CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the Years Ended February 29, February 28, February 28, 2004 2003 2002 CASH FLOWS FROM OPERATING ACTIVITIES:  Net income  $ 220,414  $ 203,306  $ 136,421  Adjustments to reconcile net income to net cash provided by  operating activities:  Depreciation of property, plant and equipment  80,079  54,147  51,873  Deferred tax provision  31,398  21,050  3,675  Amortization of goodwill and intangible assets  21,875  5,942  33,531  Loss on sale of assets and restructuring charges  5,127  7,263  324  Loss on extinguishment of debt  800  –– 2,590  Stock-based compensation expense  233  100  101  Amortization of discount on long-term debt  93  60  516  Gain on change in fair value of derivative instrument  (1,181) (23,129) –– Equity in earnings of joint venture  (542) (12,236) (1,667) Change in operating assets and liabilities, net of effects  from purchases of businesses:  Accounts receivable, net  (63,036) 6,164  (44,804) Inventories, net  96,051  (40,676) (19,130) Prepaid expenses and other current assets  2,192  (11,612) 566  Accounts payable (61,647) 10,135  19,069  Accrued excise taxes  7,658  (25,029) 4,502  Other accrued expenses and liabilities  11,417  42,882  29,960  Other assets and liabilities, net  (10,624) (2,314) (4,228) Total adjustments  119,893  32,747  76,878  Net cash provided by operating activities 340,307  236,053  213,299  CASH FLOWS FROM INVESTING ACTIVITIES:  Purchases of businesses, net of cash acquired  (1,069,470) –– (472,832) Purchases of property, plant and equipment  (105,094) (71,575) (71,148) Payment of accrued earn-out amount  (2,035) (1,674) –– Proceeds from sale of assets  13,449  1,288  35,815  Proceeds from sale of business  3,814  –– –– Proceeds from sale of marketable equity securities  849  –– –– Investment in joint venture  –– –– (77,282) Net cash used in investing activities  (1,158,487) (71,961) (585,447) CASH FLOWS FROM FINANCING ACTIVITIES:  Proceeds from issuance of long-term debt  1,600,000  10,000  252,539  Proceeds from equity offerings, net of fees  426,086  –– 151,479  Exercise of employee stock options  36,017  28,706  45,027  Proceeds from employee stock purchases  3,481  2,885  1,986  Principal payments of long-term debt  (1,282,274) (151,134) (260,982) Payment of issuance costs of long-term debt  (33,748) (20) (4,537) Payment of dividends  (3,295) –– –– Net (repayment of) proceeds from notes payable  (1,113) (51,921) 51,403  Net cash provided by (used in) financing activities  745,154  (161,484) 236,915  Effect of exchange rate changes on cash and cash investments  96,352  2,241  (1,478) NET INCREASE (DECREASE) IN CASH AND CASH INVESTMENTS  23,326  4,849  (136,711) CASH AND CASH INVESTMENTS, beginning of year  13,810  8,961  145,672  CASH AND CASH INVESTMENTS, end of year  $ 37,136  $ 13,810  $ 8,961  SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:  Cash paid during the year for:  Interest $ 137,359 $ 103,161 $ 122,121 Income taxes  $ 76,990  $ 67,187  $ 75,054  SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING  AND FINANCING ACTIVITIES:  Fair value of assets acquired, including cash acquired  $ 1,776,064  $ ––  $ 617,487  Liabilities assumed  (621,578) –– (138,913) Net assets acquired  1,154,486  –– 478,574  Less - stock issuance  (77,243) –– –– Less - direct acquisition costs accrued or previously paid  (5,939) –– –– Less - cash acquired  (1,834) –– (5,742) Net cash paid for purchases of businesses  $ 1,069,470  $ –– $ 472,832  Property, plant and equipment contributed to joint venture  $ –– $ –– $ 30,020  42 The accompanying notes to consolidated financial statements are an integral part of these statements.