FINANCIAL HIGHLIGHTS

  • First-ever quarter of net sales above $1 billion
  • Growth in all categories: net sales up 14% from prior year
  • Reported net income up 127% to $80.6 million
  • Reported diluted EPS doubled from prior year to $0.69
  • Comparable basis net income up 24% to $82.0 million
  • Comparable basis diluted EPS up 11% to $0.71
  • Net sales for beers and spirits segment up 14%
  • Net sales for wines segment up 14%
  • Company affirms full year diluted EPS guidance

FAIRPORT, N.Y., Sept. 30 /PRNewswire-FirstCall/ -- Constellation Brands, Inc. (NYSE: STZ; ASX: CBR), a leading international producer and marketer of beverage alcohol brands, reported record net sales for its second quarter ended Aug. 31, 2004, topping $1 billion for the first time in any quarter since the company was founded in 1945. Net sales increased 14 percent, driven by growth across the company's businesses of imported beers, spirits, branded wine and its U.K. wholesale business. Currency contributed five percent of the increase.

"We're pleased with the vibrancy of our beverage alcohol business' organic growth, and we're particularly happy about the performance of brands receiving incremental marketing investment in fiscal 2005, including Alice White, Ravenswood, Hardys and Blackstone wines, as well as our strong Corona beer results," stated Richard Sands, Constellation Brands chairman and chief executive officer. "Fourteen percent growth for our beers and spirits segment was driven by continued strong consumer demand for our entire Mexican beer portfolio. Our wines segment also grew 14 percent, with approximately half of that growth coming from additional distribution and sales of the brands we're supporting with incremental dollars. We're committed to growing our brands."

Constellation's reported net income increased 127 percent for the second quarter, to $80.6 million, and reported diluted earnings per share doubled to $0.69. Second quarter 2005 and 2004 reported results include restructuring and related charges and net unusual costs of $1.4 million after tax, or $0.02 per share, and $30.8 million after tax, or $0.30 per share, respectively. Net income, on a comparable basis excluding the restructuring and related charges and net unusual costs, increased 24 percent, to $82.0 million, and comparable diluted earnings per share increased 11 percent to $0.71. Diluted earnings per share growth was impacted by additional shares outstanding, primarily as a result of the company's equity offerings in July 2003, the proceeds of which were used to pay down debt incurred to partially finance the Hardy acquisition.

Constellation Beers and Spirits Results

Net sales for the quarter grew 14 percent to reach $365.2 million on strong beer and spirits growth. Beers net sales increased 17 percent driven by volume and the March 2004 price increase for the Mexican beer portfolio, including Corona Extra, Corona Light, Modelo Especial, Negra Modelo and Pacifico. Additional marketing support also contributed to the growth of the Mexican portfolio.

Spirits net sales increased five percent on a two percent rise in branded spirits and strong growth in production services. Skol and Fleischmann's Vodkas, the 99 cordials line and Black Velvet Canadian Whisky were among the brands that contributed to the increase in branded spirits sales.

Operating income for Constellation Beers and Spirits grew 20 percent to reach $83.8 million for the second quarter, due primarily to higher net sales.

Constellation Wines Results

Net sales for the quarter grew 14 percent, to $671.7 million, driven by growth in branded wine net sales and the U.K. wholesale business, as well as a seven percent favorable impact from currency.

Branded wine net sales increased eight percent, to reach $413.6 million, driven by volume growth and a four percent benefit from currency. The company's Australian wine portfolio grew in all of the key markets - U.S., U.K. and Australia. Branded wine net sales in Australia grew 18 percent including an eight percent benefit from currency, with strong volume gains from Banrock Station, Hardys, Renmano and Stanley.

Branded wine net sales in Europe grew 25 percent, including a 14 percent benefit from currency, with volume gains from Banrock Station, Hardys and Stowells. The demand for Australian wine continues to increase throughout the continent and Constellation continues to benefit from this trend.

Branded wine net sales in the U.S. declined two percent as year ago net sales benefited from the launch of new products. Excluding the impact of these new product introductions, U.S. branded wine net sales increased three percent year-over-year as the company continues to benefit from greater consumer demand for premium brands including Ravenswood, Simi and Franciscan Oakville Estate.

Wholesale and other net sales increased 25 percent driven by strong U.K. wholesale volume and a 13 percent benefit from currency.

Operating income for Constellation Wines for the second quarter increased slightly to reach $87.7 million. Operating margins declined on a percentage basis for the quarter due primarily to a change in the sales mix, with a significant increase in net sales coming from the U.K. wholesale business and lower margin wine products.

2004 California Wine Grape Harvest

"Wine grape growing conditions in California over the past year have contributed to this year's early harvest and lighter volume. We believe that this is likely to result in spot prices firming, which should be good for the industry," explained Sands. "This year's California harvest is yielding a quality wine grape crop, and we believe our consumers will experience an excellent vintage. Overall, we feel very good about the 2004 U.S. wine grape harvest." Summary

"Our business is robust," said Sands. "By making incremental investments to leverage the power of our extensive beverage alcohol portfolio, we are focusing our core competencies on goals to gain distribution and strengthen our competitive position while capitalizing on consumer-driven consumption trends."

About Constellation

Constellation Brands, Inc. is a leading international producer and marketer of beverage alcohol brands with a broad portfolio across the wine, spirits and imported beer categories. Well-known brands in Constellation's portfolio include: Corona Extra, Pacifico, St. Pauli Girl, Black Velvet, Fleischmann's, Mr. Boston, Paul Masson Grande Amber Brandy, Franciscan Oakville Estate, Estancia, Simi, Ravenswood, Blackstone, Banrock Station, Hardys, Nobilo, Alice White, Vendange, Almaden, Arbor Mist, Stowells and Blackthorn.

Quarterly Conference Call

A conference call to discuss second quarter fiscal 2005 results will be hosted by Chairman and Chief Executive Officer Richard Sands and Executive Vice President and Chief Financial Officer Tom Summer on Thursday, Sept. 30, 2004 at 5:00 p.m. (Eastern). The conference call can be accessed by dialing +412-858-4600 beginning 10 minutes prior to the start of the call. A live listen-only web cast of the conference call, together with a copy of this press release (including the attachments) and other financial information that may be discussed in the call are available on the Internet at Constellation's web site: http://www.cbrands.com under "Investors."

Explanations

Net income and diluted earnings per share on a comparable basis exclude restructuring and related charges and net unusual costs. The company discusses results on a comparable basis in order to give investors better insight on underlying business trends from continuing operations. A table reconciling these measures, as well as other related financial measures to reported results, is included in this release. For a detailed discussion of these items, please see the section "Items Affecting Comparability" following the financial statements. The company's measure of segment profitability excludes restructuring and related charges and net unusual costs, which is consistent with the measure used by management to evaluate results. Outlook

The following table sets forth management's current diluted earnings per share expectations both on a reported basis and comparable basis for the third quarter ending Nov. 30, 2004 and fiscal year ending Feb. 28, 2005. The table also includes actual diluted earnings per share both on a reported basis and comparable basis for the same periods a year ago. A reconciliation of reported information to comparable information is included in this media release.

FORWARD-LOOKING STATEMENTS

The statements made under the heading Outlook (collectively, the "Outlook"), as well as all other statements set forth in this press release which are not historical facts, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by the forward-looking statements.

During the quarter, Constellation may reiterate the estimates set forth above under the heading Outlook. Prior to the start of the company's quiet period, beginning Nov. 17, the public can continue to rely on the Outlook as still being Constellation's current expectations on the matters covered, unless Constellation publishes a notice stating otherwise.

Beginning Nov. 17, 2004, Constellation will observe a "quiet period" during which the Outlook no longer constitutes the company's current expectations. During the quiet period, the Outlook should be considered to be historical, speaking as of prior to the quiet period only, and not subject to update by the company.

The company's forward-looking statements are based on management's current expectations and, unless otherwise noted, do not take into account the impact of any future acquisition, merger or any other business combination, divestiture or financing that may be completed after the date of this release. Any projections of future results of operations, and in particular, (i) the company's estimated diluted earnings per share on a reported basis for third quarter 2005 and fiscal 2005, and (ii) the company's estimated diluted earnings per share on a comparable basis for third quarter 2005 and fiscal 2005, should not be construed in any manner as a guarantee that such results will in fact occur. In addition to the risks and uncertainties of ordinary business operations, the forward-looking statements of the company contained in this press release are also subject to the following risks and uncertainties: the company achieving certain sales projections and meeting certain cost targets; wholesalers and retailers may give higher priority to products of the company's competitors; raw material supply, production or shipment difficulties could adversely affect the company's ability to supply its customers; increased competitive activities in the form of pricing, advertising and promotions could adversely impact consumer demand for the company's products and/or result in higher than expected selling, general and administrative expenses; a general decline in alcohol consumption; increases in excise and other taxes on beverage alcohol products; and changes in foreign currency exchange rates. For additional information about risks and uncertainties that could adversely affect the company's forward-looking statements, please refer to the company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended Feb. 29, 2004.

ATTACHMENTS TO CONSTELLATION BRANDS SECOND QUARTER FISCAL 2005 MEDIA RELEASE

ITEMS AFFECTING COMPARABILITY FOR FISCAL 2005

Financing costs - Call (Redemption) of senior notes - On Feb. 10, 2004, the company called its $200,000,000 8.5% senior subordinated notes due 2009 which were redeemed March 2004. In connection with this redemption, the company incurred an unusual charge in the first quarter of fiscal 2005 related to the call premium and the remaining unamortized financing fees associated with the original issuance of the bonds. The company expects to incur a charge of $0.06 per share for fiscal 2005.

Restructuring and related charges -- In connection with the further realignment of business operations within the company's wine division, the company expects restructuring and related charges of approximately $0.03 per share for fiscal 2005.

Inventory step-up -- The Hardy acquisition resulted in an allocation of purchase price in excess of book value to certain inventory on hand at the date of purchase. This allocation of purchase price in excess of book value is referred to as inventory step-up. The inventory step-up represents an assumed manufacturing profit attributable to Hardy preacquisition. For inventory produced and sold after the acquisition date, the related manufacturer's profit accrues to the company. As a result of final appraisals, the company expects the flow through of inventory step-up to have a negative impact of approximately $0.03 per share for fiscal 2005.

ITEMS AFFECTING COMPARABILITY FOR FISCAL 2004

Excise tax, duty and other costs -- In the fourth quarter of fiscal 2004, the company recognized a net benefit of $10.4 million related to relief from certain excise taxes, duty and other costs incurred in prior years. The net $10.4 million is comprised of a $9.2 million increase in net sales, a $2.3 million reduction in cost of product sold and a $1.1 million increase in SG&A. This had a positive impact of approximately $0.06 per share for fiscal 2004.

Inventory step-up - The flow through of inventory step-up had an impact of approximately $0.13 per share for fiscal 2004.

Concentrate inventory write-down -- The company made a decision to exit the U.S. commodity concentrate product line -- located in Madera, California. The commodity concentrate product line was facing declining sales and profits and was not part of the company's core business, beverage alcohol. The company continues to produce and sell value-added, proprietary products such as MegaColors. The charge for the write-down of concentrate inventory was $0.10 per share for fiscal 2004. In addition, and related to exiting this product line, the company expects to record restructuring and related charges of approximately $0.17 per share, of which $0.14 was recorded in fiscal 2004 and $0.03 will be recorded in fiscal 2005.

Financing costs -- Hardy acquisition -- In connection with the Hardy acquisition, the company recorded amortization expense for deferred financing costs associated with noncontinuing financing, primarily related to the bridge loan agreement. This charge was $0.07 per share for fiscal 2004.

Restructuring and related charges -- Restructuring and related charges resulted from the realignment of business operations in the company's wine division, as previously announced in the fourth quarter of fiscal 2003, and exiting the commodity concentrate product line. The company incurred total charges of approximately $0.19 per share for fiscal 2004 ($0.05 for realignment of businesses and $0.14 for exiting the commodity concentrate product line).

Imputed interest charge - In connection with the Hardy acquisition and in accordance with purchase accounting, the company was required to take a one-time imputed interest charge for the time period between when the company obtained control of Hardy and the date it paid Hardy shareholders. The company incurred a charge of $0.01 per share for fiscal 2004.

Gain on change in fair value of derivative instruments -- In connection with the Hardy acquisition, the company entered into derivative instruments to cap the cost of the acquisition in U.S. dollars. The company recorded a gain in the first quarter, which represented the net change in value of the derivative instruments from the beginning of the first quarter until the date Hardy shareholders were paid. The company recorded a gain of $0.01 per share for fiscal 2004.

CONTACT:
Philippa Dworkin
585-218-3733

Mike Martin
585-218-3669

Investors
Lisa Schnorr
585-218-3677
All of Constellation Brands, Inc.