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## Acquisition of the Turner Road Vintners Assets 

On March 5, 2001, in an asset acquisition, the Company acquired several well-known premium wine brands, including Vendange, Nathanson Creek, Heritage, and Talus, working capital (primarily inventories), two wineries in California, and other related assets from Sebastiani Vineyards, Inc. and Tuolomne River Vintners Group (the “Turner Road Vintners Assets”). The results of operations of the Turner Road Vintners Assets are reported in the Constellation Wines segment and have been included in the consolidated results of operations of the Company since the date of acquisition. 

## Pacific Wine Partners 

On July 31, 2001, the Company and Hardy completed the formation of PWP, a joint venture owned equally by the Company and Hardy through March 26, 2003. Pacific Wine Partners LLC (“PWP”) produces, markets and sells a portfolio of premium wine in the United States, including a range of Australian imports. PWP also exports certain of its U.S.-produced wines to other coun- tries. In connection with the initial formation of the joint venture, PWP was given the exclusive distribution rights in the United States and the Caribbean to several brands, including Banrock Station, Hardys, Leasingham, Barossa Valley Estate and Chateau Reynella from Australia; and Nobilo from New Zealand. PWP also owns Farallon, a premium California coastal wine. In addi- tion, PWP owns a winery and controls 1,400 acres of vineyards in Monterey County, California. 

On October 16, 2001, the Company announced that PWP completed the purchase of certain assets of Blackstone Winery, including the Blackstone brand and the Codera wine business in Sonoma County. 

As a result of the Hardy Acquisition, PWP became a wholly-owned subsidiary of the Company. Accordingly, as noted above, its results of operations have been consolidated and reported in the Constellation Wines segment since March 27, 2003. Prior to March 27, 2003, the investment in PWP was accounted for using the equity method; accordingly, the results of operations of PWP from July 31, 2001, through March 26, 2003, were included in the equity in earnings of joint ventures line in the Consolidated Statements of Income of the Company. 

## RESULTS OF OPERATIONS 

## FISCAL 2004 COMPARED TO FISCAL 2003 

## Net Sales 

The following table sets forth the net sales (in thousands of dollars) by operating segment of the Company for Fiscal 2004 and Fiscal 2003. 

<img src='content_image/39018.jpg'>

Net sales for Fiscal 2004 increased to $3,552.4 million from $2,731.6 million for Fiscal 2003, an increase of $820.8 million, or 30.0%. This increase resulted primarily from the inclusion of $571.4 million of net sales of products acquired in the Hardy Acquisition as well as increases in imported beer sales of $86.6 million and U.K. wholesale sales of $61.1 million (on a local curren- cy basis). In addition, net sales benefited from a favorable foreign currency impact of $74.6 million. 

## Constellation Wines 

Net sales for the Constellation Wines segment for Fiscal 2004 increased to $2,396.1 million from $1,673.3 million for Fiscal 2003, an increase of $722.8 million, or 43.2%. Branded wine net sales increased $566.2 million, primarily due to the addition of $548.4 million of net sales of branded wine acquired in the Hardy Acquisition. Wholesale and other net sales increased $156.5 mil- lion primarily due to a favorable foreign currency impact of $63.1 million, growth in the U.K. wholesale business of $61.1 million 

