Canandaigua Brands Reports First Quarter Results

Fairport, NY, June 23, 1999 -- Canandaigua Brands, Inc. (NASDAQ: CBRNA and CBRNB), today reported net income of approximately $14 million for the three months ended May 31, 1999 ("First Quarter 2000"), exclusive of nonrecurring charges of approximately $3 million after taxes, an increase of 8 percent over net income of $13 million for the three months ended May 31, 1998 ("First Quarter 1999"). On a comparable basis excluding nonrecurring charges, earnings per share were $0.77 in First Quarter 2000, a 13 percent increase as compared to earnings of $0.68 per share on a diluted basis in First Quarter 1999. Net income and earnings per share including the nonrecurring restructuring charges were $11 million and $0.59, respectively, for First Quarter 2000.

Richard Sands, Chief Executive Officer of Canandaigua Brands, said, "We have significantly changed the face of our Company with four acquisitions over the last six months, laying the groundwork for future earnings growth. Yet our results for the quarter demonstrate that we haven't lost sight of the need to deliver current profit growth to maintain the excellent track record we've established over the last several years."

Consolidated Results

Net sales reached $530 million in First Quarter 2000, a 69 percent increase over First Quarter 1999. While most of the sales growth resulted from the Matthew Clark and Black Velvet acquisitions (both of which were completed after First Quarter 1999), net sales of the Company's other products increased by 14 percent in First Quarter 2000 as compared to net sales of $313 million in First Quarter 1999.

Gross profit rose to $156 million from $92 million in First Quarter 1999, an increase of $64 million, or 70 percent. The improvement in gross profit was primarily related to sales from the Matthew Clark and Black Velvet acquisitions, as well as increased beer and wine sales. As a percent of net sales, gross profit remained at 29.4 percent for both First Quarter 2000 and First Quarter 1999, as margin improvements within each product line were balanced by additional sales of lower-margin products such as imported beer and U.K. wholesale sales.

Selling, general and administrative expenses reached $111 million in First Quarter 2000, an 80 percent increase from $61 million in First Quarter 1999. The majority of the increase resulted from the addition of the Matthew Clark and Black Velvet businesses. The Company also increased its marketing and promotional costs to generate additional sales volume, particularly of wine and beer brands.

The Company incurred nonrecurring charges of approximately $6 million before taxes in First Quarter 2000 related to the consolidation of cider production into one facility within the Matthew Clark operating segment and to a management reorganization within the Canandaigua Wine operating segment. There were no nonrecurring charges in First Quarter 1999.

Operating income increased to $40 million for First Quarter 2000 from $31 million for First Quarter 1999. Exclusive of the nonrecurring charges, operating income increased by 48 percent to approximately $46 million in First Quarter 2000. Net interest expense reached $22 million in First Quarter 2000 from approximately $9 million in First Quarter 1999. The increase in interest expense resulted primarily from borrowings associated with the Matthew Clark and Black Velvet acquisitions.

As a result of the above factors, net income was $11 million for First Quarter 2000, or $14 million excluding the nonrecurring charges, compared with net income of $13 million for First Quarter 1999. Earnings per diluted share were $0.59, or the equivalent of $0.77 per share exclusive of the nonrecurring charges, in First Quarter 2000 compared with earnings per share of $0.68 in First Quarter 1999.

For financial analysis purposes only the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") were $53 million in First Quarter 2000, an increase of $14 million over EBITDA of $39 million in First Quarter 1999. (EBITDA should not be construed as an alternative to operating income or net cash flow from operating activities and should not be interpreted as an indication of operating performance or as a measure of liquidity.)

Canandaigua Wine Operations Net sales for Canandaigua Wine for First Quarter 2000 increased 12 percent to $164 million from $146 million in First Quarter 1999. This increase resulted primarily from the introduction of two new products (Arbor Mist and Mystic Cliffs) in Fiscal 1999, growth in the Company's international sales and increased sales of bulk wine. These increases were partially offset by declines in other wine brands and in the Company's grape juice concentrate sales.

Operating income of approximately $6 million in First Quarter 2000 represented a decrease of almost $2 million compared to First Quarter 1999. The decline was due to the nonrecurring charge of approximately $3 million related to the segment's management reorganization, as well as additional marketing expenses associated with the new product introductions. Exclusive of the nonrecurring charge, operating income increased by 10 percent to $8 million in First Quarter 2000.

Barton Operations

Net sales for Barton for First Quarter 2000 increased to $201 million from $166 million in First Quarter 1999, or 21 percent. The increase resulted from higher sales of imported beers led by Corona Extra and other brands in Barton's Mexican portfolio as well as from sales of products acquired in the Black Velvet transaction, which was completed in April 1999.

Operating income grew by 22 percent to $31 million in First Quarter 2000, led by increased sales and gross margin improvements, partially offset by increased selling, general and administrative costs associated with the sales growth.

Matthew Clark Operations

The Company acquired control of Matthew Clark in December 1998. Net sales and operating income for Matthew Clark operations were $167 million and $7 million, respectively, in First Quarter 2000. Exclusive of a nonrecurring charge of approximately $3 million related to the consolidation of cider production at a single facility, operating income was approximately $10 million.

Canandaigua Brands, Inc., headquartered in Fairport, New York, is a leader in the production, marketing and distribution of beverage alcohol products in North America and the United Kingdom. The Company markets more than 180 premier brands, including imported beers, wines, spirits, cider and bottled water, and is a leading drinks wholesaler to more than 16,000 customers in the United Kingdom.