Canandaigua Brands Announces Second Quarter Results

Fairport, NY, September 29, 1998 -- Canandaigua Brands, Inc. (NASDAQ: CBRNA and CBRNB), today reported its results for the quarter ended August 31, 1998 ("Second Quarter 1999"). Net income for Second Quarter 1999 was $15.8 million, or $0.83 per share on a diluted basis, versus net income of $12.4 million, or $0.65 per share, in the same quarter a year ago ("Second Quarter 1998"), increases of 28 percent each. Net sales of $349 million in Second Quarter 1999 increased by 16 percent over net sales of $302 million in Second Quarter 1998.

The Company also reported that it has repurchased more than one million shares of its Class A Common Stock at a total cost of $45 million as part of its previously announced program to repurchase up to $100 million of the stock.

Richard Sands, President and Chief Executive Officer, said, "The excellent results we achieved in the quarter reflect both the diversification of our portfolio and our ability to react quickly and effectively to market trends. We are now well into our fourth year of 20-plus percent growth in our imported beer portfolio, led by Corona Extra, the nation's top imported beer. We implemented programs that turned around our wine sales in the quarter, including the successful introduction of Arbor Mist and Mystic Cliffs, two new wine brands that exceeded our sales expectations in the quarter. These initiatives resulted in a three percent increase in wine volume as compared to a nine percent decline just three months ago and more than a two point increase in Canandaigua's share of the wine market according to Nielsen data."

Second Quarter Highlights

  • Net income increased 28 percent to almost $16 million
  • Earnings per share grew 28 percent to $0.83 versus $0.65 in Second Quarter 1998
  • Unit sales of branded products grew 15 percent to 20 million cases
  • Net sales increased 16 percent to $349 million
  • Gross profit margin reached 29.1 percent

    Unit volume increases of the Company's beer and wine products offset a decline in volume of spirits products, resulting in a 15 percent increase in unit sales of branded products. The Company's beer portfolio substantially outperformed the industry with a 29 percent increase in volume as compared to Second Quarter 1998. Wine volume grew by three percent, spurred by the introduction of the Arbor Mist and Mystic Cliffs brands. The Company's grape juice concentrate sales also increased in Second Quarter 1999. These increases more than offset the slight decline in spirits sales in the quarter, resulting in a $48 million increase in net sales in Second Quarter 1999.

    Gross profit in Second Quarter 1999 reached $102 million, a 20 percent increase over the prior year. The improvement was due primarily to the additional sales volume, as well as unit cost improvements for the Company's wine and spirits brands. The reduced unit costs led to an improvement in the Company's gross profit margin in Second Quarter 1999 to 29.1 percent from 28.1 percent as reported in Second Quarter 1998.

    The increase in gross profit was partially offset by higher selling, general and administrative expenses, which reached $67 million as compared to $56 million in Second Quarter 1998. The increase was due to advertising costs associated with the newly-introduced wine products and increased imported beer sales, and promotion expenses related to the growth in beer sales as well as other programs targeted at increasing the Company's share of the wine market.

    As a result of the sales growth and cost improvements, the Company's operating income increased by 20 percent to $34 million in Second Quarter 1999. Interest expense declined by two percent, while diluted average shares outstanding increased slightly in Second Quarter 1999 from a year ago, leading to net income and earnings per share increases of 28 percent to $16 million and $0.83, respectively, versus Second Quarter 1998.

    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, Pacifico, Negra Modelo, St. Pauli Girl, Tsingtao and Point Distilled Spirits: Barton, Fleischmann's, Paul Masson Grande Amber, Mr. Boston, Montezuma, Canadian LTD, Chi-Chi's, Ten High, Inver House and Monte Alban