,803 | $ | 504,254 | $ | 525,972 | ||||||
The accompanying notes are an integral part of these financial statements.
3
Crown Imports LLC
Statements of Changes in Members Equity
For the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands)
Statements of Changes in Members Equity
For the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands)
Member | Accumulated | |||||||||||
Contributions | Earnings/(Deficit) | Total | ||||||||||
Capital Contributions (Note 1) |
$ | 221,656 | $ | | $ | 221,656 | ||||||
Net income |
| 525,972 | 525,972 | |||||||||
Distributions paid to members |
| (468,000 | ) | (468,000 | ) | |||||||
Balance as of December 31, 2007 |
221,656 | 57,972 | 279,628 | |||||||||
Net income |
| 504,254 | 504,254 | |||||||||
Distributions paid to members |
| (511,819 | ) | (511,819 | ) | |||||||
Balance as of December 31, 2008 |
221,656 | 50,407 | 272,063 | |||||||||
Net income |
| 446,803 | 446,803 | |||||||||
Distributions paid to members |
| (496,372 | ) | (496,372 | ) | |||||||
Distributions payable to member |
| (25,000 | ) | (25,000 | ) | |||||||
Balance as of December 31, 2009 |
$ | 221,656 | $ | (24,162 | ) | $ | 197,494 | |||||
The accompanying notes are an integral part of these financial statements.
4
Crown Imports LLC
Statements of Cash Flows
For the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands)
Statements of Cash Flows
For the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands)
2009 | 2008 | 2007 | ||||||||||
Cash flows from operating activities |
||||||||||||
Net income |
$ | 446,803 | $ | 504,254 | $ | 525,972 | ||||||
Adjustments to reconcile net income to net cash provided by
operating activities |
||||||||||||
Depreciation and amortization |
1,353 | 1,073 | 671 | |||||||||
Changes in operating assets and liabilities |
||||||||||||
(Increase) decrease in - |
||||||||||||
Accounts receivables, including receivables from
related parties |
(1,291 | ) | (760 | ) | (106,669 | ) | ||||||
Inventories |
37,075 | 22,065 | (31,165 | ) | ||||||||
Prepaid expenses and other assets |
9,014 | 5,764 | (19,785 | ) | ||||||||
Increase (decrease) in - |
||||||||||||
Accounts payable, including payables to related parties |
6,958 | (8,429 | ) | 15,448 | ||||||||
Accrued excise taxes |
(3,821 | ) | (815 | ) | 2,484 | |||||||
Accrued expenses and other liabilities |
11,091 | (10,420 | ) | 31,332 | ||||||||
Net cash provided by operating activities |
507,182 | 512,732 | 418,288 | |||||||||
Cash flows from investing activities |
||||||||||||
Purchases of property and equipment |
(1,232 | ) | (1,746 | ) | (4,045 | ) | ||||||
Net cash used in investing activities |
(1,232 | ) | (1,746 | ) | (4,045 | ) | ||||||
Cash flows from financing activities |
||||||||||||
Member contributions |
| | 97,207 | |||||||||
Distributions paid to members |
(496,372 | ) | (511,819 | ) | (468,000 | ) | ||||||
Net cash used in financing activities |
(496,372 | ) | (511,819 | ) | (370,793 | ) | ||||||
Net increase (decrease) in cash and cash equivalents |
9,578 | (833 | ) | 43,450 | ||||||||
Cash and cash equivalents |
||||||||||||
Beginning of year |
42,617 | 43,450 | | |||||||||
End of year |
$ | 52,195 | $ | 42,617 | $ | 43,450 | ||||||
The accompanying notes are an integral part of these financial statements.
5
Crown Imports LLC
Notes to Financial Statements
As of December 31, 2009 and for the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands, unless otherwise noted)
Notes to Financial Statements
As of December 31, 2009 and for the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands, unless otherwise noted)
1. | Description of the Business and Summary of Significant Accounting Policies | |
Description of the Business |
Crown Imports LLC (the Company or Joint Venture), a Delaware limited liability company,
is a 50-50 joint venture between GModelo Corporation (GModelo), a wholly-owned subsidiary
of Diblo, S.A. de C.V. (Diblo), and Constellation Beers Ltd. (previously known as Barton
Beers, Ltd.) (Barton), an indirect wholly-owned subsidiary of Constellation Brands, Inc.
(Constellation), created on January 2, 2007. The Company imports, markets and sells an
imported beer portfolio across the entire U.S., the District of Columbia and Guam. The
Companys portfolio includes Corona Extra, Corona Light, Coronita, Modelo Especial, Negra
Modelo and Pacifico (the Modelo Brands) and the St. Pauli Girl and Tsingtao beer brands.
On January 2, 2007, pursuant to a contribution agreement among Barton, Diblo and the Company
(the Barton Contribution Agreement), Barton contributed to the Company substantially all of
Bartons assets relating to importing, marketing and selling the Modelo Brands and the St.
Pauli Girl and Tsingtao brands and liabilities associated therewith (the Barton Contributed
Net Assets), in exchange for a 50% membership interest in the Company. Simultaneously,
GModelo, a related party of Grupo Modelo, S.A.B. de C.V. (Modelo), joined Barton as a
member of the Company. In exchange for a 50% membership interest in the Company, GModelo
contributed cash in an equal amount to the Barton Contributed Net Assets, subject to
specified adjustments. The operations and governance of the Joint Venture are provided for
in the Companys Amended and Restated Limited Liability Company Agreement dated January 2,
2007 (the LLC Agreement). All information relating to the year ended December 31, 2007
refers to the period from January 2, 2007 (date of inception) through December 31, 2007. The
contributions, including noncash contributions, made to the Company by each respective member
on January 2, 2007 are as follows:
Respective Contributions to the Joint Venture | ||||
Net intangible assets |
||||
Intangibles (distribution rights) |
$ | 14,239 | ||
Goodwill |
13,003 | |||
Barton contributed net intangible assets |
27,242 | |||
Net tangible assets |
||||
Inventory |
122,671 | |||
Other assets |
11,155 | |||
Property and equipment |
1,300 | |||
Accounts payable |
(28,931 | ) | ||
Accruals |
(8,988 | ) | ||
Barton contributed net tangible assets |
97,207 | |||
Cash |
97,207 | |||
GModelo contributed assets |
97,207 | |||
Total capital contribution at inception |
$ | 221,656 | ||
6
Crown Imports LLC
Notes to Financial Statements
As of December 31, 2009 and for the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands, unless otherwise noted)
Notes to Financial Statements
As of December 31, 2009 and for the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands, unless otherwise noted)
Codification
In 2009, the Financial Accounting Standards Board (FASB) issued The FASB Accounting
Standards Codification (ASC or Codification) and the Hierarchy of Generally Accepted
Accounting Principles (GAAP). This statement is effective for the Company in 2009. Upon
effect, the Codification became the source of authoritative U.S. GAAP recognized by the FASB
and the Companys notes to the financial statements no longer make reference to the Statement
of Financial Accounting Standards or other U.S. GAAP pronouncements. The adoption of the
Codification had no impact on the Companys financial condition or results of operations.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months
or less at the time of the purchase to be cash equivalents. Such investments are stated at
cost, which approximates fair value.
Accounts Receivable
The majority of the accounts receivable balance is generated from sales to independent
distributors with whom the Company has a predetermined collection date arranged through
electronic funds transfer. An allowance for doubtful accounts is determined based on
historical information and an assessment of individual accounts.
Inventories
Inventories, principally consisting of product for resale, are valued at the lower of cost or
market, cost being determined on the first-in, first-out method. Substantially all inventory
is related to finished goods inventory. The Company assesses the valuation of its
inventories and reduces the carrying value of those inventories that are obsolete or in
excess of the Companys forecasted usage to their estimated net realizable value.
Property and Equipment
Purchases of property and equipment are recorded at cost. Depreciation is provided over the
estimated useful lives of the respective assets, generally using the straight-line method.
Amortization of leasehold improvements is provided over the lesser of the lease term or the
estimated useful life of the asset. Direct costs related to internally-developed software
projects are capitalized and amortized over their estimated useful life.
Amounts for maintenance and repairs are charged to expense as incurred. Major expenditures
for improvements which are expected to increase the useful life of an item are capitalized to
the appropriate asset accounts. Gains and losses on sales of property and equipment are
credited or charged to income. The estimated useful lives are as follows:
Depreciable life in years | ||
Machinery and equipment
|
3 to 10 | |
Software
|
3 to 7 |
Income Taxes
The Company is treated as a partnership for federal and state income tax purposes.
Accordingly, the members are responsible for U.S. federal and substantially all state income
tax liabilities arising out of the operations.
7
Crown Imports LLC
Notes to Financial Statements
As of December 31, 2009 and for the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands, unless otherwise noted)
Notes to Financial Statements
As of December 31, 2009 and for the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands, unless otherwise noted)
Revenue Recognition
Sales are recognized when title passes to the customer, which is generally when the product
is delivered.
In accordance with the guidance provided in the ASC surrounding Accounting for Consideration
Given by a Vendor to a Customer (Including a Reseller of the Vendors Products), sales
reflect reductions attributable to consideration given to customers in various customer
incentive programs, including pricing discounts on single transactions, volume discounts,
promotional and advertising allowances, and rebates. Certain customer incentive programs
require management to estimate the cost of these programs. The accrued liability for these
programs is determined through analysis of programs offered, historical trends, expectations
regarding customer and consumer participation, sales and payment trends, and experience with
payment patterns associated with similar programs that had been previously offered. Accrued
promotional allowances at December 31, 2009 and 2008 were $14,004 and $9,964, respectively.
Promotional expense for the years ended December 31, 2009, 2008, and 2007 was $117,826,
$125,878, and $139,510, respectively.
In accordance with ASC guidance regarding How Taxes Collected from Customers and Remitted to
Governmental Authorities Should Be Presented in the Income Statement, excise taxes associated
with transporting the products into the United States are recorded as a reduction to sales.
In accordance with ASC guidance surrounding Reporting Revenue Gross as a Principal rather
than Net as an Agent, the Company has entered into a revenue sharing agreement with one of
its related parties, Extrade II, with sales being recorded on a gross basis.
Cost of Product Sold
The types of costs included in cost of product sold are principally cost of finished goods,
packaging, and warehouse costs (including distribution network costs). Distribution network
costs include inbound freight charges, outbound shipping and handling costs, purchasing and
receiving costs, inspection costs, and warehousing costs.
Reclassifications
Certain amounts in the prior years financial statements and notes thereto have been
reclassified to conform to the current year presentation. Such reclassifications had no
impact on previously reported net income.
8
Crown Imports LLC
Notes to Financial Statements
As of December 31, 2009 and for the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands, unless otherwise noted)
Notes to Financial Statements
As of December 31, 2009 and for the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands, unless otherwise noted)
Selling, General and Administrative Expenses
The types of costs included in selling, general and administrative expenses consist
predominantly of advertising, marketing, and employee compensation and related benefits
costs. Generally, distribution network costs are not included in the Companys selling,
general and administrative expenses, but are included in cost of product sold as described
above. The Company expenses advertising costs as incurred, shown or distributed. Prepaid
advertising costs at December 31, 2009 and 2008 were $5,100 and $10,568, respectively.
Advertising expense for the years ended December 31, 2009, 2008, and 2007 was $137,018,
$145,534, and $145,250, respectively.
In accordance with the guidance provided in the ASC surrounding Customers Characterization
of Certain Consideration Received from a Vendor, cash consideration received by the Company
from its vendors is presumed to be a reduction of the prices of the vendors products or
services and, therefore, is characterized as a reduction of cost of product sold when
recognized in the income statement, unless 1) it is a payment for assets or services
delivered to the vendor, in which case the cash consideration shall be characterized as
revenue (or other income, as appropriate) when recognized in the income statement or 2) it is
a reimbursement of costs incurred by the Company to sell the vendors products, in which case
the cash consideration shall be characterized as a reduction of that cost when recognized in
the income statement.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the U.S. requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
Subsequent Events
For the current reporting period, subsequent events were evaluated through February 17, 2010,
which represents the date the financial statements were available to be issued.
2. | Property and Equipment |
A summary of property and equipment as of December 31, 2009 and 2008 is as follows:
2009 | 2008 | |||||||
Leasehold improvements |
$ | 957 | $ | 957 | ||||
Machinery and equipment |
3,770 | 4,972 | ||||||
Software |
3,597 | 1,163 | ||||||
8,324 | 7,092 | |||||||
Less accumulated depreciation and amortization |
3,097 | 1,744 | ||||||
Net property and equipment |
$ | 5,227 | $ | 5,348 | ||||
Depreciation and amortization expense for the years ended December 31, 2009, 2008, and 2007
was equal to $1,353, $1,073, and $671, respectively.
9
Crown Imports LLC
Notes to Financial Statements
As of December 31, 2009 and for the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands, unless otherwise noted)
Notes to Financial Statements
As of December 31, 2009 and for the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands, unless otherwise noted)
3. | Intangible Assets |
The carrying value of intangible assets, including goodwill, at December 31, 2009 and 2008,
was $27,242. Intangible assets represent distribution rights that are not amortized because
they have an indefinite useful life. The Company reviews its intangible assets and goodwill
annually for impairment, or sooner, if events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to be held and
used is measured by comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered impaired, the
impairment recognized is measured by the amount by which the carrying value of the assets
exceeds the fair value of the assets. No impairments existed as of December 31, 2009 and
2008.
4. | Employee Benefit Plans |
401(k) Plan
The Company sponsors a 401(k) plan for all salaried employees. The plan includes optional
employee contributions as a percentage of eligible earnings, subject to Internal Revenue
Service (IRS) limitations, with matching employer contributions as a percentage of eligible
earnings.
Profit Sharing Plan
The Company sponsors a profit sharing plan for certain employees under which the Company
makes discretionary contributions determined each plan year, subject to IRS limitations.
Supplementary Employee Benefit Plan (SERP)
The Company maintains a deferred compensation plan for key employees. The plan provides for
employee deferrals for discretionary benefits provided by the Company, and the excess of any
contributions owed through the profit sharing plan over IRS limitations. These employee
benefits will be distributed in a lump-sum payment after the employees leave the Company.
Short-Term Incentive Plan
The Company maintains short-term incentive plans (STIP) for key employees. Eligible
employees may be awarded cash bonuses, which vest based on achieving certain targets, as
defined in the STIP.
Long-Term Incentive Plan
The Company maintains long-term incentive plans (LTIP) for key employees. Eligible
employees may be awarded cash bonuses, which vest based on achieving certain targets, as
defined in the LTIP.
10
Crown Imports LLC
Notes to Financial Statements
As of December 31, 2009 and for the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands, unless otherwise noted)
Notes to Financial Statements
As of December 31, 2009 and for the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands, unless otherwise noted)
The total expenses under these plans for the years ended December 31, 2009, 2008, and 2007 are as follows: |
2009 | 2008 | 2007 | ||||||||||
401(k) plan |
$ | 1,118 | $ | 701 | $ | 545 | ||||||
Profit sharing plan |
1,552 | 1,657 | 1,290 | |||||||||
SERP |
27 | | 20 | |||||||||
STIP |
4,742 | 2,864 | 7,239 | |||||||||
LTIP |
3,257 | 1,172 | 1,413 | |||||||||
Total |
$ | 10,696 | $ | 6,394 | $ | 10,507 | ||||||
The total amount accrued related to employee benefit plans as of December 31, 2009 and 2008 was $11,684 and $7,254, respectively. |
5. | Related-Party Transactions | |
The Company and Extrade II S.A. de C.V. (Extrade II), an affiliate of GModelo, entered into an Importer Agreement (the Importer Agreement) effective as of the Companys inception pursuant to which Extrade II granted to the Company the exclusive rights to import, market and sell the Modelo Brands in the 50 States of the U.S., the District of Columbia and Guam. The Modelo Brands represented approximately 98% of the Companys sales for the years ended December 31, 2009, 2008, and 2007. The Company also entered into a Sub-license Agreement (the Sub-license Agreement), pursuant to which Marcas Modelo S.A. de C.V. (Marcas Modelo), another affiliate of GModelo, granted the Company an exclusive sub-license to use certain trademarks related to the Modelo Brands within this territory. Certain inventory purchases are made through Extrade I S.A. de C.V., (Extrade I), also an affiliate of GModelo. Total purchases from Extrade I and Extrade II under the Importer Agreement totaled $1,067,160, $1,133,384, and $1,170,788 for the years ended December 31, 2009, 2008, and 2007, respectively. As of December 31, 2009 and 2008, payables to related parties for inventory purchases included $4,159 and $9,867, respectively, due to Extrade II. | ||
The Importer Agreement also allows the Company to recover certain costs. Payments made to the Company under the Importer Agreement for the years ended December 31, 2009, 2008, and 2007, amounted to $3,617, $1,672, and $2,818, respectively, with $0 outstanding at December 31, 2009 and 2008. | ||
The Company makes royalty payments, which are included in cost of product sold, to Marcas Modelo for the use of the Modelo brand names. Payments from the Company under the Sub-license Agreement for the years ended December 31, 2009, 2008, and 2007, amounted to $143,122, $153,339, and $156,399, respectively, with $525 and $1,011 due to this related party at December 31, 2009 and 2008, respectively. | ||
Under the terms of the LLC Agreement, the Company follows a strategic pricing initiative (Initiative) for the Modelo Brands sold in the Companys territory. Based on this Initiative, the Company agrees to share revenue with Extrade II based on market price adjustments as established within the Importer Agreement, subject to recovery by the Company of certain costs that offset revenue sharing amounts. The amounts estimated by the Company under this Initiative are subject to periodic review by the joint venture members and adjustments, if any, are accounted |
11
Crown Imports LLC
Notes to Financial Statements
As of December 31, 2009 and for the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands, unless otherwise noted)
Notes to Financial Statements
As of December 31, 2009 and for the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands, unless otherwise noted)
for on a prospective basis. The Company has estimated revenue sharing, net of certain cost recoveries, earned by Extrade II amounted to $24,781, $14,446, and $38,731 for the years ended December 31, 2009, 2008, and 2007, respectively. The Company had a net payable to Extrade II of $7,727 and a net receivable of $3,393 as of December 31, 2009 and 2008, respectively. | ||
Additionally, the Company entered into a marketing initiative with Marketing Modelo S.A. de C.V. (Marketing Modelo), an affiliate of GModelo, for advertising. The Company also purchased various marketing and promotional materials from GModelo. The total amount paid to these related parties for the years ended December 31, 2009, 2008, and 2007 for marketing and promotions amounted to $1,877, $1,847, and $1,614, respectively, with $21 and $9 due to this related party at December 31, 2009 and 2008, respectively. | ||
Barton charged the Company $18,279, $17,576, and $16,900 for shared services provided to the Company for the years ended December 31, 2009, 2008, and 2007, respectively. Services provided include information technology, licensing, financial accounting, tax, administrative, legal and human resources. The fee is charged monthly, with future annual commitments as follows: |
Years ending December 31 | ||||
2010 |
$ | 19,010 | ||
2011 |
19,771 | |||
2012 |
20,561 | |||
Total future commitments |
$ | 59,342 | ||
6. | Leases | |
The Companys leasing operations consist principally of the leasing of office space and motor vehicles. | ||
Office space leases are all classified as operating leases and expire over the next ten years. Motor vehicle leases are classified as operating and expire over the next three years. | ||
The future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year are as follows at December 31, 2009: |
Years ending December 31 | ||||
2010 |
$ | 3,471 | ||
2011 |
1,310 | |||
2012 |
1,209 | |||
2013 |
989 | |||
2014 |
978 | |||
Thereafter |
3,415 | |||
Total minimum payments |
$ | 11,372 | ||
Total rental expense was $3,585, $3,677, and $4,245 for the years ended December 31, 2009, 2008, and 2007, respectively. |
12
Crown Imports LLC
Notes to Financial Statements
As of December 31, 2009 and for the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands, unless otherwise noted)
Notes to Financial Statements
As of December 31, 2009 and for the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands, unless otherwise noted)
7. | Commitments and Contingencies | |
Line of Credit | ||
The Company maintains an uncommitted line of credit with Citibank, N.A., which provides for maximum borrowings of $15,000. The line of credit matured on December 31, 2009. Borrowings under the line of credit bear an interest rate determined two business days before the first day of such interest period based on the rate per annum at which U.S. Dollar deposits are offered to prime banks in the London interbank market plus a margin of 200 basis points. As of January 2, 2010, the line of credit was renewed by management with a maturity date of December 31, 2010 under comparable terms. As of December 31, 2009 and 2008, there were no outstanding balances on the line of credit. | ||
Warehouse Commitments | ||
The Company enters into warehousing agreements, where rentals are based on a fixed rate per case stored, along with associated handling and repackaging fees. Under certain warehousing agreements, the Company is required to make minimum future payments based on minimum case volume per annum, whether it uses the warehouse or not. For the years ended December 31, 2009, 2008, and 2007, the Company met all minimum requirements. The annual amount of such required payments at December 31, 2009 is as follows: |
Years ending December 31 | ||||
2010 |
$ | 2,913 | ||
2011 |
2,913 | |||
Total minimum payments |
$ | 5,826 | ||
Contingencies | ||
The Company is a party to various litigation, which arises in the ordinary course of business. Although the amount of any liability with respect to such litigation cannot be determined, in the opinion of management, such liability will not have a material adverse effect on the Companys financial position, results of operations or cash flows. | ||
Member Lawsuit | ||
On December 15, 2009, the Company became aware of a lawsuit filed by GModelo against Constellation regarding a disagreement over how incremental marketing costs for the Company in 2010 are to be funded. The Company is not a party to this lawsuit, and the lawsuit is not expected to have a material impact upon the Companys financial position or its ongoing operations. | ||
Distribution Agreements | ||
The Company distributes Tsingtao and St. Pauli Girl beer pursuant to exclusive distribution agreements with the suppliers of these products. The Companys agreement with Tsingtao and St. Pauli Girl are both scheduled to expire on December 31, 2011. Prior to their expiration, these agreements may be terminated if the Company fails to meet certain performance criteria. At December 31, 2009, the Company believes it is in compliance with all of its material distribution agreements with its suppliers, and the Company does not believe that these agreements will be terminated. |
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Crown Imports LLC
Notes to Financial Statements
As of December 31, 2009 and for the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands, unless otherwise noted)
Notes to Financial Statements
As of December 31, 2009 and for the Years Ended December 31, 2009, 2008, and 2007
(Dollars in thousands, unless otherwise noted)
8. | Members Equity | |
The Company has been established as a limited liability company. Under the terms of the LLC Agreement, there is one class of membership interest in the Company and, unless otherwise provided for in the LLC Agreement, all membership interests are entitled to the same benefits, rights, duties and obligations and vote on all matters as a single class. Additionally, under the terms of the LLC Agreement, no member of the Company is liable for any debt, obligation or liability of the Company, except as provided by law or otherwise specifically as provided in the LLC Agreement. A member cannot, unless otherwise provided for in the LLC Agreement, transfer all or any portion of its membership interest. | ||
The Company is authorized to establish a capital account for each member equal to that members initial capital contribution, represented by Common Units. The Common Units are voting and subject to transfer restrictions as defined in the LLC Agreement. As of December 31, 2009 and 2008, the Company had 100 Common Units, with each of GModelo and Barton owning 50 units, in exchange for the contributions made to the Company at inception. | ||
As described in the LLC Agreement, under certain circumstances including (i) material interference with the Importer Agreement, Barton has the right (but not the obligation) to sell its membership interest to GModelo; (ii) a proposed change in control of Barton, GModelo has the right (but not the obligation) to purchase Bartons membership interest; and (iii) at the conclusion of each ten year period of the joint venture, GModelo has the right (but not the obligation) to purchase Bartons membership interest. Any such transfer is subject to the satisfaction of certain conditions, and the relevant purchase price is determined pursuant to specific formulas, all as set forth in the LLC Agreement. |
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