In Fiscal 2005, the Company expects to incur additional restructuring and related charges of $11.6 million associated with the restructuring plan of the Constellation Wines segment. These charges are expected to consist of $7.2 million related to the further realignment of business operations in the Constellation Wines segment and $4.4 million related to renegotiating existing grape con- tracts as a result of exiting the commodity concentrate product line and selling the Escalon facility. Approximately half of the total charges in connection with exiting the commodity concentrate product line and selling the Escalon facility are non-cash charges. Operating Income The following table sets forth the operating income (loss) (in thousands of dollars) by operating segment of the Company for Fiscal 2004 and Fiscal 2003. Restructuring and related charges and unusual costs of $71.6 million and $4.8 million for Fiscal 2004 and Fiscal 2003, respec- tively, consist of certain costs that are excluded by management in their evaluation of the results of each operating segment. Fiscal 2004 costs represent the flow through of inventory step-up and the amortization of deferred financing costs associated with the Hardy Acquisition of $22.5 million and $11.6 million, respectively, and costs associated with exiting the commodity concentrate product line and the Company’s realignment of its business operations in the wine segment, including the write-down of concen- trate inventory of $16.8 million and restructuring and related charges of $31.2 million, partially offset by the relief from certain excise taxes, duty and other costs incurred in prior years of $10.4 million. Fiscal 2003 costs represent restructuring and related charges associated with the Company’s realignment of its business operations in the wine segment. As a result of these costs and the above factors, consolidated operating income increased to $487.4 million for Fiscal 2004 from $405.0 million for Fiscal 2003, an increase of $82.4 million, or 20.3%. The Company entered into a foreign currency collar contract in February 2003 in connection with the Hardy Acquisition to lock in a range for the cost of the acquisition in U.S. dollars. As of February 28, 2003, this derivative instrument had a fair value of $23.1 million. Under SFAS No. 133, a transaction that involves a business combination is not eligible for hedge accounting treat- ment. As such, the derivative was recorded on the balance sheet at its fair value with the change in the fair value recognized sepa- rately on the Company’s Consolidated Statements of Income. During the first quarter of Fiscal 2004, the gain on change in fair value of the derivative instrument of $1.2 million was recognized separately on the Company’s Consolidated Statement of Income. Gain on Change in Fair Value of Derivative Instruments Equity in Earnings of Joint Ventures Interest Expense, Net Provision for Income Taxes The Company’s equity in earnings of joint ventures decreased to $0.5 million in Fiscal 2004 from $12.2 million in Fiscal 2003 due to the acquisition of the remaining 50% ownership of PWP in March 2003 resulting in consolidation of PWP’s results of oper- ations since the date of acquisition. Interest expense, net of interest income of $3.6 million and $0.8 million for Fiscal 2004 and Fiscal 2003, respectively, increased to $144.7 million for Fiscal 2004 from $105.4 million for Fiscal 2003, an increase of $39.3 million, or 37.3%. The increase result- ed from higher average borrowings due to the financing of the Hardy Acquisition, partially offset by a lower average borrowing rate, and $1.7 million of imputed interest expense related to the Hardy Acquisition. The Company’s effective tax rate for Fiscal 2004 declined to 36.0% from 39.3% for Fiscal 2003 as a result of the Hardy Acquisition, which significantly increased the allocation of income to jurisdictions with lower income tax rates. 28 Fiscal 2004 Compared to Fiscal 2003 Operating Income (Loss) 2004 2003 % Increase Constellation Wines $ 348,132 $ 224,556 55.0% Constellation Beers and Spirits 252,533 217,963 15.9% Corporate Operations and Other (41,717) (32,797) 27.2% Total Reportable Segments 558,948 409,722 36.4% Restructuring and Related Charges  and Unusual Costs (71,591) (4,764) 1402.7% Consolidated Operating Income $ 487,357 $ 404,958 20.3%