Impact on Financial Results

* Includes joint venture income and other income & expense.

Previous slide

Next slide

Back to first slide

View graphic version

•  While our shipments and net revenues posted gains in this tough operating environment, our other key results were down in fiscal 2003.

• This reflects:
  • restructuring costs, including write-downs of inventory and other assets – all of which have strengthened our operating efficiency; and
  • increased promotional spending to improve our competitive posture and sales performance

• You can see the significant impact these write-downs had on our gross profit and operating income. Clearly we aren’t happy with these results, but given the severity of the price competition in the premium market, we could have seen an even greater decline in gross margin if we hadn’t managed to limit the price erosion in our Woodbridge and Private Selection brands. Protecting our brand equity and price position is part of our strategy to accelerate sales growth; more on this in a minute.

• Altogether, write-down and severance costs in fiscal 2003 were $22.2 million, which was partially offset by a gain of $7.3 million from fixed asset sales during the year.

• I’ll also discuss how these restructuring steps and balance sheet divestitures fit our strategy in a moment.

• Before I leave this slide let me comment on EBIT, which is not a GAAP measure. In our case, EBIT includes our equity income from our joint ventures, as well as the other income & expense line. We think it is a good indication of our core profitability because the international wines in our portfolio are making a steadily larger contribution to our results.