Canandaigua Brands Reports Record Third Quarter Results

FAIRPORT, N.Y., Jan. 4 /PRNewswire/ -- Canandaigua Brands, Inc. (NYSE: CDB, CDB.B), today reported earnings per share on a diluted basis of $1.60 for the three months ended November 30, 1999 ("Third Quarter 2000"), an increase of 45 percent over earnings per share of $1.10 for the three months ended November 30, 1998 ("Third Quarter 1999").

Richard Sands, Chairman and Chief Executive Officer of Canandaigua Brands, said, "The excellent results we posted in the quarter reflect the aggressive efforts we made throughout the 1990's to expand the breadth and depth of our brand portfolio. We had solid contributions across the entire Company in the third quarter. Our spirits, fine wine and U.K. drinks businesses performed particularly well this quarter. With the enviable mix of high growth and strong cash flow businesses we've put together, Canandaigua Brands is in an excellent position to continue to grow profits as we enter the year 2000."

Consolidated Results

Net sales reached $662 million in Third Quarter 2000, a 76 percent increase over Third Quarter 1999. Most of the sales growth resulted from the acquisitions completed between December 1998 and June 1999. Net sales for the nine months ended November 30, 1999 ("Nine Months 2000"), reached $1.8 billion, a 75 percent increase as compared to the nine months ended November 30, 1998 ("Nine Months 1999").

Gross profit rose to $210 million from $116 million in Third Quarter 1999, an increase of $94 million, or 81 percent. The improvement in gross profit was primarily related to sales from the acquisitions and increased beer and wine sales. As a percent of net sales, gross profit reached 31.7 percent in Third Quarter 2000, as compared to 30.8 percent in Third Quarter 1999. The increase in the gross margin resulted primarily from price increases taken in the Company's imported beer business and the acquisition of high-margin spirits and fine wine products. Gross profit and gross profit margin for Nine Months 2000 were $555 million and 30.6 percent, respectively, compared to $311 million and 30.0 percent in Nine Months 1999.

Selling, general and administrative expenses reached $132 million in Third Quarter 2000, a 79 percent increase from $74 million in Third Quarter 1999. The majority of the increase resulted from the addition of the businesses acquired since December 1998. Selling, general and administrative expenses for Nine Months 2000 increased to $368 million from $203 million in Nine Months 1999.

Operating income increased to $77 million for Third Quarter 2000 from $42 million in Third Quarter 1999. For Nine Months 2000, operating income was $181 million, compared to $108 million in Nine Months 1999. Net interest expense reached $28 million, an increase of $20 million from Third Quarter 1999. The increase in interest expense resulted from approximately $950 million in additional net borrowings associated primarily with the acquisitions the Company made between December 1998 and June 1999. Net interest expense for Nine Months 2000 was $78 million, up from $24 million in Nine Months 1999.

As a result of these factors, net income reached $30 million in Third Quarter 2000, a 48 percent increase compared with net income of $20 million in Third Quarter 1999. Earnings per diluted share for Third Quarter 2000 were $1.60, a 45 percent increase over earnings of $1.10 in Third Quarter 1999. Net income and earnings per diluted share for Nine Months 2000 were $62 million and $3.34, respectively, versus $50 million and $2.65 for Nine Months 1999.

For financial analysis purposes only, the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") were $94 million in Third Quarter 2000, an increase of $43 million over EBITDA of $51 million in Third Quarter 1999. EBITDA for Nine Months 2000 totaled $232 million, an increase of $98 million over EBITDA of $134 million for Nine Months 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.)

Barton Results

Net sales for Barton for Third Quarter 2000 were $215 million, a 21 percent increase as compared to Third Quarter 1999. Beer sales grew by four percent as a result of price increases for most of the Company's beer brands. The Company believes that unit volume growth was adversely impacted during the quarter by wholesaler and retailer inventory build-up in prior quarters in advance of the price increases. While the longer-term impact of the price increases is difficult to determine at this time, recent wholesaler depletion and retail sales data reflect more robust growth than initially occurred following the price increases.

Spirits sales increased by 65 percent, with much of the increase related to sales associated with the acquisition of spirits brands that was completed in April 1999. Excluding the acquired brands, unit volume of the Company's spirits brands grew by six percent in Third Quarter 2000. The acquired brands grew by 22 percent as compared with volume sold by their previous owner in the prior year.

Operating income grew by 50 percent in Third Quarter 2000 to $41 million, led by the addition of profits from the spirits acquisition.

Barton's net sales and operating income increased to $666 million and $115 million, respectively, for Nine Months 2000.

Canandaigua Wine Results

Net sales for Canandaigua Wine for Third Quarter 2000 increased five percent to $207 million. Most of the increase resulted from bulk wine sales. Branded wine sales and unit volume grew slightly compared to the prior year.

Operating income of $19 million in Third Quarter 2000 increased slightly as compared to Third Quarter 1999, as the Company continued to invest in initiatives to build market share.

Net sales and operating income for Nine Months 2000 were $541 million and $35 million, respectively. Excluding a nonrecurring charge of approximately $3 million, operating income for Nine Months 2000 increased to $37 million, up four percent from the prior year.

Matthew Clark Results

The Company acquired control of Matthew Clark in December 1998. On a pro forma basis, Matthew Clark unit volume increased by 10 percent in Third Quarter 2000 as compared to the prior year. Net sales and operating income for Matthew Clark operations were $214 million and $15 million, respectively, in Third Quarter 2000, and $564 million and $35 million, respectively, for Nine Months 2000.

Franciscan Results

The Company completed the acquisitions of Franciscan Estates and Simi Winery in June 1999, both of which are being managed and reported together as the Franciscan fine wine division of the Company. On a pro forma basis combining the Franciscan Estates and Simi acquisitions, unit volume grew by 30 percent in Third Quarter 2000 versus the prior year. Franciscan had net sales of $27 million and operating income of $6 million in Third Quarter 2000. Net sales and operating income for Nine Months 2000 were $45 million and $8 million, respectively.

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 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, of Canandaigua Brands on Tuesday, January 4, 2000, at 10:00 a.m. EST. The conference call can be accessed by dialing 888-810-3141 (password: EARNINGS). A live listen-only webcast of the conference call is available 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 by dialing 402-220-0358 from approximately 11:30 a.m. EST on Tuesday, January 4, 2000, until the end of business on Thursday, January 6, 2000. An audio replay of the call will also be available at the Canandaigua Brands web site.


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

                            November 30, 1999       February 28, 1999
                                (unaudited)              (audited)
    ASSETS
    CURRENT ASSETS:
     Cash and cash investments    $24,667                 $27,645
     Accounts receivable, net     402,128                 260,433
     Inventories, net             677,363                 508,571
     Prepaid expenses and other
      current assets               67,084                  59,090
       Total current assets     1,171,242                 855,739
    PROPERTY, PLANT AND
     EQUIPMENT, net               561,397                 428,803
    OTHER ASSETS                  800,356                 509,234
       Total assets            $2,532,995              $1,793,776

    LIABILITIES AND STOCKHOLDERS' EQUITY
    CURRENT LIABILITIES:
     Notes payable               $114,391                 $87,728
     Current maturities of
      long-term debt               40,249                   6,005
     Accounts payable             182,971                 122,746
     Accrued excise taxes          46,028                  49,342
     Other accrued expenses and
      liabilities                 256,729                 149,451
       Total current liabilities  640,368                 415,272
    LONG-TERM DEBT, less current
     maturities                 1,253,863                 831,689
    DEFERRED INCOME TAXES         113,609                  88,179
    OTHER LIABILITIES              27,860                  23,364
    STOCKHOLDERS' EQUITY          497,295                 435,272
    Total liabilities and
     stockholders' equity      $2,532,995              $1,793,776


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

                                Three Months     Three Months
                                   Ended            Ended
                                November 30,     November 30,       Percent
                                   1999             1998            Change
                                 (unaudited)     (unaudited)

    Gross sales                    $864,075        $494,033         74.9%
    Net sales                      $661,520        $375,586         76.1%
    Cost of product sold          (451,833)       (259,891)         73.9%
      Gross profit                  209,687         115,695         81.2%
    Selling general and
     administrative expenses      (132,309)        (73,775)         79.3%
      Operating income               77,378          41,920         84.6%
    Interest expense, net          (27,544)         (7,748)        255.5%
      Income before income taxes     49,834          34,172         45.8%
    Provision for income taxes     (19,934)        (14,011)         42.3%
      Net income                    $29,900         $20,161         48.3%

    Earnings per common share:
     Basic                            $1.65           $1.13         46.0%
     Diluted                          $1.60           $1.10         45.5%

    Weighted average common shares
    outstanding:
     Basic                           18,083          17,892          1.1%
     Diluted                         18,651          18,325          1.8%

    Segment Information:
    Net sales:
     Barton
      Beer                         $134,155        $128,810          4.1%
      Spirits                        80,548          48,827         65.0%
        Net sales                  $214,703        $177,637         20.9%
     Canandaigua Wine
      Branded                      $182,190        $181,693          0.3%
      Other                          24,925          14,731         69.2%
        Net sales                  $207,115        $196,424          5.4%
     Matthew Clark
      Branded                      $101,708             $--           N/A
      Wholesale                     112,049              --           N/A
        Net sales                  $213,757             $--           N/A
     Franciscan                     $27,473             $--           N/A
     Corporate Operations and Other  $1,233          $1,525        -19.1%
     Intersegment eliminations    $ (2,761)             $--           N/A
    Consolidated net sales         $661,520        $375,586         76.1%

    Operating Income:
     Barton                         $41,380         $27,667         49.6%
     Canandaigua Wine                18,850          18,433          2.3%
     Matthew Clark                   15,193               -           N/A
     Franciscan                       5,991               -           N/A
     Corporate Operations and Other (4,036)         (4,180)         -3.4%
    Consolidated operating income   $77,378         $41,920         84.6%


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

                                Nine Months     Nine Months
                                    Ended          Ended
                                November 30,   November 30,
                                    1999           1998           Percent
                                (unaudited)     (unaudited)        Change

    Gross sales                  $2,383,909      $1,374,183         73.5%
    Net sales                    $1,813,269      $1,037,900         74.7%
    Cost of product sold        (1,258,332)       (726,908)         73.1%
      Gross profit                  554,937         310,992         78.4%
    Selling general and
     administrative expenses      (368,130)       (202,561)         81.7%
    Nonrecurring charges            (5,510)              --           N/A
      Operating income              181,297         108,431         67.2%
    Interest expense, net          (78,219)        (23,700)        230.0%
      Income before income taxes    103,078          84,731         21.7%
    Provision for income taxes     (41,231)        (34,740)         18.7%
      Net income                    $61,847         $49,991         23.7%

    Earnings per common share:
     Basic                            $3.43           $2.72         26.1%
     Diluted                          $3.34           $2.65         26.0%

    Weighted average common shares
    outstanding:
     Basic                           18,023          18,412         -2.1%
     Diluted                         18,502          18,881         -2.0%

    Segment Information:
    Net sales:
     Barton
      Beer                         $457,961        $388,739         17.8%
      Spirits                       207,697         143,426         44.8%
        Net sales                  $665,658        $532,165         25.1%
     Canandaigua Wine
      Branded                      $477,361        $449,036          6.3%
      Other                          63,541          54,081         17.5%
        Net sales                  $540,902        $503,117          7.5%
     Matthew Clark
      Branded                      $256,962             $--           N/A
      Wholesale                     306,802              --           N/A
        Net sales                  $563,764             $--           N/A
     Franciscan                     $44,610             $--           N/A
     Corporate Operations and Other  $4,122         $ 2,618         57.4%
     Intersegment eliminations     $(5,787)             $--           N/A
    Consolidated net sales       $1,813,269     $ 1,037,900         74.7%

    Operating Income:
     Barton                        $114,839         $82,287         39.6%
     Canandaigua Wine                34,869          36,094         -3.4%
     Matthew Clark                   34,503              --           N/A
     Franciscan                       7,562              --           N/A
    Corporate Operations and Other (10,476)         (9,950)          5.3%
    Consolidated operating income  $181,297        $108,431         67.2%

SOURCE Canandaigua Brands, Inc.
CONTACT: Kristen Jenks,
V.P.-Investor Relations of Canandaigua Brands, Inc.,
716-218-2169/
(CDB CDB.B)

CO: Canandaigua Brands, Inc.
ST: New York
IN: FOD REA
SU: ERN