<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 March 31, 1997
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 April 30, 1997 there were issued and outstanding 7,456,206 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
MARCH 31, JUNE 30,
--------- --------
1997 1996
---- ----
UNAUDITED
---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ -- $ --
Accounts receivable--trade, net 49,780 39,495
Advances to joint ventures 128 118
Inventories 180,479 142,565
Prepaid income taxes -- 2,370
Deferred income taxes 2,415 570
Prepaid expenses and other current assets 3,645 722
-------- --------
Total current assets 236,447 185,840
Property, plant and equipment, net 177,834 156,754
Investments in joint ventures 20,619 17,100
Other assets 2,512 1,501
-------- --------
Total assets $437,412 $361,195
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Book overdraft $ 7,959 $ 403
Notes payable to banks 2,000 --
Accounts payable--trade 16,546 13,733
Accrued payroll, bonuses and benefits 9,623 10,322
Other accrued expenses 4,869 2,828
Current portion of long-term debt 6,838 4,115
Income taxes payable 49 --
Deferred revenue 2,601 1,682
-------- --------
Total current liabilities 50,485 33,083
Long-term debt, less current portion 157,811 123,713
Deferred income taxes 10,178 8,944
Deferred executive compensation 5,116 6,098
Other liabilities 1,041 1,102
-------- --------
Total liabilities 224,631 172,940
-------- --------
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--7,453,206 and 7,281,529 shares 75,507 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 2,884 1,334
Retained earnings 122,066 101,195
-------- --------
212,781 188,255
-------- --------
Total liabilities and shareholders' equity $437,412 $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 NINE MONTHS ENDED
------------------ -----------------
MARCH 31, MARCH 31,
--------- ---------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross revenues $74,399 $61,537 $228,262 $184,187
Less excise taxes 3,510 3,148 11,192 9,451
------- ------- -------- --------
Net revenues 70,889 58,389 217,070 174,736
Cost of goods sold 38,964 30,085 121,489 90,197
------- ------- -------- --------
Gross profit 31,925 28,304 95,581 84,539
Selling, general and administrative expenses 18,936 16,761 56,341 50,557
------- ------- -------- --------
Operating income 12,989 11,543 39,240 33,982
Other income (expense):
Interest (2,749) (2,275) (7,742) (6,328)
Equity in net income of joint ventures 200 (130) 3,284 2,120
Other (57) 598 (566) 849
------- ------- -------- --------
Income before income taxes 10,383 9,736 34,216 30,623
Provision for income taxes 4,050 3,855 13,345 12,126
------- ------- -------- --------
Net income $ 6,333 $ 5,881 $ 20,871 $ 18,497
======= ======= ======== ========
Earnings per share $ .40 $ .38 $ 1.34 $ 1.22
======= ======= ======== ========
Weighted average number of common shares
and equivalents outstanding 15,732 15,431 15,632 15,124
======= ======= ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 4
THE ROBERT MONDAVI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------
MARCH 31,
---------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 20,871 $ 18,497
Adjustments to reconcile net income to net cash
used in operating activities:
Deferred income taxes (611) 367
Depreciation and amortization 9,233 7,557
Equity in net income of joint ventures (3,284) (2,120)
Other 2 91
Changes in assets and liabilities:
Accounts receivable--trade (10,285) (2,393)
Inventories (38,694) (35,231)
Prepaid income taxes 2,370 (1,401)
Other assets (3,658) --
Accounts payable--trade and accrued expenses 4,155 208
Income taxes payable 1,599 (1,160)
Deferred revenue 919 1,025
Deferred executive compensation (982) (165)
Other liabilities (61) 466
-------- --------
Net cash used in operating activities (18,426) (14,259)
-------- --------
Cash flows from investing activities:
Acquisitions of property, plant and equipment (30,167) (35,852)
Distributions from joint ventures 892 4,102
Contributions to joint ventures (456) (6,388)
-------- --------
Net cash used in investing activities (29,731) (38,138)
-------- --------
Cash flows from financing activities:
Book overdraft 7,556 6,761
Net proceeds under notes payable to banks 2,000 2,000
Proceeds from issuance of long-term debt 58,100 42,168
Principal repayments of long-term debt (21,279) (35,935)
Proceeds from issuance of Class A Common Stock 126 35,401
Exercise of Class A Common Stock options 1,979 1,093
Other (325) 9
-------- --------
Net cash provided by financing activities 48,157 51,497
-------- --------
Net decrease in cash and cash equivalents -- (900)
Cash and cash equivalents at the beginning of the period -- 900
-------- --------
Cash and cash equivalents at the end of the period $ -- $ --
======== ========
</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 March 31, 1997, its results of operations for the three and nine
month periods ended March 31, 1997 and 1996 and its cash flows for the nine
month periods ended March 31, 1997 and 1996. 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>
MARCH 31, JUNE 30,
--------- --------
1997 1996
---- ----
<S> <C> <C>
Wine in production $142,927 $ 95,747
Bottled wine 53,082 46,247
Supplies and crop costs 10,533 13,097
-------- --------
Inventories stated at FIFO cost 206,542 155,091
Reserve for LIFO valuation method (26,063) (12,526)
-------- --------
$180,479 $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 $2.4 million and $8.2 million, respectively, for the three months
and nine months ended March 31, 1997 and increased by $353,000 and decreased by
$77,000, respectively, for the three months and nine months ended March 31,
1996.
NOTE 3--EARNINGS PER SHARE:
During February 1997, Statement of Financial Accounting Standards No.
128 (SFAS 128), Earnings per Share, was issued. The Company is required to adopt
SFAS 128 for the quarter ending December 31, 1997. Early adoption is not
permitted. Adoption of SFAS 128 requires the Company to restate previously
reported earnings per share. The table below reflects the proforma impact to
earnings per share to conform with SFAS 128 for the following periods:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
----------------- -----------
MARCH 31, JUNE 30,
--------- --------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings per Share as
previously reported $1.34 $1.22 $1.61 $1.39 $ .75
Proforma Earnings per Share
Basic 1.39 1.27 1.67 1.40 .75
Diluted 1.34 1.22 1.61 1.39 .75
</TABLE>
5
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THREE MONTHS ENDED MARCH 31, 1997.
GROSS REVENUES. Gross revenues increased by 20.9% to $74.4 million in the third
quarter of fiscal 1997 from $61.5 million in the third quarter of fiscal 1996.
The increase in gross revenues was primarily attributable to an 11.8% increase
in sales volume to 1,511,000 cases in the third quarter of fiscal 1997 from
1,352,000 cases in the third quarter of fiscal 1996, a shift in sales mix from
Woodbridge to Vichon Mediterranean and Robert Mondavi Coastal wines and price
increases taken at the beginning of the fiscal year on certain brands.
EXCISE TAXES. The Company's federal and state excise taxes increased by 11.5% to
$3.5 million in the third quarter of fiscal 1997 from $3.1 million in the third
quarter of fiscal 1996. The dollar increase in excise taxes generally 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 21.4%
to $70.9 million in the third quarter of fiscal 1997 from $58.4 million in the
third quarter of fiscal 1996
COST OF GOODS SOLD. Cost of goods sold increased by 29.5% to $39.0 million in
the third quarter of fiscal 1997 from $30.1 million in the third quarter of
fiscal 1996, primarily due to increased sales volume and higher 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 $4.0 million and $585,000 lower,
respectively, in the third quarter of fiscal 1997 and 1996.
GROSS PROFIT. Gross profit increased by 12.8% to $31.9 million in the third
quarter of fiscal 1997 from $28.3 million in the third quarter of fiscal 1996.
The Company's gross profit percentages for the third quarter of fiscal 1997 and
1996 were 45.0% and 48.5%, respectively.
OPERATING EXPENSES. Operating expenses increased by 13.0% to $18.9 million in
the third quarter of fiscal 1997 from $16.8 million in the third quarter of
fiscal 1996. The ratio of operating expenses to net revenues was 26.7% in the
third quarter of fiscal 1997 and 28.7% in the third 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 was due to economies of scale in personnel and
overhead costs achieved as a result of increased net revenues and a decrease in
the average promotional dollars spent per case.
INTEREST. Interest expense increased by 20.8% to $2.7 million for the third
quarter of fiscal 1997 from $2.3 million for the third 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.
PROVISION FOR INCOME TAXES. The provision for income taxes was $4.1 million in
the third quarter of fiscal 1997 compared to $3.9 million in the third quarter
of fiscal 1996. The Company's effective tax rate was 39.0% and 39.6%,
respectively, in the third quarter of fiscal 1997 and 1996.
6
<PAGE> 7
NET INCOME AND EARNINGS PER SHARE. As a result of the above factors, net income
increased by 7.7% to $6.3 million in the third quarter of fiscal 1997 from $5.9
million in the third quarter of fiscal 1996. Earnings per share increased to
$.40 in the third quarter of fiscal 1997 from $.38 in the third quarter of
fiscal 1996. During February 1997, Statement of Financial Accounting Standards
No. 128 (SFAS 128), Earnings per Share, was issued. For a further discussion of
the impact of SFAS 128 upon the results of operations of the Company, see Note 3
of the consolidated financial statements.
NINE MONTHS ENDED MARCH 31, 1997.
GROSS REVENUES. Gross revenues increased by 23.9% to $228.3 million in the first
nine months of fiscal 1997 from $184.2 million in the first nine months of
fiscal 1996. The increase in gross revenues was primarily attributable to an
18.4% increase in sales volume to 4,773,000 cases in the first nine months of
fiscal 1997 from 4,030,000 cases in the first nine months of fiscal 1996, and
price increases on certain brands. Due to the limited supply of many of the
Company's wines, sales volume growth is not expected to continue at this level
for the remainder of the fiscal year.
EXCISE TAXES. The Company's federal and state excise taxes increased by 18.4% to
$11.2 million in the first nine months of fiscal 1997 from $9.5 million in the
first nine months of fiscal 1996. The dollar increase in excise taxes generally
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 24.2%
to $217.1 million in the first nine months of fiscal 1997 from $174.7 million in
the first nine months of fiscal 1996.
COST OF GOODS SOLD. Cost of goods sold increased by 34.7% to $121.5 million in
the first nine months of fiscal 1997 from $90.2 million in the first nine months
of fiscal 1996, primarily reflecting increased sales volume and higher 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 $13.5 million lower and $128,000
higher, respectively, in the first nine months of fiscal 1997 and 1996.
GROSS PROFIT. Gross profit increased by 13.1% to $95.6 million in the first nine
months of fiscal 1997 from $84.5 million in the first nine months of fiscal
1996, primarily reflecting the increase in sales volume. The Company's gross
profit percentages for the first nine months of fiscal 1997 and 1996 were 44.0%
and 48.4%, respectively.
OPERATING EXPENSES. Operating expenses increased by 11.4% to $56.3 million in
the first nine months of fiscal 1997 from $50.6 million in the first nine months
of fiscal 1996. The ratio of operating expenses to net revenues was 26.0% in the
first nine months of fiscal 1997 and 28.9% in the first nine months 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 was due to economies of scale in personnel
and overhead costs achieved as a result of increased net revenues and a decrease
in the average promotional dollars spent per case.
INTEREST. Interest expense increased by 22.3% to $7.7 million in the first nine
months of fiscal 1997 from $6.3 million in the first nine months 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 Company's average
interest rate.
EQUITY IN NET INCOME OF JOINT VENTURES. Equity in net income of joint ventures
was $3.3 million in the first nine months of fiscal 1997 compared to $2.1
million in the first nine months of fiscal 1996. This increase was primarily
attributable to increased income from the Opus One joint venture during the
period.
7
<PAGE> 8
PROVISION FOR INCOME TAXES. The provision for income taxes was $13.3 million in
the first nine months of fiscal 1997 and $12.1 million in the first nine months
of fiscal 1996. The Company's effective tax rate was 39.0% and 39.6%,
respectively, for the first nine months of fiscal 1997 and 1996.
NET INCOME AND EARNINGS PER SHARE. As a result of the above factors, net income
increased to $20.9 million in the first nine months of fiscal 1997 from $18.5
million in the first nine months of fiscal 1996. Earnings per share increased to
$1.34 in the first nine months of fiscal 1997 from $1.22 in the first nine
months of fiscal 1996. During February 1997, Statement of Financial Accounting
Standards No. 128 (SFAS 128), Earnings per Share, was issued. For a further
discussion of the impact of SFAS 128 upon the results of operations of the
Company, see Note 3 of the consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES.
Working capital as of March 31, 1997, was $186.0 million compared to
$152.8 million at June 30, 1996. The $33.2 million increase in working capital
was primarily attributable to a $37.9 million increase in inventories, that was
partially offset by a $7.6 increase in the book overdraft.
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 March 31, 1997. During the first nine months of fiscal 1997,
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.
The Company anticipates that current capital combined with cash from
operating activities and the availability of cash from additional borrowings
will be sufficient to meet its liquidity and capital expenditure requirements at
least through the end of fiscal 1998.
8
<PAGE> 9
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 March
31, 1997.
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: May 12, 1997 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.
9
<PAGE> 10
INDEX OF EXHIBITS
Exhibit No. Description
- ----------- ------------------------------------------------------
11 Statement Regarding Computation of per Share Earnings
27 Financial Data Schedule
<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 NINE MONTHS ENDED
------------------ -----------------
MARCH 31, MARCH 31,
--------- ---------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average number of
common shares outstanding
during the period 15,090,505 14,810,598 15,028,397 14,529,620
Common Stock equivalents
considered to be outstanding
for periods presented:
Options 641,854 620,513 603,404 593,893
----------- ----------- ----------- -----------
15,732,359 15,431,111 15,631,801 15,123,513
=========== =========== =========== ===========
Net income $ 6,333,000 $ 5,881,000 $20,871,000 $18,497,000
=========== =========== =========== ===========
Primary earnings per share $ .40 $ .38 $ 1.34 $ 1.22
=========== =========== =========== ===========
</TABLE>
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
MARCH 31, MARCH 31,
--------- ---------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average number of
common shares outstanding
during the period 15,090,505 14,810,598 15,028,397 14,529,620
Common Stock equivalents
considered to be outstanding
for periods presented:
Options 642,463 620,810 637,884 596,398
----------- ----------- ----------- -----------
15,732,968 15,431,408 15,666,281 15,126,018
=========== =========== =========== ===========
Net income $ 6,333,000 $ 5,881,000 $20,871,000 $18,497,000
=========== =========== =========== ===========
Fully diluted earnings per share $ .40 $ .38 $ 1.33 $ 1.22
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 49,780
<ALLOWANCES> 0
<INVENTORY> 180,479
<CURRENT-ASSETS> 236,447
<PP&E> 256,867
<DEPRECIATION> 79,033
<TOTAL-ASSETS> 437,412
<CURRENT-LIABILITIES> 50,485
<BONDS> 157,811
0
0
<COMMON> 75,507
<OTHER-SE> 137,274
<TOTAL-LIABILITY-AND-EQUITY> 437,412
<SALES> 217,070
<TOTAL-REVENUES> 217,070
<CGS> 121,489
<TOTAL-COSTS> 121,489
<OTHER-EXPENSES> 56,341
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,742
<INCOME-PRETAX> 34,216
<INCOME-TAX> 13,345
<INCOME-CONTINUING> 20,871
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,871
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.33
</TABLE>
