Canandaigua Brands Reports Second Quarter Results

FAIRPORT, N.Y., Sept. 27 /PRNewswire/ -- Canandaigua Brands, Inc. (Nasdaq: CBRNA and CBRNB) today reported earnings per share on a diluted basis of $1.14 for the three months ended August 31, 1999 (''Second Quarter 2000''), an increase of 30 percent over earnings per share of $0.88 for the three months ended August 31, 1998 (''Second Quarter 1999'').

Richard Sands, Chairman and Chief Executive Officer of Canandaigua Brands, said, ''Our performance was very strong in the second quarter. Exclusive of acquisitions, our portfolio of brands posted impressive sales and earnings gains, with sales increasing 13 percent and operating income growing more than 20 percent. The acquisitions we completed over the last year included expanding to the United Kingdom, enhancing our distilled spirits portfolio and gaining a major presence in the fine wine category. Each of the acquired businesses exceeded our expectations for the quarter, with solid volume growth recorded in each category; together, the acquisitions made a positive contribution to earnings.''

Mr. Sands added, ''Overall, the Company experienced healthy growth in each major category of business, with pro forma volumes up 15 percent for the quarter. Canandaigua Brands is clearly on track to benefit from the business development strategies we've implemented in the pursuit of our mission to become a leader in the drinks business worldwide.''

Consolidated Results

Net sales reached $622 million in Second Quarter 2000, a 78 percent increase over Second Quarter 1999. Most of the sales growth resulted from the acquisitions completed between December 1998 and June 1999; however, net sales of the Company's existing portfolio of products increased by 13 percent in Second Quarter 2000. Net sales for the six months ended August 31, 1999 (''Six Months 2000''), reached $1.2 billion, a 74 percent increase as compared to the six months ended August 31, 1998 (''Six Months 1999'').

Gross profit rose to $189 million from $103 million in Second Quarter 1999, an increase of $86 million, or 83 percent. The improvement in gross profit was primarily related to sales from the acquisitions and increased beer sales. As a percent of net sales, gross profit reached 30.4 percent in Second Quarter 2000, as compared to 29.5 percent in Second Quarter 1999. The increase in the gross margin resulted primarily from the acquisition of high-margin spirits and fine wine products. Gross profit and gross profit margin for Six Months 2000 were $345 million and 30.0 percent, respectively, compared to $195 million and 29.5 percent in Six Months 1999.

Selling, general and administrative expenses reached $125 million in Second Quarter 2000, an 86 percent increase from $67 million in Second Quarter 1999. The majority of the increase resulted from the addition of the businesses acquired since December 1998. Selling, general and administrative expenses for Six Months 2000 increased to $236 million from $129 million in Six Months 1999.

Operating income increased to $64 million for Second Quarter 2000 from $36 million in Second Quarter 1999. For Six Months 2000, operating income was $104 million, compared to $67 million in Six Months 1999. Net interest expense reached $29 million, an increase of $21 million from Second Quarter 1999. The increase in interest expense resulted from approximately $1 billion in additional borrowings associated with the acquisitions the Company made between December 1998 and June 1999. Net interest expense for Six Months 2000 was $51 million, up from $16 million in Six Months 1999.

As a result of these factors, net income reached $21 million in Second Quarter 2000, a 26 percent increase compared with net income of $17 million in Second Quarter 1999. Earnings per diluted share for Second Quarter 2000 were $1.14, a 30 percent increase over earnings of $0.88 in Second Quarter 1999, benefiting from a decrease in average shares outstanding. Net income and earnings per diluted share for Six Months 2000 were $32 million and $1.73, respectively, versus $30 million and $1.56 for Six Months 1999.

For financial analysis purposes only, the Company's earnings before interest, taxes, depreciation and amortization (''EBITDA'') were $84 million in Second Quarter 2000, an increase of $40 million over EBITDA of $44 million in Second Quarter 1999. EBITDA for Six Months 2000 totaled $138 million, an increase of $55 million over EBITDA of $83 million for Six 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 Second Quarter 2000 were $250 million, a 33 percent increase as compared to Second Quarter 1999. Beer sales grew by 26 percent. The Company believes that some of the sales growth was associated with wholesaler inventory build-up in advance of price increases. Spirits sales increased by 55 percent, with most of the increase related to sales associated with the acquisition of spirits brands that was completed in April 1999.

Operating income grew by 46 percent in Second Quarter 2000 to $42 million, led by increased profits from the growth of beer sales and the addition of profits from the spirits acquisition.

Barton's net sales and operating income increased to $451 million and $73 million, respectively, for Six Months 2000.

Canandaigua Wine Results

Net sales for Canandaigua Wine for Second Quarter 2000 increased 6 percent to $170 million. Leading the sales increase were the Company's Arbor Mist fruit-flavored varietal wines and Almaden box wines, as well as strong growth in the Company's international sales.

Operating income of $10 million in Second Quarter 2000 increased slightly as compared to Second Quarter 1999, as the Company invested incremental gross profits in initiatives to build market share.

Net sales and operating income for Six Months 2000 were $334 million and $16 million, respectively. Excluding a nonrecurring charge of approximately $3 million, operating income for Six Months 2000 increased to $19 million, up 5 percent from the prior year.

Matthew Clark Results

The Company acquired control of Matthew Clark in December 1998. Net sales and operating income for Matthew Clark operations were $183 million and $12 million, respectively, in Second Quarter 2000, and $350 million and $19 million, respectively, for Six 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 division of the Company. Franciscan had net sales of $17 million and operating income of $2 million in Second 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 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 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 Monday, September 27, at 10:00 a.m. EDT. The conference call can be accessed by dialing 212-547-0388 (password: EARNINGS).

If you are unable to participate in the conference call, there will be a replay available by dialing 402-998-1569 from approximately 11:30 a.m. EDT on Monday, September 27, 1999, until the end of business on Wednesday, September 29, 1999.

                   Consolidated Financial Statements Follow

                  CANANDAIGUA BRANDS, INC., AND SUBSIDIARIES
                    Condensed Consolidated Balance Sheets
                                (in thousands)

                                            August 31, 1999  February 28, 1999
                                              (unaudited)         (audited)
    ASSETS
    CURRENT ASSETS:
      Cash and cash investments                  $ 4,340           $27,645
      Accounts receivable, net                   344,652           260,433
      Inventories, net                           602,257           508,571
      Prepaid expenses and other current assets   74,206            59,090
        Total current assets                   1,025,455           855,739
    PROPERTY, PLANT AND EQUIPMENT, net           553,442           428,803
    OTHER ASSETS                                 801,391           509,234
     Total assets                             $2,380,288        $1,793,776

    LIABILITIES AND STOCKHOLDERS' EQUITY
    CURRENT LIABILITIES:
     Notes payable                               $75,077           $87,728
     Current maturities of long-term debt         17,844             6,005
     Accounts payable                            150,354           122,746
     Accrued Federal and state excise taxes       41,469            49,342
     Other accrued expenses and liabilities      214,287           149,451
       Total current liabilities                 499,031           415,272
    LONG-TERM DEBT, less current maturities    1,274,295           831,689
    DEFERRED INCOME TAXES                        110,261            88,179
    OTHER LIABILITIES                             27,752            23,364
    STOCKHOLDERS' EQUITY                         468,949           435,272
     Total liabilities and stockholders'
      equity                                  $2,380,288        $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
                                  August 31, 1999  August 31, 1998     Percent
                                     (unaudited)     (unaudited)        Change

    Gross sales                       $814,845        $457,281           78.2%

    Net sales                         $621,580        $349,386           77.9%
    Cost of product sold              (432,452)       (246,150)          75.7%
      Gross profit                     189,128         103,236           83.2%
    Selling general and administrative
      expenses                        (125,320)        (67,454)          85.8%
    Other nonrecurring charges              --              --            N/A
      Operating income                  63,808          35,782           78.3%
    Interest expense, net              (28,640)         (7,425)         285.7%
      Income before taxes               35,168          28,357           24.0%
    Provision for taxes                (14,067)        (11,626)          21.0%
      Net income                      $ 21,101         $16,731           26.1%

    Earnings per common share:
      Basic                           $   1.17           $0.90           30.0%
      Diluted                         $   1.14           $0.88           29.5%

    Weighted average common shares outstanding:
      Basic                             18,010          18,589           -3.1%
      Diluted                           18,499          19,051           -2.9%
    Segment Information:
    Net sales:
      Barton
        Beer                          $177,195        $141,133           25.6%
        Spirits                         73,011          47,227           54.6%
          Net sales                   $250,206        $188,360           32.8%
      Canandaigua Wine
        Branded                       $150,814        $140,545            7.3%
        Other                           19,449          20,211           -3.8%
          Net sales                   $170,263        $160,756            5.9%
      Matthew Clark
        Branded                       $ 80,879        $     --            N/A
        Wholesale                      102,330              --            N/A
          Net sales                   $183,209        $     --            N/A
      Franciscan                      $ 17,137        $     --            N/A
      Corporate Operations and Other  $  2,003        $    270          641.9%
      Intersegment eliminations       $ (1,238)       $     --            N/A
    Consolidated net sales            $621,580        $349,386           77.9%

    Operating Income:
      Barton                          $ 41,963        $ 28,832           45.5%
      Canandaigua Wine                  10,412          10,221            1.9%
      Matthew Clark                     11,980              --            N/A
      Franciscan                         1,571              --            N/A
      Corporate Operations and Other    (2,118)         (3,271)         -35.2%
    Consolidated operating income      $63,808         $35,782           78.3%


                  CANANDAIGUA BRANDS, INC., AND SUBSIDIARIES
                 Condensed Consolidated Statements of Income
                    (in thousands, except per share data)

                                    Six Months       Six Months
                                      Ended             Ended
                                 August 31, 1999   August 31, 1998     Percent
                                   (unaudited)      (unaudited)        Change

    Gross sales                    $1,519,834        $880,150           72.7%

    Net sales                      $1,151,749        $662,314           73.9%
    Cost of product sold             (806,499)       (467,017)          72.7%
      Gross profit                    345,250         195,297           76.8%
    Selling general and administrative
      expenses                       (235,821)       (128,786)          83.1%
    Other nonrecurring charges         (5,510)             --            N/A
      Operating income                103,919          66,511           56.2%
    Interest expense, net             (50,675)        (15,952)         217.7%
      Income before taxes              53,244          50,559            5.3%
    Provision for taxes               (21,297)        (20,729)           2.7%
      Net income                     $ 31,947         $29,830            7.1%

    Earnings per common share:
      Basic                          $   1.78           $1.60           11.3%
      Diluted                        $   1.73           $1.56           10.9%

    Weighted average common shares outstanding:
      Basic                            17,994          18,669           -3.6%
      Diluted                          18,459          19,168           -3.7%
    Segment Information:
    Net sales:
      Barton
        Beer                         $323,806        $259,929           24.6%
        Spirits                       127,149          94,599           34.4%
          Net sales                  $450,955        $354,528           27.2%
      Canandaigua Wine
        Branded                      $295,205        $267,343           10.4%
        Other                          38,617          39,350           -1.9%
          Net sales                  $333,822        $306,693            8.8%
      Matthew Clark
        Branded                      $155,253        $     --            N/A
        Wholesale                     194,753              --            N/A
          Net sales                  $350,006        $     --            N/A
      Franciscan                     $ 17,137        $     --            N/A
      Corporate Operations and Other $  2,889        $  1,093          164.3%
      Intersegment eliminations      $ (3,060)       $     --            N/A
    Consolidated net sales         $1,151,749        $662,314           73.9%

    Operating Income:
      Barton                         $ 73,459        $ 54,620           34.5%
      Canandaigua Wine                 16,019          17,661           -9.3%
      Matthew Clark                    19,310              --            N/A
      Franciscan                        1,571              --            N/A
      Corporate Operations and Other   (6,440)         (5,770)          11.6%
    Consolidated operating income    $103,919         $66,511           56.2%