<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, 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 October 31, 1997 there were issued and outstanding 7,828,673 shares of the
issuer's Class A Common Stock and 7,426,012 shares of the issuer's Class B
Common Stock.
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<PAGE> 2
PART I
ITEM 1. FINANCIAL STATEMENTS.
THE ROBERT MONDAVI CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1997
-------- --------
UNAUDITED
<S> <C> <C>
Current assets:
Cash and cash equivalents $ - $ 150
Accounts receivable--trade, net 45,170 59,222
Inventories 230,481 167,695
Deferred income taxes 2,042 1,677
Prepaid expenses and other current assets 6,867 5,593
-------- --------
Total current assets 284,560 234,337
Property, plant and equipment, net 193,683 186,990
Investments in joint ventures 21,893 19,212
Other assets 4,826 4,386
-------- --------
Total assets $504,962 $444,925
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Book overdraft $ 13,322 -
Notes payable to banks - 8,750
Accounts payable--trade 70,921 14,769
Employee compensation and related costs 10,930 10,608
Other accrued expenses 7,090 5,446
Current portion of long-term debt 8,631 6,790
Deferred revenue 2,117 2,064
-------- --------
Total current liabilities 113,011 48,427
Long-term debt, less current portion 144,943 158,067
Deferred income taxes 11,267 10,848
Deferred executive compensation 5,509 5,395
Other liabilities 2,529 1,017
-------- --------
Total liabilities 277,259 223,754
-------- --------
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--7,545,940 and 7,499,024 shares 76,675 76,138
Class B Common Stock, without par value:
Authorized--12,000,000 shares
Issued and outstanding--7,676,012 shares 12,324 12,324
Paid-in Capital 3,433 3,289
Retained earnings 135,271 129,420
-------- --------
227,703 221,171
-------- --------
Total liabilities and shareholders' equity $504,962 $444,925
======== ========
</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,
-----------------------
1997 1996
-------- --------
<S> <C> <C>
Gross revenues $ 68,836 $ 62,194
Less excise taxes 3,286 3,210
-------- --------
Net revenues 65,550 58,984
Cost of goods sold 36,974 33,368
-------- --------
Gross profit 28,576 25,616
Selling, general and administrative expenses 18,727 16,366
-------- --------
Operating income 9,849 9,250
Other income (expense):
Interest (2,527) (2,366)
Equity in net income of joint ventures 2,546 2,092
Other (277) (251)
-------- --------
Income before income taxes 9,591 8,725
Provision for income taxes 3,740 3,402
-------- --------
Net income $ 5,851 $ 5,323
======== ========
Earnings per share $ .37 $ .34
======== ========
Weighted average number of common shares
and equivalents outstanding 15,843 15,515
======== ========
</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,
-----------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,851 $ 5,323
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income taxes 54 (156)
Depreciation and amortization 3,357 2,878
Equity in net income of joint ventures (2,546) (2,092)
Other (355) 70
Changes in assets and liabilities:
Accounts receivable--trade 14,052 6,071
Inventories (62,918) (43,829)
Prepaid income taxes - - 2,783
Other assets (1,274) (966)
Accounts payable--trade and accrued expenses 55,095 37,309
Income taxes payable 3,167 687
Deferred revenue 53 (40)
Deferred executive compensation 114 277
Other liabilities 1,512 1,457
-------- --------
Net cash provided by operating activities 16,162 9,772
-------- --------
Cash flows from investing activities:
Acquisitions of property, plant and equipment (15,967) (15,198)
Proceeds from sale of assets 6,390 -
Contributions to joint ventures (3) (231)
-------- --------
Net cash used in investing activities (9,580) (15,429)
-------- --------
Cash flows from financing activities:
Book overdraft 13,322 7,656
Net repayments under notes payable to banks (8,750) -
Proceeds from issuance of long-term debt - 50,000
Principal repayments of long-term debt (11,283) (51,762)
Exercise of stock options 537 811
Other (558) (1,048)
-------- --------
Net cash provided by (used in) financing activities (6,732) 5,657
-------- --------
Net decrease in cash and cash equivalents (150) -
Cash and cash equivalents at the beginning of the period 150 -
-------- --------
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 September 30, 1997 and its results of operations and its cash flows
for the three month periods ended September 30, 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, 1997, on file at the
Securities and Exchange Commission.
NOTE 2--INVENTORIES:
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1997
--------- ---------
<S> <C> <C>
Wine in production $ 181,299 $ 127,922
Bottled wine 70,603 53,734
Crop costs and supplies 10,289 14,793
--------- ---------
Inventories stated at FIFO cost 262,191 196,449
Reserve for LIFO valuation method (31,710) (28,754)
--------- ---------
$ 230,481 $ 167,695
========= =========
</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 $1.8 million and $2.4 million, respectively, for the three months
ended September 30, 1997 and 1996.
NOTE 3 -- EARNINGS PER SHARE:
During February 1997, Statement of Financial Accounting Standards No.
128 (SFAS 128), Earnings per Share, was issued. This statement supersedes
Accounting Principles Board Opinion No. 15, Earnings per Share, and its related
Interpretations and establishes new accounting standards for the computation and
manner of presentation of the Company's earnings per share. The Company is
required to adopt SFAS 128 for the quarter ending December 31, 1997. Early
adoption is not permitted. When adopted, the Company will be required to restate
previously reported earnings per share for all periods presented. The table
below reflects the proforma impact to earnings per share to conform with SFAS
128 for the following periods:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED JUNE 30,
----------------- ------------------------------
1997 1996 1997 1996 1995
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings per Share as
previously reported $ .37 $ .34 $ 1.80 $ 1.61 $ 1.39
Proforma Earnings per Share
Basic $ .39 $ .36 $ 1.87 $ 1.67 $ 1.40
Diluted $ .37 $ .34 $ 1.80 $ 1.61 $ 1.39
</TABLE>
5
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THREE MONTHS ENDED SEPTEMBER 30, 1997
GROSS REVENUES Gross revenues increased by 10.7% to $68.8 million in the first
quarter of fiscal 1998 from $62.2 million in the first quarter of fiscal 1997.
The increase in gross revenues was primarily attributable to price increases on
certain of the Company's wines, a shift in sales mix to Robert Mondavi Coastal
wines and a 2.2% increase in sales volume.
EXCISE TAXES The Company's federal and state excise taxes increased 2.4% to $3.3
million in the first quarter of fiscal 1998, from $3.2 million in the first
quarter of fiscal 1997. 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 11.1%
to $65.6 million in the first quarter of fiscal 1998 from $59.0 million in the
first quarter of fiscal 1997. Net revenues per case increased 9.3% to $46.22 per
case in the first quarter of fiscal 1998 from $42.30 per case in the first
quarter of fiscal 1997, reflecting the price increases and shift in sales mix
discussed above.
COST OF GOODS SOLD Cost of goods sold increased by 10.8% to $37.0 million in the
first quarter of fiscal 1998 from $33.4 million in the first quarter of fiscal
1997, reflecting the increase in 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 $3.0 million and $3.9 million lower,
respectively, in the first quarter of fiscal 1998 and 1997.
GROSS PROFIT As a result of the above factors, gross profit increased by 11.6%
to $28.6 million in the first quarter of fiscal 1998 from $25.6 million in the
first quarter of fiscal 1997. The Company's gross profit percentages for the
first quarter of fiscal 1998 and 1997 were 43.6% and 43.4%, respectively.
OPERATING EXPENSES Operating expenses increased by 14.4% to $18.7 million in the
first quarter of fiscal 1998 from $16.4 million in the first quarter of fiscal
1997. The ratio of operating expenses to net revenues was 28.6% in the first
quarter of fiscal 1998 and 27.7% in the first quarter of fiscal 1997. The dollar
increase in operating expenses was primarily attributable to an increase in
average selling and marketing dollars spent per case.
INTEREST Interest expense increased by 6.8% to $2.5 million in the first quarter
of fiscal 1998 from $2.4 million in the first quarter of fiscal 1997. This
increase was primarily attributable to an increase in the Company's average
borrowings that was partially offset by an increase in interest capitalized.
EQUITY IN NET INCOME OF JOINT VENTURES Equity in net income of joint ventures
increased by 21.7% to $2.5 million in the first quarter of fiscal 1998 from $2.1
million in the first quarter of fiscal 1997. This increase was due mainly to
improved income from Opus One during the period.
PROVISION FOR INCOME TAXES The provision for income taxes was $3.7 million in
the first quarter of fiscal 1998 compared to $3.4 million in the first quarter
of fiscal 1997. The Company's effective tax rate was 39.0% for the first quarter
of fiscal 1998 and 1997.
6
<PAGE> 7
NET INCOME AND EARNINGS PER SHARE As a result of the above factors, net income
increased to $5.9 million in the first quarter of fiscal 1998 from $5.3 million
in the first quarter of fiscal 1997. Earnings per share increased to $.37 in the
first quarter of fiscal 1998 from $.34 in the first quarter of fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
The 1997 harvest began earlier than normal and this had a significant
impact on the Company's balance sheet at September 30, 1997, including increases
in inventories and amounts payable to external growers. Working capital as of
September 30, 1997, was $171.5 million compared to $186.0 million at June 30,
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 September 30, 1997. The short-term credit lines expire during
December 1997. The Company expects to renew the short-term credit lines for at
least their current availability of $41.2 million. The long-term credit lines
expire on December 31, 1999.
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.
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, 1997
7
<PAGE> 8
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 13, 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 contains 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, 1997, 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
(IN THOUSANDS, EXCEPT PER SHARE DATA)
EXHIBIT 11
COMPUTATION OF PRIMARY EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
SEPTEMBER 30,
--------------------
1997 1996
------- -------
<S> <C> <C>
Weighted average number of
common shares outstanding
during the period 15,190 14,970
Common Stock equivalents
considered to be outstanding
for periods presented:
Options 653 545
------- -------
15,843 15,515
======= =======
Net income $ 5,851 $ 5,323
======= =======
Earnings per share $ .37 $ .34
======= =======
</TABLE>
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------
SEPTEMBER 30,
--------------------
1997 1996
------- -------
<S> <C> <C>
Weighted average number of
common shares outstanding
during the period 15,190 14,970
Common Stock equivalents
considered to be outstanding
for periods presented:
Options 695 588
------- -------
15,885 15,558
======= =======
Net income $ 5,851 $ 5,323
======= =======
Earnings per share $ .37 $ .34
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 45,170
<ALLOWANCES> 0
<INVENTORY> 230,481
<CURRENT-ASSETS> 284,560
<PP&E> 274,159
<DEPRECIATION> 80,476
<TOTAL-ASSETS> 504,962
<CURRENT-LIABILITIES> 113,011
<BONDS> 144,943
0
0
<COMMON> 88,999
<OTHER-SE> 138,704
<TOTAL-LIABILITY-AND-EQUITY> 504,962
<SALES> 65,550
<TOTAL-REVENUES> 65,550
<CGS> 36,974
<TOTAL-COSTS> 36,974
<OTHER-EXPENSES> 18,727
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,527
<INCOME-PRETAX> 9,591
<INCOME-TAX> 3,740
<INCOME-CONTINUING> 5,851
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,851
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
