(on a local currency basis), and the addition of $23.0 million of net sales of bulk wine acquired in the Hardy Acquisition. The net sales increase in the U.K. Wholesale business on a local currency basis is primarily due to the addition of new accounts and increased average delivery sizes as the Company’s national accounts business continues to grow. The Company continues to face competitive discounting within select markets and geographies driven in part by excess grape supplies. The Company believes that the grape supply/demand cycle should come into balance over the next couple of years. The Company has taken a strategy of preserving the long-term brand equity of its portfolio and investing its marketing dollars in the higher growth sectors of the wine business. 

## Constellation Beers and Spirits 

Net sales for the Constellation Beers and Spirits segment for Fiscal 2004 increased to $1,147.2 million from $1,058.3 million for Fiscal 2003, an increase of $88.9 million, or 8.4%. This increase resulted primarily from volume gains on the Company’s imported beer portfolio, which increased $86.6 million. Spirits net sales remained relatively flat as increased branded spirits sales were offset by lower bulk whisky and contract production sales. 

## Gross Profit 

The Company’s gross profit increased to $975.8 million for Fiscal 2004 from $760.7 million for Fiscal 2003, an increase of $215.1 million, or 28.3%. The Constellation Wines segment’s gross profit increased $200.4 million primarily due to gross profit on the sales of branded wine acquired in the Hardy Acquisition. The Constellation Beers and Spirits segment’s gross profit increased $42.5 million primarily due to the volume growth in the segment’s imported beer portfolio. These increases were partially offset by $27.8 million of net unusual costs which consist of certain items that are excluded by management in their evaluation of the results of each operating segment. These net costs represent the flow through of inventory step-up associated with the Hardy Acquisition of $22.5 million and the write-down of concentrate inventory recorded in connection with the Company’s decision to exit the commodity concentrate product line of $16.8 million (see additional discussion under “Restructuring and Related Charges” below), partially offset by the relief from certain excise tax, duty and other costs incurred in prior years of $11.5 million, which was recognized in the fourth quarter of fiscal 2004. Gross profit as a percent of net sales decreased slightly to 27.5% for Fiscal 2004 from 27.8% for Fiscal 2003 as an increase in gross profit margin from sales of higher margin wine brands acquired in the Hardy Acquisition was more than offset by the net unusual costs discussed above and a decrease in gross profit margin on the Constellation Wines’ U.K. wholesale business. 

## Selling, General and Administrative Expenses 

Selling, general and administrative expenses increased to $457.3 million for Fiscal 2004 from $351.0 million for Fiscal 2003, an increase of $106.3 million, or 30.3%. The Constellation Wines segment’s selling, general and administrative expenses increased $76.8 million primarily due to $67.7 million of selling, general and administrative expenses from the addition of the Hardy and PWP businesses. The Constellation Beers and Spirits segment’s selling, general and administrative expenses increased $7.9 million due to increased imported beer and spirits advertising and selling expenses to support the growth across this segment’s businesses, partially offset by foreign currency gains. The Corporate Operations and Other segment’s general and administrative expenses increased $8.9 million primarily due to additional deferred financing costs associated with the Company’s new bank credit facility and increased general and administrative expenses to support the Company’s growth. In addition, there was a $12.7 million increase in selling, general and administrative expenses related to unusual costs which consist of certain items that are excluded by manage- ment in their evaluation of the results of each operating segment. These costs consist primarily of the additional amortized deferred financing costs associated with the bridge financing in connection with the Hardy Acquisition of $11.6 million. Selling, general and administrative expenses as a percent of net sales increased slightly to 12.9% for Fiscal 2004 as compared to 12.8% for Fiscal 2003 due primarily to the unusual costs and the increased general and administrative expenses within the Corporate Operations and Other segment. 

## Restructuring and Related Charges 

The Company recorded $31.2 million of restructuring and related charges for Fiscal 2004 associated with the restructuring plan of the Constellation Wines segment. Restructuring and related charges resulted from (i) $10.0 million related to the realignment of business operations and (ii) $21.2 million related to exiting the commodity concentrate product line in the U.S. and selling its win- ery located in Escalon, California. In total, the Company recorded $38.0 million of costs associated with exiting the commodity concentrate product line and selling its Escalon facility allocated between cost of product sold ($16.8 million) and restructuring and related charges ($21.2 million). 

The Company recorded $4.8 million of restructuring and related charges for Fiscal 2003 associated with an asset impairment charge in connection with two of Constellation Wines segment’s production facilities. 

