Welcome everyone to the Constellation Brands third quarter 2010 earnings call. (Operator Instructions) I would now like to turn the conference over to Ms. Patty Yahn-Urlaub, Vice President of Investor Relations. Please go ahead.

Thank you. Good morning everyone and welcome to Constellation’s third quarter 2010 conference call. I am here this morning with Rob Sands, our President and Chief Executive Officer and Bob Ryder, our Chief Financial Officer. This call complements our news release which has also been furnished to the SEC. During the call, we will discuss financial information on a GAAP comparable organic and constant currency basis. However, discussions will generally focus on comparable financial results. Reconciliations between the most directly comparable GAAP measure and these and other non-GAAP financial measures are included in the news release or otherwise available on the company’s website at www.cbrands.com under the Investors section. Please also be aware that we may make forward-looking statements during this call. Although statements represent our best estimates and expectations, actual results could differ materially from our estimates and expectations. For a detailed list of risk factors that may impact the company’s estimates, please refer to the news release and Constellation’s SEC filings. And now I would like to turn the call over to Rob.

Thanks Patty. Good morning everybody and Happy New Year. I hope that everybody had a great holiday season. Welcome to our discussion of Constellation’s third quarter fiscal 2010 sales and earnings results. Before we get started I would like to thank those of you who attended our recent New York City Investor Meeting. I hope one of your key take aways from that meeting is that Constellation is evolving as a fundamentally different company that is better positioned than ever to deliver value. We are focused on executing a strategy into the foreseeable future that delivers this value through organic growth, enhanced profitability, free cash flow and ROIC. The third quarter is evidence of the fact we continue to make progress against our strategic goals of generating cash, paying down debt and reducing costs. During the quarter we advanced our portfolio transformation with the announcement of our agreement to sell our U.K. cider business to C&C Group for approximately $70 million. The Gaymer Cider Company was originally acquired in 1998 with the Massey Clark business. This transaction is consistent with our strategic focus on premium, higher growth, higher margin wine, beer and spirits brands. The deal is on track to close by mid-January and we expect to use the proceeds to further reduce our borrowings. During the quarter we also progressed with transition activities associated with our US distributor consolidation effort which now encompasses 22 states representing approximately 60% of our total US wine and spirits volume. As you know, the initial distributor transition commenced September 1st with the second quarter benefiting from the implementation of this program. At that time, actions were taken to ensure maximum levels of customer service between distributor and the retail customers during the transition period. Now these actions had the planned effect of moving…

Thanks Rob. Good morning everyone. Our Q3 comparable EPS came in at $0.54 versus $0.60 in the previous year. The quarter witnessed quite a few unfavorable timing impacts across most product categories. US wine was impacted by the shift of sales from Q3 to Q2. Spirit sales growth was impacted by a previous year glass shortage for SVEDKA and Crown’s profits were impacted by unfavorable sales timing and marketing expense timing in the quarter. In addition to these quarterly timing-related items, North American wine depletion did not begin to improve until late in the quarter, our international business continued to experience gross margin pressures and Crown’s beer business continued to be impacted by the economy. We believe the negative timing events will correct themselves this year and we also believe we have strategies in place to improve the more fundamental challenges facing the business. We have continued taking steps to strengthen our organic business model and we are seeing good progress in a number of areas. As we continue to reduce costs which has helped offset the impact of consumer shifts to lower margin products in this challenging economic environment, focus on generating free cash flow as we are targeting to be in the high end of our full-year free cash flow guidance range, reduce debt and interest expense and work with our consolidated distributor base in the US to drive improvement in our organic sales and mix trends. We saw good promotion and displays for our brands during the holiday season and began to see some improving depletion and marketplace trends in US wine and beer as the quarter progressed. Our comparable basis effective tax rate for the quarter was 35%. We also project a full year rate of approximately 35% versus our previous targeted full-year rate of 38%.…

(Operator Instructions) The first question comes from the line of Kaumil Gajrawala - UBS Warburg.

You brought the tax rate down quite a bit but no change to guidance with only eight weeks left or so in this quarter. Can you help give us a read on why the range is as wide as it is?

We kept the EPS range at $0.10 when normally in the third quarter we might tighten it a little bit by $0.02 or so. I think it was because of the continued vibrations in the economy and perhaps if it follows through the potential cost of the refinancing of the revolver. They are the two big reasons.

So it is not related to spending or marketing or anything like that. It is just more terms of lack of visibility on what core trends are versus where they would have been six months ago?

I think that is fair. We just felt we would like to keep the range at the $0.10 given all the uncertainty as our depletions continue to improve in both beer and in wine but we are not sure what is going to happen in the economy and we are still fine tuning our distributor transition.

At Crown, how do you feel about where the inventory levels are currently at the distributors? There is obviously a big spread between your trends in depletions. What should we expect in the relationship between the two over the next quarter or so?

Generally in the beer business, shipments and depletions are prealigned. This is actually a good news story in that we feel that we were able to get some pretty good media buys because the prices came down in the advertising market over some peak sporting events and actually the sporting events had pretty high ratings. They were actually some pretty good games if you remember back to that. So we think they were good buys and we do think that drove some increased depletions in the quarter. The level of increased depletion surprised us a little bit so we had a slight de-stocking in the beer channel which I think will be replenished in the fourth quarter.

The next question comes from the line of Lauren Torres – HSBC.

In your prepared remarks you mentioned that you are seeing trends improve both in beer and wine in the US particularly late in the quarter. I guess I am just trying to get a better sense of with the holiday season obviously being more promotional maybe there is some discounting in there and is that really just driving that momentum or do you think it is coming from somewhere else? So with on-premise still being weak and convenience stores being weak is it just kind of consumers buying in here at lower prices and your lower price brands doing better or do you feel you are really seeing some difference here versus last quarter?

First of all that comment was relative to our business, not the industry in general. The industry in general although is performing well. I would say it has been fairly consistent as opposed to there being an uptick. In our business on the wine side yes we are seeing some improved performance. I think that is generally as a result of the fact that a lot of our efforts for instance our distributor consolidation and the increase of our promotional activities in the third quarter these things are now kicking in and we really are starting to see some positive impact on that in late third quarter and we have seen some of the positive impact of that into December and the holiday season. We are pretty optimistic that things are working pretty well at this stage on the wine side. On the beer side, as much as Bob said we had some very good media. The media I think drove some pretty strong sales particularly in grocery. We are seeing some stabilization on the on-premise side. I would say the convenience sector still remains highly challenged. On beer, I would say that while we are generally pleased and optimistic with the performance we are nevertheless still believing that we will be down from a depletion perspective mid single digits for the year because in general that segment, the import segment although we are way outperforming the competitors. That segment still remains pretty challenged in the beer business.

So would you say for beer and wine both on-premise and convenience that generally it has been stable, not getting worse?

Well convenience isn’t a big factor for wine. For beer it is the largest channel. So two completely different things. In terms of, no I don’t think it is getting worse but as I said it remains a pretty challenged segment but let me just reiterate for wine it is not a factor. For beer it is a significant factor.

Lastly, from a price sensitivity standpoint I know you talked about trading down and certain price points doing better than others. Any real changes there from your comments last quarter?

Not really. By the way in general I would say trading up has picked up and fundamentally there isn’t trading down in that the higher priced segments are now growing much faster than the lower price segments with the super premium plus category growing high single digits again. That said, I still would say that within category there is some trading down going on. I would say categories mean price segments. So if you look at the $10-15 segment within that there will be some trading down towards the lower end of that segment versus the higher end or if you are looking even the higher end segments there will be some trading down. Fundamentally there is trading up although within segments there is trading down and therefore there can be some negative mix shift which is the case. There is some negative mix shift in the business even within categories some of the lower price products are selling better than the higher priced products and of course margin tends to go with the price point.

The next question comes from the line of Bill Leach – TIAA-CREF. Bill Leach – TIAA-CREF: I wanted to follow-up on the question about the fourth quarter guidance. You only made $0.21 in the fourth quarter last year so you have a $0.10 which is almost a 50% variability and you are basically guiding from anywhere from a 10% decline to a 20% gain which is essentially meaningless. Can’t you flesh that out a little bit? Also if you do expect Crown to be down in earnings high single digits, 12% in nine months, does that mean you actually expect it to be up in the fourth quarter?

Part of that for the quarter and for the full year we did have the tax rate upside. Offsetting that might be some slightly weaker EBIT throughout the businesses. We are still a bit tentative on what sales are going to do so we thought it was prudent to keep the full $0.10 range. Remember, if we are successful in refinancing our debt there will be costs associated with that as well which would hit the fourth quarter. Bill Leach – TIAA-CREF: Wouldn’t that be these nonrecurring charges?

Pardon? Bill Leach – TIAA-CREF: Wouldn’t that be due to a non-recurring charge?

Some would and some wouldn’t. Bill Leach – TIAA-CREF: You have to admit that is an unusually wide range for a quarter.

I guess. $0.08 versus $0.10. I don’t know some may be passionate about it. I don’t know. Bill Leach – TIAA-CREF: Do you expect Crown to be up in profits in the fourth quarter?

I wouldn’t expect that. No. Profits have been negative for Crown. You can back into it our stated guidance for Crown is profits will be down high single digits. It may be high single digits to maybe very low double digits. Bill Leach – TIAA-CREF: Can you give us some guidance about the tax rate for next fiscal year? Will it go back up to 38%?

We can try. We will be giving full-year guidance at the year-end call. It is interesting you say that because all of our planning meetings with our business units happen very shortly and after that the tax guys start wrapping up what we think geographies and profits are going to come to. So it is a whole process. We will be talking about that on the April call. Bill Leach – TIAA-CREF: Because we have to make an earnings estimate for next year which starts shortly. What would you suggest we plug in as a normalized tax rate? Your previous guidance was 38% for this year. Would that be a good number going forward?

That will be your choice. Right now I can’t anticipate any significant changes here. Remember there are some pretty big swingers in the air like if our transaction goes ahead with Australia Vintage Limited that can have an impact on tax rates. So there are a lot of moving parts. I don’t envy you because you are right you have to make a call and you don’t have all the information. Sorry about that.

The next question comes from the line of Timothy Ramey - D.A. Davidson & Co. Timothy Ramey - D.A. Davidson & Co.: Just thinking ahead to try and get a handle on the growth in the branded wine business, it is awfully difficult to march through given pretty good reported numbers on the IRI stuff but we know that is the best performing segment and on-premise declining. What do you think the outlook is for the wine segment for calendar 2010 forgetting your fiscal year? Are we going to have growth in calendar 2010?

I would say somewhere between really we can only talk volumetrically because you don’t have a lot of insight into dollars beyond the IRI channel which is only about 30% but volumetrically I would say that around 1% would be a good guess. It could be a bit higher than that. It could be a bit lower than that depending on the state of the economy. That is for the total wine industry in the US. We will see IRI grow faster than that. We will see mass merchandise grow faster than that. We will see on-premise grow slower than that. There is going to be puts and takes. Volumetrically about 1% and then in dollars will be higher than that because of the general trends towards trading up which continue. Timothy Ramey - D.A. Davidson & Co.: I know you are not going to give us guidance today but given your more premium mix is there any reason why you shouldn’t exceed the industry growth in 2010 versus 2009?

Our goal is to equal or exceed industry growth on a weighted basis. So you have to take into account what categories you play in and so on and so forth. That is our goal. So equal or greater.

The next question comes from the line of Lindsey Druckerman – Goldman Sachs. Lindsey Druckerman – Goldman Sachs: I was hoping you could clarify the underlying wine trends in the US in the third quarter Inventory shift that moved into the second quarter and hurt the third quarter. You reported up 3% in the second quarter and down 3% in the third quarter so it sort of implies that underlying the second quarter including the inventory shift you were down low to mid single digits and in this quarter you were up low to mid single digits which is a nice sequential uptick. Is that a fair way to read that?

It is a little confusing. Probably the easiest way to look at it is the year-to-date numbers. If you look at year-to-date in the press release for North America I think sales were essentially flat. Right? That is pretty much in line with where our more recent depletion data has been. So that is probably the best way to look at it. Lindsey Druckerman – Goldman Sachs: Is it fair to say at all you saw a sequential improvement in an underlying basis in the third quarter versus the second quarter?

From a depletion standpoint maybe a little bit. Lindsey Druckerman – Goldman Sachs: From a sales standpoint? We are seeing more promos and discounting.

I think sales if you iron out the movement in Q2 to Q3 again sales were sort of flat in North America similar to the year-to-date trend. Okay? Depletions have gotten better since just before Thanksgiving I would say versus what they were from the second quarter through the first part of the third quarter. Lindsey Druckerman – Goldman Sachs: On the gross margin performance in the third quarter you mentioned promotional spending, the inventory shift in Australia as some of the drivers. You also mentioned that the promo spending didn’t really hit until or at least impact your sales until the end of the quarter. Is this something you booked for the entirety of the third quarter?

I guess we talked about this a bit at the second quarter. Because of the distributor strategy we sort of held back some promo spending in Q1 and Q2 so we could sort of do it with the new distributors in Q3 and Q4. So that did flow through our income statement in Q3. Now you don’t see that. It is in the net sales number. So Q3 of this year we did spend in the US more promotions money than we did in the previous year. So that did impact the P&L. Lindsey Druckerman – Goldman Sachs: Can you quantify how much the distributor pre-sell for holiday hurt your margin in the third quarter?

Can you repeat that? Lindsey Druckerman – Goldman Sachs: You had year-over-year gross margin compression. How much of that was a function of loading or pre-selling for holiday in the second quarter for your distributor transition? The other elements would presumably would continue…Australia cost of goods would flow through in February. You are still promoting for the February quarter so I am just wondering how much of that year-over-year compression is one-off.

I don’t know if I would call any of it one off. Because of the noise between Q2 and Q3 both in wine and remember the comment we had around SVEDKA it is probably better to look at the year-to-date P&L where you will see a gross margin reduction but that is more than offset by our SG&A initiatives and on a year-to-date operating profits are up about 180 basis points. Gross profit margin was down about 230 basis points or something like that. The SG&A saved it. We think and we took these actions in the fourth quarter of last year. We think we have been relatively diligent about bringing SG&A down to offset the gross margin compression. Lindsey Druckerman – Goldman Sachs: Lastly, with respect to the Crown JV, the current lawsuit aside can you comment on whether there is anything in your contract whereby if Constellations director who sits on Crown’s board will be not acting in good faith for the entity it would damage your participation in that JV?

No. There is nothing to that effect.

The next question comes from the line of Marc Greenberg – Deutsche Bank. Marc Greenberg – Deutsche Bank: My question relates to Crown. As you know, the litigation surrounds a relatively small dollar amount and I am wondering if this doesn’t suggest that the broader partnership agreement may not be on steady footing. Maybe you could offer some perspective on how we should consider the potential risk to Constellation based on any deterioration here and is there any point in which you might say look it is not working, let’s move on? And how we might think about what that could mean to shareholders?

I think Lindsey asked the question and my answer was a definitive no. The litigation has no impact whatsoever on the contract. There is no impact on the term. It is a dispute over money which was said an immaterial amount. Clearly again in an answer to your question my answer is no. I am not even clear on what you mean by calling it quits. No, we won’t. We can’t do that. As you know the contract’s initial term runs through the end of 2016. We have certainly no reason to believe or expect that anything different will occur other than the business will continue to be operated and generate the kind of results it has historically. The results of course historically it has been a very strong performer. With the downturn in the economy the import business has been negatively impacted. I would say as the economy improves there is upside in that business in particular being a bit more cyclical than some of our other businesses. There is no impact on the business that is Crown and there is no impact really on the JV agreement or the term related to the lawsuit which as I said is what we stated is an immaterial amount of dollars. Marc Greenberg – Deutsche Bank: To follow-up is it fair to characterize the current relationship with Modello and Constellation as maybe not seeing eye to eye on certain things? I guess that is kind of why I asked that question. I know the business risk is the business is being run separate and distinct from this. I wouldn’t contest this at all. But I am trying to think about the value of this asset and in the past you have talked about the fact you don’t feel that at times the value of the Crown JV is reflected in the value of your share price. I guess with this lawsuit maybe it puts a bit of a cloud on that.

First of all nothing about the lawsuit would impact my previous statements with regard to the value of the JV not being appropriately reflected in Constellation’s valuation for all the reasons I have stated in the past because nothing has changed in that regard with respect to what happens at the end of the contract and the issues around recognizing the terminal value. Nothing has changed at all. Obviously there is a disagreement between us and Modello on the point that is being litigated in the lawsuit. I would say as a general proposition that both partners recognize we have to get along and we have to work together as it relates to the overall operations of Crown to maximize its success. No, we can’t ignore the fact that there is a dispute over something very specific which is being litigated but we are all reasonable people and we all understand that we have to get along and operate with respect to ensuring that the operations of the business are maximized. That is basically where things stand.

The next question comes from the line of Kevin Dryer - Cavelli & Company. Kevin Dryer - Cavelli & Company: On the increase in accounts receivable I think you said something about that being related to some of the timing issues. Is that related to the change in distributors?

Essentially the shipment to distributors happened at a point in the quarter where we won’t collect the receivable until the fourth quarter so that is why you have a very high receivables balance and you have an increased use of cash in the accounts receivable line item on the cash flow statement. Kevin Dryer - Cavelli & Company: In terms of the tax rate, while I understand you won’t give fiscal 2011 guidance, can you explain again why the rate came down to 35% from 38% for this year?

Sure. It was essentially some positive outcomes on some tax audits essentially. So the tax audits were cleared. When they are cleared we reflect either the positive or negative in the P&L and this quarter it was a positive. Kevin Dryer - Cavelli & Company: So these weren’t like one-time reversals from prior years or something like that?

Actually yes they were. The auditors are usually about 3-4 years in arrears and when the audits get cleared up and these related to previous years’ tax expense that was taken that can flush through the P&L. So if they get cleared positively that reduces this year’s tax rate. If they don’t get cleared then you should have that actually covered and you won’t see a change in the tax rate. Kevin Dryer - Cavelli & Company: Finally, I want to know if you can comment again another question on Crown. With Modello’s lawsuit within that it is not just about money. They seem to allege you are trying to use this marketing budget to renegotiate the terms of the JV. Can you comment on that at all? If you were looking to renegotiate what are you looking to do? Extend the term for instance?

The answer is no I really can’t comment on that. It is a matter that is being litigated. It is really not appropriate for me to comment on that point. I apologize for not being able to give you more information on that but clearly that is not something we discuss at this time.

The next question comes from the line of Mark Swartzberg - Stifel Nicolaus.

On CapEx, 130-150 is the guidance for the current fiscal year but the 150 number seems rather large unless you have something large in the way of spending happening in the current quarter. That is part one of my CapEx question and then I have a follow-up.

I would say we are a pretty big business and in every industry I have been in the wide majority of your capital spend occurs in the fourth quarter because sometimes it is the engineering school training that happens. I have been in a couple of different businesses so that is kind of happening. The other thing going on is the fusion ERP project we have going on that certainly we will be spending around that in the fourth quarter and there was very little if any in last year’s fourth quarter. So that is probably the answer to that.

That is the low visibility item back on the line of questioning Bill had? You would think that in January you would know what you are going to spend on that. Is that the item that has uncertainty to it?

There is a lot. Again as I said, the way you do a capital forecast there are thousands of projects that sort of roll up and it is very difficult to get…the engineers always want to hold onto that capital forecast so we do the best we can to try to isolate the numbers and give the best guess we can. But you never know. So it could be a lot of projects get spent against and also the fusion project is a new project so there is no history against which we can look. We are relatively comfortable in bringing down that CapEx number and again the range is $20 million in a $250-270 million number. So there is a lot of moving parts in the cash flow forecast.

I think you answered my follow-up. As we think longer term it sounds like last year the number was just shy of 130. There are some unusual items this year regardless of whether it is 130 or 150 for the fiscal year. It sounds like long term you think the number is closer to 130 than 150?

I think that is a pretty narrow range for a long-term forecast. I think if I was you the long term forecast a fair number would be 130-150 and again because of where we are in the wine business we are pretty mature. We have all our facilities so our big use of capital is more around inventory than it is around capital spending. 130-150 I think is probably about 3.5% to 4% of sales which for us isn’t a real big number.

There are no further questions at this time. I will turn the floor back over to Mr. Robert Sands for any closing remarks.

Thanks for joining our call today. Let me summarize what I think are the highlights of the third quarter as follows: First, we continued to benefit from our global cost reduction initiatives. Our full year free cash flow is targeted to be at the upper end of our guidance range. We reduced debt by more than $335 million since the beginning of our fiscal year. We continued our portfolio transformation efforts with the proposed sale of our cider business, the proceeds of which we expect to be used to further reduce our debt. We are experiencing improving depletion trends in our US wine, spirits and beer business. Lastly, we continue to progress with our distributor consolidation initiative. Our plan is to continue execution of our strategic initiatives throughout the final quarter of the year. Finally, we will be providing guidance for our fiscal year 2011 during our next quarterly conference call scheduled for early April. Thank you again everybody for joining our call.

Thank you all for participating in today’s conference call. You may now disconnect.