x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

CONSTELLATION BRANDS, INC.

(Exact name of registrant as specified in its charter)

Delaware		16-0716709
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

370 Woodcliff Drive, Suite 300, Fairport, New York    14450

(Address of principal executive offices)                                          (Zip Code)

Registrant’s telephone number, including area code (585) 218-3600

Title of each class		Name of each exchange on which registered
Class A Common Stock (par value $.01 per share)		New York Stock Exchange
Class B Common Stock (par value $.01 per share)		New York Stock Exchange
Depositary Shares Each Representing 1/40 of a  Share of 5.75% Series A Mandatory Convertible Preferred Stock (par value $.01 per share)		New York Stock Exchange

 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  X     No ___

 

 

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  X     No ___

Large Accelerated Filer  X     Accelerated Filer ___   Non-accelerated Filer ___

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ___   No    X   

 

 

 

 

========================================================================================================================================

 

 

This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company’s control, that could cause actual results to differ materially from those set forth in, or implied by, such forward-looking statements. All statements other than statements of historical facts included in this Annual Report on Form 10-K, including the statements under Item 1 “Business” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s business strategy, future financial position, prospects, plans and objectives of management, as well as information concerning expected actions of third parties are forward-looking statements. When used in this Annual Report on Form 10-K, the words “anticipate,” “intend,” “expect,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this Annual Report on Form 10-K. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. In addition to the risks and uncertainties of ordinary business operations, important factors that could cause actual results to differ materially from those set forth in, or implied, by the Company’s forward-looking statements contained in this Annual Report on Form 10-K are those described in Item 1A “Risk Factors” and elsewhere in this report and in other Company filings with the Securities and Exchange Commission.

Item 1.   Business

Unless the context otherwise requires, the terms “Company,” “we,” “our,” or “us” refer to Constellation Brands, Inc. and its subsidiaries, and all references to “net sales” refer to gross sales less promotions, returns and allowances, and excise taxes to conform with the Company’s method of classification. All references to “Fiscal 2006,” “Fiscal 2005” and “Fiscal 2004” shall refer to the Company’s fiscal year ended the last day of February of the indicated year. All references to “Fiscal 2007” shall refer to the Company’s fiscal year ending February 28, 2007.

Market positions and industry data discussed in this Annual Report on Form 10-K are as of calendar 2005 and have been obtained or derived from industry and government publications and Company estimates. The industry and government publications include: Adams Liquor Handbook; Adams Wine Handbook; Adams Beer Handbook; Adams Handbook Advance; The U.S. Wine Market: Impact Databank Review and Forecast; The U.S. Beer Market: Impact Databank Review and Forecast; The U.S. Spirits Market: Impact Databank Review and Forecast; International Wine and Spirit Record; Euromonitor; Australian Bureau of Statistics; Information Resources, Inc.; ACNielsen; AZTEC; Beer Marketer’s Insights; The Beer Institute; and DISCUS. The Company has not independently verified the data from the industry and government publications. Unless otherwise noted, all references to market positions are based on unit volume.

The Company is a Delaware corporation incorporated on December 4, 1972, as the successor to a business founded in 1945. The Company has approximately 7,900 employees located throughout the world and the corporate headquarters are located in Fairport, New York.

The Company is a leading international producer and marketer of beverage alcohol with a broad portfolio of brands across the wine, imported beer and spirits categories. The Company has the largest wine business in the world and has a leading market position in each of its core markets, which include the United States, United Kingdom, Australia and New Zealand.

In the United States, the Company is the largest multi-category (wine, imported beer and spirits) supplier of beverage alcohol. In addition to its position in wine, the Company is the largest marketer of imported beer in 25 primarily western states, where it has exclusive rights to distribute the Mexican brands in its portfolio, and is a leading producer and marketer of distilled spirits. With its broad product portfolio, the Company believes it is distinctly positioned to satisfy an array of consumer preferences across all beverage alcohol categories and price points.

Many of the Company’s products are recognized leaders in their respective categories and geographic markets. The Company’s strong market positions make the Company a supplier of choice to its customers, who include wholesale distributors, retailers and on-premise locations.

In addition, in the United Kingdom, the Company is the leading independent (non-brewery-owned) drinks wholesaler, providing a full range of beverage alcohol and soft drinks to the on-premise trade. The Company leverages this business as a strategic route-to-market for its imported wine portfolio.

Net sales by product category are summarized as follows:

		For the Year  Ended  February 28,  2006			% of Total			For the Year Ended February 28, 2005			% of Total
(in millions)
Branded wine		$	2,263.4			49	%	$	1,830.8			45	%
Wholesale and other			972.0			21	%		1,020.6			25	%
Imported beers			1,043.5			23	%		922.9			22	%
Spirits			324.5			7	%		313.3			8	%
Consolidated Net Sales		$	4,603.4			100	%	$	4,087.6			100	%

The Company’s geographic markets include North America (primarily the United States), Europe (primarily the United Kingdom) and Australasia (primarily Australia and New Zealand). Net sales by geographic area (based on the location of the selling company) are summarized as follows:

		For the Year Ended February 28, 2006			% of Total			For the Year Ended February 28, 2005			% of Total
(in millions)
North America		$	2,912.1			63	%	$	2,387.3			58	%
Europe			1,372.0			30	%		1,385.6			34	%
Australasia			319.3			7	%		314.7			8	%
Consolidated Net Sales		$	4,603.4			100	%	$	4,087.6			100	%

There are certain key trends within the beverage alcohol industry which include:

·	Consolidation of wholesalers and retailers; and

·	Attractive consumer trends which include:

·	An increase in global wine consumption;

·	Growth of New World wines (wines produced from the United States, Australia, New Zealand, Chile, Argentina and South Africa) in the Company’s core markets outpacing growth of Old World wines (wines primarily produced in European countries including France, Germany, Spain and Italy);

·	Wine and spirits categories growing at a faster rate than the beer category, particularly in the U.S. and the U.K.; and

·

Consumers “trading up” to premium products within each category. On a global basis, within the wine category, premium wines are growing faster than value-priced wines. In the United States, within the beer category, imported beers are growing faster than domestic beers, and premium spirits are growing faster than value-priced spirits.

To capitalize on these trends, the Company has employed a strategy of growing through a combination of internal growth and acquisitions to become more competitive, with a focus on the faster growing segments of the beverage alcohol industry and developing strong market positions in the wine, imported beer and spirits categories. Key elements of the Company’s strategy include:

·	Leveraging the Company’s existing portfolio of leading brands;

·	Developing new products, new packaging and line extensions;

·	Diversifying the Company’s product portfolio with an emphasis on premium spirits and premium, super-premium and fine wines;

·	Diversifying geographic markets with a focus on expansion in Canada, Western Europe, Eastern Europe and Japan;

·	Strengthening its relationships with wholesalers and retailers;

·	Expanding its distribution and enhancing its production capabilities;

·	Realizing operating synergies; and

·	Acquiring additional management, operational, marketing, and product development expertise.

As part of the Company’s strategy outlined above, on April 2, 2006, the Company entered into an arrangement agreement with Vincor International Inc. (“Vincor”) under which, subject to satisfaction of certain conditions, the Company will acquire all of the issued and outstanding common shares of Vincor at a cash price of Cdn$36.50 per common share. The transaction, including Vincor’s outstanding indebtedness, is valued at approximately Cdn$1.5 billion and is currently expected to be completed in early June 2006. Vincor is Canada’s largest producer and marketer of wines, and as such, Canada would become a core market for the Company. Vincor is also a marketer of wine in the United Kingdom, including the leading South African wine, and a producer and marketer of premium, super-premium and fine wines from California, Washington State, Western Australia and New Zealand. Vincor’s well-known brands include Inniskillin, Jackson-Triggs, Sumac Ridge, Hawthorne Mountain, Sawmill Creek, Notre Vin Maison, Entre-Lacs, L’Ambiance, Caballero de Chile, Spumante Bambino, President Canadian Champagne, and Okanagan Vineyards, all of which are produced in Canada. In addition, R.H. Phillips, Toasted Head, and Hogue are produced in the United States, Goundrey and Amberley are produced in Australia, Kim Crawford is produced in New Zealand and Kumala is produced in South Africa.

In December 2004, the Company acquired The Robert Mondavi Corporation (“Robert Mondavi”), a leading premium wine producer based in Napa, California. Through this transaction, the Company acquired various additional winery and vineyard interests, and, additionally produces, markets and sells premium, super-premium and fine California wines under the Woodbridge by Robert Mondavi, Robert Mondavi Private Selection and Robert Mondavi Winery brand names. Woodbridge and Robert Mondavi Private Selection are the leading domestic premium and super-premium wine brands, respectively, in the United States. As a result of the Robert Mondavi acquisition, the Company acquired an ownership interest in Opus One, a joint venture owned equally by Robert Mondavi and Baron Philippe de Rothschild, S.A. During September 2005, the Company’s president and Baroness Philippine de Rothschild announced an agreement to maintain equal ownership of Opus One. Opus One produces fine wines at its Napa Valley winery.

The acquisition of Robert Mondavi supports the Company’s strategy of strengthening the breadth of its portfolio across price segments to capitalize on the overall growth in the premium, super-premium and fine wine categories. The Company believes that the acquired Robert Mondavi brand names have strong brand recognition globally. The vast majority of Robert Mondavi’s sales are generated in the United States. The Company is leveraging the Robert Mondavi brands in the United States through its selling, marketing and distribution infrastructure. The Company also intends to further expand distribution for the Robert Mondavi brands in Europe through its Constellation Europe infrastructure.  Distribution of the Robert Mondavi Woodbridge brand in the U.K. market is underway and the brand has been introduced into most major U.K. retailers.

In December 2004, the Company purchased a 40% interest in Ruffino S.r.l. (“Ruffino”), the well-known Italian fine wine company, and in February 2005, the Constellation Wines segment began distributing Ruffino’s products in the United States. Also in December 2004, the Company became a 50% owner in a joint venture with jstar Brands called Planet 10 Spirits. The objective of Planet 10 Spirits is to create and market premium spirit brands in the United States and key export markets. The first product from this joint venture is Effen Vodka, a luxury brand imported from Holland.

In April 2003, the Company completed the acquisition of BRL Hardy Limited, now known as Hardy Wine Company Limited (“Hardy”), Australia’s largest producer of wine, which enhanced the Company’s overall growth prospects and gave the Company an immediate presence in the Australian domestic and export markets. As a result of the acquisition of Hardy, the Company also acquired the remaining 50% ownership of Pacific Wine Partners LLC (“PWP”), the joint venture the Company established with Hardy in July 2001 that produces, markets and sells a portfolio of premium wine in the United States, including a range of Australian imports. The acquisition of Hardy along with the remaining interest in PWP is referred to together as the “Hardy Acquisition.” Among the well-known brands acquired in the Hardy Acquisition are Banrock Station, Hardys Nottage Hill, Hardys Stamp and VR, Eileen Hardy, Sir James, Omni, Nobilo, Leasingham and Houghton. In October 2005, PWP was merged into another subsidiary of the Company.

For more information about these transactions, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Annual Report on Form 10-K.

The Company’s internal organization structure consists of two business divisions, Constellation Wines and Constellation Beers and Spirits. Consequently, the Company reports its operating results in three segments: Constellation Wines (branded wine, and U.K. wholesale and other), Constellation Beers and Spirits (imported beers and distilled spirits) and Corporate Operations and Other. The business segments, described more fully below, reflect how the Company’s operations are being managed, how operating performance within the Company is being evaluated by senior management and the structure of its internal financial reporting.

Information regarding net sales, operating income and total assets of each of the Company’s business segments and information regarding geographic areas is set forth in Note 22 to the Company’s consolidated financial statements located in Item 8 of this Annual Report on Form 10-K.

Constellation Wines

Constellation Wines is the leading producer and marketer of wine in the world. It sells a large number of wine brands across all categories - table wine, sparkling wine and dessert wine - and across all price points - popular, premium, super-premium and fine wine. The portfolio of super-premium and fine wines is supported by vineyard holdings in the United States, Australia, New Zealand and Chile. As the largest producer and marketer of wine in the world, Constellation Wines has leading market positions in several countries. It is a leading producer and marketer of wine in the United States, Australia and New Zealand and the largest marketer of wine in the United Kingdom. Wine produced by the Company in the United States is primarily marketed domestically and in the United Kingdom. Wine produced in Australia and New Zealand is primarily marketed domestically and in the United States and United Kingdom, while wine produced in Chile is primarily marketed in the United States and United Kingdom. In addition, Constellation Wines exports its wine products to other major wine consuming markets of the world.

In the United States, Constellation Wines sells 19 of the top-selling 100 table wine brands and has one of the largest fine wine portfolios. In the United Kingdom, it has seven of the top-selling 20 table wine brands and the best selling brand of fortified British wine. In Australia, it has wine brands across all price points and varieties, including a comprehensive range of premium wine brands, and has 5 of the top-selling 20 wine brands and is the largest producer of cask (box) wines.

Constellation Wines’ well-known wine brands include Robert Mondavi Winery, Simi, Franciscan Oakville Estate, Estancia, Ravenswood, Blackstone, Robert Mondavi Private Selection, Ruffino, Alice White, Nobilo, Hardys, Woodbridge by Robert Mondavi, Vendange, Arbor Mist, Almaden, and Stowells.

Constellation Wines is also the leading independent beverage wholesaler to the on-premise trade in the United Kingdom and has more than 20,000 on-premise accounts. The wholesaling business involves the distribution of wine, distilled spirits, cider, beer, RTDs and soft drinks. These products include Constellation Wines’ branded wine, cider and water products, and products produced by other major drinks companies.

Constellation Wines is also the second largest producer and marketer of cider in the United Kingdom, with leading cider brands Blackthorn and Gaymer’s Olde English, and produces and markets Strathmore, the leading bottled water brand in the United Kingdom on-premise market.

In conjunction with its wine production, Constellation Wines produces and sells bulk wine and other related products and services.

Constellation Beers and Spirits

Constellation Beers and Spirits imports and markets a diversified line of beer and produces, bottles, imports and markets a diversified line of distilled spirits. It is the largest marketer of imported beer in 25 primarily western U.S. states, where it has exclusive rights to distribute the Mexican brands in its portfolio, Corona Extra, Corona Light, Modelo Especial, Pacifico, and Negra Modelo. Constellation Beers and Spirits has exclusive distribution rights to the entire United States for the St. Pauli Girl brand, the number two selling German Beer, and Tsingtao brand, the number one selling Chinese Beer. All of the segments’ Mexican brands and St. Pauli Girl brand are among the top-selling 20 imported beer brands in the United States. Corona Extra is the best selling imported beer in the United States and the sixth best selling beer overall in the United States.

Constellation Beers and Spirits is a leading producer and marketer of distilled spirits in the United States. The majority of the segment’s distilled spirits unit volume consists of products marketed in the value and mid-premium priced category. Principal distilled spirits brands include Black Velvet, Barton, Sköl, Fleischmann’s, Canadian LTD, Montezuma, Ten High, Chi-Chi’s prepared cocktails, Mr. Boston, Inver House, and Monte Alban. The segment is continuing efforts to increase its premium spirits offerings, with brands that include Black Velvet Reserve, the 99 Schnapps family, Effen Vodka, Ridgemont Reserve 1792, Meukow Cognac and Cocktails by Jenn.

Constellation Beers and Spirits also sells bulk distilled spirits and other related products and services.

Corporate Operations and Other

The Corporate Operations and Other segment includes traditional corporate-related items including executive management, corporate development, corporate finance, human resources, internal audit, investor relations, legal, public relations, global information technology and global strategic sourcing.

The Company employs full-time, in-house marketing, sales and customer service organizations within its segments to maintain a high degree of focus on each of its product categories. The organizations use a range of marketing strategies and tactics to build brand equity and increase sales, including market research, consumer and trade advertising, price promotions, point-of-sale materials, event sponsorship, on-premise promotions and public relations. Where opportunities exist, particularly with national accounts, the Company leverages its sales and marketing skills across the organization and categories.

In North America, the Company’s products are primarily distributed by approximately 700 wholesale distributors as well as state and provincial alcoholic beverage control agencies. As is the case with all other beverage alcohol companies, products sold through state or provincial alcoholic beverage control agencies are subject to obtaining and maintaining listings to sell the Company’s products in that agency’s state or province. State and provincial governments can affect prices paid by consumers of the Company’s products. This is possible either through the imposition of taxes or, in states and provinces in which the government acts as the distributor of the Company’s products through an alcoholic beverage control agency, by directly setting retail prices for the Company’s products.

 

 

 

·	Our ability to obtain financing for future working capital needs or acquisitions or other purposes may be limited;

·	Our funds available for operations, expansion or distributions will be reduced because we will dedicate a significant portion of our cash flow from operations to the payment of principal and interest on Our indebtedness and dividends on our Series A mandatory convertible preferred stock;

·	Our ability to conduct our business could be limited by restrictive covenants; and

·	Our vulnerability to adverse economic conditions may be greater than less leveraged competitors and, thus, our ability to withstand competitive pressures may be limited.

·	A general decline in economic conditions;

·	Increased concern about the health consequences of consuming beverage alcohol products and about drinking and driving;

·	A trend toward a healthier diet including lighter, lower calorie beverages such as diet soft drinks, juices and water products;

·	The increased activity of anti-alcohol groups; and

·	Increased federal, state or foreign excise or other taxes on beverage alcohol products.

 

The success of our brands depends upon the positive image that consumers have of those brands. Contamination, whether arising accidentally or through deliberate third-party action, or other events that harm the integrity or consumer support for those brands, could adversely affect their sales. Contaminants in raw materials purchased from third parties and used in the production of our wine and spirits products or defects in the distillation or fermentation process could lead to low beverage quality as well as illness among, or injury to, consumers of our products and may result in reduced sales of the affected brand or all of our brands.

Recently, we have experienced significant increases in energy costs, and energy costs could continue to rise, which would result in higher transportation, freight and other operating costs. Our future operating expenses and margins will be dependent on our ability to manage the impact of cost increases. We cannot guarantee that we will be able to pass along increased energy costs to our customers through increased prices.

We depend on information technology to enable us to operate efficiently and interface with customers, as well as maintain financial accuracy and efficiency. If we do not allocate, and effectively manage, the resources necessary to build and sustain the proper technology infrastructure, we could be subject to transaction errors, processing inefficiencies, the loss of customers, business disruptions, or the loss of or damage to intellectual property through security breach. As with all large systems, our information systems could be penetrated by outside parties intent on extracting information, corrupting information or disrupting business processes. Such unauthorized access could disrupt our business and could result in the loss of assets.

New accounting standards or pronouncements that may become applicable to us from time to time, or changes in the interpretation of existing standards and pronouncements, could have a significant effect on our reported results for the affected periods. We are also subject to income tax in the numerous jurisdictions in which we generate revenues. In addition, our products are subject to import and excise duties and/or sales or value-added taxes in many jurisdictions in which we operate. Increases in income tax rates could reduce our after-tax income from affected jurisdictions, while increases in indirect taxes could affect our products' affordability and therefore reduce our sales.

Various diseases, pests, fungi, viruses, drought, frosts and certain other weather conditions could affect the quality and quantity of grapes available, decreasing the supply of our products and negatively impacting profitability. We cannot guarantee that our grape suppliers will succeed in preventing contamination in existing vineyards or that we will succeed in preventing contamination in our existing vineyards or future vineyards we may acquire. Future government restrictions regarding the use of certain materials used in grape growing may increase vineyard costs and/or reduce production. Grape growing also requires adequate water supplies. A substantial reduction in water supplies could result in material losses of grape crops and vines, which could lead to a shortage of our product supply.

Item 1B.   Unresolved Staff Comments

Not Applicable.

Item 2.      Properties

Through its business segments, the Company operates wineries, distilling plants, bottling plants, and cider and water producing facilities, most of which include warehousing and distribution facilities on the premises. The Company also operates separate distribution centers under the Constellation Wines segment’s wholesaling business. In addition to the Company’s properties described below, certain of the Company’s businesses maintain office space for sales and similar activities and offsite warehouse and distribution facilities in a variety of geographic locations.

The Company believes that its facilities, taken as a whole, are in good condition and working order and have adequate capacity to meet its needs for the foreseeable future.

The following discussion details the properties associated with the Company’s three business segments.

Constellation Wines

Through the Constellation Wines segment, the Company maintains facilities in the United States, Australia, New Zealand, the United Kingdom, Chile and the Republic of Ireland. These facilities include wineries, bottling plants, cider and water producing facilities, warehousing and distribution facilities, distribution centers and office facilities. The segment maintains owned and/or leased division offices in Canandaigua, New York; St. Helena, California; Gonzales, California; Reynella, South Australia; Bristol, England and Guildford, England.

United States

In the United States, the Company through its Constellation Wines segment operates two wineries in New York, located in Canandaigua and Naples; 14 wineries in California, located in Acampo, Gonzales, Healdsburg, Kenwood, Oakville, Soledad, Rutherford, Ukiah, two in Lodi, two in Madera and two in Sonoma; two wineries in Washington, located in Woodinville and Sunnyside; and one winery in Caldwell, Idaho. All of these wineries are owned, except for the wineries in Caldwell (Idaho) and Woodinville (Washington), which are leased. The Constellation Wines segment considers its principal wineries in the United States to be the Mission Bell winery in Madera (California), the Canandaigua winery in Canandaigua (New York), the Ravenswood wineries in Sonoma (California), the Franciscan Vineyards winery in Rutherford (California), the Woodbridge Winery in Acampo (California), the Turner Road Vintners Winery in Lodi (California), the Robert Mondavi Winery in Oakville (California) and the Blackstone Winery in Gonzales (California). The Mission Bell winery crushes grapes, produces, bottles and distributes wine and produces specialty concentrates and Mega Colors for sale. The Canandaigua winery crushes grapes and produces, bottles and distributes wine. The other principal wineries crush grapes, vinify, cellar and bottle wine.

Through the Constellation Wines segment, as of February 28, 2006, the Company owned or leased approximately 10,100 acres of vineyards, either fully bearing or under development, in California and New York to supply a portion of the grapes used in the production of wine.

Australasia

Through the Constellation Wines segment, the Company owns and operates 10 Australian wineries, five of which are in South Australia, two in Western Australia and the other three in New South Wales, Australian Capital Territory and Tasmania. Additionally, through this segment the Company also owns three wineries in New Zealand. All but one of these Australasian wineries crush grapes, vinify and cellar wine. Five include bottling and/or packaging operations. The facility in Reynella, South Australia bottles a significant portion of the wine produced in Australia, produces all Australian sparkling wines and cellars wines. The Company considers the segment’s principal facilities in Australasia to be the Berri Estates winery located in Glossop and the bottling facility located in Reynella, both in South Australia.

Through the Constellation Wines segment, the Company owns or has interests in approximately 6,300 plantable acres of vineyards in South Australia, the Australian Capital Territory, Western Australia, Victoria, and Tasmania, and approximately 2,500 acres of vineyards, either fully bearing or under development, in New Zealand.

Europe

Through the Constellation Wines segment, in the United Kingdom the Company owns and operates two facilities in England, located in Bristol and Shepton Mallet and one facility in Scotland, located in Forfar. The Bristol facility is considered a principal facility and produces, bottles and packages wine; the Shepton Mallet facility produces, bottles and packages cider; and the Forfar facility produces, bottles and packages water products.

Through this segment, the Company operates a National Distribution Centre, located at a leased facility in Severnside, Bristol, England, together with two leased satellite facilities within the same region, to distribute the Company’s products that are produced at the Bristol and Shepton Mallet facilities as well as products imported from other wine suppliers. To support its wholesaling business, the Company operates 11 physical distribution centers located throughout the United Kingdom, 10 of which are leased, as well as two virtual depots and two satellite depots. These distribution centers and depots are used to distribute products produced by the Company, as well as by third parties.

Additionally, through the Constellation Wines segment, the Company leases warehouse and office facilities in Dublin and has contracted with a third party with respect to a depot in Cork in support of the Company’s business of marketing, storing and distributing alcoholic beverages in the Republic of Ireland.

Chile

Through the Constellation Wines segment, the Company also operates, through a majority owned subsidiary, a winery in the Casablanca Valley, Chile, that crushes grapes and vinifies, cellars and bottles wine. Through this segment, the Company also owns or leases approximately 1,300 acres of vineyards, either fully bearing or under development, in Chile for the production of wine.

Constellation Beers and Spirits

Through the Constellation Beers and Spirits segment, the Company maintains leased division offices in Chicago, Illinois. On behalf of the segment’s imported beer business, the Company contracts with five providers of warehouse space and services in eight locations throughout the United States.

Through this segment, the Company owns and operates four distilling plants, two in the United States and two in Canada. The two distilling plants in the United States are located in Bardstown, Kentucky and Albany, Georgia. The two distilling plants in Canada are located in Valleyfield, Quebec and Lethbridge, Alberta. The Company considers this segment’s principal distilling plants to be the facilities located in Bardstown (Kentucky), Valleyfield (Quebec) and Lethbridge (Alberta). The Bardstown facility distills, bottles and warehouses distilled spirits products for the Company and, on a contractual basis, for other industry members. The two Canadian facilities distill, bottle and store Canadian whisky for the segment, and distill and/or bottle and store Canadian whisky, vodka, rum, gin and liqueurs for third parties.

In the United States, the Company through its Constellation Beers and Spirits segment also operates three bottling plants, located in Atlanta, Georgia; Owensboro, Kentucky and Carson, California. The facilities located in Atlanta (Georgia) and Owensboro (Kentucky) are owned, while the facility in Carson (California) is leased. The Company considers this segment’s bottling plant located in Owensboro to be one of the segment’s principal facilities. The Owensboro facility bottles and warehouses distilled spirits products for the segment and is also utilized for contract bottling.

Corporate Operations and Other

The Company’s corporate headquarters are located in leased offices in Fairport, New York.

Item 3.   Legal Proceedings

In the course of their business, the Company and its subsidiaries are subject to litigation from time to time. Although the amount of any liability with respect to such litigation cannot be determined, in the opinion of management, such liability will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

Item 4.   Submission of Matters to a Vote of Security Holders

Not Applicable.

Information with respect to the current executive officers of the Company is as follows:

 

Alexander L. Berk is the Chief Executive Officer of Constellation Beers and Spirits and the President and Chief Executive Officer of Barton Incorporated. Since 1990 and prior to becoming Chief Executive Officer of Barton Incorporated in March 1998, Mr. Berk was President and Chief Operating Officer of Barton Incorporated and from 1988 to 1990, he was the President and Chief Executive Officer of Schenley Industries. Mr. Berk has been in the beverage alcohol industry for most of his career, serving in various positions.

F. Paul Hetterich has been the Company’s Executive Vice President, Business Development and Corporate Strategy since June 2003. From April 2001 to June 2003, Mr. Hetterich served as the Company’s Senior Vice President, Corporate Development. Prior to that, Mr. Hetterich held several increasingly senior positions in the Company’s marketing and business development groups. Mr. Hetterich has been with the Company since 1986.

Thomas J. Mullin joined the Company as Executive Vice President and General Counsel in May 2000. Prior to joining the Company, Mr. Mullin served as President and Chief Executive Officer of TD Waterhouse Bank, NA, a national banking association, since February 2000, of CT USA, F.S.B. since September 1998, and of CT USA, Inc. since March 1997. He also served as Executive Vice President, Business Development and Corporate Strategy of C.T. Financial Services, Inc. from March 1997 through February 2000. From 1985 through 1997, Mr. Mullin served as Vice Chairman and Senior Executive Vice President of First Federal Savings and Loan Association of Rochester, New York and from 1982 through 1985, he was a partner in the law firm of Phillips, Lytle, Hitchcock, Blaine & Huber.

Thomas S. Summer joined the Company in April l997 as Senior Vice President and Chief Financial Officer and in April 2000 was elected Executive Vice President. From November 1991 to April 1997, Mr. Summer served as Vice President, Treasurer of Cardinal Health, Inc., a large national health care services company, where he was responsible for directing financing strategies and treasury matters. Prior to that, from November 1987 to November 1991, Mr. Summer held several positions in corporate finance and international treasury with PepsiCo, Inc.

W. Keith Wilson joined the Company in January 2002 as Senior Vice President, Human Resources, and in September 2002, he was elected Chief Human Resources Officer and in April 2003 he was elected Executive Vice President. From 1999 to 2001, Mr. Wilson served as Senior Vice President, Global Human Resources of Xerox Engineering Systems, a subsidiary of Xerox Corporation, that engineers, manufactures and sells hi-tech reprographics equipment and software worldwide. From 1990 to 1999, he served in various senior human resource positions with the banking, marketing and real estate and relocation businesses of Prudential Life Insurance of America, an insurance company that also provides other financial products.

Executive officers of the Company are generally chosen or elected to their positions annually and hold office until the earlier of their removal or resignation or until their successors are chosen and qualified.

Until February 28, 2006, Stephen B. Millar, 62, was the Chief Executive Officer of Constellation Wines and had held this position since the closing of the Hardy Acquisition. Prior to the Company’s acquisition of Hardy, Mr. Millar was Hardy’s Managing Director and had held this position since 1991. Mr. Millar currently serves in leadership roles in a number of industry organizations. He is an Executive Council Member, Chairman of the Audit Committee and Deputy Chairman of the International Trade Advisory Committee of the Winemakers’ Federation of Australia. He also serves as the President of the Australian Wine and Brandy Producers’ Association, as a Council Member of the South Australian Wine Industry Council and the Australian Wine Research Institute and as a Director of Drink Wise Australia Limited. Effective February 28, 2006, Mr. Millar retired from the position of Chief Executive Officer of Constellation Wines. That position has not been filled. Mr. Millar remains in a non-executive employment relationship with the Company.

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company’s Class A Common Stock (the “Class A Stock”) and Class B Common Stock (the “Class B Stock”) trade on the New York Stock ExchangeÒ (“NYSE”) under the symbols STZ and STZ.B, respectively. The following tables set forth for the periods indicated the high and low sales prices of the Class A Stock and the Class B Stock as reported on the NYSE.

During April 2005, the Company’s Board of Directors approved two-for-one splits of the Company’s Class A Stock and Class B Stock, which were distributed in the form of stock dividends on May 13, 2005, to stockholders of record on April 29, 2005. Prices in the following tables have been adjusted to give effect to these common stock splits.

 

 

At April 14, 2006, the number of holders of record of Class A Stock and Class B Stock of the Company were 1,035 and 219, respectively.

With respect to its common stock, the Company’s policy is to retain all of its earnings to finance the development and expansion of its business, and the Company has not paid any cash dividends on its common stock since its initial public offering in 1973. In addition, under the terms of the Company’s senior credit facility, the Company is currently constrained from paying cash dividends on its common stock. Also, the indentures for the Company’s outstanding senior notes and senior subordinated notes may restrict the payment of cash dividends on its common stock under certain circumstances. Any indentures for debt securities issued in the future and any credit agreements entered into in the future may also restrict or prohibit the payment of cash dividends on common stock. During April 2005, the Company’s Board of Directors approved two-for-one stock splits of the Company’s Class A Stock and Class B Stock, which were distributed in the form of stock dividends on May 13, 2005, to stockholders of record on April 29, 2005. Share and per share amounts have been retroactively restated to give effect to these common stock splits.