<PAGE> 1
- - -------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
--------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 33-61516
THE ROBERT MONDAVI CORPORATION
Incorporated under the laws I.R.S. Employer Identification:
of the State of California 94-2765451
Principal Executive Offices:
7801 St. Helena Highway
Oakville, CA 94562
Telephone: (707) 259-9463
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
--- ---
As of October 31, 1996 there were issued and outstanding 7,344,229 shares of the
issuer's Class A Common Stock and 7,676,012 shares of the issuer's Class B
Common Stock.
- - -------------------------------------------------------------------------------
<PAGE> 2
PART I
ITEM 1. FINANCIAL STATEMENTS.
THE ROBERT MONDAVI CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, JUNE 30,
------------- --------
1996 1996
---- ----
UNAUDITED
<S> <C> <C>
Current assets:
Cash and cash equivalents ..................................................... $ -- $ --
Accounts receivable--trade, net ............................................... 33,424 39,495
Advances to joint ventures .................................................... 922 118
Inventories ................................................................... 186,073 142,565
Prepaid income taxes .......................................................... -- 2,370
Deferred income taxes ......................................................... 1,041 570
Prepaid expenses and other current assets ..................................... 1,688 722
-------- --------
Total current assets ................................................... 223,148 185,840
Property, plant and equipment, net .............................................. 169,108 156,754
Investments in joint ventures ................................................... 19,635 17,100
Other assets .................................................................... 1,750 1,501
-------- --------
Total assets ........................................................... $413,641 $361,195
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Book overdraft ................................................................ $ 8,059 $ 403
Accounts payable--trade ....................................................... 52,487 13,733
Accrued payroll, bonuses and benefits ......................................... 8,360 10,322
Other accrued expenses ........................................................ 3,345 2,828
Current portion of long-term debt ............................................. 5,042 4,115
Income taxes payable .......................................................... 687 --
Deferred revenue .............................................................. 1,642 1,682
-------- --------
Total current liabilities .............................................. 79,622 33,083
Long-term debt, less current portion ............................................ 121,024 123,713
Deferred income taxes ........................................................... 9,259 8,944
Deferred executive compensation ................................................. 6,375 6,098
Other liabilities ............................................................... 2,559 1,102
-------- --------
Total liabilities ...................................................... 218,839 172,940
-------- --------
Commitments and contingencies
Shareholders' equity:
Preferred Stock:
Authorized--5,000,000 shares
Issued and outstanding--no shares ........................................... -- --
Class A Common Stock, without par value:
Authorized--25,000,000 shares
Issued and outstanding--7,342,979 and 7,281,529 shares ...................... 74,213 73,402
Class B Common Stock, without par value:
Authorized--12,000,000 shares
Issued and outstanding--7,676,012 and 7,676,012 shares ...................... 12,324 12,324
Paid-in Capital ................................................................. 1,747 1,334
Retained earnings ............................................................... 106,518 101,195
-------- --------
194,802 188,255
Total liabilities and shareholders' equity ............................. $413,641 $361,195
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE> 3
THE ROBERT MONDAVI CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
SEPTEMBER 30,
-------------
1996 1995
-------- --------
<S> <C> <C>
Gross revenues ............................. $ 62,194 $ 47,889
Less excise taxes .......................... 3,210 2,328
-------- --------
Net revenues ............................... 58,984 45,561
Cost of goods sold ......................... 33,368 23,468
-------- --------
Gross profit ............................... 25,616 22,093
Selling, general and administrative expenses 16,366 14,296
-------- --------
Operating income ........................... 9,250 7,797
Other income (expense):
Interest ................................. (2,366) (2,041)
Equity in net income of joint ventures ... 2,092 1,478
Other .................................... (251) 313
-------- --------
Income before income taxes ................. 8,725 7,547
Provision for income taxes ................. 3,402 2,990
-------- --------
Net income ................................. $ 5,323 $ 4,557
======== ========
Earnings per share ......................... $ .34 $ .31
======== ========
Weighted average number of common shares
and equivalents outstanding .............. 15,515 14,518
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 4
THE ROBERT MONDAVI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
SEPTEMBER 30,
-------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................. $ 5,323 $ 4,557
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income taxes ................................ (156) 91
Depreciation and amortization ........................ 2,878 2,301
Equity in net income of joint ventures ............... (2,092) (1,478)
Other ................................................ 70 --
Changes in assets and liabilities:
Accounts receivable--trade ......................... 6,071 10,858
Inventories ........................................ (43,829) (21,123)
Prepaid income taxes ............................... 2,783 --
Other assets ....................................... (966) (340)
Accounts payable--trade and accrued expenses ....... 37,309 13,024
Income taxes payable ............................... 687 1,818
Deferred revenue ................................... (40) 21
Deferred executive compensation .................... 277 326
Other liabilities .................................. 1,457 1,164
-------- --------
Net cash provided by operating activities .............. 9,772 11,219
-------- --------
Cash flows from investing activities:
Acquisitions of property, plant and equipment .......... (15,198) (9,763)
Contributions to joint ventures ........................ (231) (204)
-------- --------
Net cash used in investing activities .................. (15,429) (9,967)
-------- --------
Cash flows from financing activities:
Book overdraft ......................................... 7,656 5,282
Net repayments under notes payable to banks ............ -- --
Proceeds from issuance of long-term debt ............... 50,000 368
Principal repayments of long-term debt ................. (51,762) (32,736)
Proceeds from issuance of Class A Common Stock ......... -- 35,323
Exercise of stock options .............................. 811 248
Other .................................................. (1,048) (37)
-------- --------
Net cash provided by financing activities .............. 5,657 8,448
-------- --------
Net increase in cash and cash equivalents .............. -- 9,700
Cash and cash equivalents at the beginning of the period -- 900
-------- --------
Cash and cash equivalents at the end of the period ..... $ -- $ 10,600
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 5
THE ROBERT MONDAVI CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--BASIS OF PRESENTATION:
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (which include only normal
recurring adjustments) necessary to present fairly the Company's financial
position at September 30, 1996 and its results of operations and its cash flows
for the three month periods ended September 30, 1996 and 1995. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted from the accompanying consolidated financial statements.
For further information, reference should be made to the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K (the 10- K) for the fiscal year ended June 30, 1996, on file at the
Securities and Exchange Commission.
NOTE 2--INVENTORIES:
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1996 1996
---- ----
<S> <C> <C>
Wine in production $ 132,623 $ 95,747
Bottled wine 60,203 46,247
Crop costs and supplies 9,712 13,097
---------- ---------
Inventories stated at FIFO cost 202,538 155,091
Reserve for LIFO valuation method (16,465) (12,526)
---------- ---------
$ 186,073 $ 142,565
========== =========
</TABLE>
Information related to the FIFO method may be useful in comparing
operating results to those of companies not on LIFO. If inventories valued at
LIFO cost had been valued at FIFO cost, net income would have increased by
approximately $2,403,000 for the three months ended September 30, 1996 and
decreased by approximately $333,000 for the three months ended September 30,
1995.
5
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
THREE MONTHS ENDED SEPTEMBER 30, 1996
GROSS REVENUES Gross revenues increased by 29.9% to $62.2 million in the first
quarter of fiscal 1997 from $47.9 million in the first quarter of fiscal 1996.
The increase in gross revenues was primarily attributable to a 36.1% increase in
sales volume to 1,368,000 cases in the first quarter of fiscal 1997 from
1,005,000 cases in the first quarter of fiscal 1996. Due to the limited supply
of the Company's wines, sales volume growth is not expected to continue at this
level throughout the remainder of the fiscal year.
EXCISE TAXES The Company's federal and state excise taxes increased 37.9% to
$3.2 million in the first quarter of fiscal 1997, from $2.3 million in the first
quarter of fiscal 1996. The dollar increase in excise taxes correlates to the
increase in sales volume, since the excise tax is assessed on a per gallon basis
and the excise tax rate is unchanged from the prior year.
NET REVENUES As a result of the above factors, net revenues increased by 29.4%
to $59.0 million in the first quarter of fiscal 1997 from $45.6 million in the
first quarter of fiscal 1996. Net revenues per case decreased 5.0% to $42.30 per
case in the first quarter of fiscal 1997 from $44.54 per case in the first
quarter of fiscal 1996. The decrease in net revenues per case was primarily
attributable to a shift in sales mix to the Woodbridge brand.
COST OF GOODS SOLD Cost of goods sold increased by 42.2% to $33.4 million in the
first quarter of fiscal 1997 from $23.5 million in the first quarter of fiscal
1996, reflecting the increase in sales volume and rising grape and bulk wine
costs. If inventories valued at LIFO cost had been valued at FIFO cost, then
cost of goods sold would have been $3,939,000 lower and $551,000 higher,
respectively, in the first quarter of fiscal 1997 and 1996.
GROSS PROFIT Gross profit increased by 15.9% to $25.6 million in the first
quarter of fiscal 1997 from $22.1 million in the first quarter of fiscal 1996,
primarily reflecting the increase in sales volume discussed above. The Company's
gross profit percentages for the first quarter of fiscal 1997 and 1996 were
43.4% and 48.5%, respectively. The decrease in the gross profit percentage in
the first quarter of fiscal 1997 was the result of higher grape and bulk wine
costs, including the effect of lower grape yields from the Company's vineyards.
OPERATING EXPENSES Operating expenses increased by 14.5% to $16.4 million in the
first quarter of fiscal 1997 from $14.3 million in the first quarter of fiscal
1996. The ratio of operating expenses to net revenues was 27.7% in the first
quarter of fiscal 1997 and 31.4% in the first quarter of fiscal 1996. The dollar
increase in operating expenses was primarily attributable to an increase in
sales and marketing expenses associated with increased sales volume. The
improved operating expense ratio in the first quarter of fiscal 1997 was due to
a decrease in average promotional dollars spent per case and economies of scale
in personnel and overhead costs achieved as a result of increased net revenues.
INTEREST Interest expense increased by 15.9% to $2.4 million in the first
quarter of fiscal 1997 from $2.0 million in the first quarter of fiscal 1996.
This increase was primarily attributable to an increase in the Company's average
borrowings that was partially offset by a decrease in the average interest rate.
6
<PAGE> 7
EQUITY IN NET INCOME OF JOINT VENTURES Equity in net income of joint ventures
increased by 41.5% to $2.1 million in the first quarter of fiscal 1997 from $1.5
million in the first quarter of fiscal 1996. This increase was primarily
attributable to the timing of Opus One's fall release, which resulted in a
higher percentage of Opus One's case shipments during the first quarter of
fiscal 1997 when compared to the corresponding period in fiscal 1996.
PROVISION FOR INCOME TAXES The Company's effective tax rate for the year is
approximately .6% less than the prior year, which is primarily the result of an
increase in the benefit derived from investment tax credits and the Company's
foreign sales corporation.
NET INCOME AND EARNINGS PER SHARE As a result of the above factors, net income
increased to $5.3 million in the first quarter of fiscal 1997 from $4.6 million
in the first quarter of fiscal 1996. Earnings per share increased to $.34 in the
first quarter of fiscal 1997, from $.31 in the first quarter of fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
Working capital as of September 30, 1996, was $143.5 million compared
to $152.8 million at June 30, 1996. The $9.3 million decrease in working capital
is primarily the result of a decrease in accounts receivable as a result of
lower sales volume in the first quarter of fiscal 1997 as compared to the fourth
quarter of fiscal 1996 and an increase in accounts payable and book overdraft as
a result of the harvest which occurred during the first quarter of fiscal 1997.
The Company has unsecured short-term and long-term credit lines that
have a maximum credit availability of $41.2 million and $50.0 million,
respectively, at October 1, 1996. During the quarter, the Company obtained $50.0
million of unsecured term loans. The proceeds from these loans were used to
repay a portion of the Company's secured long-term debt and a portion of its
unsecured credit lines of $18.9 million and $31.1 million, respectively.
Considering the above, and cash generated from operations which was used to
repay debt, the Company's total debt decreased $1.8 million since June 30, 1996.
The Company anticipates that current capital combined with cash from
operating activities and the availability of cash under its credit lines will be
sufficient to meet its liquidity and capital expenditure requirements at least
through the end of fiscal 1998.
7
<PAGE> 8
PART II
ITEM 1. LEGAL PROCEEDINGS.
The Company is subject to litigation in the ordinary course of its
business. In the opinion of management, the ultimate outcome of existing
litigation will not have a material adverse effect on the Company's consolidated
financial condition or the results of its operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
1) Exhibits:
Exhibit 11 Statement re Computation of Per Share
Earnings.
2) Form 8-K:
No reports on Form 8-K were filed during the quarter
ended September 30, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE ROBERT MONDAVI CORPORATION
Dated: November 08, 1996 By /s/ GREGORY M. EVANS
---------------------
Gregory M. Evans,
Senior Vice President and
Chief Financial Officer
FORWARD-LOOKING STATEMENTS
The above form 10-Q and other information provided from time to time by
the Company contain historical information as well as forward-looking statements
about the Company, the premium wine industry and general business and economic
conditions. Such forward-looking statements include, for example, projections
or predictions about the Company's future growth, consumer demand for its wines,
including new brands and brand extensions, margin trends, the premium wine grape
market and the Company's anticipated future investment in vineyards and other
capital projects. Actual results may differ materially from the Company's
present expectations. Among other things, reduced consumer spending or a change
in consumer preferences could reduce demand for the Company's wines. Similarly,
competition from numerous domestic and foreign vintners could affect the
Company's ability to sustain volume and revenue growth. The price of grapes, the
Company's single largest product cost, is beyond the Company's control and
higher grape costs may put more pressure on the Company's gross profit margin
than is currently forecast. Interest rates and other business and economic
conditions could increase significantly the cost and risks of projected capital
spending. For additional cautionary statements identifying important factors
that could cause actual results to differ materially from such forward-looking
information, please refer to Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," in the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1996, on file with the
Securities and Exchange Commission. For these and other reasons, no
forward-looking statement by the Company can nor should be taken as a guarantee
of what will happen in the future.
8
<PAGE> 1
THE ROBERT MONDAVI CORPORATION
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
EXHIBIT 11
COMPUTATION OF PRIMARY EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
---- ----
<S> <C> <C>
Weighted average number of
common shares outstanding
during the period 14,969,995 14,020,379
Common Stock equivalents
considered to be outstanding
for periods presented:
Options 544,606 497,450
----------- -----------
15,514,601 14,517,829
=========== ===========
Net income $ 5,323,000 $ 4,557,000
=========== ===========
Earnings per share $ .34 $ .31
=========== ===========
</TABLE>
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
SEPTEMBER 30,
-------------
1996 1995
---- ----
<S> <C> <C>
Weighted average number of
common shares outstanding
during the period 14,969,995 14,020,379
Common Stock equivalents considered
to be outstanding for periods presented:
Options 588,285 600,530
----------- -----------
15,558,280 14,620,909
=========== ===========
Net income $ 5,323,000 $ 4,557,000
=========== ===========
Earnings per share $ .34 $ .31
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 33,424
<ALLOWANCES> 0
<INVENTORY> 186,073
<CURRENT-ASSETS> 223,148
<PP&E> 242,756
<DEPRECIATION> 73,648
<TOTAL-ASSETS> 413,641
<CURRENT-LIABILITIES> 79,622
<BONDS> 121,024
0
0
<COMMON> 86,537
<OTHER-SE> 108,265
<TOTAL-LIABILITY-AND-EQUITY> 413,641
<SALES> 58,984
<TOTAL-REVENUES> 58,984
<CGS> 33,368
<TOTAL-COSTS> 33,368
<OTHER-EXPENSES> 16,366
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,366
<INCOME-PRETAX> 8,725
<INCOME-TAX> 3,402
<INCOME-CONTINUING> 5,323
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,323
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
