Canandaigua Brands Announces First Quarter Results and Stock Repurchase Program

Fairport, NY, June 23, 1998 -- Canandaigua Brands, Inc. (NASDAQ: CBRNA and CBRNB), today reported its results for the quarter ended May 31, 1998 ("First Quarter 1999"). Net income for First Quarter 1999 was almost $14 million, or $0.70 per share on a diluted basis, versus net income of $10 million, or $0.53 per share, in the same quarter a year ago ("First Quarter 1998"), increases of 36 percent and 32 percent, respectively. Net sales of $313 million in First Quarter 1999 increased by two percent over net sales of $306 million in First Quarter 1998.

The Company also announced today that its Board of Directors has authorized the repurchase of up to $100 million of the Company's common stock. The repurchase of shares will be accomplished from time to time, depending upon market conditions, through open market or privately negotiated transactions.

Richard Sands, President and Chief Executive Officer, said, "We were pleased with our results in the quarter. Our beer and spirits portfolios continued to outperform their respective categories. We achieved further unit cost improvements in our wine business that helped to offset a decline in wine sales versus a year ago. These achievements ensured that we were able to maintain strong earnings growth in the quarter. We've taken action to regain market share for our existing brands in the wine category, and are introducing two new wine product lines for which we have high expectations."

Commenting on the share repurchase program, Mr. Sands added, "Canandaigua Brands is in a strong financial position. We believe that repurchase of the Company's common stock under the appropriate circumstances represents an attractive investment opportunity that will benefit our shareholders."

First Quarter Highlights

  • Net income increased 36 percent to almost $14 million
  • Earnings per share grew 32 percent to $0.70 versus $0.53 in First Quarter 1998
  • Unit volume of branded products grew seven percent to 18 million cases
  • Net sales increased two percent to $313 million
  • Gross profit margin reached 29.7 percent

    Unit volume increases of the Company's beer and spirits products offset a decline in unit volume of wine products, resulting in a 7 percent increase in unit volume of branded products. The Company's beer portfolio continued its strong growth record with a 22 percent increase in unit volume as compared to First Quarter 1998. The net increase in overall branded unit volume led to a $12 million increase in net sales in First Quarter 1999, partially offset by a $7 million decline in net sales of the Company's nonbranded products, particularly grape juice concentrate.

    Gross profit in First Quarter 1999 reached $93 million, a 15 percent increase over the prior year, due to unit cost improvements, particularly for the Company's wine business, price increases on many of the Company's table wine products and the overall increase in unit volume of branded products. The pricing changes and reduced costs led to an improvement in the Company's gross profit margin in First Quarter 1999 to 29.7 percent from 26.4 percent as reported in First Quarter 1998.

    The increase in gross profit was partially offset by higher selling, general and administrative expenses, which reached $61 million as compared to $55 million in First Quarter 1998. The increase was due to advertising and promotion costs associated with the increased unit volume of beer and spirits products and other programs targeted at the wine market.

    As a result of the sales growth and cost improvements, the Company's operating income increased by 24 percent to $32 million in First Quarter 1999. Interest expense and diluted average shares outstanding both increased slightly in First Quarter 1999 from a year ago. Net income and earnings per share increased 36 percent to $14 million and 32 percent to $0.70, respectively, in First Quarter 1999.

    Canandaigua Brands, Inc., headquartered in Fairport, New York, is a leading producer and marketer of beverage alcohol brands. As the second largest supplier of wine, the second largest importer of beer and the fourth largest supplier of distilled spirits, Canandaigua Brands is the largest single-source supplier of these products in the United States.

    The Company's portfolio includes the following key brands:

    Wine: Inglenook, Almaden, Paul Masson, Taylor, Cook's, Richards Wild Irish Rose, Manischewitz, Marcus James, Estate Cellars, Dunnewood, Vina Santa Carolina, Mystic Cliffs and Arbor Mist

    Beer: Corona Extra and Corona Light, Modelo Especial, St. Pauli Girl, Pacifico, Tsingtao, Point and Negra Modelo

    Distilled Spirits: Barton, Fleischmann's, Paul Masson Grande Amber, Mr. Boston, Montezuma, Canadian LTD, Chi-Chi's, Ten High, Inver House and Monte Alban