Canandaigua Brands Reports Record First Quarter Results

FAIRPORT, N.Y., June 22 /PRNewswire/ -- Canandaigua Brands, Inc. (NYSE: CDB and CDB.B), today reported net income of $18 million for the three months ended May 31, 2000 ("First Quarter 2001"), an increase of 26 percent over net income of $14 million for the three months ended May 31, 1999 ("First Quarter 2000"), excluding the after-tax impact of nonrecurring charges of approximately $3 million taken in First Quarter 2000. Earnings per share on a diluted basis grew by 25 percent to $0.96 per share versus First Quarter 2000 earnings per share of $0.77, excluding the after-tax impact of nonrecurring charges. Net income and earnings per share including nonrecurring charges were $11 million and $0.59, respectively, for First Quarter 2000.

Richard Sands, Chairman and Chief Executive Officer of Canandaigua Brands, said, "We continue to deliver top line growth across multiple businesses which is contributing positively to our performance. The success of our recent acquisition strategy is clearly demonstrated in our results as we once again reported record sales and profits. Industry dynamics continue to look favorable, and in particular, demand for beer and fine wines is still strong after recent price increases. Our healthy cash flow is further strengthening the balance sheet, positioning the Company to continue our track record of double-digit earnings growth."

Consolidated Results

Net sales reached $586 million in First Quarter 2001, a 10 percent increase over net sales of $530 million reported for First Quarter 2000. Net sales growth was driven primarily by the inclusion of the Black Velvet and Franciscan Estates (including Simi) acquisitions (completed in April 1999 and June 1999, respectively) for the full quarter. Net sales increases in beer, Matthew Clark wholesale and Barton's remaining spirits portfolio also contributed to the growth in net sales.

Gross profit grew to $184 million in First Quarter 2001 from $156 million in First Quarter 2000, an increase of $28 million, or 18 percent. The gross profit improvement can be attributed primarily to the Black Velvet and Franciscan Estates acquisitions, as well as increased beer sales. As a percent of net sales, gross profit increased by 200 basis points to 31 percent from 29 percent in First Quarter 2000. The gross margin improvement was related to sales of higher margin products, specifically Black Velvet and the Franciscan Estates portfolio.

Selling, general and administrative expenses increased by 14 percent to $126 million in First Quarter 2001 from $111 million in First Quarter 2000. The increase was primarily related to the Black Velvet and Franciscan Estates acquisitions.

Operating income in First Quarter 2001 grew to $57 million versus $46 million in First Quarter 2000, an increase of 26 percent, excluding the pretax nonrecurring charges of approximately $6 million in First Quarter 2000. Operating income for the First Quarter 2000 including nonrecurring charges was $40 million.

As a result of the above factors, net income increased by 26 percent to $18 million from $14 million (excluding the after-tax impact of nonrecurring charges) in First Quarter 2000. Earnings per share on a fully diluted basis for First Quarter 2001 were $0.96 compared with fully diluted earnings of $0.77 per share (excluding the after-tax impact of nonrecurring charges) in First Quarter 2000. Including the after-tax impact of nonrecurring charges, fully diluted earnings per share were $0.59 for First Quarter 2000.

Barton

Barton's net sales for First Quarter 2001 grew by 17 percent to $236 million compared with First Quarter 2000 net sales of $201 million. Specifically, spirits net sales, led by Black Velvet, grew 34 percent in First Quarter 2001. On a pro forma basis, sales of branded products from the Black Velvet acquisition grew 20 percent in First Quarter 2001. The spirits portfolio, exclusive of the Black Velvet brands, grew by 6 percent while beer sales, led by the Mexican beer brands, grew by 11 percent.

Operating income reached $39 million in First Quarter 2001 compared with $31 million in First Quarter 2000, an increase of 23 percent. The increase can be attributed to the inclusion of products related to the Black Velvet acquisition for the full quarter along with volume increases in beer and spirits.

Canandaigua Wine

Canandaigua Wine's net sales for First Quarter 2001 were $162 million, declining slightly from First Quarter 2000 net sales of $164 million. The decline can be attributed to a decrease in grape juice concentrate sales, while branded wine sales were unchanged against the comparable quarter last year.

Operating income for First Quarter 2001 was $8 million, virtually unchanged versus the comparable quarter a year ago, excluding the pretax nonrecurring charges of approximately $3 million recorded in First Quarter 2000. Operating income for the First Quarter 2000 including nonrecurring charges was $6 million.

Matthew Clark

Net sales for Matthew Clark grew by 2 percent to $170 million for First Quarter 2001 versus $167 million in the comparable quarter a year ago. Increases in Matthew Clark's wholesale business were partially offset by declines in Matthew Clark's branded business.

Operating income of $10 million for First Quarter 2001, was essentially unchanged versus the comparable quarter a year ago, excluding the pretax nonrecurring charges of approximately $3 million reported in First Quarter 2000. Including nonrecurring charges, First Quarter 2000 operating income was $7 million.

Franciscan

Net sales and operating income for First Quarter 2001 were $22 million and $5 million, respectively. Net sales for First Quarter 2001 grew by 15 percent when compared with pro forma net sales for First Quarter 2000. The Franciscan acquisition and Simi acquisition, both of which are being managed and reported together as the Franciscan Estates division of the Company, were completed in June 1999. Therefore, Franciscan Estates' results for First Quarter 2001 are all incremental when compared with First Quarter 2000.

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 185 premier brands, including imported beers, wines, spirits, cider and bottled water, and is a leading drinks wholesaler in the United Kingdom. Canandaigua Brands can be found on the Internet at http://www.cbrands.com.

CONFERENCE CALL DETAILS

A conference call to discuss the quarterly results will be hosted by Richard Sands, CEO, and Tom Summer, CFO, on Thursday, June 22, 2000, at 11:30 a.m. EDT. The conference call can be accessed by dialing 412-858-4600. A live listen-only web cast of the conference call as well as replays of the conference call are available on the Internet at the Canandaigua Brands web site: http://www.cbrands.com under: Investor Info.

If you are unable to participate in the conference call, there will be a replay available at the Canandaigua Brands web site.


                  CANANDAIGUA BRANDS, INC., AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                (in thousands)


                                                     May 31,   February 29,
                                                        2000           2000
                                                 (unaudited)      (audited)
    ASSETS

    CURRENT ASSETS:
     Cash and cash investments                       $14,024        $34,308
     Accounts receivable, net                        334,731        291,108
     Inventories, net                                601,733        615,700
     Prepaid expenses and other current assets        52,106         54,881
       Total current assets                        1,002,594        995,997
    PROPERTY, PLANT AND EQUIPMENT, net               530,991        542,971
    OTHER ASSETS                                     793,515        809,823
     Total assets                                 $2,327,100     $2,348,791

    LIABILITIES AND STOCKHOLDERS' EQUITY

    CURRENT LIABILITIES:
     Notes payable                                   $10,000        $26,800
     Current maturities of long-term debt             56,508         53,987
     Accounts payable                                129,376        122,213
     Accrued excise taxes                             41,212         30,446
     Other accrued expenses and liabilities          207,052        204,771
       Total current liabilities                     444,148        438,217
    LONG-TERM DEBT, less current maturities        1,205,705      1,237,135
    DEFERRED INCOME TAXES                            115,337        116,447
    OTHER LIABILITIES                                 32,366         36,152
    STOCKHOLDERS' EQUITY                             529,544        520,840
     Total liabilities and stockholders' equity   $2,327,100     $2,348,791

                  CANANDAIGUA BRANDS, INC., AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                    (in thousands, except per share data)


                                Three Months     Three Months
                                   Ended            Ended
                                May 31, 2000     May 31, 1999        Percent
                                (unaudited)      (unaudited)         Change

    Gross sales                    $774,522        $704,990           10%
    Net sales                      $585,580        $530,169           10%
    Cost of product sold          (401,707)       (374,046)            7%
    Gross profit                    183,873         156,123           18%
    Selling, general and
     administrative expenses      (126,409)       (110,502)           14%
    Nonrecurring charges                 --         (5,510)           N/A
    Operating income                 57,464          40,111           43%
    Interest expense, net          (27,627)        (22,034)           25%
    Income before income taxes       29,837          18,077           65%
    Provision for income taxes     (11,935)         (7,231)           65%
    Net income                      $17,902         $10,846           65%

    Earnings per common share:
      Basic                           $0.98           $0.60           63%
      Diluted                         $0.96           $0.59           63%
    Weighted average common
     shares outstanding:
      Basic                          18,230          17,977            1%
      Diluted                        18,598          18,447            1%
    Segment Information:
    Net sales:
     Barton
      Beer                         $163,134        $146,611           11%
      Spirits                        72,546          54,139           34%
       Net sales                   $235,680        $200,750           17%
    Canandaigua Wine
     Branded                       $144,566        $144,391            0%
     Other                           17,812          19,168           -7%
       Net sales                   $162,378        $163,559           -1%
    Matthew Clark
     Branded                        $69,615        $ 74,375           -6%
     Wholesale                       99,923          92,422            8%
      Net sales                    $169,538        $166,797            2%
    Franciscan                      $21,889              $-           N/A
     Corporate Operations
      and Other                      $1,085            $885           23%
     Intersegment eliminations     $(4,990)        $(1,822)          174%
     Consolidated net sales        $585,580        $530,169           10%

    Operating Income:
     Barton                         $38,835         $31,497           23%
     Canandaigua Wine                 7,981           5,607           42%
     Matthew Clark                   10,374           7,330           42%
     Franciscan                       5,416               -           N/A
     Corporate Operations
      and Other                     (5,142)         (4,323)           19%
    Consolidated operating income   $57,464         $40,111           43%

SOURCE Canandaigua Brands, Inc.

CONTACT: Mark Maring, V.P.- Investor Relations of Canandaigua Brands, Inc., 716-218-2169/