<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 December 31, 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 January 31, 1997 there were issued and outstanding 7,389,405 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
December 31, June 30,
1996 1996
--------- ---------
Unaudited
<S> <C> <C>
Current assets:
Cash and cash equivalents $ - - $ - -
Accounts receivable--trade, net 46,215 39,495
Advances to joint ventures 55 118
Inventories 182,144 142,565
Prepaid income taxes - - 2,370
Deferred income taxes 1,855 570
Prepaid expenses and other current assets 2,465 722
-------- --------
Total current assets 232,734 185,840
Property, plant and equipment, net 174,411 156,754
Investments in joint ventures 19,546 17,100
Other assets 1,722 1,501
-------- --------
Total assets $428,413 $361,195
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Book overdraft $ 2,086 $ 403
Accounts payable--trade 31,061 13,733
Accrued payroll, bonuses and benefits 10,237 10,322
Other accrued expenses 4,535 2,828
Current portion of long-term debt 6,954 4,115
Income taxes payable 3,964 - -
Deferred revenue 1,561 1,682
-------- --------
Total current liabilities 60,398 33,083
Long-term debt, less current portion 143,805 123,713
Deferred income taxes 9,804 8,944
Deferred executive compensation 6,762 6,098
Other liabilities 2,980 1,102
-------- --------
Total liabilities 223,749 172,940
-------- --------
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--7,374,355 and 7,281,529 shares 74,603 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 2,004 1,334
Retained earnings 115,733 101,195
-------- --------
204,664 188,255
-------- --------
Total liabilities and shareholders' equity $428,413 $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 Six Months Ended
December 31, December 31,
------------------- ---------------------
1996 1995 1996 1995
------- ------- -------- --------
<S> <C> <C> <C> <C>
Gross revenues $91,669 $74,761 $153,863 $122,650
Less excise taxes 4,472 3,975 7,682 6,303
------- ------- -------- --------
Net revenues 87,197 70,786 146,181 116,347
Cost of goods sold 49,157 36,644 82,525 60,112
------- ------- -------- --------
Gross profit 38,040 34,142 63,656 56,235
Selling, general and administrative expenses 21,039 19,500 37,405 33,796
------- ------- -------- --------
Operating income 17,001 14,642 26,251 22,439
Other income (expense):
Interest (2,627) (2,012) (4,993) (4,053)
Equity in net income of joint ventures 992 772 3,084 2,250
Other (258) (62) (509) 251
------- ------- -------- --------
Income before income taxes 15,108 13,340 23,833 20,887
Provision for income taxes 5,893 5,281 9,295 8,271
------- ------- -------- --------
Net income $ 9,215 $ 8,059 $14,538 $ 12,616
======= ======= ======= ========
Earnings per share $ .59 $ .52 $ .93 $ .84
======= ======= ======= ========
Weighted average number of common shares
and equivalents outstanding 15,606 15,395 15,564 14,967
======= ======= ======= ========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 4
THE ROBERT MONDAVI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
----------------------
1996 1995
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 14,538 $ 12,616
Adjustments to reconcile net income to net cash
used in operating activities:
Deferred income taxes (425) 253
Depreciation and amortization 5,908 4,616
Equity in net income of joint ventures (3,084) (2,250)
Other 141 181
Changes in assets and liabilities:
Accounts receivable--trade (6,720) (2,592)
Inventories (39,607) (44,111)
Other assets 979 (224)
Accounts payable--trade and accrued expenses 18,950 17,674
Income taxes payable 3,964 2,718
Deferred revenue (121) (39)
Deferred executive compensation 664 880
Other liabilities 1,878 1,439
-------- --------
Net cash used in operating activities (2,935) (8,839)
-------- --------
Cash flows from investing activities:
Acquisitions of property, plant and equipment (23,532) (17,134)
Distributions from joint ventures 792 3,019
Contributions to joint ventures (235) (207)
-------- --------
Net cash used in investing activities (22,975) (14,322)
-------- --------
Cash flows from financing activities:
Book overdraft 1,683 2,494
Proceeds from issuance of long-term debt 50,000 17,868
Principal repayments of long-term debt (27,069) (34,317)
Proceeds from issuance of Class A Common Stock - - 35,401
Exercise of Class A Common Stock options 1,075 551
Other 95 264
-------- --------
Net cash provided by financing activities 25,910 22,261
-------- --------
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 December 31, 1996, its results of operations for the three and six
month periods ended December 31, 1996 and 1995 and its cash flows for the six
month periods ended December 31, 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>
December 31, June 30,
1996 1996
------------ --------
<S> <C> <C>
Wine in production $143,520 $ 95,747
Bottled wine 53,221 46,247
Supplies and crop costs 7,491 13,097
-------- --------
Inventories stated at FIFO cost 204,232 155,091
Reserve for LIFO valuation method (22,088) (12,526)
-------- --------
$182,144 $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 $3.4 million and $5.8 million, respectively, for the three months
and six months ended December 31, 1996 and decreased by $98,000 and $431,000,
respectively, for the three months and six months ended December 31, 1995.
5
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
THREE MONTHS ENDED DECEMBER 31, 1996.
GROSS REVENUES. Gross revenues increased by 22.6% to $91.7 million in the
second quarter of fiscal 1997 from $74.8 million in the second quarter of
fiscal 1996. The increase in gross revenues was primarily attributable to a
13.1% increase in sales volume to 1,894,000 cases in the second quarter of
fiscal 1997 from 1,674,000 cases in the second quarter of fiscal 1996.
EXCISE TAXES. The Company's federal and state excise taxes increased by 12.5%
to $4.5 million in the second quarter of fiscal 1997 from $4.0 million in the
second 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
23.2% to $87.2 million in the second quarter of fiscal 1997 from $70.8 million
in the second quarter of fiscal 1996. Net revenues per case increased by 9.2%
in the second quarter of fiscal 1997 compared to the second quarter of fiscal
1996, primarily due to a shift in sales mix to Robert Mondavi Coastal wines and
price increases on certain brands.
COST OF GOODS SOLD. Cost of goods sold increased by 34.1% to $49.2 million in
the second quarter of fiscal 1997 from $36.6 million in the second 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 $5.6 million lower and $162,000 higher,
respectively, in the second quarter of fiscal 1997 and 1996.
GROSS PROFIT. Gross profit increased by 11.4% to $38.0 million in the second
quarter of fiscal 1997 from $34.1 million in the second quarter of fiscal 1996.
The Company's gross profit percentages for the second quarter of fiscal 1997
and 1996 were 43.6% and 48.2%, respectively.
OPERATING EXPENSES. Operating expenses increased by 7.9% to $21.0 million in
the second quarter of fiscal 1997 from $19.5 million in the second quarter of
fiscal 1996. The ratio of operating expenses to net revenues was 24.1% in the
second quarter of fiscal 1997 and 27.5% in the second 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 30.6% to $2.6 million for the second
quarter of fiscal 1997 from $2.0 million for the second 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.
EQUITY IN NET INCOME OF JOINT VENTURES. Equity in net income of joint
ventures was $992,000 in the second quarter of fiscal 1997 compared to $772,000
in the second quarter of fiscal 1996.
PROVISION FOR INCOME TAXES. The provision for income taxes was $5.9 million
in the second quarter of fiscal 1997 compared to $5.3 million in the second
quarter of fiscal 1996. The Company's effective tax rate was 30.0% and 39.6%,
respectively, in the second 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 14.3% to $9.2 million in the second quarter of fiscal 1997
from $8.1 million in the second quarter of fiscal 1996. Earnings per share
increased to $.59 in the second quarter of fiscal 1997 from $.52 in the second
quarter of fiscal 1996.
SIX MONTHS ENDED DECEMBER 31, 1996.
GROSS REVENUES. Gross revenues increased by 25.4% to $153.9 million in the
first six months of fiscal 1997 from $122.7 million in the first six months of
fiscal 1996. The increase in gross revenues was primarily attributable to a
21.8% increase in sales volume to 3,262,000 cases in the first six months of
fiscal 1997 from 2,679,000 cases in the first six months of fiscal 1996. Due
to the limited supply 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 21.9%
to $7.7 million in the first six months of fiscal 1997 from $6.3 million in the
first six 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
25.6% to $146.2 million in the first six months of fiscal 1997 from $116.3
million in the first six months of fiscal 1996. Net revenues per case
increased by 3.3% in the first six months of fiscal 1997 compared to the first
six months of fiscal 1996, reflecting price increases on certain brands.
COST OF GOODS SOLD. Cost of goods sold increased by 37.3% to $82.5 million in
the first six months of fiscal 1997 from $60.1 million in the first six 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 $9.6 million lower and
$713,000 higher, respectively, in the first six months of fiscal 1997 and 1996.
GROSS PROFIT. Gross profit increased by 13.2% to $63.7 million in the first
six months of fiscal 1997 from $56.2 million in the first six months of fiscal
1996, primarily reflecting the increase in sales volume. The Company's gross
profit percentages for the first six months of fiscal 1997 and 1996 were 43.5%
and 48.3%, respectively.
OPERATING EXPENSES. Operating expenses increased by 10.7% to $37.4 million in
the first six months of fiscal 1997 from $33.8 million in the first six months
of fiscal 1996. The ratio of operating expenses to net revenues was 25.6% in
the first six months of fiscal 1997 and 29.0% in the first six 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 23.2% to $5.0 million in the first
six months of fiscal 1997 from $4.1 million in the first six 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 $3.1 million in the first six months of fiscal 1997 compared to
$2.3 million in the first six months of fiscal 1996. This increase was
primarily attributable to improved income from the Opus One joint venture
during the period.
7
<PAGE> 8
Provision For Income Taxes. The provision for income taxes was $9.3 million
in the first six months of fiscal 1997 and $8.3 million in the first six months
of fiscal 1996. The Company's effective tax rate was 39.0% and 39.6%,
respectively, for the first six months of fiscal 1997 and 1996.
Net Income And Earnings Per Share. As a result of the above factors, net
income increased to $14.5 million in the first six months of fiscal 1997 from
$12.6 million in the first six months of fiscal 1996. Earnings per share
increased to $.93 in the first six months of fiscal 1997 from $.84 in the first
six months of fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES.
During the second quarter of fiscal 1997, the Company completed its
1996 harvest. The completion of harvest had a significant impact on the
Company's balance sheet, including increases in inventories and amounts payable
to external growers. Working capital as of December 31, 1996, was $172.3
million compared to $152.8 million at June 30, 1996. The $19.5 million
increase in working capital was primarily attributable to a $40.0 million
increase in inventories, that was partially offset by $20.2 million increase
in grower accounts payable. The Company had a book overdraft of $2.1 million
and $403,000 at December 31, 1996, and June 30, 1996, respectively.
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 January 1, 1997. During the first six 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 under its credit lines 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 4. Submission of Matters to a Vote of Security Holders.
The Company's Annual Meeting of Shareholders was held on November 4,
1996 at the Robert Mondavi Winery, Oakville, California. Two matters were
submitted to a vote of shareholders: election of directors and ratification of
Price Waterhouse LLP as the Company's independent auditors for the fiscal year
ending June 30, 1997.
Frank Farella, Philip Greer and James Barksdale were nominated as
Class A directors. 6,393,119 Class A shares were voted for Mr. Farella and
89,180 shares were withheld. 6,342,689 Class A shares were voted for Mr. Greer
and 139,610 shares were withheld. 6,394,980 Class A shares were voted for Mr.
Barksdale and 87,319 shares were withheld. Accordingly, Mssrs. Farella, Greer
and Barksdale were elected as Class A directors.
Robert G. Mondavi, R. Michael Mondavi, Marcia Mondavi Borger, Timothy
J. Mondavi, Clifford S. Adams and Bartlett R. Rhoades were nominated as Class B
directors. 7,676,012 Class B shares were voted
8
<PAGE> 9
for Robert G. Mondavi, R. Michael Mondavi, Marcia Mondavi Borger, Timothy J.
Mondavi and Clifford S. Adams. 7,526,582 Class B shares were voted for
Bartlett R. Rhoades and 149,430 shares were withheld. Accordingly, each of the
Class B nominees was re-elected to the board.
6,474,420 Class A shares were voted in favor of the ratification of
Price Waterhouse LLP, 6,184 shares were voted against and 1,695 shares
abstained. 76,760,120 Class B votes were cast in favor of the ratification of
Price Waterhouse LLP.
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 December
31, 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: February 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 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> 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 SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
--------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Weighted average number of
common shares outstanding
during the period 15,010,697 14,760,933 14,985,539 14,390,655
Common Stock equivalents
considered to be outstanding
for periods presented:
Options 595,276 633,630 578,049 576,765
----------- ----------- ----------- -----------
15,605,973 15,394,563 15,563,588 14,967,420
=========== =========== =========== ===========
Net income $ 9,215,000 $ 8,059,000 $14,538,000 $12,616,000
=========== =========== =========== ===========
Primary earnings per share $ .59 $ .52 $ .93 $ .84
=========== =========== =========== ===========
</TABLE>
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
---------------------- --------------------------
1996 1995 1996 1995
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Weighted average number of
common shares outstanding
during the period 15,010,697 14,760,933 14,985,539 14,390,655
Common Stock equivalents
considered to be outstanding
for periods presented:
Options 641,240 634,127 643,822 634,006
----------- ----------- ------------ -----------
15,690,547 15,395,060 15,629,361 15,024,661
----------- ----------- ------------ -----------
Net income $ 9,215,000 $ 8,059,000 $14,538,000 $12,616,000
=========== =========== =========== ===========
Fully diluted earnings per share $ .59 $ .52 $ .93 $ .84
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S.DOLLAR
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 46,215
<ALLOWANCES> 0
<INVENTORY> 182,144
<CURRENT-ASSETS> 232,734
<PP&E> 251,001
<DEPRECIATION> 76,590
<TOTAL-ASSETS> 428,413
<CURRENT-LIABILITIES> 60,398
<BONDS> 143,805
0
0
<COMMON> 86,927
<OTHER-SE> 117,737
<TOTAL-LIABILITY-AND-EQUITY> 428,413
<SALES> 146,181
<TOTAL-REVENUES> 146,181
<CGS> 82,525
<TOTAL-COSTS> 82,525
<OTHER-EXPENSES> 37,405
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,993
<INCOME-PRETAX> 23,833
<INCOME-TAX> 9,295
<INCOME-CONTINUING> 14,538
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,538
<EPS-PRIMARY> .93
<EPS-DILUTED> .93
</TABLE>
