Net Income FISCAL 2003 COMPARED TO FISCAL 2002 Net Sales Constellation Wines Constellation Beers and Spirits Gross Profit As a result of the above factors, net income increased to $220.4 million for Fiscal 2004 from $203.3 million for Fiscal 2003, an increase of $17.1 million, or 8.4%. The following table sets forth the net sales (in thousands of dollars) by operating segment of the Company for Fiscal 2003 and Fiscal 2002. Net sales for Fiscal 2003 increased to $2,731.6 million from $2,606.8 million for Fiscal 2002, an increase of $124.9 million, or 4.8%. This increase resulted primarily from increased sales of imported beer of $49.1 million and the impact of foreign curren- cy changes of $50.7 million in the Constellation Wines segment. Also contributing to the sales growth were increased sales in U.K. wholesale of $28.6 million (on a local currency basis), fine wine sales of $23.8 million and spirits sales of $7.6 million, offset by lower bulk wine, grape juice concentrate sales of $14.7 million, popular and premium branded wine sales of $13.9 million and U.K. branded sales of $9.4 million (on a local currency basis). Net sales for the Constellation Wines segment for Fiscal 2003 increased to $1,673.3 million from $1,605.1 million for Fiscal 2002, an increase of $68.2 million, or 4.2%. Branded wines sales increased $20.0 million due to increased fine wine sales of $23.8 million and a favorable foreign currency impact of $9.3 million partially offset by lower popular and premium wine sales of $13.9 million. The increase in fine wine sales resulted from an additional four months of sales of the brands acquired in the acquisition of Ravenswood Winery, Inc. (“Ravenswood”), completed in July 2001, of $14.1 million, as well as an increase of $9.7 million due to volume growth in the fine wine business partially offset by higher promotional costs and a shift towards lower priced fine wine brands. Popular and premium wine sales declined $13.9 million on lower volume offset slightly by higher average selling prices. Volumes were negatively impacted as a result of increased promotional spending in the industry, which the Company did not par- ticipate in heavily. In this competitive pricing environment, the Company continues to be selective in its promotional activities, focus- ing instead on growth areas, long-term brand building initiatives and increased profitability. Wholesale and other sales increased $48.2 million primarily due to a favorable foreign currency impact of $41.4 million and a $28.6 million local currency increase in U.K. wholesale sales due to the addition of new accounts and increased average delivery sizes, partially offset by lower bulk wine, grape juice concentrate and cider sales of $24.7 million. Net sales for the Constellation Beers and Spirits segment for Fiscal 2003 increased to $1,058.3 million from $1,001.7 million for Fiscal 2002, an increase of $56.7 million, or 5.7%. This increase resulted primarily from a $49.1 million increase in imported beer sales. The growth in imported beer sales was due to a price increase on the Company’s Mexican beer portfolio, which took effect in the first quarter of Fiscal 2003. Spirits sales increased $7.6 million due primarily to increased bulk whiskey sales of $6.4 million, along with a slight increase in branded sales of $1.2 million. The Company’s gross profit increased to $760.7 million for Fiscal 2003 from $695.2 million for Fiscal 2002, an increase of $65.6 million, or 9.4%. The Constellation Wines segment’s gross profit increased $30.8 million due to lower wine costs, the addi- tional four months of sales of the brands acquired in the Ravenswood Acquisition (completed in July 2001), a favorable mix of 29 Fiscal 2003 Compared to Fiscal 2002 Net Sales 2003 2002 % Increase Constellation Wines: Branded wines $ 983,505 $ 963,514 2.1% Wholesale and other 689,794 641,589 7.5% Constellation Wines net sales $ 1,673,299 $ 1,605,103 4.2% Constellation Beers and Spirits: Imported beers $ 776,006 $ 726,953 6.7% Spirits 282,307 274,702 2.8% Constellation Beers and Spirits net sales $ 1,058,313 $ 1,001,655 5.7% Corporate Operations and Other $ – $ – N/A Consolidated Net Sales $ 2,731,612 $ 2,606,758 4.8%