Equity in Earnings of Joint Ventures Interest Expense, Net Provision for Income Taxes Net Income FINANCIAL LIQUIDITY AND CAPITAL RESOURCES GENERAL FISCAL 2004 CASH FLOWS Operating Activities Investing Activities Financing Activities 31 Net cash provided by financing activities for Fiscal 2004 was $745.2 million resulting primarily from proceeds of $1,600.0 mil- lion from issuance of long-term debt, including $1,060.2 million of long-term debt incurred to acquire Hardy, plus net proceeds from the 2003 Equity Offerings (as defined below) of $426.1 million. This amount was partially offset by principal payments of long-term debt of $1,282.3 million. Net cash used in investing activities for Fiscal 2004 was $1,158.5 million, which resulted primarily from net cash paid of $1,069.5 million for the purchases of businesses and $105.1 million of capital expenditures. Net cash provided by operating activities for Fiscal 2004 was $340.3 million, which resulted from $220.4 million of net income, plus $137.9 million of net noncash items charged to the Consolidated Statement of Income, less $18.0 million representing the net change in the Company’s operating assets and liabilities. The net non-cash items consisted primarily of depreciation of property, plant and equipment, deferred tax provision and amortization of intangible and other assets. The net change in operating assets and liabilities resulted primarily from an increase in accounts receivable and a decrease in accounts payable, partially offset by a decrease in inventories and an increase in accrued advertising and promotion. The Company’s principal use of cash in its operating activities is for purchasing and carrying inventories and carrying season- al accounts receivable. The Company’s primary source of liquidity has historically been cash flow from operations, except during annual grape harvests when the Company has relied on short-term borrowings. In the United States, the annual grape crush nor- mally begins in August and runs through October. In Australia, the annual grape crush normally begins in February and runs through May. The Company generally begins taking delivery of grapes at the beginning of the crush season with payments for such grapes beginning to come due one month later. The Company’s short-term borrowings to support such purchases generally reach their highest levels one to two months after the crush season has ended. Historically, the Company has used cash flow from oper- ating activities to repay its short-term borrowings and fund capital expenditures. The Company will continue to use its short-term borrowings to support its working capital requirements. The Company believes that cash provided by operating activities and its financing activities, primarily short-term borrowings, will provide adequate resources to satisfy its working capital, scheduled prin- cipal and interest payments on debt, preferred dividend payment requirements, and anticipated capital expenditure requirements for both its short-term and long-term capital needs. As a result of the above factors, net income increased to $203.3 million for Fiscal 2003 from $136.4 million for Fiscal 2002, an increase of $66.9 million, or 49.0%. The Company’s effective tax rate for Fiscal 2003 declined to 39.3% from 40.0% for Fiscal 2002 as a result of the adoption of SFAS No. 142 on March 1, 2002. Interest expense, net of interest income of $0.8 million and $1.6 million for Fiscal 2003 and Fiscal 2002, respectively, decreased to $105.4 million for Fiscal 2003 from $114.2 million for Fiscal 2002, a decrease of $8.8 million, or (7.7%). The decrease result- ed from decreases in both the average borrowings for the year and the average interest rate for the year. The Company’s equity in earnings of joint venture increased to $12.2 million in Fiscal 2003 from $1.7 million in Fiscal 2002. Due to the formation of the joint venture in July 2001, there were seven months of earnings in Fiscal 2002 versus twelve months of earnings in Fiscal 2003. In addition, Fiscal 2003 benefited from an additional seven months of earnings due to the joint venture’s purchase of certain assets of the Blackstone Winery, including the Blackstone brand and the Codera wine business in Sonoma County, which was completed in October 2001.